1. Description of the Business
IMAX Corporation, together with its consolidated wholly-owned subsidiaries (the “Company”), is an entertainment technology company specializing in digital and film-based motion picture technologies, whose principal activities are the:
• design, manufacture, sale and lease of proprietary theater systems for IMAX theaters principally owned and operated by commercial and institutional customers located in 62 countries as at December 31, 2014;
• production, digital re-mastering, post-production and/or distribution of certain films shown throughout the IMAX theater network;
• provision of other services to the IMAX theater network, including ongoing maintenance and extended warranty services for IMAX theater systems;
• operation of certain theaters primarily in the United States; and
• other activities, which includes short-term rental of cameras and aftermarket sales of projector system components.
The Company refers to all theaters using the IMAX theater system as “IMAX theaters.”
The Company's revenues from equipment and product sales include the sale and sales-type leasing of its theater systems and sales of their associated parts and accessories, contingent rentals on sales-type leases and contingent additional payments on sales transactions.
The Company's revenues from services include the provision of maintenance and extended warranty services, digital re-mastering services, film production and film post-production services, film distribution, and the operation of certain theaters.
The Company's rentals include revenues from the leasing of its theater systems that are operating leases, contingent rentals on operating leases, joint revenue sharing arrangements and the rental of the Company's cameras and camera equipment.
The Company's finance income represents interest income arising from the sales-type leases and financed sales of the Company's theater systems.
The Company's other revenues include the settlement of contractual obligations with customers.
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Significant accounting policies are summarized as follows:
The Company prepares its consolidated financial statements in accordance with U.S. GAAP.
(a) Basis of Consolidation
The consolidated financial statements include the accounts of the Company together with its wholly-owned subsidiaries, except for subsidiaries which the Company has identified as variable interest entities (“VIEs”) where the Company is not the primary beneficiary.
The Company has evaluated its various variable interests to determine whether they are VIEs as required by the Consolidation Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC” or “Codification”).
The Company has 10 film production companies that are VIEs. For 4 of the Company's film production companies, the Company has determined that it is the primary beneficiary of these entities as the Company has the power to direct the activities of the respective VIE that most significantly impact the respective VIE's economic performance and has the obligation to absorb losses of the VIE that could potentially be significant to the respective VIE or the right to receive benefits from the respective VIE that could potentially be significant to the respective VIE. These consolidated production companies have total assets of $7.7 million (December 31, 2013 — $nil) and total liabilities of $0.3 million as at December 31, 2014 (December 31, 2013 — $nil). The majority of these consolidated assets are held by the IMAX Original Film Fund (the “Film Fund”) as described in note 22(b). For the other 6 film production companies which are VIEs, the Company did not consolidate these film entities since it does not have the power to direct activities and does not absorb the majority of the expected losses or expected residual returns. The Company equity accounts for these entities. As at December 31, 2014, these 6 VIEs have total assets and total liabilities of $0.4 million (December 31, 2013 — $5.2 million). Earnings of the investees included in the Company's consolidated statement of operations amounted to $nil in 2014 (2013 — $nil). The carrying value of these investments in VIEs that are not consolidated is $nil at December 31, 2014 (December 31, 2013 — $nil). A loss in value of an investment other than a temporary decline is recognized as a charge to the consolidated statement of operations. The Company's exposure, which is determined based on the level of funding contributed by the Company and the development stage of the respective film, is $nil at December 31, 2014 (2013 — $1.5 million).
The Company accounts for investments in new business ventures using the guidance of the FASB ASC 323 “Investments – Equity Method and Joint Ventures” (“ASC 323”) and ASC 320 “Investments in Debt and Equity Securities” (“ASC 320”), as appropriate.
All significant intercompany accounts and transactions, including all unrealized intercompany profits on transactions with equity-accounted investees, have been eliminated.
In 2013, the Company determined that the functional currency of one of its wholly-owned subsidiaries had changed from the Company's reporting currency to the currency of the nation is which it is domiciled. As a result, in accordance with the FASB ASC 830 “Foreign Currency Matters”, the adjustment attributable to the current-rate translation of non-monetary assets as of the date of the change was reported in other comprehensive income.
(b) Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could be materially different from these estimates. Significant estimates made by management include, but are not limited to: selling prices associated with the individual elements in multiple element arrangements; residual values of leased theater systems; economic lives of leased assets; allowances for potential uncollectibility of accounts receivable, financing receivables and net investment in leases; provisions for inventory obsolescence; ultimate revenues for film assets; impairment provisions for film assets, long-lived assets and goodwill; depreciable lives of property, plant and equipment; useful lives of intangible assets; pension plan assumptions; accruals for contingencies including tax contingencies; valuation allowances for deferred income tax assets; and, estimates of the fair value of stock-based payment awards.
(c) Cash and Cash Equivalents
The Company considers all highly liquid investments convertible to a known amount of cash and with an original maturity to the Company of three months or less to be cash equivalents.
(d) Accounts Receivable and Financing Receivables
Allowances for doubtful accounts receivable are based on the Company's assessment of the collectibility of specific customer balances, which is based upon a review of the customer's credit worthiness, past collection history and the underlying asset value of the equipment, where applicable. Interest on overdue accounts receivable is recognized as income as the amounts are collected.
For trade accounts receivable that have characteristics of both a contractual maturity of one year or less, and arose from the sale of other goods or services, the Company charges off the balance against the allowance for doubtful accounts when it is known that a provided amount will not be collected.
The Company monitors the performance of the theaters to which it has leased or sold theater systems which are subject to ongoing payments. When facts and circumstances indicate that there is a potential impairment in the net investment in lease or a financing receivable, the Company will evaluate the potential outcome of either renegotiations involving changes in the terms of the receivable or defaults on the existing lease or financed sale agreements. The Company will record a provision if it is considered probable that the Company will be unable to collect all amounts due under the contractual terms of the arrangement or a renegotiated lease amount will cause a reclassification of the sales-type lease to an operating lease.
When the net investment in lease or the financing receivable is impaired, the Company will recognize a provision for the difference between the carrying value in the investment and the present value of expected future cash flows discounted using the effective interest rate for the net investment in the lease or the financing receivable. If the Company expects to recover the theater system, the provision is equal to the excess of the carrying value of the investment over the fair value of the equipment.
When the minimum lease payments are renegotiated and the lease continues to be classified as a sales-type lease, the reduction in payments is applied to reduce unearned finance income.
These provisions are adjusted when there is a significant change in the amount or timing of the expected future cash flows or when actual cash flows differ from cash flow previously expected.
Once a net investment in lease or financing receivable is considered impaired, the Company does not recognize interest income until the collectibility issues are resolved. When finance income is not recognized, any payments received are applied against outstanding gross minimum lease amounts receivable or gross receivables from financed sales. Once the collectability issues are resolved, the Company will once again commence the recognition of interest income.
(e) Inventories
Inventories are carried at the lower of cost, determined on an average cost basis, and net realizable value except for raw materials, which are carried at the lower of cost and replacement cost. Finished goods and work-in-process include the cost of raw materials, direct labor, theater design costs, and an applicable share of manufacturing overhead costs.
The costs related to theater systems under sales and sales-type lease arrangements are relieved from inventory to costs and expenses applicable to revenues-equipment and product sales when revenue recognition criteria are met. The costs related to theater systems under operating lease arrangements and joint revenue sharing arrangements are transferred from inventory to assets under construction in property, plant and equipment when allocated to a signed joint revenue sharing arrangement or when the arrangement is first classified as an operating lease.
The Company records provisions for excess and obsolete inventory based upon current estimates of future events and conditions, including the anticipated installation dates for the current backlog of theater system contracts, technological developments, signings in negotiation, growth prospects within the customers' ultimate marketplace and anticipated market acceptance of the Company's current and pending theater systems.
Finished goods inventories can contain theater systems for which title has passed to the Company's customer (as the theater system has been delivered to the customer) but the revenue recognition criteria as discussed in note 2(m) have not been met.
(f) Film Assets
Costs of producing films, including labor, allocated overhead, capitalized interest, and costs of acquiring film rights are recorded as film assets and accounted for in accordance with Entertainment-Films Topic of the FASB ASC. Production financing provided by third parties that acquire substantive rights in the film is recorded as a reduction of the cost of the production. Film assets are amortized and participation costs are accrued using the individual-film-forecast method in the same ratio that current gross revenues bear to current and anticipated future ultimate revenues. Estimates of ultimate revenues are prepared on a title-by-title basis and reviewed regularly by management and revised where necessary to reflect the most current information. Ultimate revenues for films include estimates of revenue over a period not to exceed ten years following the date of initial release.
Film exploitation costs, including advertising costs, are expensed as incurred.
Costs, including labor and allocated overhead, of digitally re-mastering films where the copyright is owned by a third party and the Company shares in the revenue of the third party are included in film assets. These costs are amortized using the individual-film-forecast method in the same ratio that current gross revenues bear to current and anticipated future ultimate revenues from the re-mastered film.
The recoverability of film assets is dependent upon commercial acceptance of the films. If events or circumstances indicate that the recoverable amount of a film asset is less than the unamortized film costs, the film asset is written down to its fair value. The Company determines the fair value of its film assets using a discounted cash flow model.
(g) Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives as follows:
Theater system components (1) — over the equipment's anticipated useful life (7 to 20 years)
Camera equipment — 5 to 10 years
Buildings — 20 to 25 years
Office and production equipment — 3 to 5 years
Leasehold improvements — over the shorter of the initial term of the underlying leases plus any
reasonably assured renewal terms, and the useful life of the asset
__________
(1) includes equipment under joint revenue sharing arrangements.
Equipment and components allocated to be used in future operating leases and joint revenue sharing arrangements, as well as direct labor costs and an allocation of direct production costs, are included in assets under construction until such equipment is installed and in working condition, at which time the equipment is depreciated on a straight-line basis over the lesser of the term of the joint revenue sharing arrangement and the equipment's anticipated useful life.
The Company reviews the carrying values of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent when testing for, and measuring for, impairment. In performing its review of recoverability, the Company estimates the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized in the consolidated statements of operations. Measurement of the impairment loss is based on the excess of the carrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows.
A liability for the fair value of an asset retirement obligation associated with the retirement of tangible long-lived assets and the associated asset retirement costs are recognized in the period in which the liability and costs are incurred if a reasonable estimate of fair value can be made using a discounted cash flow model. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and subsequently amortized over the asset's useful life. The liability is accreted over the period to expected cash outflows.
(h) Other Assets
Other assets include insurance recoverable, deferred charges on debt financing, deferred selling costs that are direct and incremental to the acquisition of sales contracts, foreign currency derivatives, lease incentives and investments in new business ventures.
Costs of debt financing are deferred and amortized over the term of the debt using the effective interest method.
Selling costs related to an arrangement incurred prior to recognition of the related revenue are deferred and expensed to costs and expenses applicable to revenues upon: (i) recognition of the contract's theater system revenue; or (ii) abandonment of the sale arrangement.
Foreign currency derivatives are accounted for at fair value using quoted prices in closed exchanges (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy).
The Company may provide lease incentives to certain exhibitors which are essential to entering into the respective lease arrangement. Lease incentives include payments made to or on behalf of the exhibitor. These lease incentives are recognized as a reduction in rental revenue on a straight-line basis over the term of the lease.
Investments in new business ventures are accounted for using ASC 323 as described in note 2(a). The Company currently accounts for its 10.1% investment in 3net, a 3D television channel operated by a limited liability corporation owned by the Company and its joint venture investment with TCL Multimedia Technology Holdings Limited, using the equity method of accounting. The Company accounts for in-kind contributions to its equity investment in accordance with ASC 845 “Non-Monetary Transactions” (“ASC 845”) whereby if the fair value of the asset or assets contributed is greater than the carrying value a partial gain shall be recognized.
The Company's investment in debt securities is classified as an available-for-sale investment in accordance with ASC 320. Unrealized holding gains and losses for this investment is excluded from earnings and reported in other comprehensive income until realized. Realization occurs upon sale of a portion of or the entire investment. The investment is impaired if the fair value is less than cost, which is assessed in each reporting period. When the Company intends to sell a specifically identified beneficial interest, a write-down for other-than-temporary impairment shall be recognized in earnings.
The Company's investment in preferred shares, which meets the criteria for classification as an equity security in accordance with ASC 325, is accounted for at cost. The Company records the related warrants at fair value upon recognition date. Warrants are recognized over the term of the agreement.
(i) Goodwill
Goodwill represents the excess of purchase price over the fair value of net identifiable assets acquired in a purchase business combination. Goodwill is not subject to amortization and is tested for impairment annually, or more frequently if events or circumstances indicate that the asset might be impaired. The Company performs a qualitative assessment of its reporting units and certain select quantitative calculations against its current long range plan to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. The Company first assesses certain qualitative factors to determine whether the existence of events or circumstances leads to determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carry amount, then performing the two-step impairment test is unnecessary. When necessary, impairment of goodwill is tested at the reporting unit level by comparing the reporting unit's carrying amount, including goodwill, to the fair value of the reporting unit. The fair value of the reporting unit is estimated using a discounted cash flow approach. If the carrying amount of the reporting unit exceeds its fair value, then a second step is performed to measure the amount of impairment loss, if any, by comparing the fair value of each identifiable asset and liability in the reporting unit to the total fair value of the reporting unit. Any impairment loss is expensed in the consolidated statement of operations and is not reversed if the fair value subsequently increases.
(j) Other Intangible Assets
Patents, trademarks and other intangibles are recorded at cost and are amortized on a straight-line basis over estimated useful lives ranging from 4 to 10 years except, for intangible assets that have an identifiable pattern of consumption of the economic benefit of the asset, which are amortized over the consumption pattern.
The Company reviews the carrying values of its other intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent when testing for, and measuring for, impairment. In performing its review for recoverability, the Company estimates the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized in the consolidated statement of operations. Measurement of the impairment loss is based on the excess of the carrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows.
(k) Deferred Revenue
Deferred revenue represents cash received prior to revenue recognition criteria being met for theater system sales or leases, film contracts, maintenance and extended warranty services, film related services and film distribution.
(l) Income Taxes
Income taxes are accounted for under the liability method whereby deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the accounting and tax bases of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates or laws is recognized in the consolidated statement of operations in the period in which the change is enacted. Investment tax credits are recognized as a reduction of income tax expense.
The Company assesses realization of deferred income tax assets and, based on all available evidence, concludes whether it is more likely than not that the net deferred income tax assets will be realized. A valuation allowance is provided for the amount of deferred income tax assets not considered to be realizable.
The Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, the Company may incur additional tax expense based upon the outcomes of such matters. In addition, when applicable, the Company adjusts tax expense to reflect the Company's ongoing assessments of such matters which require judgment and can materially increase or decrease its effective rate as well as impact operating results. The Company provides for such exposures in accordance with the Income Taxes Topic of the FASB ASC.
(m) Revenue Recognition
Multiple Element Arrangements
The Company's revenue arrangements with certain customers may involve multiple elements consisting of a theater system (projector, sound system, screen system and, if applicable, 3D glasses cleaning machine); services associated with the theater system including theater design support, supervision of installation, and projectionist training; a license to use of the IMAX brand; 3D glasses; maintenance and extended warranty services; and licensing of films. The Company evaluates all elements in an arrangement to determine what are considered deliverables for accounting purposes and which of the deliverables represent separate units of accounting based on the applicable accounting guidance in the Leases Topic of the FASB ASC; the Guarantees Topic of the FASB ASC; the Entertainment – Films Topic of FASB ASC; and the Revenue Recognition Topic of the FASB. If separate units of accounting are either required under the relevant accounting standards or determined to be applicable under the Revenue Recognition Topic, the total consideration received or receivable in the arrangement is allocated based on the applicable guidance in the above noted standards.
Theater Systems
The Company has identified the projection system, sound system, screen system and, if applicable, 3D glasses cleaning machine, theater design support, supervision of installation, projectionist training and the use of the IMAX brand to be a single deliverable and a single unit of accounting (the “System Deliverable”). When an arrangement does not include all the elements of a System Deliverable, the elements of the System Deliverable included in the arrangement are considered by the Company to be a single deliverable and a single unit of accounting. The Company is not responsible for the physical installation of the equipment in the customer's facility; however, the Company supervises the installation by the customer. The customer has the right to use the IMAX brand from the date the Company and the customer enter into an arrangement.
The Company's System Deliverable arrangements involve either a lease or a sale of the theater system. Consideration for the System Deliverable, other than for those delivered pursuant to joint revenue sharing arrangements, consist of upfront or initial payments made before and after the final installation of the theater system equipment and ongoing payments throughout the term of the lease or over a period of time, as specified in the arrangement. The ongoing payments are the greater of an annual fixed minimum amount or a certain percentage of the theater box-office. Amounts received in excess of the annual fixed minimum amounts are considered contingent payments. The Company's arrangements are non-cancellable, unless the Company fails to perform its obligations. In the absence of a material default by the Company, there is no right to any remedy for the customer under the Company's arrangements. If a material default by the Company exists, the customer has the right to terminate the arrangement and seek a refund only if the customer provides notice to the Company of a material default and only if the Company does not cure the default within a specified period.
For arrangements entered into or materially modified after January 1, 2011, consideration is allocated to each unit of accounting based on the unit's relative selling prices. The Company uses vender-specific objective evidence of selling price (VSOE) when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. VSOE is established for the Company's System Deliverable, maintenance and extended warranty services and film license arrangements. The Company uses a best estimate of selling price (BESP) for units of accounting that do not have VSOE or third party evidence of selling price. The Company determines BESP for a deliverable by considering multiple factors including the Company's historical pricing practices, product class, market competition and geography.
Sales Arrangements
For arrangements qualifying as sales, the revenue allocated to the System Deliverable is recognized in accordance with the Revenue Recognition Topic of the FASB ASC, when all of the following conditions have been met: (i) the projector, sound system and screen system have been installed and are in full working condition, (ii) the 3D glasses cleaning machine, if applicable, has been delivered, (iii) projectionist training has been completed and (iv) the earlier of (a) receipt of written customer acceptance certifying the completion of installation and run-in testing of the equipment and the completion of projectionist training or (b) public opening of the theater, provided there is persuasive evidence of an arrangement, the price is fixed or determinable and collectibility is reasonably assured.
The initial revenue recognized consists of the initial payments received and the present value of any future initial payments and fixed minimum ongoing payments that have been attributed to this unit of accounting. Contingent payments in excess of the fixed minimum ongoing payments are recognized when reported by theater operators, provided collectibility is reasonably assured.
The Company has also agreed, on occasion, to sell equipment under lease or at the end of a lease term. Consideration agreed to for these lease buyouts is included in revenues from equipment and product sales, when persuasive evidence of an arrangement exists, the fees are fixed or determinable, collectibility is reasonably assured and title to the theater system passes from the Company to the customer.
Lease Arrangements
The Company uses the Leases Topic of FASB ASC to evaluate whether an arrangement is a lease within the scope of the accounting standard. Arrangements not within the scope of the accounting standard are accounted for either as a sales or services arrangement, as applicable.
For lease arrangements, the Company determines the classification of the lease in accordance with the Lease Topic of FASB ASC. A lease arrangement that transfers substantially all of the benefits and risks incident to ownership of the equipment is classified as a sales-type lease based on the criteria established by the accounting standard; otherwise the lease is classified as an operating lease. Prior to commencement of the lease term for the equipment, the Company may modify certain payment terms or make concessions. If these circumstances occur, the Company reassesses the classification of the lease based on the modified terms and conditions.
