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Receivables
 3 Months Ended
Mar. 31, 2022
Receivables [Abstract]  
Receivables

4. Receivables

The ability of the Company to collect its receivables is dependent on the viability and solvency of individual theater operators which is significantly influenced by consumer behavior and general economic conditions. Theater operators, or other customers, may experience financial difficulties that could result in their being unable to fulfill their payment obligations to the Company.

In order to mitigate the credit risk associated with its receivables, management performs an initial credit evaluation prior to entering into an arrangement with a customer and then regularly monitors the credit quality of each customer through an analysis of collections history and aging. This monitoring process includes meetings on at least a monthly basis to identify credit concerns and potential changes in credit quality classification. A customer may improve their credit quality classification once a substantial payment is made on an overdue balance or when the customer has agreed to a payment plan and payments have commenced in accordance with that plan. Changes in credit quality classification are dependent upon management approval. The Company’s internal credit quality classifications for theater operators are as follows:

•
Good Standing — The theater operator continues to be in good standing as payments and reporting are received on a regular basis.
•
Credit Watch — The theater operator has demonstrated a delay in payments, but continues to be in active communication with the Company. Theater operators placed on Credit Watch are subject to enhanced monitoring. In addition, depending on the size of the outstanding balance, length of time in arrears, and other factors, future transactions may need to be approved by management. These receivables are in better condition than those in the Pre-Approved Transactions Only category, but are not in as good condition as the receivables in the Good Standing category.
•
Pre-Approved Transactions Only — The theater operator has demonstrated a delay in payments with little or no communication with the Company. All services and shipments to the theater operator must be reviewed and approved by management. These receivables are in better condition than those in the All Transactions Suspended category, but are not in as good condition as the receivables in the Credit Watch category. In certain situations, a theater operator may be placed on nonaccrual status and all revenue recognition related to the theater may be suspended, including the accretion of Finance Income for Financing Receivables.
•
All Transactions Suspended — The theater operator is severely delinquent, non-responsive or not negotiating in good faith with the Company. Once a theater operator is classified within the All Transactions Suspended category, the theater is placed on nonaccrual status and all revenue recognitions related to the theater are suspended, including the accretion of Finance Income for Financing Receivables.

During the period when the accretion of Finance Income is suspended for Financing Receivables, any payments received from a customer are applied against the outstanding balance owed. If payments are sufficient to cover any unreserved receivables, a reversal of the provision is recorded to the extent of the residual cash received. Once the collectability issues are resolved and the customer has returned to being in good standing, the Company will resume recognition of Finance Income.

When a customer’s aging exceeds 90 days, the Company’s policy is to perform an enhanced review to assess collectability of the theater’s past due accounts. The over 90 days past due category may be an indicator of potential impairment as up to 90 days outstanding is considered to be a reasonable time to resolve any issues.

The Company develops an estimate of expected credit losses by class of receivable and customer type through a calculation that utilizes historical loss rates which are then adjusted for specific receivables that are judged to have a higher-than-normal risk profile after considering management’s internal credit quality classifications. Additional credit loss provisions are also recorded taking into account macro-economic and industry risk factors. The write-off of any billed receivable balance requires the approval of management.

Management’s judgments regarding expected credit losses are based on the facts available to management and involve estimates about the future. Due to the unprecedented nature of the COVID-19 pandemic, its effect on the Company’s customers and their ability to meet their financial obligations to the Company is difficult to predict. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect (see Note 2).

Accounts Receivable

Accounts receivable principally includes amounts currently due to the Company under theater sale and sales-type lease arrangements, contingent fees owed by theater operators as a result of box office performance, and fees for theater maintenance services. Accounts receivable also includes amounts due to the Company from movie studios and other content creators principally for digitally remastering films into IMAX formats, as well as for film distribution and post-production services.

