Condensed Consolidated Statements of Operations Supplemental Information

9 Months Ended

Sep. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Condensed Consolidated Statements of Operations Supplemental Information

8.  Condensed Consolidated Statements of Operations Supplemental Information

(a) Selling Expenses

The Company defers direct selling costs such as sales commissions and other amounts related to its sales and sales-type lease arrangements until the related revenue is recognized. These costs and direct advertising and marketing, included in costs and expenses applicable to Revenues – Equipment and product sales, totaled $0.6 million and $1.5 million for the three and nine months ended September 30, 2019, respectively (2018 — $0.8 million and $2.0 million, respectively).

Film exploitation costs, including advertising and marketing, totaled $4.3 million and $18.4 million for the three and nine months ended September 30, 2019, respectively (2018 — $3.1 million and $15.7 million, respectively), and are recorded in costs and expenses applicable to revenues-services as incurred.

Commissions are recognized as costs and expenses applicable to Revenues – Rentals in the month they are earned. These costs totaled an expense of $0.3 million and a recovery of $0.3 million for the three and nine months ended September 30, 2019, respectively (2018 — expense of $0.4 million and $1.0 million, respectively). Direct advertising and marketing costs for each theater are charged to costs and expenses applicable to Revenues – Rentals as incurred. These costs totaled an expense of $0.5 million and $1.4 million for the three and nine months ended September 30, 2019, respectively (2018 — $0.5 million and $1.2 million, respectively).

(b) Foreign Exchange

Included in selling, general and administrative expenses for the three and nine months ended September 30, 2019 is a loss of $0.7 million and $1.1 million, respectively (2018 — gain of $0.4 million and loss of $0.7 million, respectively) for net foreign exchange gains/losses related to the translation of foreign currency denominated monetary assets and liabilities. See note 15(d) for additional information.

(c) Collaborative Arrangements

Joint Revenue Sharing Arrangements

In a joint revenue sharing arrangement, the Company receives a portion of a theater’s box office and in certain arrangements a portion of concession revenues and a small upfront or initial payment, in exchange for placing a theater system at the theater operator’s venue. 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 equipment under joint revenue sharing arrangements 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 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 extended warranty throughout the term. The customer is responsible for obtaining insurance coverage for the theater systems commencing on the date specified in the arrangement’s shipping terms and ending on the date the theater systems are delivered back to the Company.

The Company has signed joint revenue sharing agreements with 39 exhibitors for a total of 1,243 theater systems, of which 841 theaters were operating as at September 30, 2019, the terms of which are similar in nature, rights and obligations. The accounting policy for the Company’s joint revenue sharing arrangements is disclosed in note 2(m) of the Company’s 2018 Form 10-K.

Amounts attributable to transactions arising between the Company and its customers under joint revenue sharing arrangements are included in Revenue — Equipment and product sales and Revenue — Rentals and for the three and nine months ended September 30, 2019 amounted to $17.9 million and $66.1 million, respectively (2018 — $17.0 million and $60.6 million, respectively).

IMAX DMR

In an IMAX DMR arrangement, the Company transforms conventional motion pictures into the Company’s large screen format, allowing the release of Hollywood content to the global IMAX theater network. In a typical IMAX DMR film arrangement, the Company will absorb its costs for the digital re-mastering and then recoup this cost from a percentage of the box-office receipts of the film, which in recent years has averaged approximately 12.5% outside of Greater China and a lower percentage for certain films within Greater China. The Company does not typically hold distribution rights or the copyright to these films.

For the nine months ended September 30, 2019, the majority of IMAX DMR revenue was earned from the exhibition of 59 IMAX DMR films (2018 – 58) throughout the IMAX theater network. The accounting policy for the Company’s IMAX DMR arrangements is disclosed in note 2(m) of the Company’s 2018 Form 10-K.

Amounts attributable to transactions arising between the Company and its customers under IMAX DMR arrangements are included in Revenues – Services and for the three and nine months ended September 30, 2019 amounted to $26.7 million and $93.9 million, respectively (2018 — $22.4 million and $85.6 million, respectively).

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 at September 30, 2019, the Company has two significant co-produced film arrangements which represent the VIE total assets balance of $11.3 million and liabilities balance of $15.6 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 2(a) and 2(m) of the Company’s 2018 Form 10-K.

For the three and nine months ended September 30, 2019, expenses totaling $0.1 million and $0.3 million, respectively (2018 — expense of $0.2 million and $0.4 million, respectively) attributable to transactions between the Company and other parties involved in the production of the films have been included in cost and expenses applicable to Revenues – Services.

For the three and nine months ended September 30, 2019, revenues of $nil and $nil, respectively (2018 —$nil and $0.4 million, respectively) and costs and expenses applicable to revenues of $nil and $nil, respectively (2018 — $nil and $0.5 million, respectively) attributable to this collaborative arrangement have been recorded in Revenue – Services and Costs and expenses applicable to Revenues – Services, respectively.