For sales-type leases, the revenue allocated to the System Deliverable is recognized when the lease term commences, which the Company deems to be when all of the following conditions have been met: (i) the projector, sound system and screen system have been installed and are in full working condition; (ii) the 3D glasses cleaning machine, if applicable, has been delivered; (iii) projectionist training has been completed; and (iv) the earlier of (a) receipt of the written customer acceptance certifying the completion of installation and run-in testing of the equipment and the completion of projectionist training or (b) public opening of the theater, provided collectibility is reasonably assured.
The initial revenue recognized for sales-type leases consists of the initial payments received and the present value of future initial payments and fixed minimum ongoing payments computed at the interest rate implicit in the lease. Contingent payments in excess of the fixed minimum payments are recognized when reported by theater operators, provided collectibility is reasonably assured.
For operating leases, initial payments and fixed minimum ongoing payments are recognized as revenue on a straight-line basis over the lease term. For operating leases, the lease term is considered to commence when all of the following conditions have been met: (i) the projector, sound system and screen system have been installed and in full working condition; (ii) the 3D glasses cleaning machine, if applicable, has been delivered; (iii) projectionist training has been completed; and (iv) the earlier of (a) receipt of written customer acceptance certifying the completion of installation and run-in testing of the equipment and the completion of projectionist training or (b) public opening of the theater. Contingent payments in excess of fixed minimum ongoing payments are recognized as revenue when reported by theater operators, provided collectibility is reasonably assured.
Revenues from joint revenue sharing arrangements with upfront payments that qualify for classification as sales and sales-type leases are recognized in accordance with the sales and sales-type lease criteria discussed above. Contingent revenues from joint revenue sharing arrangements are recognized as box-office results and concessions revenues are reported by the theater operator, provided collectibility is reasonably assured.
Finance Income
Finance income is recognized over the term of the sales-type lease or financed sales receivable, provided collectibility is reasonably assured. Finance income recognition ceases when the Company determines that the associated receivable is not collectible.
Finance income is suspended when the Company identifies a theater that is delinquent, non-responsive or not negotiating in good faith with the Company. Once the collectability issues are resolved the Company will resume recognition of finance income.
Improvements and Modifications
Improvements and modifications to the theater system after installation are treated as separate revenue transactions, if and when the Company is requested to perform these services. Revenue is recognized for these services when the performance of the services has been completed, provided there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectibility is reasonably assured.
Cost of Equipment and Product Sales
Theater systems and other equipment subject to sales-type leases and sales arrangements includes the cost of the equipment and costs related to project management, design, delivery and installation supervision services as applicable. The costs related to theater systems under sales and sales-type lease arrangements are relieved from inventory to costs and expenses applicable to revenues-equipment and product sales when revenue recognition criteria are met. In addition, the Company defers direct selling costs such as sales commissions and other amounts related to these contracts until the related revenue is recognized. These costs included in costs and expenses applicable to revenues-equipment and product sales, totaled $2.5 million in 2014 (2013 – $2.5 million, 2012 – $2.7 million). The cost of equipment and product sales prior to direct selling costs was $34.5 million in 2014 (2013 – $35.0 million, 2012 – $34.8 million). The Company may have warranty obligations at or after the time revenue is recognized which require replacement of certain parts that do not affect the functionality of the theater system or services. The costs for warranty obligations for known issues are accrued as charges to costs and expenses applicable to revenues-equipment and product sales at the time revenue is recognized based on the Company's past historical experience and cost estimates.
Cost of Rentals
For theater systems and other equipment subject to an operating lease or placed in a theater operators' venue under a joint revenue sharing arrangement, the cost of equipment and those costs that result directly from and are essential to the arrangement, is included within property, plant and equipment. Depreciation and impairment losses, if any, are included in cost of rentals based on the accounting policy set out in note 2(g). Commissions are recognized as costs and expenses applicable to revenues-rentals in the month they are earned, which is typically the month of installation. These costs totaled $1.1 million in 2014 (2013 — $1.9 million, 2012 — $1.5 million). Direct advertising and marketing costs for each theater are charged to costs and expenses applicable to revenues-rentals as incurred. These costs totaled $1.5 million in 2014 (2013 — $1.7 million, 2012 — $1.9 million).
Terminations, Consensual Buyouts and Concessions
The Company enters into theater system arrangements with customers that contain customer payment obligations prior to the scheduled installation of the theater system. During the period of time between signing and the installation of the theater system, which may extend several years, certain customers may be unable to, or may elect not to, proceed with the theater system installation for a number of reasons including business considerations, or the inability to obtain certain consents, approvals or financing. Once the determination is made that the customer will not proceed with installation, the arrangement may be terminated under the default provisions of the arrangement or by mutual agreement between the Company and the customer (a “consensual buyout”). Terminations by default are situations when a customer does not meet the payment obligations under an arrangement and the Company retains the amounts paid by the customer. Under a consensual buyout, the Company and the customer agree, in writing, to a settlement and to release each other of any further obligations under the arrangement or an arbitrated settlement is reached. Any initial payments retained or additional payments received by the Company are recognized as revenue when the settlement arrangements are executed and the cash is received, respectively. These termination and consensual buyout amounts are recognized in Other revenues.
In addition, the Company could agree with customers to convert their obligations for other theater system configurations that have not yet been installed to arrangements to acquire or lease the IMAX digital theater system. The Company considers these situations to be a termination of the previous arrangement and origination of a new arrangement for the IMAX digital theater system. For all arrangements entered into or modified prior to the date of adoption of the amended FASB ASC 605-25, the Company continues to defer an amount of any initial fees received from the customer such that the aggregate of the fees deferred and the net present value of the future fixed initial and ongoing payments to be received from the customer equals the selling price of the IMAX digital theater system to be leased or acquired by the customer. Any residual portion of the initial fees received from the customer for the terminated theater system is recorded in other revenues at the time when the obligation for the original theater system is terminated and the new theater system arrangement is signed. Under the amended FASB ASC 605-25, for all arrangements entered into or materially modified after the date of adoption, the total arrangement consideration to be received is allocated on a relative selling price basis to the digital upgrade and the termination of the previous theater system. The arrangement consideration allocated to the termination of the existing arrangement is recorded in Other revenues at the time when the obligation for the original theater system is terminated and the new theater system arrangement is signed.
The Company may offer certain incentives to customers to complete theater system transactions including payment concessions or free services and products such as film licenses or 3D glasses. Reductions in, and deferral of, payments are taken into account in determining the sales price either by a direct reduction in the sales price or a reduction of payments to be discounted in accordance with the Leases or Interests Topic of the FASB ASC. Free products and services are accounted for as separate units of accounting. Other consideration given by the Company to customers are accounted for in accordance with the Revenue Recognition Topic of the FASB ASC.
Maintenance and Extended Warranty Services
Maintenance and extended warranty services may be provided under a multiple element arrangement or as a separately priced contract. Revenues related to these services are deferred and recognized on a straight-line basis over the contract period and are recognized in Services revenues. Maintenance and extended warranty services includes maintenance of the customer's equipment and replacement parts. Under certain maintenance arrangements, maintenance services may include additional training services to the customer's technicians. All costs associated with this maintenance and extended warranty program are expensed as incurred. A loss on maintenance and extended warranty services is recognized if the expected cost of providing the services under the contracts exceeds the related deferred revenue.
Film Production and IMAX DMR Services
In certain film arrangements, the Company produces a film financed by third parties whereby the third party retains the copyright and the Company obtains exclusive distribution rights. Under these arrangements, the Company is entitled to receive a fixed fee or to retain as a fee the excess of funding over cost of production (the “production fee”). The third parties receive a portion of the revenues received by the Company from distributing the film, which is charged to costs and expenses applicable to revenues-services. The production fees are deferred, and recognized as a reduction in the cost of the film based on the ratio of the Company's distribution revenues recognized in the current period to the ultimate distribution revenues expected from the film. Film exploitation costs, including advertising and marketing totaled $7.1 million in 2014 (2013 — $4.2 million, 2012 — $3.3 million) and are recorded in costs and expenses applicable to revenues-services as incurred.
Revenue from film production services where the Company does not hold the associated distribution rights are recognized in Services revenues when performance of the contractual service is complete, provided there is persuasive evidence of an agreement, the fee is fixed or determinable and collectibility is reasonably assured.
Revenues from digitally re-mastering (IMAX DMR) films where third parties own or hold the copyrights and the rights to distribute the film are derived in the form of processing fees and recoupments calculated as a percentage of box-office receipts generated from the re-mastered films. Processing fees are recognized as Services revenues when the performance of the related re-mastering service is completed provided there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectibility is reasonably assured. Recoupments, calculated as a percentage of box-office receipts, are recognized as Services revenue when box-office receipts are reported by the third party that owns or holds the related film rights, provided collectibility is reasonably assured.
Losses on film production and IMAX DMR services are recognized as costs and expenses applicable to revenues-services in the period when it is determined that the Company's estimate of total revenues to be realized by the Company will not exceed estimated total production costs to be expended on the film production and the cost of IMAX DMR services.
Film Distribution
Revenue from the licensing of films is recognized in Services revenues when persuasive evidence of a licensing arrangement exists, the film has been completed and delivered, the license period has begun, the fee is fixed or determinable and collectibility is reasonably assured. When license fees are based on a percentage of box-office receipts, revenue is recognized when box-office receipts are reported by exhibitors, provided collectibility is reasonably assured. Film exploitation costs, including advertising and marketing, totaled $0.6 million in 2014 (2013 — $0.4 million, 2012 — $1.5 million) and are recorded in costs and expenses applicable to revenues-services as incurred.
Film Post-Production Services
Revenues from post-production film services are recognized in Services revenues when performance of the contracted services is complete provided there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectibility is reasonably assured.
Other
The Company recognizes revenue in Services revenues from its owned and operated theaters resulting from box-office ticket and concession sales as tickets are sold, films are shown and upon the sale of various concessions. The sales are cash or credit card transactions with theatergoers based on fixed prices per seat or per concession item.
In addition, the Company enters into commercial arrangements with third party theater owners resulting in the sharing of profits and losses which are recognized in Services revenues when reported by such theaters. The Company also provides management services to certain theaters and recognizes revenue over the term of such services.
Revenues on camera rentals are recognized in Rental revenues over the rental period.
Revenue from the sale of 3D glasses is recognized in Equipment and product sales revenue when the 3D glasses have been delivered to the customer.
Other service revenues are recognized in Service revenues when the performance of contracted services is complete.
(n) Research and Development
Research and development costs are expensed as incurred and primarily include projector and sound parts, labor, consulting fees, allocation of overheads and other related materials which pertain to the Company's development of ongoing product and services. Research and development costs pertaining to fixed and intangible assets that have alternative future uses are capitalized and amortized under their related policies.
(o) Foreign Currency Translation
Monetary assets and liabilities of the Company's operations which are denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the end of the period. Non-monetary items are translated at historical exchange rates. Revenue and expense transactions are translated at exchange rates prevalent at the transaction date. In 2013, the Company determined that the functional currency of one of its wholly-owned subsidiaries had changed from the Company's reporting currency to the currency of the nation in which it is domiciled. As a result, in accordance with the FASB ASC 830 “Foreign Currency Matters”, the adjustment attributable to current-rate translation of non-monetary assets as of the date of the change was reported in other comprehensive income (“OCI”). The functional currency of its other wholly-owned subsidiaries continues to be the United States dollar. Foreign exchange translation gains and losses are included in the determination of earnings in the period in which they arise.
Foreign currency derivatives are recognized and measured in the balance sheet at fair value. Changes in the fair value (gains or losses) are recognized in the consolidated statement of operations except for derivatives designated and qualifying as foreign currency hedging instruments. For foreign currency hedging instruments, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in other comprehensive income and reclassified to the consolidated statement of operations when the forecasted transaction occurs. Any ineffective portion is recognized immediately in the consolidated statement of operations.
(p) Stock-Based Compensation
The Company's stock-based compensation generally includes stock options, restricted share units (“RSUs”) and stock appreciation rights (“SARs”). Stock-based compensation is recognized in accordance with the FASB ASC Topic 505, “Equity” and Topic 718, “Compensation-Stock Compensation.”
The Company estimates the fair value of stock option and SAR awards on the date of grant using fair value measurement techniques such as an option-pricing model. The fair value of RSU awards is equal to the closing price of the Company's common stock on the date of grant. The value of the portion of the employee award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's consolidated statement of operations.
The Company utilizes a lattice-binomial option-pricing model (“Binomial Model”) to determine the fair value of stock option and SAR awards. The fair value determined by the Binomial Model is affected by the Company's stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company's expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The Binomial Model also considers the expected exercise multiple which is the multiple of exercise price to grant price at which exercises are expected to occur on average. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company's employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in management's opinion, the Binomial Model best provides a fair measure of the fair value of the Company's employee stock options. See note 14(c) for the assumptions used to determine the fair value of stock-based payment awards.
Stock-based compensation expense includes compensation cost for employee stock-based payment awards granted and all modified, repurchased or cancelled employee awards. In addition, compensation expense includes the compensation cost, based on the grant-date fair value calculated for pro forma disclosures under ASC 718-10-55, for the portion of awards for which required service had not been rendered that were outstanding. Compensation expense for these employee awards is recognized using the straight-line single-option method. As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been adjusted for estimated forfeitures. The Codification requires forfeitures to be estimated at the time of grant and revised, if subsequent information indicates that the actual forfeitures are likely to be different from previous estimates. The Company utilizes the market yield on U.S. treasury securities (also known as nominal rate) over the contractual term of the instrument being issued.
Stock Options
As the Company stratifies its employees into homogeneous groups in order to calculate fair value under the Binomial Model, ranges of assumptions used are presented for expected option life and annual termination probability. The Company uses historical data to estimate option exercise and employee termination within the valuation model; various groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected volatility rate is estimated based on a blended volatility method which takes into consideration the Company's historical share price volatility, the Company's implied volatility which is implied by the observed current market prices of the Company's traded options and the Company's peer group volatility. The Company utilizes an expected term method to determine expected option life based on such data as vesting periods of awards, historical data that includes past exercise and post-vesting cancellations and stock price history.
The Company's policy is to issue new shares from treasury to satisfy stock options which are exercised.
Restricted Share Units
The Company's RSUs have been classified as equity in accordance with Topic 505. The fair value of RSU awards is equal to the closing price of the Company's common stock on the date of grant.
Stock Appreciation Rights
The Company's SARs have been classified as liabilities in accordance with Topic 505. The Company utilizes the Binomial Model to determine the value of these instruments settleable in cash.
Awards to Non-Employees
Stock-based awards for services provided by non-employees are accounted for based on the fair value of the services received or the stock-based award, whichever is more reliably determinable. If the fair value of the stock-based award is used, the fair value is measured at the date of the award and remeasured until the earlier of the date that the Company has a performance commitment from the non-employees, the date performance is completed, or the date the awards vest.
(q) Pension Plans and Postretirement Benefits
The Company has a defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”). As the Company's SERP is unfunded, as at December 31, 2014, a liability is recognized for the projected benefit obligation.
Assumptions used in computing the defined benefit obligations are reviewed annually by management in consultation with its actuaries and adjusted for current conditions. Actuarial gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefits cost are recognized as a component of other comprehensive income. Amounts recognized in accumulated other comprehensive income including unrecognized actuarial gains or losses and prior service costs are adjusted as they are subsequently recognized in the consolidated statement of operations as components of net periodic benefit cost. Prior service costs resulting from the pension plan inception or amendments are amortized over the expected future service life of the employees, cumulative actuarial gains and losses in excess of 10% of the projected benefit obligation are amortized over the expected average remaining service life of the employees, and current service costs are expensed when earned. The remaining weighted average future service life of the employee used in computing the defined benefit obligation for the year ended December 31, 2014 was 2.0 years.
For defined contribution pension plans, required contributions by the Company are recorded as an expense.
A liability is recognized for the unfunded accumulated benefit obligation of the postretirement benefits plan. Assumptions used in computing the accumulated benefit obligation are reviewed by management in consultation with its actuaries and adjusted for current conditions. Current service cost is recognized as incurred and actuarial gains and losses are recognized as a component of other comprehensive income (loss). Amounts recognized in accumulated other comprehensive income (loss) including unrecognized actuarial gains or losses are adjusted as they are subsequently recognized in the consolidated statement of operations as components of net periodic benefit cost.
(r) Guarantees
The FASB ASC Guarantees Topic requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of certain guarantees. Disclosures as required under the accounting guidance have been included in note 13(i).
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The consolidated financial statements include the accounts of the Company together with its wholly-owned subsidiaries, except for subsidiaries which the Company has identified as variable interest entities (“VIEs”) where the Company is not the primary beneficiary.
The Company has evaluated its various variable interests to determine whether they are VIEs as required by the Consolidation Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC” or “Codification”).
The Company has 10 film production companies that are VIEs. For 4 of the Company's film production companies, the Company has determined that it is the primary beneficiary of these entities as the Company has the power to direct the activities of the respective VIE that most significantly impact the respective VIE's economic performance and has the obligation to absorb losses of the VIE that could potentially be significant to the respective VIE or the right to receive benefits from the respective VIE that could potentially be significant to the respective VIE. These consolidated production companies have total assets of $7.7 million (December 31, 2013 — $nil) and total liabilities of $0.3 million as at December 31, 2014 (December 31, 2013 — $nil). The majority of these consolidated assets are held by the IMAX Original Film Fund (the “Film Fund”) as described in note 22(b). For the other 6 film production companies which are VIEs, the Company did not consolidate these film entities since it does not have the power to direct activities and does not absorb the majority of the expected losses or expected residual returns. The Company equity accounts for these entities. As at December 31, 2014, these 6 VIEs have total assets and total liabilities of $0.4 million (December 31, 2013 — $5.2 million). Earnings of the investees included in the Company's consolidated statement of operations amounted to $nil in 2014 (2013 — $nil). The carrying value of these investments in VIEs that are not consolidated is $nil at December 31, 2014 (December 31, 2013 — $nil). A loss in value of an investment other than a temporary decline is recognized as a charge to the consolidated statement of operations. The Company's exposure, which is determined based on the level of funding contributed by the Company and the development stage of the respective film, is $nil at December 31, 2014 (2013 — $1.5 million).
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All significant intercompany accounts and transactions, including all unrealized intercompany profits on transactions with equity-accounted investees, have been eliminated.
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The Company accounts for investments in new business ventures using the guidance of the FASB ASC 323 “Investments – Equity Method and Joint Ventures” (“ASC 323”) and ASC 320 “Investments in Debt and Equity Securities” (“ASC 320”), as appropriate.
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The Company accounts for investments in new business ventures using the guidance of the FASB ASC 323 “Investments – Equity Method and Joint Ventures” (“ASC 323”) and ASC 320 “Investments in Debt and Equity Securities” (“ASC 320”), as appropriate.
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In 2013, the Company determined that the functional currency of one of its wholly-owned subsidiaries had changed from the Company's reporting currency to the currency of the nation is which it is domiciled. As a result, in accordance with the FASB ASC 830 “Foreign Currency Matters”, the adjustment attributable to the current-rate translation of non-monetary assets as of the date of the change was reported in other comprehensive income.
Foreign Currency Translation
Monetary assets and liabilities of the Company's operations which are denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the end of the period. Non-monetary items are translated at historical exchange rates. Revenue and expense transactions are translated at exchange rates prevalent at the transaction date. In 2013, the Company determined that the functional currency of one of its wholly-owned subsidiaries had changed from the Company's reporting currency to the currency of the nation in which it is domiciled. As a result, in accordance with the FASB ASC 830 “Foreign Currency Matters”, the adjustment attributable to current-rate translation of non-monetary assets as of the date of the change was reported in other comprehensive income (“OCI”). The functional currency of its other wholly-owned subsidiaries continues to be the United States dollar. Foreign exchange translation gains and losses are included in the determination of earnings in the period in which they arise.