The following tables summarize the activity in the allowance for credit losses related to Accounts Receivable for the three months ended March 31, 2022 and 2021:

 

 

Three Months Ended March 31, 2022

 

(In thousands of U.S. Dollars)

 

Theater
Operators

 

 

Studios

 

 

Other

 

 

Total

 

Beginning balance

 

$

8,867

 

 

$

1,994

 

 

$

1,085

 

 

$

11,946

 

Current period provision, net

 

 

1,981

 

 

 

3

 

 

 

273

 

 

 

2,257

 

Write-offs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Foreign exchange

 

 

(17

)

 

 

(2

)

 

 

—

 

 

 

(19

)

Ending balance

 

$

10,831

 

 

$

1,995

 

 

$

1,358

 

 

$

14,184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

(In thousands of U.S. Dollars)

 

Theater
Operators

 

 

Studios

 

 

Other

 

 

Total

 

Beginning balance

 

$

8,368

 

 

$

4,481

 

 

$

1,446

 

 

$

14,295

 

Current period provision (reversal), net

 

 

599

 

 

 

(499

)

 

 

(249

)

 

 

(149

)

Write-offs

 

 

(170

)

 

 

(149

)

 

 

—

 

 

 

(319

)

Foreign exchange

 

 

(14

)

 

 

(62

)

 

 

(9

)

 

 

(85

)

Ending balance

 

$

8,783

 

 

$

3,771

 

 

$

1,188

 

 

$

13,742

 

For the three months ended March 31, 2022, the Company’s allowance for current expected credit losses related to Accounts Receivable increased by $2.2 million principally due to reserves established against its receivables in Russia due to uncertainties associated with the ongoing Russia-Ukraine conflict, partially offset by the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets continues to improve.

For the three months ended March 31, 2021, the Company’s allowance for current expected credit losses related to Accounts Receivable decreased by $0.6 million principally as a result of the write-off of certain receivable balances ($0.3 million) and a net provision reversal ($0.1 million) due to better than expected collection experience with respect to foreign movie studios, partially offset by an increase in the provision associated with a higher level of accounts receivable in the period.

Financing Receivables

Financing receivables are due from theater operators and consist of the Company’s net investment in sales-type leases and receivables associated with financed sales of IMAX Theater Systems. As of March 31, 2022 and December 31, 2021, financing receivables consist of the following:

 

 

March 31,

 

 

December 31,

 

(In thousands of U.S. Dollars)

 

2022

 

 

2021

 

Net investment in leases

 

 

 

 

 

 

Gross minimum payments due under sales-type leases

 

$

29,259

 

 

$

29,953

 

Unearned finance income

 

 

(703

)

 

 

(763

)

Present value of minimum payments due under sales-type leases

 

 

28,556

 

 

 

29,190

 

Allowance for credit losses

 

 

(706

)

 

 

(798

)

Net investment in leases

 

 

27,850

 

 

 

28,392

 

Financed sales receivables

 

 

 

 

 

 

Gross minimum payments due under financed sales

 

 

147,319

 

 

 

152,315

 

Unearned finance income

 

 

(32,524

)

 

 

(34,244

)

Present value of minimum payments due under financed sales

 

 

114,795

 

 

 

118,071

 

Allowance for credit losses

 

 

(11,135

)

 

 

(5,414

)

Net financed sales receivables

 

 

103,660

 

 

 

112,657

 

Total financing receivables

 

$

131,510

 

 

$

141,049

 

 

 

 

 

 

 

 

Net financed sales receivables due within one year

 

$

27,863

 

 

$

29,115

 

Net financed sales receivables due after one year

 

 

75,797

 

 

 

83,542

 

Total financed sales receivables

 

$

103,660

 

 

$

112,657

 

 

As of March 31, 2022 and December 31, 2021, the weighted-average remaining lease term and weighted-average interest rate associated with the Company’s sales-type lease arrangements and financed sale receivables, as applicable, are as follows:

 

 

 

March 31,

 

December 31,

 

 

 

2022

 

2021

Weighted-average remaining lease term (in years)

 

 

 

 

 

 

 

 

Sales-type lease arrangements

 

 

 

9.4

 

 

 

 

9.6

 

 

Weighted-average interest rate

 

 

 

 

 

 

 

 

 

Sales-type lease arrangements

 

 

 

6.60

 

%

 

 

6.56

 

%

Financed sales receivables

 

 

 

8.80

 

%

 

 

8.79

 

%

The tables below provide information on the Company’s net investment in leases by credit quality indicator as of March 31, 2022 and December 31, 2021. The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.

