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Condensed Consolidated Statements of Operations Supplemental Information

9 Months Ended

Sep. 30, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Condensed Consolidated Statements of Operations Supplemental Information

9. Condensed Consolidated Statements of Operations Supplemental Information

(a)

Selling Expenses

Sales commissions and other selling expenses paid prior to the recognition of the related revenue are deferred and recognized in the Condensed Consolidated Statements of Operations upon the recognition of the related theater system revenue. For the three and nine months ended September 30, 2021, the sales commission costs recognized within Costs and Expenses Applicable to Revenues – Technology Sales are $0.2 million and $0.6 million, respectively (2020 — $0.3 million and $0.4 million, respectively). Direct advertising and marketing costs for each theater are expensed as incurred. For the three and nine months ended September 30, 2021, the total of all such costs recognized within Costs and Expenses Applicable to Revenues – Technology Sales was $0.1 million and $0.3 million, respectively (2020 — $0.3 million and $0.6 million, respectively).

Sales commissions related to joint revenue sharing arrangements accounted for operating leases are recognized as Costs and Expenses Applicable to Revenues – Technology Rentals in the month they are earned by the salesperson, which is typically the month in which the theater system is installed. For the three and nine months ended September 30, 2021, sales commissions related to such joint revenue sharing arrangements totaled $0.1 million and $0.4 million, respectively (2020 — $0.3 million and $0.5 million, respectively). Direct advertising and marketing costs for each theater are expensed as incurred. For the three and nine months ended September 30, 2021, the total of such costs recognized within Costs and Expenses Applicable to Revenues – Technology Rentals was $0.7 million and $1.5 million, respectively (2020 — $0.4 million and $0.8 million, respectively).

Film exploitation costs, including advertising and marketing expense, totaled $3.2 million and $5.9 million, respectively, for the three and nine months ended September 30, 2021 (2020 — $0.5 million and $3.1 million, respectively), and are expensed as incurred within Costs and Expenses Applicable to Revenues – Image Enhancement and Maintenance Services.

(b)

Foreign Exchange

Included in Selling, General and Administrative Expenses for the three and nine months ended September 30, 2021 is a net loss of $(0.6) million and a net gain of $1.1 million, respectively (2020 — net gain of $0.2 million and net loss of $(0.8) million, respectively) resulting from changes in exchange rates related to foreign currency denominated monetary assets and liabilities. See Note 16(c) for additional information.

(c)

Collaborative Arrangements

Joint Revenue Sharing Arrangements

The Company provides IMAX Theater Systems to customers through joint revenue sharing arrangements. Under the traditional form of these arrangements, in exchange for providing the IMAX Theater System under a long-term lease, the Company earns rent based on a percentage of contingent box office receipts and, in some cases, concession revenues, rather than requiring the customer to pay a fixed upfront fee or annual minimum payments. Under certain other joint revenue sharing arrangements, known as hybrid arrangements, the customer is responsible for making fixed upfront payments prior to the delivery and installation of the IMAX Theater System. Under joint revenue sharing arrangements, the customer has the ability and the right to operate the hardware components or direct others to operate them in a manner determined by the customer. The Company’s joint revenue sharing arrangements are typically non-cancellable for 10 years or longer with renewal provisions. Title to the IMAX Theater System under a joint revenue sharing arrangement generally does not transfer to the customer. The Company’s joint revenue sharing arrangements do not contain a guarantee of residual value at the end of the lease term. The customer is required to pay for executory costs such as insurance and taxes and is required to pay the Company for maintenance and an extended warranty throughout the term. The customer is responsible for obtaining insurance coverage for the IMAX Theater System commencing on the date specified in the arrangement’s shipping terms and ending on the date the IMAX Theater System is returned to the Company.

As of September 30, 2021, the Company has signed traditional and hybrid joint revenue sharing agreements with 42 exhibitors (2020 — 41) for a total of 1,228 IMAX Theater Systems (2020 — 1,233), of which 904 theaters (2020 — 881) were operational and included in the network as of that date. The terms of these arrangements are similar in nature, rights and obligations. The accounting policy for the Company’s joint revenue sharing arrangements is disclosed in Note 3(n) of the Company’s 2020 Form 10-K.

Revenue attributable to transactions arising between the Company and its customers under joint revenue sharing arrangements are recorded within Revenues — Technology Sales and Revenues — Technology Rentals. For the three and nine months ended September 30, 2021, such revenues totaled $10.9 million and $29.9 million, respectively (2020 — $4.5 million and $11.5 million, respectively). (See Note 13(a) for a disaggregated presentation of the Company’s revenues.)

IMAX DMR

In an IMAX DMR arrangement, the Company receives a percentage of the box office receipts from a third party who owns the copyright to a film in exchange for converting the film into IMAX DMR format and distributing it through the IMAX network. The percentage of gross box office receipts earned in IMAX DMR arrangements has averaged approximately 12.5%, except for within Greater China, where the Company receives a lower percentage of net box office receipts for certain Hollywood films.

For the three and nine months ended September 30, 2021, the majority of IMAX DMR revenue was earned from the exhibition of 24 films (21 new and 3 carryovers) and 53 films (47 new and 6 carryovers), respectively, and the re-release of classic titles throughout the IMAX theater network, as compared to six new films and 20 films (16 new and 4 carryovers), respectively, and the re-release of classic titles in the three and nine months ended September 30, 2020. The accounting policy for the Company’s IMAX DMR arrangements is disclosed in Note 3(n) of the Company’s 2020 Form 10-K.

Revenue attributable to transactions arising between the Company and its customers under IMAX DMR arrangements are included in Revenues – Image Enhancement and Maintenance Services. For the three and nine months ended September 30, 2021, such revenues totaled $15.7 million and $39.4 million, respectively (2020 — $6.9 million and $18.1 million, respectively). (See Note 13(a) for a disaggregated presentation of the Company’s revenues.)

Co-Produced Film Arrangements

In certain film arrangements, the Company co-produces a film with a third party whereby the third party retains the copyright and rights to the film. In some cases, the Company obtains exclusive theatrical distribution rights to the film. Under these arrangements, both parties contribute funding to the Company’s partly-owned subsidiary for the production and distribution of the film and for associated exploitation costs.

As of September 30, 2021, the Company has one co-produced film arrangement, which represents the VIE total assets balance of $1.6 million and liabilities balance of $0.3 million and three other co-produced film arrangements, the terms of which are similar. The accounting policies relating to co-produced film arrangements are disclosed in Notes 3(a) and 3(n) of the Company’s 2020 Form 10-K.

For the three and nine months ended September 30, 2021, an expense of $0.2 million and $0.3 million, respectively (2020 — $0.5 million and $1.9 million, respectively) attributable to transactions between the Company and other parties involved in the production of the films have been included in Costs and Expenses Applicable to Revenues – Image Enhancement and Maintenance Services.