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(c) Cash and Cash Equivalents
The Company considers all highly liquid investments convertible to a known amount of cash and with an original maturity to the Company of three months or less to be cash equivalents.
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For trade accounts receivable that have characteristics of both a contractual maturity of one year or less, and arose from the sale of other goods or services, the Company charges off the balance against the allowance for doubtful accounts when it is known that a provided amount will not be collected.
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The Company monitors the performance of the theaters to which it has leased or sold theater systems which are subject to ongoing payments. When facts and circumstances indicate that there is a potential impairment in the net investment in lease or a financing receivable, the Company will evaluate the potential outcome of either renegotiations involving changes in the terms of the receivable or defaults on the existing lease or financed sale agreements. The Company will record a provision if it is considered probable that the Company will be unable to collect all amounts due under the contractual terms of the arrangement or a renegotiated lease amount will cause a reclassification of the sales-type lease to an operating lease.
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Revenues from joint revenue sharing arrangements with upfront payments that qualify for classification as sales and sales-type leases are recognized in accordance with the sales and sales-type lease criteria discussed above. Contingent revenues from joint revenue sharing arrangements are recognized as box-office results and concessions revenues are reported by the theater operator, provided collectibility is reasonably assured.
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(e) Inventories
Inventories are carried at the lower of cost, determined on an average cost basis, and net realizable value except for raw materials, which are carried at the lower of cost and replacement cost. Finished goods and work-in-process include the cost of raw materials, direct labor, theater design costs, and an applicable share of manufacturing overhead costs.
The costs related to theater systems under sales and sales-type lease arrangements are relieved from inventory to costs and expenses applicable to revenues-equipment and product sales when revenue recognition criteria are met. The costs related to theater systems under operating lease arrangements and joint revenue sharing arrangements are transferred from inventory to assets under construction in property, plant and equipment when allocated to a signed joint revenue sharing arrangement or when the arrangement is first classified as an operating lease.
The Company records provisions for excess and obsolete inventory based upon current estimates of future events and conditions, including the anticipated installation dates for the current backlog of theater system contracts, technological developments, signings in negotiation, growth prospects within the customers' ultimate marketplace and anticipated market acceptance of the Company's current and pending theater systems.
Finished goods inventories can contain theater systems for which title has passed to the Company's customer (as the theater system has been delivered to the customer) but the revenue recognition criteria as discussed in note 2(m) have not been met.
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A liability for the fair value of an asset retirement obligation associated with the retirement of tangible long-lived assets and the associated asset retirement costs are recognized in the period in which the liability and costs are incurred if a reasonable estimate of fair value can be made using a discounted cash flow model. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and subsequently amortized over the asset's useful life. The liability is accreted over the period to expected cash outflows.
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(h) Other Assets
Other assets include insurance recoverable, deferred charges on debt financing, deferred selling costs that are direct and incremental to the acquisition of sales contracts, foreign currency derivatives, lease incentives and investments in new business ventures.
Costs of debt financing are deferred and amortized over the term of the debt using the effective interest method.
Selling costs related to an arrangement incurred prior to recognition of the related revenue are deferred and expensed to costs and expenses applicable to revenues upon: (i) recognition of the contract's theater system revenue; or (ii) abandonment of the sale arrangement.
Foreign currency derivatives are accounted for at fair value using quoted prices in closed exchanges (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy).
The Company may provide lease incentives to certain exhibitors which are essential to entering into the respective lease arrangement. Lease incentives include payments made to or on behalf of the exhibitor. These lease incentives are recognized as a reduction in rental revenue on a straight-line basis over the term of the lease.
Investments in new business ventures are accounted for using ASC 323 as described in note 2(a). The Company currently accounts for its 10.1% investment in 3net, a 3D television channel operated by a limited liability corporation owned by the Company and its joint venture investment with TCL Multimedia Technology Holdings Limited, using the equity method of accounting. The Company accounts for in-kind contributions to its equity investment in accordance with ASC 845 “Non-Monetary Transactions” (“ASC 845”) whereby if the fair value of the asset or assets contributed is greater than the carrying value a partial gain shall be recognized.
The Company's investment in debt securities is classified as an available-for-sale investment in accordance with ASC 320. Unrealized holding gains and losses for this investment is excluded from earnings and reported in other comprehensive income until realized. Realization occurs upon sale of a portion of or the entire investment. The investment is impaired if the fair value is less than cost, which is assessed in each reporting period. When the Company intends to sell a specifically identified beneficial interest, a write-down for other-than-temporary impairment shall be recognized in earnings.
The Company's investment in preferred shares, which meets the criteria for classification as an equity security in accordance with ASC 325, is accounted for at cost. The Company records the related warrants at fair value upon recognition date. Warrants are recognized over the term of the agreement.
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(i) Goodwill
Goodwill represents the excess of purchase price over the fair value of net identifiable assets acquired in a purchase business combination. Goodwill is not subject to amortization and is tested for impairment annually, or more frequently if events or circumstances indicate that the asset might be impaired. The Company performs a qualitative assessment of its reporting units and certain select quantitative calculations against its current long range plan to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. The Company first assesses certain qualitative factors to determine whether the existence of events or circumstances leads to determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carry amount, then performing the two-step impairment test is unnecessary. When necessary, impairment of goodwill is tested at the reporting unit level by comparing the reporting unit's carrying amount, including goodwill, to the fair value of the reporting unit. The fair value of the reporting unit is estimated using a discounted cash flow approach. If the carrying amount of the reporting unit exceeds its fair value, then a second step is performed to measure the amount of impairment loss, if any, by comparing the fair value of each identifiable asset and liability in the reporting unit to the total fair value of the reporting unit. Any impairment loss is expensed in the consolidated statement of operations and is not reversed if the fair value subsequently increases.
"}]},{"name":"rpt:f-467","factDimensions":{"xbrl:concept":"us-gaap:GoodwillAndIntangibleAssetsIntangibleAssetsPolicy","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
(j) Other Intangible Assets
Patents, trademarks and other intangibles are recorded at cost and are amortized on a straight-line basis over estimated useful lives ranging from 4 to 10 years except, for intangible assets that have an identifiable pattern of consumption of the economic benefit of the asset, which are amortized over the consumption pattern.
The Company reviews the carrying values of its other intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent when testing for, and measuring for, impairment. In performing its review for recoverability, the Company estimates the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized in the consolidated statement of operations. Measurement of the impairment loss is based on the excess of the carrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows.
"}]},{"name":"rpt:f-468","factDimensions":{"xbrl:concept":"us-gaap:RevenueRecognitionDeferredRevenue","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
(k) Deferred Revenue
Deferred revenue represents cash received prior to revenue recognition criteria being met for theater system sales or leases, film contracts, maintenance and extended warranty services, film related services and film distribution.
"}]},{"name":"rpt:f-469","factDimensions":{"xbrl:concept":"us-gaap:IncomeTaxPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
(l) Income Taxes
Income taxes are accounted for under the liability method whereby deferred income tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the accounting and tax bases of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates or laws is recognized in the consolidated statement of operations in the period in which the change is enacted. Investment tax credits are recognized as a reduction of income tax expense.
The Company assesses realization of deferred income tax assets and, based on all available evidence, concludes whether it is more likely than not that the net deferred income tax assets will be realized. A valuation allowance is provided for the amount of deferred income tax assets not considered to be realizable.
The Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, the Company may incur additional tax expense based upon the outcomes of such matters. In addition, when applicable, the Company adjusts tax expense to reflect the Company's ongoing assessments of such matters which require judgment and can materially increase or decrease its effective rate as well as impact operating results. The Company provides for such exposures in accordance with the Income Taxes Topic of the FASB ASC.
"}]},{"name":"rpt:f-470","factDimensions":{"xbrl:concept":"us-gaap:RevenueRecognitionLeases","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
Lease Arrangements
The Company uses the Leases Topic of FASB ASC to evaluate whether an arrangement is a lease within the scope of the accounting standard. Arrangements not within the scope of the accounting standard are accounted for either as a sales or services arrangement, as applicable.
For lease arrangements, the Company determines the classification of the lease in accordance with the Lease Topic of FASB ASC. A lease arrangement that transfers substantially all of the benefits and risks incident to ownership of the equipment is classified as a sales-type lease based on the criteria established by the accounting standard; otherwise the lease is classified as an operating lease. Prior to commencement of the lease term for the equipment, the Company may modify certain payment terms or make concessions. If these circumstances occur, the Company reassesses the classification of the lease based on the modified terms and conditions.
For sales-type leases, the revenue allocated to the System Deliverable is recognized when the lease term commences, which the Company deems to be when all of the following conditions have been met: (i) the projector, sound system and screen system have been installed and are in full working condition; (ii) the 3D glasses cleaning machine, if applicable, has been delivered; (iii) projectionist training has been completed; and (iv) the earlier of (a) receipt of the written customer acceptance certifying the completion of installation and run-in testing of the equipment and the completion of projectionist training or (b) public opening of the theater, provided collectibility is reasonably assured.
The initial revenue recognized for sales-type leases consists of the initial payments received and the present value of future initial payments and fixed minimum ongoing payments computed at the interest rate implicit in the lease. Contingent payments in excess of the fixed minimum payments are recognized when reported by theater operators, provided collectibility is reasonably assured.
For operating leases, initial payments and fixed minimum ongoing payments are recognized as revenue on a straight-line basis over the lease term. For operating leases, the lease term is considered to commence when all of the following conditions have been met: (i) the projector, sound system and screen system have been installed and in full working condition; (ii) the 3D glasses cleaning machine, if applicable, has been delivered; (iii) projectionist training has been completed; and (iv) the earlier of (a) receipt of written customer acceptance certifying the completion of installation and run-in testing of the equipment and the completion of projectionist training or (b) public opening of the theater. Contingent payments in excess of fixed minimum ongoing payments are recognized as revenue when reported by theater operators, provided collectibility is reasonably assured.
Revenues from joint revenue sharing arrangements with upfront payments that qualify for classification as sales and sales-type leases are recognized in accordance with the sales and sales-type lease criteria discussed above. Contingent revenues from joint revenue sharing arrangements are recognized as box-office results and concessions revenues are reported by the theater operator, provided collectibility is reasonably assured.
The Company has assessed the nature of its joint revenue sharing arrangements and concluded that, based on the guidance in the Revenue Recognition Topic of the ASC, the arrangements contain a lease. 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 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. See additional details regarding the Company's traditional and hybrid joint revenue sharing arrangements as described in note 2(m).
"}]},{"name":"rpt:f-471","factDimensions":{"xbrl:concept":"imax:RevenueRecognitionFinanceIncomePolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"Finance Income
Finance income is recognized over the term of the sales-type lease or financed sales receivable, provided collectibility is reasonably assured. Finance income recognition ceases when the Company determines that the associated receivable is not collectible.
Finance income is suspended when the Company identifies a theater that is delinquent, non-responsive or not negotiating in good faith with the Company. Once the collectability issues are resolved the Company will resume recognition of finance income.
"}]},{"name":"rpt:f-472","factDimensions":{"xbrl:concept":"us-gaap:CostOfSalesPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
Cost of Equipment and Product Sales
Theater systems and other equipment subject to sales-type leases and sales arrangements includes the cost of the equipment and costs related to project management, design, delivery and installation supervision services as applicable. The costs related to theater systems under sales and sales-type lease arrangements are relieved from inventory to costs and expenses applicable to revenues-equipment and product sales when revenue recognition criteria are met. In addition, the Company defers direct selling costs such as sales commissions and other amounts related to these contracts until the related revenue is recognized. These costs included in costs and expenses applicable to revenues-equipment and product sales, totaled $2.5 million in 2014 (2013 – $2.5 million, 2012 – $2.7 million). The cost of equipment and product sales prior to direct selling costs was $34.5 million in 2014 (2013 – $35.0 million, 2012 – $34.8 million). The Company may have warranty obligations at or after the time revenue is recognized which require replacement of certain parts that do not affect the functionality of the theater system or services. The costs for warranty obligations for known issues are accrued as charges to costs and expenses applicable to revenues-equipment and product sales at the time revenue is recognized based on the Company's past historical experience and cost estimates.
"}]},{"name":"rpt:f-473","factDimensions":{"xbrl:concept":"imax:CostOfRentalsPolicytextblock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
Cost of Rentals
For theater systems and other equipment subject to an operating lease or placed in a theater operators' venue under a joint revenue sharing arrangement, the cost of equipment and those costs that result directly from and are essential to the arrangement, is included within property, plant and equipment. Depreciation and impairment losses, if any, are included in cost of rentals based on the accounting policy set out in note 2(g). Commissions are recognized as costs and expenses applicable to revenues-rentals in the month they are earned, which is typically the month of installation. These costs totaled $1.1 million in 2014 (2013 — $1.9 million, 2012 — $1.5 million). Direct advertising and marketing costs for each theater are charged to costs and expenses applicable to revenues-rentals as incurred. These costs totaled $1.5 million in 2014 (2013 — $1.7 million, 2012 — $1.9 million).
"}]},{"name":"rpt:f-474","factDimensions":{"xbrl:concept":"us-gaap:RevenueRecognitionIncentives","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
The Company may offer certain incentives to customers to complete theater system transactions including payment concessions or free services and products such as film licenses or 3D glasses. Reductions in, and deferral of, payments are taken into account in determining the sales price either by a direct reduction in the sales price or a reduction of payments to be discounted in accordance with the Leases or Interests Topic of the FASB ASC. Free products and services are accounted for as separate units of accounting. Other consideration given by the Company to customers are accounted for in accordance with the Revenue Recognition Topic of the FASB ASC.
"}]},{"name":"rpt:f-475","factDimensions":{"xbrl:concept":"imax:MaintenanceAndExtendedWarrantyServicesPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
Maintenance and Extended Warranty Services
Maintenance and extended warranty services may be provided under a multiple element arrangement or as a separately priced contract. Revenues related to these services are deferred and recognized on a straight-line basis over the contract period and are recognized in Services revenues. Maintenance and extended warranty services includes maintenance of the customer's equipment and replacement parts. Under certain maintenance arrangements, maintenance services may include additional training services to the customer's technicians. All costs associated with this maintenance and extended warranty program are expensed as incurred. A loss on maintenance and extended warranty services is recognized if the expected cost of providing the services under the contracts exceeds the related deferred revenue.
"}]},{"name":"rpt:f-476","factDimensions":{"xbrl:concept":"us-gaap:FilmsRevenueRecognitionPolicyPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
Film Production and IMAX DMR Services
In certain film arrangements, the Company produces a film financed by third parties whereby the third party retains the copyright and the Company obtains exclusive distribution rights. Under these arrangements, the Company is entitled to receive a fixed fee or to retain as a fee the excess of funding over cost of production (the “production fee”). The third parties receive a portion of the revenues received by the Company from distributing the film, which is charged to costs and expenses applicable to revenues-services. The production fees are deferred, and recognized as a reduction in the cost of the film based on the ratio of the Company's distribution revenues recognized in the current period to the ultimate distribution revenues expected from the film. Film exploitation costs, including advertising and marketing totaled $7.1 million in 2014 (2013 — $4.2 million, 2012 — $3.3 million) and are recorded in costs and expenses applicable to revenues-services as incurred.
Revenue from film production services where the Company does not hold the associated distribution rights are recognized in Services revenues when performance of the contractual service is complete, provided there is persuasive evidence of an agreement, the fee is fixed or determinable and collectibility is reasonably assured.
Revenues from digitally re-mastering (IMAX DMR) films where third parties own or hold the copyrights and the rights to distribute the film are derived in the form of processing fees and recoupments calculated as a percentage of box-office receipts generated from the re-mastered films. Processing fees are recognized as Services revenues when the performance of the related re-mastering service is completed provided there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectibility is reasonably assured. Recoupments, calculated as a percentage of box-office receipts, are recognized as Services revenue when box-office receipts are reported by the third party that owns or holds the related film rights, provided collectibility is reasonably assured.
Losses on film production and IMAX DMR services are recognized as costs and expenses applicable to revenues-services in the period when it is determined that the Company's estimate of total revenues to be realized by the Company will not exceed estimated total production costs to be expended on the film production and the cost of IMAX DMR services.
Film Distribution
Revenue from the licensing of films is recognized in Services revenues when persuasive evidence of a licensing arrangement exists, the film has been completed and delivered, the license period has begun, the fee is fixed or determinable and collectibility is reasonably assured. When license fees are based on a percentage of box-office receipts, revenue is recognized when box-office receipts are reported by exhibitors, provided collectibility is reasonably assured. Film exploitation costs, including advertising and marketing, totaled $0.6 million in 2014 (2013 — $0.4 million, 2012 — $1.5 million) and are recorded in costs and expenses applicable to revenues-services as incurred.
Film Post-Production Services
Revenues from post-production film services are recognized in Services revenues when performance of the contracted services is complete provided there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectibility is reasonably assured.
"}]},{"name":"rpt:f-477","factDimensions":{"xbrl:concept":"imax:OtherRevenuePolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
Other
The Company recognizes revenue in Services revenues from its owned and operated theaters resulting from box-office ticket and concession sales as tickets are sold, films are shown and upon the sale of various concessions. The sales are cash or credit card transactions with theatergoers based on fixed prices per seat or per concession item.
In addition, the Company enters into commercial arrangements with third party theater owners resulting in the sharing of profits and losses which are recognized in Services revenues when reported by such theaters. The Company also provides management services to certain theaters and recognizes revenue over the term of such services.
Revenues on camera rentals are recognized in Rental revenues over the rental period.
Revenue from the sale of 3D glasses is recognized in Equipment and product sales revenue when the 3D glasses have been delivered to the customer.
Other service revenues are recognized in Service revenues when the performance of contracted services is complete.
Improvements and modifications to the theater system after installation are treated as separate revenue transactions, if and when the Company is requested to perform these services. Revenue is recognized for these services when the performance of the services has been completed, provided there is persuasive evidence of an arrangement, the fee is fixed or determinable and collectibility is reasonably assured.
"}]},{"name":"rpt:f-478","factDimensions":{"xbrl:concept":"us-gaap:ResearchAndDevelopmentExpensePolicy","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
(n) Research and Development
Research and development costs are expensed as incurred and primarily include projector and sound parts, labor, consulting fees, allocation of overheads and other related materials which pertain to the Company's development of ongoing product and services. Research and development costs pertaining to fixed and intangible assets that have alternative future uses are capitalized and amortized under their related policies.
"}]},{"name":"rpt:f-479","factDimensions":{"xbrl:concept":"us-gaap:DerivativesMethodsOfAccountingHedgingDerivatives","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
Foreign currency derivatives are recognized and measured in the balance sheet at fair value. Changes in the fair value (gains or losses) are recognized in the consolidated statement of operations except for derivatives designated and qualifying as foreign currency hedging instruments. For foreign currency hedging instruments, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in other comprehensive income and reclassified to the consolidated statement of operations when the forecasted transaction occurs. Any ineffective portion is recognized immediately in the consolidated statement of operations.
"}]},{"name":"rpt:f-480","factDimensions":{"xbrl:concept":"us-gaap:ShareBasedCompensationOptionAndIncentivePlansPolicy","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
(p) Stock-Based Compensation
The Company's stock-based compensation generally includes stock options, restricted share units (“RSUs”) and stock appreciation rights (“SARs”). Stock-based compensation is recognized in accordance with the FASB ASC Topic 505, “Equity” and Topic 718, “Compensation-Stock Compensation.”