(In thousands of U.S. Dollars)

 

By Origination Year

 

 

 

 

As of March 31, 2022

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

Prior

 

 

Total

 

Net investment in leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit quality classification:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In good standing

 

$

—

 

 

$

11,040

 

 

$

3,815

 

 

$

7,989

 

 

$

2,429

 

 

$

2,412

 

 

$

27,685

 

Credit Watch

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Pre-approved transactions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Transactions suspended

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

871

 

 

 

871

 

Total net investment in leases

 

$

—

 

 

$

11,040

 

 

$

3,815

 

 

$

7,989

 

 

$

2,429

 

 

$

3,283

 

 

$

28,556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands of U.S. Dollars)

 

By Origination Year

 

 

 

 

As of December 31, 2021

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

Prior

 

 

Total

 

Net investment in leases:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit quality classification:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In good standing

 

$

11,030

 

 

$

3,991

 

 

$

7,973

 

 

$

2,574

 

 

$

823

 

 

$

1,928

 

 

$

28,319

 

Credit Watch

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Pre-approved transactions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Transactions suspended

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

871

 

 

 

871

 

Total net investment in leases

 

$

11,030

 

 

$

3,991

 

 

$

7,973

 

 

$

2,574

 

 

$

823

 

 

$

2,799

 

 

$

29,190

 

 

The tables below provide information on the Company’s financed sale receivables by credit quality indicator as of March 31, 2022 and December 31, 2021. The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.

(In thousands of U.S. Dollars)

 

By Origination Year

 

 

 

 

As of March 31, 2022

 

2022

 

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

Prior

 

 

Total

 

Financed sales receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit quality classification:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In good standing

 

$

1,383

 

 

$

11,956

 

 

$

8,011

 

 

$

8,949

 

 

$

12,187

 

 

$

49,247

 

 

$

91,733

 

Credit Watch

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,086

 

 

 

2,086

 

Pre-approved transactions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,213

 

 

 

428

 

 

 

6,830

 

 

 

8,471

 

Transactions suspended

 

 

—

 

 

 

302

 

 

 

143

 

 

 

1,321

 

 

 

961

 

 

 

9,778

 

 

 

12,505

 

Total financed sales receivables

 

$

1,383

 

 

$

12,258

 

 

$

8,154

 

 

$

11,483

 

 

$

13,576

 

 

$

67,941

 

 

$

114,795

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands of U.S. Dollars)

 

By Origination Year

 

 

 

 

As of December 31, 2021

 

2021

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

Prior

 

 

Total

 

Financed sales receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit quality classification:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In good standing

 

$

12,520

 

 

$

8,251

 

 

$

10,593

 

 

$

13,278

 

 

$

12,615

 

 

$

47,950

 

 

$

105,207

 

Credit Watch

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

321

 

 

 

1,292

 

 

 

1,613

 

Pre-approved transactions

 

 

—

 

 

 

—

 

 

 

743

 

 

 

418

 

 

 

2,098

 

 

 

3,650

 

 

 

6,909

 

Transactions suspended

 

 

—

 

 

 

—

 

 

 

335

 

 

 

—

 

 

 

680

 

 

 

3,327

 

 

 

4,342

 

Total financed sales receivables

 

$

12,520

 

 

$

8,251

 

 

$

11,671

 

 

$

13,696

 

 

$

15,714

 

 

$

56,219

 

 

$

118,071

 

The balance of financed sale receivables classified within the Transactions Suspended category as of March 31, 2022 includes amounts due from exhibitors in Russia, Ukraine, and Belarus which were reclassified from other credit quality classifications in the first quarter of 2022 as a result of the ongoing Russia-Ukraine conflict.