The Company estimates the fair value of stock option and SAR awards on the date of grant using fair value measurement techniques such as an option-pricing model. The fair value of RSU awards is equal to the closing price of the Company's common stock on the date of grant. The value of the portion of the employee award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's consolidated statement of operations.
The Company utilizes a lattice-binomial option-pricing model (“Binomial Model”) to determine the fair value of stock option and SAR awards. The fair value determined by the Binomial Model is affected by the Company's stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company's expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The Binomial Model also considers the expected exercise multiple which is the multiple of exercise price to grant price at which exercises are expected to occur on average. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company's employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in management's opinion, the Binomial Model best provides a fair measure of the fair value of the Company's employee stock options. See note 14(c) for the assumptions used to determine the fair value of stock-based payment awards.
Stock-based compensation expense includes compensation cost for employee stock-based payment awards granted and all modified, repurchased or cancelled employee awards. In addition, compensation expense includes the compensation cost, based on the grant-date fair value calculated for pro forma disclosures under ASC 718-10-55, for the portion of awards for which required service had not been rendered that were outstanding. Compensation expense for these employee awards is recognized using the straight-line single-option method. As stock-based compensation expense recognized is based on awards ultimately expected to vest, it has been adjusted for estimated forfeitures. The Codification requires forfeitures to be estimated at the time of grant and revised, if subsequent information indicates that the actual forfeitures are likely to be different from previous estimates. The Company utilizes the market yield on U.S. treasury securities (also known as nominal rate) over the contractual term of the instrument being issued.
Stock Options
As the Company stratifies its employees into homogeneous groups in order to calculate fair value under the Binomial Model, ranges of assumptions used are presented for expected option life and annual termination probability. The Company uses historical data to estimate option exercise and employee termination within the valuation model; various groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected volatility rate is estimated based on a blended volatility method which takes into consideration the Company's historical share price volatility, the Company's implied volatility which is implied by the observed current market prices of the Company's traded options and the Company's peer group volatility. The Company utilizes an expected term method to determine expected option life based on such data as vesting periods of awards, historical data that includes past exercise and post-vesting cancellations and stock price history.
The Company's policy is to issue new shares from treasury to satisfy stock options which are exercised.
Restricted Share Units
The Company's RSUs have been classified as equity in accordance with Topic 505. The fair value of RSU awards is equal to the closing price of the Company's common stock on the date of grant.
Stock Appreciation Rights
The Company's SARs have been classified as liabilities in accordance with Topic 505. The Company utilizes the Binomial Model to determine the value of these instruments settleable in cash.
Awards to Non-Employees
Stock-based awards for services provided by non-employees are accounted for based on the fair value of the services received or the stock-based award, whichever is more reliably determinable. If the fair value of the stock-based award is used, the fair value is measured at the date of the award and remeasured until the earlier of the date that the Company has a performance commitment from the non-employees, the date performance is completed, or the date the awards vest.
The Company's policy is to issue new common shares from treasury to satisfy stock options which are exercised.
The Company utilizes a Binomial Model to determine the fair value of stock-based payment awards. The fair value determined by the Binomial Model is affected by the Company's stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company's expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The Binomial Model also considers the expected exercise multiple which is the multiple of exercise price to grant price at which exercises are expected to occur on average. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company's employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in management's opinion, the Binomial Model best provides a fair measure of the fair value of the Company's employee stock options.
"}]},{"name":"rpt:f-481","factDimensions":{"xbrl:concept":"us-gaap:PensionAndOtherPostretirementPlansPolicy","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"(q) Pension Plans and Postretirement Benefits
The Company has a defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”). As the Company's SERP is unfunded, as at December 31, 2014, a liability is recognized for the projected benefit obligation.
Assumptions used in computing the defined benefit obligations are reviewed annually by management in consultation with its actuaries and adjusted for current conditions. Actuarial gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefits cost are recognized as a component of other comprehensive income. Amounts recognized in accumulated other comprehensive income including unrecognized actuarial gains or losses and prior service costs are adjusted as they are subsequently recognized in the consolidated statement of operations as components of net periodic benefit cost. Prior service costs resulting from the pension plan inception or amendments are amortized over the expected future service life of the employees, cumulative actuarial gains and losses in excess of 10% of the projected benefit obligation are amortized over the expected average remaining service life of the employees, and current service costs are expensed when earned. The remaining weighted average future service life of the employee used in computing the defined benefit obligation for the year ended December 31, 2014 was 2.0 years.
For defined contribution pension plans, required contributions by the Company are recorded as an expense.
A liability is recognized for the unfunded accumulated benefit obligation of the postretirement benefits plan. Assumptions used in computing the accumulated benefit obligation are reviewed by management in consultation with its actuaries and adjusted for current conditions. Current service cost is recognized as incurred and actuarial gains and losses are recognized as a component of other comprehensive income (loss). Amounts recognized in accumulated other comprehensive income (loss) including unrecognized actuarial gains or losses are adjusted as they are subsequently recognized in the consolidated statement of operations as components of net periodic benefit cost.
"}]},{"name":"rpt:f-482","factDimensions":{"xbrl:concept":"us-gaap:GuaranteesIndemnificationsAndWarrantiesPolicies","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
(r) Guarantees
The FASB ASC Guarantees Topic requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of certain guarantees. Disclosures as required under the accounting guidance have been included in note 13(i).
"}]},{"name":"rpt:f-483","factDimensions":{"xbrl:concept":"us-gaap:PropertyPlantAndEquipmentPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
(g) Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives as follows:
Theater system components (1) — over the equipment's anticipated useful life (7 to 20 years)
Camera equipment — 5 to 10 years
Buildings — 20 to 25 years
Office and production equipment — 3 to 5 years
Leasehold improvements — over the shorter of the initial term of the underlying leases plus any
reasonably assured renewal terms, and the useful life of the asset
__________
(1) includes equipment under joint revenue sharing arrangements.
Equipment and components allocated to be used in future operating leases and joint revenue sharing arrangements, as well as direct labor costs and an allocation of direct production costs, are included in assets under construction until such equipment is installed and in working condition, at which time the equipment is depreciated on a straight-line basis over the lesser of the term of the joint revenue sharing arrangement and the equipment's anticipated useful life.
The Company reviews the carrying values of its property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent when testing for, and measuring for, impairment. In performing its review of recoverability, the Company estimates the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized in the consolidated statements of operations. Measurement of the impairment loss is based on the excess of the carrying amount of the asset or asset group over the fair value calculated using discounted expected future cash flows.
"}]},{"name":"rpt:f-484","factDimensions":{"xbrl:concept":"us-gaap:FilmCostsPolicyPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
(f) Film Assets
Costs of producing films, including labor, allocated overhead, capitalized interest, and costs of acquiring film rights are recorded as film assets and accounted for in accordance with Entertainment-Films Topic of the FASB ASC. Production financing provided by third parties that acquire substantive rights in the film is recorded as a reduction of the cost of the production. Film assets are amortized and participation costs are accrued using the individual-film-forecast method in the same ratio that current gross revenues bear to current and anticipated future ultimate revenues. Estimates of ultimate revenues are prepared on a title-by-title basis and reviewed regularly by management and revised where necessary to reflect the most current information. Ultimate revenues for films include estimates of revenue over a period not to exceed ten years following the date of initial release.
Film exploitation costs, including advertising costs, are expensed as incurred.
Costs, including labor and allocated overhead, of digitally re-mastering films where the copyright is owned by a third party and the Company shares in the revenue of the third party are included in film assets. These costs are amortized using the individual-film-forecast method in the same ratio that current gross revenues bear to current and anticipated future ultimate revenues from the re-mastered film.
The recoverability of film assets is dependent upon commercial acceptance of the films. If events or circumstances indicate that the recoverable amount of a film asset is less than the unamortized film costs, the film asset is written down to its fair value. The Company determines the fair value of its film assets using a discounted cash flow model.
"}]},{"name":"rpt:f-485","factDimensions":{"xbrl:concept":"us-gaap:UseOfEstimates","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
(b) Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could be materially different from these estimates. Significant estimates made by management include, but are not limited to: selling prices associated with the individual elements in multiple element arrangements; residual values of leased theater systems; economic lives of leased assets; allowances for potential uncollectibility of accounts receivable, financing receivables and net investment in leases; provisions for inventory obsolescence; ultimate revenues for film assets; impairment provisions for film assets, long-lived assets and goodwill; depreciable lives of property, plant and equipment; useful lives of intangible assets; pension plan assumptions; accruals for contingencies including tax contingencies; valuation allowances for deferred income tax assets; and, estimates of the fair value of stock-based payment awards.
"}]},{"name":"rpt:f-486","factDimensions":{"xbrl:concept":"us-gaap:RevenueRecognitionMultipleElementArrangements","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
Multiple Element Arrangements
The Company's revenue arrangements with certain customers may involve multiple elements consisting of a theater system (projector, sound system, screen system and, if applicable, 3D glasses cleaning machine); services associated with the theater system including theater design support, supervision of installation, and projectionist training; a license to use of the IMAX brand; 3D glasses; maintenance and extended warranty services; and licensing of films. The Company evaluates all elements in an arrangement to determine what are considered deliverables for accounting purposes and which of the deliverables represent separate units of accounting based on the applicable accounting guidance in the Leases Topic of the FASB ASC; the Guarantees Topic of the FASB ASC; the Entertainment – Films Topic of FASB ASC; and the Revenue Recognition Topic of the FASB. If separate units of accounting are either required under the relevant accounting standards or determined to be applicable under the Revenue Recognition Topic, the total consideration received or receivable in the arrangement is allocated based on the applicable guidance in the above noted standards.
Theater Systems
The Company has identified the projection system, sound system, screen system and, if applicable, 3D glasses cleaning machine, theater design support, supervision of installation, projectionist training and the use of the IMAX brand to be a single deliverable and a single unit of accounting (the “System Deliverable”). When an arrangement does not include all the elements of a System Deliverable, the elements of the System Deliverable included in the arrangement are considered by the Company to be a single deliverable and a single unit of accounting. The Company is not responsible for the physical installation of the equipment in the customer's facility; however, the Company supervises the installation by the customer. The customer has the right to use the IMAX brand from the date the Company and the customer enter into an arrangement.
The Company's System Deliverable arrangements involve either a lease or a sale of the theater system. Consideration for the System Deliverable, other than for those delivered pursuant to joint revenue sharing arrangements, consist of upfront or initial payments made before and after the final installation of the theater system equipment and ongoing payments throughout the term of the lease or over a period of time, as specified in the arrangement. The ongoing payments are the greater of an annual fixed minimum amount or a certain percentage of the theater box-office. Amounts received in excess of the annual fixed minimum amounts are considered contingent payments. The Company's arrangements are non-cancellable, unless the Company fails to perform its obligations. In the absence of a material default by the Company, there is no right to any remedy for the customer under the Company's arrangements. If a material default by the Company exists, the customer has the right to terminate the arrangement and seek a refund only if the customer provides notice to the Company of a material default and only if the Company does not cure the default within a specified period.
For arrangements entered into or materially modified after January 1, 2011, consideration is allocated to each unit of accounting based on the unit's relative selling prices. The Company uses vender-specific objective evidence of selling price (VSOE) when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. VSOE is established for the Company's System Deliverable, maintenance and extended warranty services and film license arrangements. The Company uses a best estimate of selling price (BESP) for units of accounting that do not have VSOE or third party evidence of selling price. The Company determines BESP for a deliverable by considering multiple factors including the Company's historical pricing practices, product class, market competition and geography.
Sales Arrangements
For arrangements qualifying as sales, the revenue allocated to the System Deliverable is recognized in accordance with the Revenue Recognition Topic of the FASB ASC, when all of the following conditions have been met: (i) the projector, sound system and screen system have been installed and are in full working condition, (ii) the 3D glasses cleaning machine, if applicable, has been delivered, (iii) projectionist training has been completed and (iv) the earlier of (a) receipt of written customer acceptance certifying the completion of installation and run-in testing of the equipment and the completion of projectionist training or (b) public opening of the theater, provided there is persuasive evidence of an arrangement, the price is fixed or determinable and collectibility is reasonably assured.
The initial revenue recognized consists of the initial payments received and the present value of any future initial payments and fixed minimum ongoing payments that have been attributed to this unit of accounting. Contingent payments in excess of the fixed minimum ongoing payments are recognized when reported by theater operators, provided collectibility is reasonably assured.
The Company has also agreed, on occasion, to sell equipment under lease or at the end of a lease term. Consideration agreed to for these lease buyouts is included in revenues from equipment and product sales, when persuasive evidence of an arrangement exists, the fees are fixed or determinable, collectibility is reasonably assured and title to the theater system passes from the Company to the customer.
"}]},{"name":"rpt:f-487","factDimensions":{"xbrl:concept":"imax:TerminationsConsenualBuyoutsAndConcessionsPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
The Company enters into theater system arrangements with customers that contain customer payment obligations prior to the scheduled installation of the theater system. During the period of time between signing and the installation of the theater system, which may extend several years, certain customers may be unable to, or may elect not to, proceed with the theater system installation for a number of reasons including business considerations, or the inability to obtain certain consents, approvals or financing. Once the determination is made that the customer will not proceed with installation, the arrangement may be terminated under the default provisions of the arrangement or by mutual agreement between the Company and the customer (a “consensual buyout”). Terminations by default are situations when a customer does not meet the payment obligations under an arrangement and the Company retains the amounts paid by the customer. Under a consensual buyout, the Company and the customer agree, in writing, to a settlement and to release each other of any further obligations under the arrangement or an arbitrated settlement is reached. Any initial payments retained or additional payments received by the Company are recognized as revenue when the settlement arrangements are executed and the cash is received, respectively. These termination and consensual buyout amounts are recognized in Other revenues.
In addition, the Company could agree with customers to convert their obligations for other theater system configurations that have not yet been installed to arrangements to acquire or lease the IMAX digital theater system. The Company considers these situations to be a termination of the previous arrangement and origination of a new arrangement for the IMAX digital theater system. For all arrangements entered into or modified prior to the date of adoption of the amended FASB ASC 605-25, the Company continues to defer an amount of any initial fees received from the customer such that the aggregate of the fees deferred and the net present value of the future fixed initial and ongoing payments to be received from the customer equals the selling price of the IMAX digital theater system to be leased or acquired by the customer. Any residual portion of the initial fees received from the customer for the terminated theater system is recorded in other revenues at the time when the obligation for the original theater system is terminated and the new theater system arrangement is signed. Under the amended FASB ASC 605-25, for all arrangements entered into or materially modified after the date of adoption, the total arrangement consideration to be received is allocated on a relative selling price basis to the digital upgrade and the termination of the previous theater system. The arrangement consideration allocated to the termination of the existing arrangement is recorded in Other revenues at the time when the obligation for the original theater system is terminated and the new theater system arrangement is signed.
The Company may offer certain incentives to customers to complete theater system transactions including payment concessions or free services and products such as film licenses or 3D glasses. Reductions in, and deferral of, payments are taken into account in determining the sales price either by a direct reduction in the sales price or a reduction of payments to be discounted in accordance with the Leases or Interests Topic of the FASB ASC. Free products and services are accounted for as separate units of accounting. Other consideration given by the Company to customers are accounted for in accordance with the Revenue Recognition Topic of the FASB ASC.
"}]},{"name":"rpt:f-488","factDimensions":{"xbrl:concept":"us-gaap:AccountingChangesAndErrorCorrectionsTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"Adoption of New Accounting Policies
In February 2013, the FASB issued ASU No. 2013-04, “Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date” (“ASU 2013-04”). The purpose of ASU 2013-04 is to provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. ASU 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors, as well as the nature and amount of the obligation as well as other information about those obligations. For public entities, the amendments are effective for fiscal years and interim reporting periods beginning after December 15, 2013. The Company adopted the amended standard on January 1, 2014. The adoption of the amended standard did not have a material impact on the Company's consolidated financial statements.
In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (“ASU 2013-05”). The purpose of ASU 2013-05 is to resolve the diversity in practice in relation to the treatment of the release of cumulative translation adjustments (“CTA”) upon sale (in full or part) of a foreign investment. It applies to the release of the CTA into net income when a parent either sells a part of all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. For public entities, the amendments are effective for fiscal years and interim reporting periods beginning after December 15, 2013. The Company adopted the amended standard on January 1, 2014. The adoption of the amended standard did not have a material impact on the Company's consolidated financial statements.
In April 2013, the FASB issued ASU No. 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting” (“ASU 2013-07”). The amendments of ASU 2013-07 require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent and to present relevant information about an entity's expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013 and interim periods therein. Standards should be applied prospectively from the day liquidation becomes imminent. The Company adopted the amended standard on January 1, 2014. The adoption of the amended standard did not have a material impact on the Company's consolidated financial statements.
In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2013-11”). The amendments of ASU 2013-11 provide entities with guidance of how to present a provision for uncertain tax positions in the financial statements when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. For public entities, the amendments are effective for fiscal years and interim reporting periods beginning after December 15, 2013. The Company adopted the amended standard on January 1, 2014. The adoption of the amended standard did not have a material impact on the Company's consolidated financial statements.
In December 2013, the FASB issued ASU No. 2013-12, “Definition of a Public Business Entity” (“ASU 2013-12”). The amendments of ASU 2013-12 provide entities with a single definition of a Public Business Entity for use in future financial accounting and reporting guidance in 2014 and onwards. The Company adopted the amended standard on January 1, 2014. The adoption of the amended standard did not have a material impact on the Company's consolidated financial statements.
"}]},{"name":"rpt:f-489","factDimensions":{"xbrl:concept":"us-gaap:DescriptionOfNewAccountingPronouncementsNotYetAdopted","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
Recently Issued FASB Accounting Standard Codification Updates
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contract with Customers (Topic 606)” “ASU 2014-09”). The purpose of the amendment is to clarify the principles for recognizing revenue and developing common revenue standards between U.S. GAAP and IFRS, through the application of a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers. Under this amended standard, the Company will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. For public entities, the amendments are effective for interim and annual reporting periods beginning after December 15, 2016. The Company is currently assessing the impact of ASU 2014-09 on its consolidated financial statements.
"}]},{"name":"rpt:f-490","factDimensions":{"xbrl:concept":"us-gaap:NewAccountingPronouncementsPolicyPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
Adoption of New Accounting Policies
In February 2013, the FASB issued ASU No. 2013-04, “Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date” (“ASU 2013-04”). The purpose of ASU 2013-04 is to provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. ASU 2013-04 requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors, as well as the nature and amount of the obligation as well as other information about those obligations. For public entities, the amendments are effective for fiscal years and interim reporting periods beginning after December 15, 2013. The Company adopted the amended standard on January 1, 2014. The adoption of the amended standard did not have a material impact on the Company's consolidated financial statements.
In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity” (“ASU 2013-05”). The purpose of ASU 2013-05 is to resolve the diversity in practice in relation to the treatment of the release of cumulative translation adjustments (“CTA”) upon sale (in full or part) of a foreign investment. It applies to the release of the CTA into net income when a parent either sells a part of all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. For public entities, the amendments are effective for fiscal years and interim reporting periods beginning after December 15, 2013. The Company adopted the amended standard on January 1, 2014. The adoption of the amended standard did not have a material impact on the Company's consolidated financial statements.
In April 2013, the FASB issued ASU No. 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting” (“ASU 2013-07”). The amendments of ASU 2013-07 require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent and to present relevant information about an entity's expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013 and interim periods therein. Standards should be applied prospectively from the day liquidation becomes imminent. The Company adopted the amended standard on January 1, 2014. The adoption of the amended standard did not have a material impact on the Company's consolidated financial statements.
In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2013-11”). The amendments of ASU 2013-11 provide entities with guidance of how to present a provision for uncertain tax positions in the financial statements when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. For public entities, the amendments are effective for fiscal years and interim reporting periods beginning after December 15, 2013. The Company adopted the amended standard on January 1, 2014. The adoption of the amended standard did not have a material impact on the Company's consolidated financial statements.
In December 2013, the FASB issued ASU No. 2013-12, “Definition of a Public Business Entity” (“ASU 2013-12”). The amendments of ASU 2013-12 provide entities with a single definition of a Public Business Entity for use in future financial accounting and reporting guidance in 2014 and onwards. The Company adopted the amended standard on January 1, 2014. The adoption of the amended standard did not have a material impact on the Company's consolidated financial statements.
"}]},{"name":"rpt:f-491","factDimensions":{"xbrl:concept":"us-gaap:FinancingReceivablesTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
4. Lease Arrangements
(a) General Terms of Lease Arrangements
A number of the Company's leases are classified as sales-type leases. Certain arrangements that are legal sales are also classified as sales-type leases as certain clauses within the arrangements limit transfer of title or provide the Company with conditional rights to the system. The customer's rights under the Company's lease arrangements are described in note 2(m). The Company classifies its lease arrangements at inception of the arrangement and, if required, after a modification of the lease arrangement, to determine whether they are sales-type leases or operating leases. Under the Company's lease 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 lease portfolio terms are typically non-cancellable for 10 to 20 years with renewal provisions from inception. Except for those sales arrangements that are classified as sales-type leases, the Company's leases generally do not contain an automatic transfer of title at the end of the lease term. The Company's lease 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 extended warranty generally after the first year of the lease until the end of the lease 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 assessed the nature of its joint revenue sharing arrangements and concluded that, based on the guidance in the Revenue Recognition Topic of the ASC, the arrangements contain a lease. 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 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. See additional details regarding the Company's traditional and hybrid joint revenue sharing arrangements as described in note 2(m).
(b) Financing Receivables
Financing receivables, consisting of net investment in sales-type leases and receivables from financed sales of theater systems are as follows:
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Gross minimum lease payments receivable | $ | 13,928 | $ | 17,475 | |
| Unearned finance income | (2,357) | (3,052) | |||
| Minimum lease payments receivable | 11,571 | 14,423 | |||
| Accumulated allowance for uncollectible amounts | (972) | (806) | |||
| Net investment in leases | 10,599 | 13,617 | |||
| Gross financed sales receivables | 131,155 | 129,398 | |||
| Unearned finance income | (35,560) | (35,669) | |||
| Financed sales receivables | 95,595 | 93,729 | |||
| Accumulated allowance for uncollectible amounts | (494) | (236) | |||
| Net financed sales receivables | 95,101 | 93,493 | |||
| Total financing receivables | $ | 105,700 | $ | 107,110 | |
| Net financed sales receivables due within one year | $ | 15,544 | $ | 17,335 | |
| Net financed sales receivables due after one year | $ | 79,557 | $ | 76,158 |
In 2014, the financed sales receivables had a weighted average effective interest rate of 9.6% (2013 — 9.8%).
(c) Contingent Fees
Contingent fees that meet the Company's revenue recognition policy, from customers under various arrangements, have been reported in revenue as follows:
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Sales | $ | 2,058 | $ | 2,493 | $ | 1,797 | ||
| Sales-type leases | 102 | 184 | 308 | |||||
| Operating leases | 886 | 1,009 | 930 | |||||
| Subtotal - sales, sales-type leases and operating leases | 3,046 | 3,686 | 3,035 | |||||
| Joint revenue sharing arrangements | 57,973 | 58,694 | 48,133 | |||||
| $ | 61,019 | $ | 62,380 | $ | 51,168 |
(d) Future Minimum Rental Payments
Future minimum rental payments receivable from operating and sales-type leases at December 31, 2014, for each of the next five years are as follows:
| Operating Leases | Sales-Type Leases | ||||
| 2015 | $ | 1,912 | $ | 2,543 | |
| 2016 | 1,278 | 2,284 | |||
| 2017 | 1,249 | 1,871 | |||
| 2018 | 1,155 | 1,550 | |||
| 2019 | 1,005 | 2,728 | |||
| Thereafter | 4,026 | 2,398 | |||
| Total | $ | 10,625 | $ | 13,374 |
Total future minimum rental payments receivable from sales-type leases at December 31, 2014 exclude $0.6 million which represents amounts billed but not yet received.
"}]},{"name":"rpt:f-492","factDimensions":{"xbrl:concept":"imax:NonCancellableJointRevenueSharingArrangementsTerm","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"10 years or longer"}]},{"name":"rpt:f-493","factDimensions":{"xbrl:concept":"imax:Noncancellableleaseportfolioterm","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"10 to 20 years"}]},{"name":"rpt:f-494","factDimensions":{"xbrl:concept":"imax:FinancingReceivablesConsistingOfNetInvestmentInSalesTypeLeasesAndReceivablesFromFinancedSalesTableTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Gross minimum lease payments receivable | $ | 13,928 | $ | 17,475 | |
| Unearned finance income | (2,357) | (3,052) | |||
| Minimum lease payments receivable | 11,571 | 14,423 | |||
| Accumulated allowance for uncollectible amounts | (972) | (806) | |||
| Net investment in leases | 10,599 | 13,617 | |||
| Gross financed sales receivables | 131,155 | 129,398 | |||
| Unearned finance income | (35,560) | (35,669) | |||
| Financed sales receivables | 95,595 | 93,729 | |||
| Accumulated allowance for uncollectible amounts | (494) | (236) | |||
| Net financed sales receivables | 95,101 | 93,493 | |||
| Total financing receivables | $ | 105,700 | $ | 107,110 | |
| Net financed sales receivables due within one year | $ | 15,544 | $ | 17,335 | |
| Net financed sales receivables due after one year | $ | 79,557 | $ | 76,158 |
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Sales | $ | 2,058 | $ | 2,493 | $ | 1,797 | ||
| Sales-type leases | 102 | 184 | 308 | |||||
| Operating leases | 886 | 1,009 | 930 | |||||
| Subtotal - sales, sales-type leases and operating leases | 3,046 | 3,686 | 3,035 | |||||
| Joint revenue sharing arrangements | 57,973 | 58,694 | 48,133 | |||||
| $ | 61,019 | $ | 62,380 | $ | 51,168 |
| Operating Leases | Sales-Type Leases | ||||
| 2015 | $ | 1,912 | $ | 2,543 | |
| 2016 | 1,278 | 2,284 | |||
| 2017 | 1,249 | 1,871 | |||
| 2018 | 1,155 | 1,550 | |||
| 2019 | 1,005 | 2,728 | |||
| Thereafter | 4,026 | 2,398 | |||
| Total | $ | 10,625 | $ | 13,374 |
5. Inventories
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Raw materials | $ | 9,147 | $ | 4,321 | |
| Work-in-process | 1,211 | 500 | |||
| Finished goods | 6,705 | 5,004 | |||
| $ | 17,063 | $ | 9,825 |
At December 31, 2014, finished goods inventory for which title had passed to the customer and revenue was deferred amounted to $1.4 million (December 31, 2013 — $1.7 million).
Inventories at December 31, 2014 include write-downs for excess and obsolete inventory based upon current estimates of net realizable value considering future events and conditions of $0.4 million (December 31, 2013 — $0.4 million).
"}]},{"name":"rpt:f-559","factDimensions":{"xbrl:concept":"us-gaap:ScheduleOfInventoryCurrentTableTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Raw materials | $ | 9,147 | $ | 4,321 | |
| Work-in-process | 1,211 | 500 | |||
| Finished goods | 6,705 | 5,004 | |||
| $ | 17,063 | $ | 9,825 |
6. Film Assets
| As at December 31, | ||||||
| 2014 | 2013 | |||||
| Completed and released films, net of accumulated amortization of | $ | 8,018 | $ | 5,583 | ||
| $96,214 (2013 — $84,363) | ||||||
| Films in production | 1,758 | 750 | ||||
| Films in development | 5,387 | 743 | ||||
| $ | 15,163 | $ | 7,076 |
The Company expects to amortize film costs of $7.1 million for released films within three years from December 31, 2014 (December 31, 2013 — $5.0 million), including $3.1 million, which reflects the portion of the costs of the Company's completed films that are expected to be amortized within the next year. The amount of participation payments to third parties related to these films that the Company expects to pay during 2015, which is included in accrued liabilities at December 31, 2014, is $5.0 million (2013 — $3.6 million).
"}]},{"name":"rpt:f-573","factDimensions":{"xbrl:concept":"imax:ScheduleOfFilmAssetsTableTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
| As at December 31, | ||||||
| 2014 | 2013 | |||||
| Completed and released films, net of accumulated amortization of | $ | 8,018 | $ | 5,583 | ||
| $96,214 (2013 — $84,363) | ||||||
| Films in production | 1,758 | 750 | ||||
| Films in development | 5,387 | 743 | ||||
| $ | 15,163 | $ | 7,076 |
7. Property, Plant and Equipment
| As at December 31, 2014 | |||||||||
| Accumulated | Net Book | ||||||||
| Cost | Depreciation | Value | |||||||
| Equipment leased or held for use | |||||||||
| Theater system components(1)(2)(3)(4) | $ | 179,236 | $ | 63,862 | $ | 115,374 | |||
| Camera equipment(8) | 5,253 | 2,874 | 2,379 | ||||||
| 184,489 | 66,736 | 117,753 | |||||||
| Assets under construction(5)(6) | 43,250 | - | 43,250 | ||||||
| Other property, plant and equipment | |||||||||
| Land | 8,180 | - | 8,180 | ||||||
| Buildings | 16,584 | 10,998 | 5,586 | ||||||
| Office and production equipment(7) | 27,996 | 19,659 | 8,337 | ||||||
| Leasehold improvements | 9,937 | 9,619 | 318 | ||||||
| 62,697 | 40,276 | 22,421 | |||||||
| $ | 290,436 | $ | 107,012 | $ | 183,424 | ||||
| As at December 31, 2013 | |||||||||
| Accumulated | Net Book | ||||||||
| Cost | Depreciation | Value | |||||||
| Equipment leased or held for use | |||||||||
| Theater system components(1)(2)(3) | $ | 158,192 | $ | 51,537 | $ | 106,655 | |||
| Camera equipment(8) | 4,591 | 2,736 | 1,855 | ||||||
| 162,783 | 54,273 | 108,510 | |||||||
| Assets under construction(5) | 8,055 | - | 8,055 | ||||||
| Other property, plant and equipment | |||||||||
| Land | 1,593 | - | 1,593 | ||||||
| Buildings | 15,832 | 10,410 | 5,422 | ||||||
| Office and production equipment(7) | 27,190 | 18,707 | 8,483 | ||||||
| Leasehold improvements | 9,884 | 9,100 | 784 | ||||||
| 54,499 | 38,217 | 16,282 | |||||||
| $ | 225,337 | $ | 92,490 | $ | 132,847 |
__________
(1) Included in theater system components are assets with costs of $15.3 million (2013 — $14.3 million) and accumulated depreciation of $9.1 million (2013 — $8.6 million) that are leased to customers under operating leases.
(2) Included in theater system components are assets with costs of $157.6 million (2013 — $138.1 million) and accumulated depreciation of $50.2 million (2013 — $38.4 million) that are used in joint revenue sharing arrangements.
(3) In 2014 and 2013, the Company identified and wrote off $0.3 million and less than $0.1 million, respectively of theater system components that are no longer in use and fully amortized.
(4) During 2013, the Company signed an amending agreement governing one of its joint revenue sharing arrangements which increased the length of the term for all IMAX theater systems under that arrangement from 10 to 13 years. As a result, the Company adjusted the estimated useful life of its IMAX digital projection systems in use for those joint revenue sharing theaters, on a prospective basis, to reflect the change in term from 10 years to 13 years. This has resulted in decreased depreciation expense of $0.7 million in 2013 and $1.4 million in each of the next 5 years as the theater systems will now be depreciated over a longer estimated useful life.
(5) Included in assets under construction are components with costs of $0.1 million (2013 — $4.8 million) that will be utilized to construct assets to be used in joint revenue sharing arrangements.
(6) Included in assets under construction is $40.1 million, including accrued expenditures of $12.2 million, for the construction of a new office facility in California.
(7) Fully amortized office and production equipment is still in use by the Company. In 2014, the Company identified and wrote off $2.0 million (2013 - $0.3 million) of office and production equipment that is no longer in use and fully amortized.
(8) Fully amortized camera equipment is still in use by the Company. In 2014 and 2013, the Company identified and wrote off $0.3 million and $1.8 million, respectively of camera equipment that is no longer in use and fully amortized.
"}]},{"name":"rpt:f-588","factDimensions":{"xbrl:concept":"us-gaap:PropertyPlantAndEquipmentTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
| As at December 31, 2014 | |||||||||
| Accumulated | Net Book | ||||||||
| Cost | Depreciation | Value | |||||||
| Equipment leased or held for use | |||||||||
| Theater system components(1)(2)(3)(4) | $ | 179,236 | $ | 63,862 | $ | 115,374 | |||
| Camera equipment(8) | 5,253 | 2,874 | 2,379 | ||||||
| 184,489 | 66,736 | 117,753 | |||||||
| Assets under construction(5)(6) | 43,250 | - | 43,250 | ||||||
| Other property, plant and equipment | |||||||||
| Land | 8,180 | - | 8,180 | ||||||
| Buildings | 16,584 | 10,998 | 5,586 | ||||||
| Office and production equipment(7) | 27,996 | 19,659 | 8,337 | ||||||
| Leasehold improvements | 9,937 | 9,619 | 318 | ||||||
| 62,697 | 40,276 | 22,421 | |||||||
| $ | 290,436 | $ | 107,012 | $ | 183,424 | ||||
| As at December 31, 2013 | |||||||||
| Accumulated | Net Book | ||||||||
| Cost | Depreciation | Value | |||||||
| Equipment leased or held for use | |||||||||
| Theater system components(1)(2)(3) | $ | 158,192 | $ | 51,537 | $ | 106,655 | |||
| Camera equipment(8) | 4,591 | 2,736 | 1,855 | ||||||
| 162,783 | 54,273 | 108,510 | |||||||
| Assets under construction(5) | 8,055 | - | 8,055 | ||||||
| Other property, plant and equipment | |||||||||
| Land | 1,593 | - | 1,593 | ||||||
| Buildings | 15,832 | 10,410 | 5,422 | ||||||
| Office and production equipment(7) | 27,190 | 18,707 | 8,483 | ||||||
| Leasehold improvements | 9,884 | 9,100 | 784 | ||||||
| 54,499 | 38,217 | 16,282 | |||||||
| $ | 225,337 | $ | 92,490 | $ | 132,847 |
8. Other Assets
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Prepaid taxes (note 9) | $ | 8,174 | $ | - | |
| Lease incentives provided to theaters | 5,785 | 5,172 | |||
| Commissions and other deferred selling expenses | 3,448 | 2,586 | |||
| Equity-accounted investments | 2,765 | 404 | |||
| Deferred charges on debt financing | 2,120 | 2,218 | |||
| Investment in new business ventures | 619 | 5,380 | |||
| Insurance recoverable (note 13) | 136 | 11,094 | |||
| Other | - | 180 | |||
| $ | 23,047 | $ | 27,034 |
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Prepaid taxes (note 9) | $ | 8,174 | $ | - | |
| Lease incentives provided to theaters | 5,785 | 5,172 | |||
| Commissions and other deferred selling expenses | 3,448 | 2,586 | |||
| Equity-accounted investments | 2,765 | 404 | |||
| Deferred charges on debt financing | 2,120 | 2,218 | |||
| Investment in new business ventures | 619 | 5,380 | |||
| Insurance recoverable (note 13) | 136 | 11,094 | |||
| Other | - | 180 | |||
| $ | 23,047 | $ | 27,034 |
9. Income Taxes
(a) Income (loss) from continuing operations before income taxes by tax jurisdiction are comprised of the following:
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Canada | $ | 15,453 | $ | 51,593 | $ | 55,477 | ||
| United States | 10,350 | 678 | 3,148 | |||||
| China | 26,327 | 12,012 | (476) | |||||
| Other | 5,221 | (473) | 141 | |||||
| $ | 57,351 | $ | 63,810 | $ | 58,290 |
(b) The (provision for) recovery of income taxes related to income from continuing operations is comprised of the following:
| Years Ended December 31, | ||||||||||
| 2014 | 2013 | 2012 | ||||||||
| Current: | ||||||||||
| Canada | $ | (3,495) | $ | (1,068) | $ | (370) | ||||
| United States | (4,072) | (144) | 15 | |||||||
| China | (6,023) | (2,317) | - | |||||||
| Other | (249) | (201) | - | |||||||
| (13,839) | (3,730) | (355) | ||||||||
| Deferred:(1) | ||||||||||
| Canada | 433 | (13,198) | (14,441) | |||||||
| United States | (791) | 214 | (420) | |||||||
| China | (216) | (252) | 137 | |||||||
| Other | (53) | 337 | - | |||||||
| (627) | (12,899) | (14,724) | ||||||||
| $ | (14,466) | $ | (16,629) | $ | (15,079) |
(1) For the year ended December 31, 2014, the Company has decreased the valuation allowance by $4.4 million (2013 - $1.4 million decrease) relating to the future utilization of deductible temporary differences, tax credits, and certain net operating loss carryforwards, of which $0.4 million was recorded to deferred income tax expense and $4.0 million was recorded to share capital. Also included in the provision for income taxes is the deferred tax related to amounts recorded in and reclassified from other comprehensive income in the year of $0.8 million.
(c) The provision for income taxes from continuing operations differs from the amount that would have resulted by applying the combined Canadian federal and provincial statutory income tax rates to earnings due to the following:
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Income tax provision at combined statutory rates | $ | (15,189) | $ | (16,914) | $ | (15,447) | |||
| Adjustments resulting from: | |||||||||
| Non-deductible stock based compensation | (2,244) | (2,603) | (3,166) | ||||||
| Other non-deductible/non-includable items | 1,257 | (341) | 12 | ||||||
| Decrease in valuation allowance relating to current year temporary differences | 429 | 341 | 43 | ||||||
| Withholding and other taxes | |||||||||
| Changes to tax reserves | 230 | 84 | 833 | ||||||
| U.S. federal and state taxes | (200) | (144) | 45 | ||||||
| Income tax at different rates in foreign and other provincial jurisdictions | 516 | 918 | (56) | ||||||
| Investment and other tax credits (non-refundable) | 1,773 | 1,041 | 1,368 | ||||||
| Effect of changes in legislation relating to enacted tax rate increases | - | - | 494 | ||||||
| Changes to deferred tax assets and liabilities resulting from audit and other tax return adjustments | (1,013) | 11 | 483 | ||||||
| Tax effect of loss from equity-accounted investments | (41) | 1,040 | 463 | ||||||
| Other | 16 | (62) | (151) | ||||||
| Provision for income taxes, as reported | $ | (14,466) | $ | (16,629) | $ | (15,079) |
(d) The net deferred income tax asset is comprised of the following:
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Net operating loss carryforwards | $ | 1,091 | $ | 15,377 | |
| Investment tax credit and other tax credit carryforwards | 225 | 6,615 | |||
| Write-downs of other assets | 681 | 255 | |||
| Excess tax over accounting basis in property, plant and equipment and inventories | 8,062 | (852) | |||
| Accrued pension liability | 6,496 | 5,287 | |||
| Other accrued reserves | 7,955 | 4,138 | |||
| Total deferred income tax assets | 24,510 | 30,820 | |||
| Income recognition on net investment in leases | (1,142) | (1,807) | |||
| 23,368 | 29,013 | ||||
| Valuation allowance | (310) | (4,754) | |||
| Net deferred income tax asset | $ | 23,058 | $ | 24,259 |
The gross deferred tax assets include an asset of $0.7 million relating to the remaining tax effect resulting from the Company's defined benefit pension plan and postretirement benefit plans, the related actuarial gains and losses and unrealized net gains and losses on cash flow hedging instruments recorded in accumulated other comprehensive loss.