The following tables provide an aging analysis for the Company’s net investment in leases and financed sale receivables as of March 31, 2022 and December 31, 2021:

 

 

As of March 31, 2022

 

(In thousands of U.S. Dollars)

 

Accrued
and
Current

 

 

30-89
Days

 

 

90+
Days

 

 

Billed

 

 

Unbilled

 

 

Recorded
Receivable

 

 

Allowance
for Credit
Losses

 

 

Net

 

Net investment in leases

 

$

248

 

 

$

364

 

 

$

1,112

 

 

$

1,724

 

 

$

26,832

 

 

$

28,556

 

 

$

(706

)

 

$

27,850

 

Financed sales receivables

 

 

1,256

 

 

 

2,438

 

 

 

6,842

 

 

 

10,536

 

 

 

104,259

 

 

 

114,795

 

 

 

(11,135

)

 

 

103,660

 

Total

 

$

1,504

 

 

$

2,802

 

 

$

7,954

 

 

$

12,260

 

 

$

131,091

 

 

$

143,351

 

 

$

(11,841

)

 

$

131,510

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

 

(In thousands of U.S. Dollars)

 

Accrued
and
Current

 

 

30-89
Days

 

 

90+
Days

 

 

Billed

 

 

Unbilled

 

 

Recorded
Receivable

 

 

Allowance
for Credit
Losses

 

 

Net

 

Net investment in leases

 

$

225

 

 

$

156

 

 

$

1,267

 

 

$

1,648

 

 

$

27,542

 

 

$

29,190

 

 

$

(798

)

 

$

28,392

 

Financed sales receivables

 

 

1,750

 

 

 

989

 

 

 

8,378

 

 

 

11,117

 

 

 

106,954

 

 

 

118,071

 

 

 

(5,414

)

 

 

112,657

 

Total

 

$

1,975

 

 

$

1,145

 

 

$

9,645

 

 

$

12,765

 

 

$

134,496

 

 

$

147,261

 

 

$

(6,212

)

 

$

141,049

 

 

The following tables provide information about the Company’s net investment in leases and financed sale receivables with billed amounts past due for which it continues to accrue finance income as of March 31, 2022 and December 31, 2021. The amounts disclosed for each credit quality classification are determined on a customer-by-customer basis and include both billed and unbilled amounts.

 

 

 

As of March 31, 2022

 

(In thousands of U.S. Dollars)

 

Accrued
and
Current

 

 

30-89 Days

 

 

90+ Days

 

 

Billed

 

 

Unbilled

 

 

Allowance
for Credit
Losses

 

 

Net

 

Net investment in leases

 

$

144

 

 

$

320

 

 

$

1,134

 

 

$

1,598

 

 

$

14,084

 

 

$

(167

)

 

$

15,515

 

Financed sales receivables

 

 

599

 

 

 

1,355

 

 

 

5,388

 

 

 

7,342

 

 

 

36,354

 

 

 

(976

)

 

 

42,720

 

Total

 

$

743

 

 

$

1,675

 

 

$

6,522

 

 

$

8,940

 

 

$

50,438

 

 

$

(1,143

)

 

$

58,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

 

(In thousands of U.S. Dollars)

 

Accrued
and
Current

 

 

30-89 Days

 

 

90+ Days

 

 

Billed

 

 

Unbilled

 

 

Allowance
for Credit
Losses

 

 

Net

 

Net investment in leases

 

$

143

 

 

$

132

 

 

$

825

 

 

$

1,100

 

 

$

12,619

 

 

$

(176

)

 

$

13,543

 

Financed sales receivables

 

 

959

 

 

 

729

 

 

 

6,190

 

 

 

7,878

 

 

 

41,439

 

 

 

(1,413

)

 

 

47,904

 

Total

 

$

1,102

 

 

$

861

 

 

$

7,015

 

 

$

8,978

 

 

$

54,058

 

 

$

(1,589

)

 

$

61,447

 

The following table provides information about the Company’s net investment in leases and financed sale receivables that are on nonaccrual status as of March 31, 2022 and December 31, 2021:

 

 

 

As of March 31, 2022

 

 

As of December 31, 2021

 

(In thousands of U.S. Dollars)

 

Recorded
Receivable

 

 

 

Allowance
for Credit
Losses

 

 

 