During the year, the Company and its subsidiaries completed a number of intra-entity sale of assets. The Company has deferred or eliminated the related tax expense and deferred taxes specifically associated with such intra-entity transfers, and is included in Other Assets as disclosed in note 8.
The Company has not provided Canadian taxes on cumulative earnings of non-Canadian affiliates and associated companies that have been reinvested indefinitely. Taxes are provided for earnings of non-Canadian affiliates and associated companies when the Company determines that such earnings are no longer indefinitely reinvested.
(e) Estimated net operating loss carryforwards (excluding state losses) and estimated tax credit carryforwards expire as follows:
| Investment Tax\nCredits and Other\nTax Credit\nCarryforwards | Net Operating\nLoss\nCarryforwards | ||||
| 2015 | $ | - | $ | 20 | |
| 2016 | - | - | |||
| 2017 | - | - | |||
| 2018 | - | - | |||
| 2019 | - | - | |||
| Thereafter | 1,709 | 665 | |||
| $ | 1,709 | $ | 685 |
Estimated net operating loss carryforwards can be carried forward to reduce taxable income through to 2028. Investment tax credits and other tax credits can be carried forward to reduce income taxes payable through to 2034.
(f) Valuation allowance
The provision for income taxes in the year ended December 31, 2014 includes a net income tax recovery of $0.4 million (2013 - $0.3 million recovery) in continuing operations related to a decrease in the valuation allowance for the Company's deferred tax assets and other tax adjustments. In 2014, the Company reversed $4.4 million in valuation allowance relating to current period deductible temporary differences and the utilization of loss carryforwards, of which $0.4 million was included in the provision for income taxes and $4.0 million was included directly to shareholders' equity. During the year ended December 31, 2014, after considering all available evidence, both positive (including recent and historical profits, projected future profitability, backlog, carryforward periods for, and utilization of net operating loss carryovers and tax credits, discretionary deductions and other factors) and negative (including cumulative losses in past years and other factors), it was concluded that the valuation allowance against the Company's deferred tax assets should be reversed by approximately $4.4 million (2013 - $1.4 million decrease). The remaining $0.3 million (2013 - $4.8 million) balance in the valuation allowance as at December 31, 2014 is primarily attributable to certain U.S. state net operating loss carryovers that may expire unutilized.
(g) Uncertain tax positions
In connection with the Company's adoption of FIN 48, as of January 1, 2007, the Company recorded a net increase to its deficit of $2.1 million (including approximately $0.9 million related to accrued interest and penalties) related to the measurement of potential international withholding tax requirements and a decrease in reserves for income taxes. As at December 31, 2014 and December 31, 2013, the Company had total unrecognized tax benefits (including interest and penalties) of $2.3 million and $2.7 million, respectively, for international withholding taxes. All of the unrecognized tax benefits could impact the Company's effective tax rate if recognized. While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could differ from the Company's accrued position. Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.
A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) for the years ended December 31, is as follows:
| (In thousands of U.S. Dollars) | 2014 | 2013 | 2012 | |||||
| Balance at beginning of the year | $ | 2,202 | $ | 2,286 | $ | 3,119 | ||
| Additions based on tax positions related to the current year | 237 | 210 | 392 | |||||
| Reductions for tax positions of prior years | - | - | (77) | |||||
| Settlements | - | - | (38) | |||||
| Reductions resulting from lapse of applicable statute of limitations and administrative practices | (467) | (294) | (1,110) | |||||
| Balance at the end of the year | $ | 1,972 | $ | 2,202 | $ | 2,286 |
Consistent with its historical financial reporting, the Company has elected to classify interest and penalties related to income tax liabilities, when applicable, as part of the interest expense in its consolidated statements of operations rather than income tax expense. The Company recovered $0.2 million in potential interest and penalties associated with its provision for uncertain tax positions for the years ended December 31, 2014 (2013 - less than $0.1 million recovery, 2012 - $0.8 million recovery).
The number of years with open tax audits varies depending on the tax jurisdiction. The Company's major taxing jurisdictions include Canada, the province of Ontario, the United States (including multiple states) and China.
The Company's 2009 through 2014 tax years remain subject to examination by the IRS for U.S. federal tax purposes, and the 2006 through 2014 tax years remain subject to examination by the appropriate governmental agencies for Canadian federal tax purposes. There are other on-going audits in various other jurisdictions that are not material to the financial statements.
(h) Income Tax Effect on Comprehensive Income
The income tax benefit (expense) related to the following items included in other comprehensive income are:
| 2014 | 2013 | 2012 | |||||||
| Unrecognized actuarial gain or loss on defined benefit plan | $ | 225 | $ | (588) | $ | 285 | |||
| Amortization of actuarial loss on defined benefit plan | - | (114) | (91) | ||||||
| Unrecognized actuarial gain or loss on postretirement benefit plans | 151 | 43 | 33 | ||||||
| Amortization of actuarial gain on postretirement benefit plan | 8 | - | - | ||||||
| Gain on curtailment of postretirement benefit plan | - | (100) | - | ||||||
| Other-than-temporary impairment of available-for-sale investment | (45) | - | (19) | ||||||
| Change in market value of available-for-sale investment | - | 45 | (42) | ||||||
| Unrealized change in cash flow hedging instruments | 658 | 264 | (185) | ||||||
| Realized change in cash flow hedging instruments upon settlement | (306) | (80) | 62 | ||||||
| Foreign currency translation adjustments | 59 | 26 | - | ||||||
| $ | 750 | $ | (504) | $ | 43 |
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Canada | $ | 15,453 | $ | 51,593 | $ | 55,477 | ||
| United States | 10,350 | 678 | 3,148 | |||||
| China | 26,327 | 12,012 | (476) | |||||
| Other | 5,221 | (473) | 141 | |||||
| $ | 57,351 | $ | 63,810 | $ | 58,290 |
| Years Ended December 31, | ||||||||||
| 2014 | 2013 | 2012 | ||||||||
| Current: | ||||||||||
| Canada | $ | (3,495) | $ | (1,068) | $ | (370) | ||||
| United States | (4,072) | (144) | 15 | |||||||
| China | (6,023) | (2,317) | - | |||||||
| Other | (249) | (201) | - | |||||||
| (13,839) | (3,730) | (355) | ||||||||
| Deferred:(1) | ||||||||||
| Canada | 433 | (13,198) | (14,441) | |||||||
| United States | (791) | 214 | (420) | |||||||
| China | (216) | (252) | 137 | |||||||
| Other | (53) | 337 | - | |||||||
| (627) | (12,899) | (14,724) | ||||||||
| $ | (14,466) | $ | (16,629) | $ | (15,079) |
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Income tax provision at combined statutory rates | $ | (15,189) | $ | (16,914) | $ | (15,447) | |||
| Adjustments resulting from: | |||||||||
| Non-deductible stock based compensation | (2,244) | (2,603) | (3,166) | ||||||
| Other non-deductible/non-includable items | 1,257 | (341) | 12 | ||||||
| Decrease in valuation allowance relating to current year temporary differences | 429 | 341 | 43 | ||||||
| Withholding and other taxes | |||||||||
| Changes to tax reserves | 230 | 84 | 833 | ||||||
| U.S. federal and state taxes | (200) | (144) | 45 | ||||||
| Income tax at different rates in foreign and other provincial jurisdictions | 516 | 918 | (56) | ||||||
| Investment and other tax credits (non-refundable) | 1,773 | 1,041 | 1,368 | ||||||
| Effect of changes in legislation relating to enacted tax rate increases | - | - | 494 | ||||||
| Changes to deferred tax assets and liabilities resulting from audit and other tax return adjustments | (1,013) | 11 | 483 | ||||||
| Tax effect of loss from equity-accounted investments | (41) | 1,040 | 463 | ||||||
| Other | 16 | (62) | (151) | ||||||
| Provision for income taxes, as reported | $ | (14,466) | $ | (16,629) | $ | (15,079) |
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Net operating loss carryforwards | $ | 1,091 | $ | 15,377 | |
| Investment tax credit and other tax credit carryforwards | 225 | 6,615 | |||
| Write-downs of other assets | 681 | 255 | |||
| Excess tax over accounting basis in property, plant and equipment and inventories | 8,062 | (852) | |||
| Accrued pension liability | 6,496 | 5,287 | |||
| Other accrued reserves | 7,955 | 4,138 | |||
| Total deferred income tax assets | 24,510 | 30,820 | |||
| Income recognition on net investment in leases | (1,142) | (1,807) | |||
| 23,368 | 29,013 | ||||
| Valuation allowance | (310) | (4,754) | |||
| Net deferred income tax asset | $ | 23,058 | $ | 24,259 |
| Investment Tax\nCredits and Other\nTax Credit\nCarryforwards | Net Operating\nLoss\nCarryforwards | ||||
| 2015 | $ | - | $ | 20 | |
| 2016 | - | - | |||
| 2017 | - | - | |||
| 2018 | - | - | |||
| 2019 | - | - | |||
| Thereafter | 1,709 | 665 | |||
| $ | 1,709 | $ | 685 |
| (In thousands of U.S. Dollars) | 2014 | 2013 | 2012 | |||||
| Balance at beginning of the year | $ | 2,202 | $ | 2,286 | $ | 3,119 | ||
| Additions based on tax positions related to the current year | 237 | 210 | 392 | |||||
| Reductions for tax positions of prior years | - | - | (77) | |||||
| Settlements | - | - | (38) | |||||
| Reductions resulting from lapse of applicable statute of limitations and administrative practices | (467) | (294) | (1,110) | |||||
| Balance at the end of the year | $ | 1,972 | $ | 2,202 | $ | 2,286 |
| 2014 | 2013 | 2012 | |||||||
| Unrecognized actuarial gain or loss on defined benefit plan | $ | 225 | $ | (588) | $ | 285 | |||
| Amortization of actuarial loss on defined benefit plan | - | (114) | (91) | ||||||
| Unrecognized actuarial gain or loss on postretirement benefit plans | 151 | 43 | 33 | ||||||
| Amortization of actuarial gain on postretirement benefit plan | 8 | - | - | ||||||
| Gain on curtailment of postretirement benefit plan | - | (100) | - | ||||||
| Other-than-temporary impairment of available-for-sale investment | (45) | - | (19) | ||||||
| Change in market value of available-for-sale investment | - | 45 | (42) | ||||||
| Unrealized change in cash flow hedging instruments | 658 | 264 | (185) | ||||||
| Realized change in cash flow hedging instruments upon settlement | (306) | (80) | 62 | ||||||
| Foreign currency translation adjustments | 59 | 26 | - | ||||||
| $ | 750 | $ | (504) | $ | 43 |
10. Other Intangible Assets
| As at December 31, 2014 | ||||||||
| Accumulated | Net Book | |||||||
| Cost | Amortization | Value | ||||||
| Patents and trademarks | $ | 9,686 | $ | 5,967 | $ | 3,719 | ||
| Licenses and intellectual property | 20,490 | 4,867 | 15,623 | |||||
| Other | 9,873 | 1,664 | 8,209 | |||||
| $ | 40,049 | $ | 12,498 | $ | 27,551 | |||
| As at December 31, 2013 | ||||||||
| Accumulated | Net Book | |||||||
| Cost | Amortization | Value | ||||||
| Patents and trademarks | $ | 8,774 | $ | 5,741 | $ | 3,033 | ||
| Licenses and intellectual property | 19,950 | 3,260 | 16,690 | |||||
| Other | 8,843 | 821 | 8,022 | |||||
| $ | 37,567 | $ | 9,822 | $ | 27,745 |
Other intangible assets of $9.9 million are comprised mainly of the Company's investment in a new enterprise resource planning system, which the Company started amortizing on January 1, 2013. Fully amortized other intangible assets are still in use by the Company. In 2014, the Company identified and wrote off $0.1 million (2013 ─ $0.1 million) of patents and trademarks that are no longer in use.
During 2014, the Company acquired $2.9 million in other intangible assets. The net book value of these other intangible assets was $2.6 million as at December 31, 2014. The weighted average amortization period for these additions is 10 years.
During 2014, the Company incurred costs of $0.1 million to renew or extend the term of acquired patents and trademarks which were recorded in selling, general and administrative expenses (2013 ─ $0.1 million).
The estimated amortization expense for each of the years ended December 31, are as follows:
| 2015 | $ | 2,961 |
| 2016 | 2,787 | |
| 2017 | 2,787 | |
| 2018 | 2,787 | |
| 2019 | 2,787 |
| As at December 31, 2014 | ||||||||
| Accumulated | Net Book | |||||||
| Cost | Amortization | Value | ||||||
| Patents and trademarks | $ | 9,686 | $ | 5,967 | $ | 3,719 | ||
| Licenses and intellectual property | 20,490 | 4,867 | 15,623 | |||||
| Other | 9,873 | 1,664 | 8,209 | |||||
| $ | 40,049 | $ | 12,498 | $ | 27,551 | |||
| As at December 31, 2013 | ||||||||
| Accumulated | Net Book | |||||||
| Cost | Amortization | Value | ||||||
| Patents and trademarks | $ | 8,774 | $ | 5,741 | $ | 3,033 | ||
| Licenses and intellectual property | 19,950 | 3,260 | 16,690 | |||||
| Other | 8,843 | 821 | 8,022 | |||||
| $ | 37,567 | $ | 9,822 | $ | 27,745 |
| 2015 | $ | 2,961 |
| 2016 | 2,787 | |
| 2017 | 2,787 | |
| 2018 | 2,787 | |
| 2019 | 2,787 |
11. Credit Facility and Playa Vista Construction Loan
On February 7, 2013, the Company amended and restated the terms of its existing senior secured credit facility (the “Prior Credit Facility”). The amended and restated facility (the “Credit Facility”), with a scheduled maturity of February 7, 2018, has a maximum borrowing capacity of $200.0 million. The Prior Credit Facility had a maximum borrowing capacity of $110.0 million. Certain of the Company's subsidiaries serve as guarantors (the “Guarantors”) of the Company's obligations under the Credit Facility. The Credit Facility is collateralized by a first priority security interest in substantially all of the present and future assets of the Company and the Guarantors. In 2014, the Company amended the terms of the Credit Facility to obtain consents from the lenders named therein to allow it to enter into certain corporate transactions, including the sale of a 20.0% interest in IMAX China Holding, Inc. (“IMAX China”) and the Playa Vista Loan described below.
The terms of the Credit Facility are set forth in the Third Amended and Restated Credit Agreement (as amended, the “Credit Agreement”), dated February 7, 2013, among the Company, the Guarantors, the lenders named therein, Wells Fargo Bank, National Association (“Wells Fargo”), as agent and issuing lender (Wells Fargo, together with the lenders named therein, the “Lenders”) and Wells Fargo Securities, LLC, as Sole Lead Arranger and Sole Bookrunner and in various collateral and security documents entered into by the Company and the Guarantors. Each of the Guarantors has also entered into a guarantee in respect of the Company's obligations under the Credit Facility.
Under the Credit Facility, the effective interest rate for the year ended December 31, 2014 for the revolving loan portion was nil, as no amounts were outstanding during the period (2013 – 2.41%).
The Company was in compliance with all of its requirements at December 31, 2014.
Total amounts drawn and available under the Credit Facility at December 31, 2014 were $nil and $200.0 million, respectively (December 31, 2013 — $nil and $200.0 million, respectively).
As at December 31, 2014, the Company did not have any letters of credit and advance payment guarantees outstanding (December 31, 2013 — $nil), under the Credit Facility.
Playa Vista Construction Financing
On October 6, 2014, IMAX PV Development Inc., a Delaware corporation (“PV Borrower”) and direct wholly-owned subsidiary of IMAX U.S.A. Inc., a Delaware corporation and direct wholly-owned subsidiary of the Company, entered into a construction loan agreement with Wells Fargo. The construction loan is being used to fund up to $25.7 million (the “Playa Vista Loan”) of the costs of development and construction of the previously announced new West Coast headquarters of the Company, located in a new office facility in the Playa Vista neighborhood of Los Angeles, California (the “Playa Vista Project”).
The total cost of development of the Playa Vista Project is expected to be approximately $50.0 million, with all costs in excess of the Playa Vista Loan being provided through funding by the Company.
The Playa Vista Loan is secured by a deed of trust from PV Borrower in favor of Wells Fargo, granting a first lien on and security interest in the Playa Vista property and the Playa Vista Project, including all improvements to be constructed thereon, and other documents evidencing and securing the loan (the “Loan Documents”). The Loan Documents include absolute and unconditional payment and completion guarantees provided by the Company to Wells Fargo for the performance by PV Borrower of all the terms and provisions of the Playa Vista Loan and the construction and completion of the Playa Vista Project, and an environmental indemnity also provided by the Company.
Unless converted from a construction to permanent loan as described below, the Playa Vista Loan will be fully due and payable on April 6, 2016 (the “Maturity Date”).
Absent a default, the Playa Vista Loan bears interest at a variable interest rate per annum equal to 2.25% above the 30-day LIBOR rate. The interest rate is subject to adjustment monthly based on the latest 30-day LIBOR rate. Prior to the Maturity Date, PV Borrower is required to make monthly payments of interest only. The Playa Vista Loan may be prepaid at any time without premium, but with all accrued interest and other applicable payments.
The Loan Documents require the completion of construction no later than 90 days prior to the Maturity Date, subject to delays for certain unforeseeable events. The Loan Documents contain affirmative, negative and financial covenants (including compliance with the financial covenants of the Company's outstanding revolving and term senior secured facility with Wells Fargo), agreements, representations, warranties, borrowing conditions, and events of default customary for development projects such as the Playa Vista Project.
PV Borrower has the right to convert the Playa Vista Loan from a construction to a permanent loan with a term of 120 months (from the date of conversion), subject to the satisfaction of certain conditions including completion of the Playa Vista Project. If PV Borrower converts the Playa Vista Loan to a permanent loan, PV Borrower will have the right, subject to certain conditions, to increase the principal balance of the loan up to but not in excess of $30.0 million. Upon conversion, the interest rate under the permanent loan will decrease from 2.25% to 2.0% above the 30-day LIBOR rate and PV Borrower will be required to make monthly payments of combined principal and interest sufficient to fully amortize the loan based on a 15-year straight line amortization.
Bank indebtedness includes the following:
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Playa Vista Construction Loan | $ | 4,710 | $ | - |
Total amounts drawn and available under the construction loan at December 31, 2014 was $4.7 million and $21.0 million, respectively (December 31, 2013 — $nil) at an effective interest rate of 2.42%.
In accordance with the loan agreement, the Company is obligated to make payments on the principal of the construction loan as follows:
| 2015 | $ | - |
| 2016 | 4,710 | |
| 2017 | - | |
| 2018 | - | |
| 2019 | - | |
| Thereafter | - | |
| $ | 4,710 |
Wells Fargo Foreign Exchange Facility
Under the Credit Facility, the Company is able to purchase foreign currency forward contracts and/or other swap arrangements. The settlement risk on its foreign currency forward contracts was $1.8 million at December 31, 2014 as the notional value exceeded the fair value of the forward contracts. As at December 31, 2014, the Company has $36.8 million of such arrangements outstanding.
Bank of Montreal Facility
As at December 31, 2014, the Company has available a $10.0 million facility (December 31, 2013 — $10.0 million) with the Bank of Montreal for use solely in conjunction with the issuance of performance guarantees and letters of credit fully insured by EDC (the “Bank of Montreal Facility”). As at December 31, 2014, the Company has letters of credit and advance payment guarantees outstanding of $0.3 million (2013 — $0.3 million) under the Bank of Montreal Facility.
"}]},{"name":"rpt:f-918","factDimensions":{"xbrl:concept":"us-gaap:LineOfCreditFacilityRevolvingCreditConversionToTermLoanDescription","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582","us-gaap:DebtInstrumentAxis":"us-gaap:MortgagesMember"},"factValues":[{"value":"PV Borrower has the right to convert the Playa Vista Loan from a construction to a permanent loan with a term of 120 months (from the date of conversion), subject to the satisfaction of certain conditions including completion of the Playa Vista Project. If PV Borrower converts the Playa Vista Loan to a permanent loan, PV Borrower will have the right, subject to certain conditions, to increase the principal balance of the loan up to but not in excess of $30.0 million. Upon conversion, the interest rate under the permanent loan will decrease from 2.25% to 2.0% above the 30-day LIBOR rate and PV Borrower will be required to make monthly payments of combined principal and interest sufficient to fully amortize the loan based on a 15-year straight line amortization."}]},{"name":"rpt:f-919","factDimensions":{"xbrl:concept":"us-gaap:LineOfCreditFacilityInterestRateDescription","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582","us-gaap:DebtInstrumentAxis":"us-gaap:MortgagesMember"},"factValues":[{"value":"Playa Vista Loan bears interest at a variable interest rate per annum equal to 2.25% above the 30-day LIBOR rate. The interest rate is subject to adjustment monthly based on the latest 30-day LIBOR rate."}]},{"name":"rpt:f-920","factDimensions":{"xbrl:concept":"imax:Debtinstrumentconditionoffinancingdescription","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582","us-gaap:DebtInstrumentAxis":"us-gaap:MortgagesMember"},"factValues":[{"value":"The Loan Documents require the completion of construction no later than 90 days prior to the Maturity Date, subject to delays for certain unforeseeable events."}]},{"name":"rpt:f-921","factDimensions":{"xbrl:concept":"us-gaap:DebtInstrumentPaymentTerms","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582","us-gaap:DebtInstrumentAxis":"us-gaap:MortgagesMember"},"factValues":[{"value":"Prior to the Maturity Date, PV Borrower is required to make monthly payments of interest only. The Playa Vista Loan may be prepaid at any time without premium, but with all accrued interest and other applicable payments."}]},{"name":"rpt:f-922","factDimensions":{"xbrl:concept":"imax:BankIndebtednessTableTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"| As at December 31, | |||||
| 2014 | 2013 | ||||
| Playa Vista Construction Loan | $ | 4,710 | $ | - |
| 2015 | $ | - |
| 2016 | 4,710 | |
| 2017 | - | |
| 2018 | - | |
| 2019 | - | |
| Thereafter | - | |
| $ | 4,710 |
12. Commitments
(a) The Company's lease commitments consist of rent and equipment under operating leases. The Company accounts for any incentives provided over the term of the lease. Total minimum annual rental payments to be made by the Company as at December 31, 2014 for each of the years ended December 31, are as follows:
| Operating Leases | ||
| 2015 | $ | 5,364 |
| 2016 | 2,493 | |
| 2017 | 1,908 | |
| 2018 | 1,851 | |
| 2019 | 1,288 | |
| Thereafter | 49 | |
| $ | 12,953 |
Rent expense was $6.6 million for 2014 (2013 — $6.5 million, 2012 — $6.2 million).
Recorded in the accrued liabilities balance as at December 31, 2014 is $1.6 million (December 31, 2013 — $1.7 million) related to accrued rent and lease inducements being recognized as an offset to rent expense over the term of the respective leases.
Purchase obligations under long-term supplier contracts as at December 31, 2014 were $35.3 million (December 31, 2013 — $11.8 million).
(b) As at December 31, 2014 the Company did not have any letters of credit and advance payment guarantees outstanding (December 31, 2013 — $nil), under the Credit Facility. As at December 31, 2014 the Company had letters of credit and advance payment guarantees outstanding of $0.3 million as compared to $0.3 million as at December 31, 2013, under the Bank of Montreal Facility.
(c) The Company compensates its sales force with both fixed and variable compensation. Commissions on the sale or lease of the Company's theater systems are payable in graduated amounts from the time of collection of the customer's first payment to the Company up to the collection of the customer's last initial payment. At December 31, 2014, $1.5 million (December 31, 2013—$1.5 million) of commissions have been accrued and will be payable in future periods.
"}]},{"name":"rpt:f-957","factDimensions":{"xbrl:concept":"imax:LeasesFutureMinimumPaymentsDueTableTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
| Operating Leases | ||
| 2015 | $ | 5,364 |
| 2016 | 2,493 | |
| 2017 | 1,908 | |
| 2018 | 1,851 | |
| 2019 | 1,288 | |
| Thereafter | 49 | |
| $ | 12,953 |
13. Contingencies and Guarantees
The Company is involved in lawsuits, claims, and proceedings, including those identified below, which arise in the ordinary course of business. In accordance with the Contingencies Topic of the FASB ASC, the Company will make a provision for a liability when it is both probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company believes it has adequate provisions for any such matters. The Company reviews these provisions in conjunction with any related provisions on assets related to the claims at least quarterly and adjusts these provisions to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other pertinent information related to the case. Should developments in any of these matters outlined below cause a change in the Company's determination as to an unfavorable outcome and result in the need to recognize a material provision, or, should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on the Company's results of operations, cash flows, and financial position in the period or periods in which such a change in determination, settlement or judgment occurs.
The Company expenses legal costs relating to its lawsuits, claims and proceedings as incurred.
(a) In March 2005, the Company, together with Three-Dimensional Media Group, Ltd. (“3DMG”), filed a complaint in the U.S. District Court for the Central District of California, Western Division, against In-Three, Inc. (“In-Three”) alleging patent infringement. On March 10, 2006, the Company and In-Three entered into a settlement agreement settling the dispute between the Company and In-Three. Despite the settlement reached between the Company and In-Three, co-plaintiff 3DMG refused to dismiss its claims against In-Three. Accordingly, the Company and In-Three moved jointly for a motion to dismiss the Company's and In-Three's claims. On August 24, 2010, the Court dismissed all of the claims pending between the Company and In-Three, thus dismissing the Company from the litigation.
On May 15, 2006, the Company initiated arbitration against 3DMG before the International Centre for Dispute Resolution in New York (the “ICDR”), alleging breaches of the license and consulting agreements between the Company and 3DMG. On June 15, 2006, 3DMG filed an answer denying any breaches and asserting counterclaims that the Company breached the parties' license agreement. On June 21, 2007, the ICDR unanimously denied 3DMG's Motion for Summary Judgment filed on April 11, 2007 concerning the Company's claims and 3DMG's counterclaims. The proceeding was suspended on May 4, 2009 due to failure of 3DMG to pay fees associated with the proceeding. The proceeding was further suspended on October 11, 2010 pending resolution of reexamination proceedings currently pending involving one of 3DMG's patents. The Company will continue to pursue its claims vigorously and believes that all allegations made by 3DMG are without merit. The Company further believes that the amount of loss, if any, suffered in connection with the counterclaims would not have a material impact on the financial position or results of operations of the Company, although no assurance can be given with respect to the ultimate outcome of the arbitration.
(b) In January 2004, the Company and IMAX Theatre Services Ltd., a subsidiary of the Company, commenced an arbitration seeking damages before the International Court of Arbitration of the International Chamber of Commerce (the “ICC”) with respect to the breach by Electronic Media Limited (“EML”) of its December 2000 agreement with the Company. In June 2004, the Company commenced a related arbitration before the ICC against EML's affiliate, E-City Entertainment (I) PVT Limited (“E-City”). On March 27, 2008, the arbitration panel issued a final award in favor of the Company in the amount of $11.3 million, consisting of past and future rents owed to the Company, plus interest and costs, as well as an additional $2,512 each day in interest from October 1, 2007 until the date the award is paid. In July 2008, E-City commenced a proceeding in Mumbai, India seeking an order that the ICC award may not be recognized in India. The Company has opposed that application on a number of grounds and seeks to have the ICC award recognized in India. On June 13, 2013, the Bombay High Court ruled that it has jurisdiction over the proceeding but on November 19, 2013, the Supreme Court of India stayed proceedings in the High Court pending Supreme Court review of the High Court's ruling. On June 24, 2011, the Company commenced a proceeding in the Ontario Superior Court of Justice for recognition of the ICC final award. On December 2, 2011, the Ontario Court issued an order recognizing the final award and requiring E-City to pay the Company $30,000 to cover the costs of the application. On December 22, 2014, E-City filed a notice of motion in Ontario to set aside or stay the 2011 order recognizing the arbitral award in Ontario. In January 2013, the Company filed an action in the New York Supreme Court seeking to collect the amount owed to the Company by certain entities and individuals affiliated with E-City, and on July 11, 2014, the Company moved to amend its petition in the New York matter to have the Canadian judgment recognized as part of this proceeding. The Respondents in the New York action have answered and objected to the Company's petition, and they have moved to dismiss for improper service of process. On July 29, 2014, the Company commenced a separate proceeding to have the Canadian judgment recognized in New York. On November 26, 2014, E-City filed a motion in the Bombay High Court seeking to enjoin IMAX from continuing the New York legal proceedings. On February 2, 2015, the Bombay High Court denied E-City's request for an ad interim injunction.
(c) The Company and certain of its officers and directors were named as defendants in eight purported class action lawsuits filed between August 11, 2006 and September 18, 2006, alleging violations of U.S. federal securities laws. These eight actions were filed in the U.S. District Court for the Southern District of New York (the “Court”) and were subsequently consolidated by the Court. The plaintiffs filed a consolidated amended class action complaint on October 2, 2007, which added PricewaterhouseCoopers LLP, the Company's auditors, as a defendant. The amended complaint, brought on behalf of shareholders who purchased the Company's common stock on the NASDAQ between February 27, 2003 and July 20, 2007 (the “U.S. Class”), alleged primarily that the defendants engaged in securities fraud by disseminating materially false and misleading statements during the class period regarding the Company's revenue recognition of theater system installations, and failing to disclose material information concerning the Company's revenue recognition practices. On March 26, 2012, the parties executed and filed with the Court an amended formal stipulation of settlement and proposed form of notice to the class. On June 20, 2012 the Court issued an order granting final approval of the settlement. Under the terms of the settlement, members of the U.S. Class who did not opt out of the settlement released defendants from liability for all claims that were alleged in this action or could have been alleged in this action or any other proceeding (including the action in Canada as described in (d) of this note (the “Canadian Action”) relating to the purchase of the Company's securities on the NASDAQ between February 27, 2003 and July 20, 2007 or the subject matter and facts relating to this action. As part of the settlement and in exchange for the release, defendants agreed to pay $12.0 million to a settlement fund which amount was funded by the carriers of the Company's directors and officers insurance policy and by PricewaterhouseCoopers LLP. The settlement was distributed to the U.S. Class on May 5, 2014.
(d) A class action lawsuit was filed on September 20, 2006 in the Canadian Court against the Company and certain of its officers and directors, alleging violations of Canadian securities laws. This lawsuit was brought on behalf of shareholders who acquired the Company's securities between February 17, 2006 and August 9, 2006. The lawsuit seeks $210.0 million in compensatory and punitive damages, as well as costs. For reasons released December 14, 2009, the Canadian Court granted leave to the plaintiffs to amend their statement of claim to plead certain claims pursuant to the Securities Act (Ontario) against the Company and certain individuals (“the Defendants”) and granted certification of the action as a class proceeding. These are procedural decisions, and do not contain any conclusions binding on a judge at trial as to the factual or legal merits of the claim. Leave to appeal those decisions was denied. In March 2013, the Defendants obtained an Order enforcing the settlement Order in the parallel class action in the United States in this Canadian class action lawsuit, with the result that the class in this case was reduced in size by approximately 85%. A motion by the Plaintiffs for leave to appeal that Order was dismissed. The Company believes the allegations made against it in the statement of claim are meritless and will vigorously defend the matter, although no assurance can be given with respect to the ultimate outcome of such proceedings. The Company's directors' and officers' insurance policy provides for reimbursement of costs and expenses incurred in connection with this lawsuit as well as potential damages awarded, if any, subject to certain policy limits, exclusions and deductibles.
(e) The Company has also been involved in litigation against Gary Tsui (“Tsui”) and related parties in both Canada and China based on Tsui's theft and use of the Company's trade secrets. The Company filed a lawsuit against Tsui and other related individuals and entities in the Ontario Superior Court of Justice on December 8, 2009, through which the Company sought injunctive relief to prohibit Tsui from disclosing or using the Company's confidential and proprietary information and from competing with the Company. The Ontario Court awarded the injunctive relief sought by the Company on December 22, 2009. On April 30, 2013, a warrant was issued for Tsui's arrest based on his refusal to comply with the orders of the Ontario Court, including with respect to the continued use of the Company's trade secrets. The Ontario action was heard in June 2014 and judgment was rendered in the Company's favor. The Court awarded the Company $6.0 million in damages against all defendants for conversion and misuse of confidential information, $456,000 against all defendants for disgorgement of profits from the lost business opportunity, $50,000 from Tsui in punitive damages of prejudgment interest on the forgoing and $300,000 in costs against all defendants. The Company also initiated suits against Tsui in Beijing No. 1 Intermediate People's Court in Beijing, China on February 16, 2013 and December 3, 2013, seeking relief similar to that sought in the Ontario action (the “Beijing Action”). In October, 2013, Jiangsu Sunway Digital Technology Co. Ltd (a company incorporated by Tsui), commenced an action against the Company in Zhenjiang Intermediate People's Court, in Zhenjiang, China, alleging that the Company defamed and slandered the plaintiff through the commencement of the actions against Tsui in Canada and China referred to above, as well as several written communications to third parties (the “Zhenjiang Action”). In December 2014, the parties entered into a settlement agreement to settle, on terms which they agreed to maintain as confidential, all outstanding matters in connection with the Beijing Action and the Zhenjiang Action. The Company does not expect the settlement agreement to have a material impact on the financial position of the Company.
(f) In November 2013, a purported class action complaint was filed in the United States District Court for the Northern District of Illinois (the “Court”) against IMAX Chicago Theatre LLC (“IMAX Chicago Theatre”), a subsidiary of the Company. The plaintiff, Scott Redman, alleges that IMAX Chicago Theatre provided certain credit card and debit card receipts to customers that were purportedly not in compliance with the applicable truncation requirements of the Fair and Accurate Credit Transactions Act. The plaintiff seeks statutory damages individually and on behalf of a putative class. On February 20, 2014, IMAX Chicago Theatre filed a motion to dismiss the complaint, which the Court denied on January 23, 2015. IMAX Chicago Theatre believes that it has meritorious defenses and intends to defend the lawsuit vigorously. However, given the early stage of the proceedings, IMAX Chicago Theatre is unable to predict the outcome of this matter and is unable to assess the potential impact, if any, of the lawsuit at this time.
(g) In March 2013, IMAX (Shanghai) Multimedia Technology Co., Ltd., the Company's wholly-owned subsidiary in China, received notice from the Shanghai office of the General Administration of Customs that it had been selected for a customs audit. The Company is unable to assess the potential impact, if any, of the audit at this time.
(h) In addition to the matters described above, the Company is currently involved in other legal proceedings or governmental inquiries which, in the opinion of the Company's management, will not materially affect the Company's financial position or future operating results, although no assurance can be given with respect to the ultimate outcome of any such proceedings.
(i) In the normal course of business, the Company enters into agreements that may contain features that meet the definition of a guarantee. The Guarantees Topic of the FASB ASC defines a guarantee to be a contract (including an indemnity) that contingently requires the Company to make payments (either in cash, financial instruments, other assets, shares of its stock or provision of services) to a third party based on (a) changes in an underlying interest rate, foreign exchange rate, equity or commodity instrument, index or other variable, that is related to an asset, a liability or an equity security of the counterparty, (b) failure of another party to perform under an obligating agreement or (c) failure of another third party to pay its indebtedness when due.
Financial Guarantees
The Company has provided no significant financial guarantees to third parties.
Product Warranties
The following summarizes the accrual for product warranties that was recorded as part of accrued liabilities in the consolidated balance sheets:
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Balance at the beginning of the year | $ | 7 | $ | 32 | |
| Warranty redemptions | (5) | (77) | |||
| Warranties issued | 11 | 52 | |||
| Revisions | (7) | - | |||
| Balance at the end of the year | $ | 6 | $ | 7 |
Director/Officer Indemnifications
The Company's General By-law contains an indemnification of its directors/officers, former directors/officers and persons who have acted at its request to be a director/officer of an entity in which the Company is a shareholder or creditor, to indemnify them, to the extent permitted by the Canada Business Corporations Act, against expenses (including legal fees), judgments, fines and any amount actually and reasonably incurred by them in connection with any action, suit or proceeding in which the directors and/or officers are sued as a result of their service, if they acted honestly and in good faith with a view to the best interests of the Company. The nature of the indemnification prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to counterparties. The Company has purchased directors' and officers' liability insurance. No amount has been accrued in the consolidated balance sheet as at December 31, 2014 and December 31, 2013 with respect to this indemnity.
Other Indemnification Agreements
In the normal course of the Company's operations, the Company provides indemnifications to counterparties in transactions such as: theater system lease and sale agreements and the supervision of installation or servicing of the theater systems; film production, exhibition and distribution agreements; real property lease agreements; and employment agreements. These indemnification agreements require the Company to compensate the counterparties for costs incurred as a result of litigation claims that may be suffered by the counterparty as a consequence of the transaction or the Company's breach or non-performance under these agreements. While the terms of these indemnification agreements vary based upon the contract, they normally extend for the life of the agreements. A small number of agreements do not provide for any limit on the maximum potential amount of indemnification; however, virtually all of the Company's system lease and sale agreements limit such maximum potential liability to the purchase price of the system. The fact that the maximum potential amount of indemnification required by the Company is not specified in some cases prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to counterparties. Historically, the Company has not made any significant payments under such indemnifications and no amounts have been accrued in the consolidated financial statements with respect to the contingent aspect of these indemnities.
"}]},{"name":"rpt:f-979","factDimensions":{"xbrl:concept":"us-gaap:CommitmentsAndContingenciesPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
The Company is involved in lawsuits, claims, and proceedings, including those identified below, which arise in the ordinary course of business. In accordance with the Contingencies Topic of the FASB ASC, the Company will make a provision for a liability when it is both probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company believes it has adequate provisions for any such matters. The Company reviews these provisions in conjunction with any related provisions on assets related to the claims at least quarterly and adjusts these provisions to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other pertinent information related to the case. Should developments in any of these matters outlined below cause a change in the Company's determination as to an unfavorable outcome and result in the need to recognize a material provision, or, should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on the Company's results of operations, cash flows, and financial position in the period or periods in which such a change in determination, settlement or judgment occurs.
"}]},{"name":"rpt:f-980","factDimensions":{"xbrl:concept":"us-gaap:LegalCostsPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"The Company expenses legal costs relating to its lawsuits, claims and proceedings as incurred.