Net

 

 

 

Recorded
Receivable

 

 

 

Allowance
for Credit
Losses

 

 

 

Net

 

Net investment in leases

 

$

871

 

 

 

$

(304

)

 

 

$

567

 

 

 

$

871

 

 

 

$

(309

)

 

 

$

562

 

Net financed sales receivables

 

 

18,290

 

 

 

 

(9,208

)

 

 

 

9,082

 

 

 

 

8,642

 

 

 

 

(2,357

)

 

 

 

6,285

 

Total

 

$

19,161

 

 

 

$

(9,512

)

 

 

$

9,649

 

 

 

$

9,513

 

 

 

$

(2,666

)

 

 

$

6,847

 

The balances of net investment in leases and financed sale receivables that are on nonaccrual status as of March 31, 2022 include amounts due from exhibitors in Russia, Ukraine, and Belarus which were placed on nonaccrual status in the first quarter of 2022 as a result of the ongoing Russia-Ukraine conflict.

For the three months ended March 31, 2022, the Company recognized less than $0.1 million (2021 — less than $0.1 million) in Finance Income related to the net investment in leases with billed amounts past due. For the three months ended March 31, 2022 and 2021, the Company did not recognize Finance Income related to the net investment in leases on nonaccrual status. For the three months ended March 31, 2022, the Company recognized $0.7 million (2021 — $1.2 million) in Finance Income related to the financed sale receivables with billed amounts past due. For the three months ended March 31, 2022, the Company recognized $0.2 million (2021 — $0.2 million) in Finance Income related to the financed sales receivables on nonaccrual status.

The following tables summarize the activity in the allowance for credit losses related to the Company’s net investment in leases and financed sale receivables for the three months ended March 31, 2022 and 2021:

 

 

Three Months Ended March 31, 2022

 

 

 

Net Investment

 

 

Financed

 

(In thousands of U.S. Dollars)

 

in Leases

 

 

Sales Receivables

 

Beginning balance

 

$

798

 

 

$

5,414

 

Current period (reversal) provision, net

 

 

(93

)

 

 

5,708

 

Write-offs

 

 

—

 

 

 

—

 

Foreign exchange

 

 

1

 

 

 

13

 

Ending balance

 

$

706

 

 

$

11,135

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

Net Investment

 

 

Net Financed

 

(In thousands of U.S. Dollars)

 

in Leases

 

 

Sales Receivables

 

Beginning balance

 

$

557

 

 

$

7,274

 

Current period provision, net

 

 

27

 

 

 

227

 

Write-offs

 

 

—

 

 

 

—

 

Foreign exchange

 

 

(3

)

 

 

(10

)

Ending balance

 

$

581

 

 

$

7,491

 

For the three months ended March 31, 2022, the Company’s allowance for current expected credit losses related to its net investment in leases and financed sale receivables increased by $5.6 million principally due to reserves established against its receivables in Russia due to uncertainties associated with the ongoing Russia-Ukraine conflict, partially offset by the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets continues to improve.

Variable Consideration Receivables

In sale arrangements, variable consideration may become due to the Company from theater operators if certain annual minimum box office receipt thresholds are exceeded. Such variable consideration is recorded as revenue in the period when the sale is recognized and adjusted in future periods based on actual results and changes in estimates. Variable consideration is only recognized to the extent the Company believes there is not a risk of significant revenue reversal.

The following table summarizes the activity in the allowance for credit losses related to Variable Consideration Receivables for the three months ended March 31, 2022 and 2021:

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

(In thousands of U.S. Dollars)

 

Theater
Operators

 

 

Theater
Operators

 

Beginning balance

 

$

1,082

 

 

$

1,887

 

Current period (reversal) provision, net

 

 

(643

)

 

 

200

 

Write-offs

 

 

—

 

 

 

—

 

Foreign exchange

 

 

—

 

 

 

1

 

Ending balance

 

$

439

 

 

$

2,088

 

For the three months ended March 31, 2022, the Company’s allowance for current expected credit losses related to Variable Consideration Receivables decreased by $0.6 million principally due to the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets continues to improve.