"}]},{"name":"rpt:f-981","factDimensions":{"xbrl:concept":"us-gaap:ProductWarrantyAccrual","xbrl:period":"2014-01-01T00:00:00","xbrl:entity":"cik:0000921582","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"7000","decimals":-3}]},{"name":"rpt:f-982","factDimensions":{"xbrl:concept":"us-gaap:ProductWarrantyAccrualWarrantiesIssued","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"11000","decimals":-3}]},{"name":"rpt:f-983","factDimensions":{"xbrl:concept":"us-gaap:ProductWarrantyAccrual","xbrl:period":"2015-01-01T00:00:00","xbrl:entity":"cik:0000921582","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"6000","decimals":-3}]},{"name":"rpt:f-984","factDimensions":{"xbrl:concept":"us-gaap:ProductWarrantyAccrual","xbrl:period":"2013-01-01T00:00:00","xbrl:entity":"cik:0000921582","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"32000","decimals":-3}]},{"name":"rpt:f-985","factDimensions":{"xbrl:concept":"us-gaap:ProductWarrantyAccrualWarrantiesIssued","xbrl:period":"2013-01-01T00:00:00/2014-01-01T00:00:00","xbrl:entity":"cik:0000921582","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"52000","decimals":-3}]},{"name":"rpt:f-986","factDimensions":{"xbrl:concept":"us-gaap:ScheduleOfProductWarrantyLiabilityTableTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"| As at December 31, | |||||
| 2014 | 2013 | ||||
| Balance at the beginning of the year | $ | 7 | $ | 32 | |
| Warranty redemptions | (5) | (77) | |||
| Warranties issued | 11 | 52 | |||
| Revisions | (7) | - | |||
| Balance at the end of the year | $ | 6 | $ | 7 |
14. Capital Stock
(a) Authorized
Common Shares
The authorized capital of the Company consists of an unlimited number of common shares. The following is a summary of the rights, privileges, restrictions and conditions of the common shares.
The holders of common shares are entitled to receive dividends if, as and when declared by the directors of the Company, subject to the rights of the holders of any other class of shares of the Company entitled to receive dividends in priority to the common shares.
The holders of the common shares are entitled to one vote for each common share held at all meetings of the shareholders.
(b) Changes during the Year
In 2014, the Company issued 1,149,587 (2013 — 1,316,347, 2012 — 1,429,685) common shares pursuant to the exercise of stock options for cash proceeds of $10.8 million (2013 — $9.0 million, 2012 — $8.9 million). In addition, the Company issued 109,264 common shares (net of shares withheld for tax) pursuant to the vesting of RSUs (2013 – 42,461, 2012 – nil).
(c) Stock-Based Compensation
The Company issues stock-based compensation to eligible employees, directors and consultants under the Company's 2013 Long- Term Incentive Plan and the China Long-Term Incentive Plan, as described below.
On June 11, 2013, the Company's shareholders approved the IMAX 2013 Long-Term Incentive Plan (“IMAX LTIP”) at the Company's Annual and Special Meeting. Awards to employees, directors and consultants under the IMAX LTIP may consist of stock options, RSUs and other awards.
The Company's Stock Option Plan (“SOP”) which shareholders approved in June 2008, permitted the grant of stock options to employees, directors and consultants. As a result of the implementation of the IMAX LTIP on June 11, 2013, stock options will no longer be granted under the SOP.
A separate stock option plan, the China Long-Term Incentive Plan (the “China LTIP”) was adopted by a subsidiary of the Company in October 2012.
The compensation costs recorded in the consolidated statement of operations for these plans were $15.1 million in 2014 (2013 — $11.9 million, 2012 — $13.1 million).
As at December 31, 2014, the Company has reserved a total of 9,173,106 (December 31, 2013— 10,530,723) common shares for future issuance under the SOP and IMAX LTIP. Of the common shares reserved for issuance, there are options in respect of 5,925,660 common shares and RSUs in respect of 595,834 common shares outstanding at December 31, 2014. At December 31, 2014 options in respect of 3,368,558 common shares were vested and exercisable.
Stock Option Plan
The Company's policy is to issue new common shares from treasury to satisfy stock options which are exercised.
The Company utilizes a Binomial Model to determine the fair value of stock-based payment awards. The fair value determined by the Binomial Model is affected by the Company's stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company's expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The Binomial Model also considers the expected exercise multiple which is the multiple of exercise price to grant price at which exercises are expected to occur on average. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company's employee stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in management's opinion, the Binomial Model best provides a fair measure of the fair value of the Company's employee stock options.
All awards of stock options are made at fair market value of the Company's common shares on the date of grant. The fair market value of a common share on a given date means the higher of the closing price of a common share on the grant date (or the most recent trading date if the grant date is not a trading date) on the New York Stock Exchange (“NYSE”), the Toronto Stock Exchange (the “TSX”) and such national exchange, as may be designated by the Company's Board of Directors (the “Fair Market Value”). The stock options vest within 5 years and expire 10 years or less from the date granted. The SOP and IMAX LTIP provide that vesting will be accelerated if there is a change of control, as defined in each plan and upon certain conditions.
The Company recorded an expense of $8.9 million in 2014 (2013 — $8.9 million, 2012 — $12.4 million) related to stock option grants issued to employees and directors in the IMAX LTIP and SOP plans. An income tax benefit of $1.5 million is recorded in the consolidated statement of operations for these costs. Total stock-based compensation expense related to non-vested employee stock options not yet recognized at December 31, 2014 and the weighted average period over which the awards are expected to be recognized is $14.8 million and 2.3 years respectively (2013 — $14.3 million and 3.0 years, 2012 — $20.6 million and 3.6 years).
The weighted average fair value of all stock options, granted to employees and directors in 2014 at the measurement date was $8.25 per share (2013 — $7.10 per share, 2012 — $7.45 per share). For the years ended December 31, the following assumptions were used to estimate the average fair value of the stock options:
| 2014 | 2013 | 2012 | ||||
| Average risk-free interest rate | 2.46% | 1.63% | 1.36% | |||
| Expected option life (in years) | 4.15 - 5.82 | 4.51 - 4.63 | 2.89 - 6.26 | |||
| Expected volatility | 32.5% - 37.5% | 40% | 50% | |||
| Annual termination probability | 0% - 8.40% | 0% - 8.52% | 0% - 8.76% | |||
| Dividend yield | 0% | 0% | 0% |
Stock options to Non-Employees
During 2014, an aggregate of 10,000 (2013 — 2,500, 2012 — 12,500) stock options to purchase the Company's common stock with an average exercise price of $26.47 (2013 — $26.28, 2012 — $22.82) were granted to certain advisors and strategic partners of the Company. These stock options granted have a maximum contractual life of 7 years. The stock options granted in 2014 were granted under the IMAX LTIP.
As at December 31, 2014 non-employee options outstanding amounted to 31,500 stock options (2013 — 76,751, 2012 — 120,001) with a weighted average exercise price of $21.75 (2013 — $15.67, 2012 — $14.14). 16,100 stock options (2013 — 31,509, 2012 — 35,717) were exercisable with an average weighted exercise price of $18.14 (2013 — $12.38, 2012 — $11.57) and the vested options have an aggregate intrinsic value of $0.2 million (2013 — $0.5 million, 2012 — $0.4 million). The weighted average fair value of stock options granted to non-employees during 2014 at the measurement date was $4.84 per share (2013 — $11.50 per share, 2012 — $11.73 per share), utilizing a Binomial Model with the following underlying assumptions:
| Years Ended December 31 | ||||||
| 2014 | 2013 | 2012 | ||||
| Average risk-free interest rate | 0.53% | 1.64% | 1.28% | |||
| Contractual option life | 2 years | 7 years | 7 years | |||
| Average expected volatility | 32.5% | 40.0% | 50.0% | |||
| Dividend yield | 0% | 0% | 0% |
In 2014, the Company recorded a charge of $0.1 million, (2013 — $0.2 million, 2012 — $0.1 million) to costs and expenses related to revenues – services and selling, general and administrative expenses related to the non-employee stock options. Included in accrued liabilities is an accrual of less than $0.1 million for non-employee stock options (December 31, 2013 — $0.1 million).
China Long-Term Incentive Plan (“China LTIP”)
The China LTIP was adopted by IMAX China in October 2012. Each stock option issued under the China LTIP represents an opportunity to participate economically in the future growth and value creation of the subsidiary. The China LTIP options issued by IMAX China (“China Options”) operate in tandem with options granted to certain employees of the subsidiary under the Company's SOP and IMAX LTIP (“Tandem Options”).
In 2012, an aggregate of 146,623 Tandem Options were granted to certain employees in conjunction with the China Options with an average price of $22.39 in accordance with the China LTIP. During 2014, an additional 39,823 Tandem Options were granted in conjunction with China Options with an average price of $28.52 per share. The Tandem Options have a maximum contractual life of 7 years. As at December 31, 2014 there were 186,446 (December 31, 2013 – 146,623) outstanding and unvested Tandem Options issued under the China LTIP with a weighted average exercise price of $23.70 per share (December 31, 2013 – $22.39 per share). The weighted average fair value of the Tandem Options granted during 2014 was $6.41 per share. The total fair value of the Tandem Options granted with respect to the China LTIP was $1.9 million. The Company is recognizing this expense over a 5 year period. If a performance event occurs, including upon the occurrence of a qualified initial public offering or upon a change in control on or prior to the fifth anniversary of the grant date, the 186,446 Tandem Options issued forfeit immediately and the related charge would be reversed. There were no option awards issued under the China LTIP during 2013.
The Company recorded an expense of $0.3 million (2013 – $0.3 million, 2012 – less than $0.1 million) related to SOP Options issued under the China LTIP.
Stock Option Summary
The following table summarizes certain information in respect of option activity under the SOP and IMAX LTIP:
| Weighted Average Exercise | |||||||||||||||
| Number of Shares | Price Per Share | ||||||||||||||
| 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||
| Options outstanding, beginning of year | 6,263,121 | 7,441,068 | 7,200,721 | $ | 21.11 | $ | 18.48 | $ | 14.60 | ||||||
| Granted | 872,155 | 375,650 | 1,833,485 | 27.48 | 25.29 | 24.59 | |||||||||
| Exercised | (1,149,587) | (1,316,347) | (1,429,685) | 9.42 | 6.81 | 6.24 | |||||||||
| Forfeited | (36,242) | (228,190) | (154,958) | 24.63 | 24.55 | 23.03 | |||||||||
| Expired | - | - | - | - | - | - | |||||||||
| Cancelled | (23,787) | (9,060) | (8,495) | 33.60 | 30.90 | 22.07 | |||||||||
| Options outstanding, end of year | 5,925,660 | 6,263,121 | 7,441,068 | 24.24 | 21.11 | 18.48 | |||||||||
| Options exercisable, end of year | 3,368,558 | 3,578,006 | 3,480,160 | 22.69 | 18.56 | 14.50 |
In 2014, the Company cancelled 23,787 stock options from its SOP (2013 — 9,060, 2012 — 8,495) surrendered by Company employees.
As at December 31, 2014, 5,461,704 options were fully vested or are expected to vest with a weighted average exercise price of $24.04, aggregate intrinsic value of $38.5 million and weighted average remaining contractual life of 4.3 years. As at December 31, 2014, options that are exercisable have an intrinsic value of $28.4 million and a weighted average remaining contractual life of 4.2 years. The intrinsic value of options exercised in 2014 was $21.8 million (2013 — $26.7 million, 2012 — $23.4 million).
Restricted Share Units
RSUs have been granted to employees, consultants and directors under the IMAX LTIP. Each RSU represents a contingent right to receive one common share and is the economic equivalent of one common share. The grant date fair value of each RSU is equal to the share price of the Company's stock at the grant date. The Company recorded an expense of $5.8 million for the year ended December 31, 2014 (2013 — $2.1 million), related to RSU grants issued to employees and directors in the plan. The annual termination probability assumed for the year ended December 31, 2014, ranged from 0% to 9.50%. In addition, the Company recorded an expense of less than $0.1 million for the year ended December 31, 2014 (2013 — less than $0.1 million), related to RSU grants issued to certain advisors and strategic partners of the Company.
Total stock-based compensation expense related to non-vested RSU's not yet recognized at December 31, 2014 and the weighted average period over which the awards are expected to be recognized is $11.0 million and 2.9 years (2013 — $4.7 million and 2.9 years). The Company's actual tax benefits realized for the tax deductions related to the vesting of RSUs was $0.4 million for the year ended December 31, 2014 (2013 — $nil).
RSUs granted under the IMAX LTIP vest between immediately and four years from the date granted. Vesting of the RSUs is subject to continued employment or service with the Company.
The following table summarizes certain information in respect of RSU activity under the IMAX LTIP:
| Number of Awards | Weighted Average Grant Date Fair Value Per Share | |||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||
| RSUs outstanding, beginning of year | 264,140 | - | $ | 26.14 | $ | - | ||||
| Granted | 484,088 | 322,561 | 27.42 | 26.16 | ||||||
| Vested and settled | (148,001) | (46,360) | 26.29 | 26.23 | ||||||
| Forfeited | (4,393) | (12,061) | 26.88 | 26.28 | ||||||
| RSUs outstanding, end of year | 595,834 | 264,140 | 27.13 | 26.14 |
Stock Appreciation Rights
There have been no stock appreciation rights (“SARs”) granted since 2007. For the year ended December 31, 2013, 118,000 SARs were cash settled for $2.4 million. The average exercise price for the settled SARs for the year ended December 31, 2013 was $6.86 per SAR. As at December 31, 2014, no SARS were outstanding. None of the SARs were forfeited, cancelled, or expired for the years ended December 31, 2014 and 2013. The Company has recorded an expense of $nil for 2014 (2013 ― $0.4 million, 2012 ― $0.6 million) to selling, general and administrative expenses related to these SARs.
Issuer Purchases of Equity Securities
On June 16, 2014, the Company's board of directors approved a new $150.0 million share repurchase program for shares of the Company's common stock. Purchases under the program commenced during the third quarter of 2014. The share repurchase program expires on June 30, 2017. The repurchases may be made either in the open market or through private transactions, subject to market conditions, applicable legal requirements and other relevant factors. The Company has no obligation to repurchase shares and the share repurchase program may be suspended or discontinued by the Company at any time. During 2014, the Company repurchased 112,034 common shares at an average price of $27.30 per share. The retired shares were repurchased for $3.1 million. The average carrying value of the stock retired was deducted from common stock and the remaining excess over the average carrying value of stock was charged to accumulated deficit.
The total number of shares purchased during the year ended December 31, 2014 does not include any shares received in the administration of employee share-based compensation plans.
(d) Income per share
Reconciliations of the numerator and denominator of the basic and diluted per-share computations are comprised of the following:
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Net income attributable to common shareholders | $ | 39,736 | $ | 44,115 | $ | 41,337 | |||
| Less: Accretion charges associated with redeemable common stock | (426) | - | - | ||||||
| Net income applicable to common shareholders | $ | 39,310 | $ | 44,115 | $ | 41,337 | |||
| Weighted average number of common shares (000's): | |||||||||
| Issued and outstanding, beginning of period | 67,841 | 66,482 | 65,053 | ||||||
| Weighted average number of shares issued during the period | 505 | 669 | 801 | ||||||
| Weighted average number of shares used in computing basic earnings per | |||||||||
| Share | 68,346 | 67,151 | 65,854 | ||||||
| Assumed exercise of stock options and RSUs, net of shares assumed | 1,408 | 1,810 | 2,079 | ||||||
| Weighted average number of shares used in computing diluted earnings per | |||||||||
| Share | 69,754 | 68,961 | 67,933 |
The calculation of diluted earnings per share excludes 4,151,008 shares that are issuable upon exercise of 1,500 RSUs and 4,149,508 stock options for the year ended December 31, 2014, as the impact of these exercises would be antidilutive.
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| Average risk-free interest rate | 2.46% | 1.63% | 1.36% | |||
| Expected option life (in years) | 4.15 - 5.82 | 4.51 - 4.63 | 2.89 - 6.26 | |||
| Expected volatility | 32.5% - 37.5% | 40% | 50% | |||
| Annual termination probability | 0% - 8.40% | 0% - 8.52% | 0% - 8.76% | |||
| Dividend yield | 0% | 0% | 0% |
| Years Ended December 31 | ||||||
| 2014 | 2013 | 2012 | ||||
| Average risk-free interest rate | 0.53% | 1.64% | 1.28% | |||
| Contractual option life | 2 years | 7 years | 7 years | |||
| Average expected volatility | 32.5% | 40.0% | 50.0% | |||
| Dividend yield | 0% | 0% | 0% |
| Weighted Average Exercise | |||||||||||||||
| Number of Shares | Price Per Share | ||||||||||||||
| 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||
| Options outstanding, beginning of year | 6,263,121 | 7,441,068 | 7,200,721 | $ | 21.11 | $ | 18.48 | $ | 14.60 | ||||||
| Granted | 872,155 | 375,650 | 1,833,485 | 27.48 | 25.29 | 24.59 | |||||||||
| Exercised | (1,149,587) | (1,316,347) | (1,429,685) | 9.42 | 6.81 | 6.24 | |||||||||
| Forfeited | (36,242) | (228,190) | (154,958) | 24.63 | 24.55 | 23.03 | |||||||||
| Expired | - | - | - | - | - | - | |||||||||
| Cancelled | (23,787) | (9,060) | (8,495) | 33.60 | 30.90 | 22.07 | |||||||||
| Options outstanding, end of year | 5,925,660 | 6,263,121 | 7,441,068 | 24.24 | 21.11 | 18.48 | |||||||||
| Options exercisable, end of year | 3,368,558 | 3,578,006 | 3,480,160 | 22.69 | 18.56 | 14.50 |
| Number of Awards | Weighted Average Grant Date Fair Value Per Share | |||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||
| RSUs outstanding, beginning of year | 264,140 | - | $ | 26.14 | $ | - | ||||
| Granted | 484,088 | 322,561 | 27.42 | 26.16 | ||||||
| Vested and settled | (148,001) | (46,360) | 26.29 | 26.23 | ||||||
| Forfeited | (4,393) | (12,061) | 26.88 | 26.28 | ||||||
| RSUs outstanding, end of year | 595,834 | 264,140 | 27.13 | 26.14 |
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Net income attributable to common shareholders | $ | 39,736 | $ | 44,115 | $ | 41,337 | |||
| Less: Accretion charges associated with redeemable common stock | (426) | - | - | ||||||
| Net income applicable to common shareholders | $ | 39,310 | $ | 44,115 | $ | 41,337 | |||
| Weighted average number of common shares (000's): | |||||||||
| Issued and outstanding, beginning of period | 67,841 | 66,482 | 65,053 | ||||||
| Weighted average number of shares issued during the period | 505 | 669 | 801 | ||||||
| Weighted average number of shares used in computing basic earnings per | |||||||||
| Share | 68,346 | 67,151 | 65,854 | ||||||
| Assumed exercise of stock options and RSUs, net of shares assumed | 1,408 | 1,810 | 2,079 | ||||||
| Weighted average number of shares used in computing diluted earnings per | |||||||||
| Share | 69,754 | 68,961 | 67,933 |
15. Consolidated Statements of Operations Supplemental Information
(a) Other Revenues
The Company enters into theater system arrangements with customers that typically contain customer payment obligations prior to the scheduled installation of the theater systems. During the period of time between signing and theater system installation, certain customers each year are unable to, or elect not to, proceed with the theater system installation for a number of reasons, including business considerations, or the inability to obtain certain consents, approvals or financing. Once the determination is made that the customer will not proceed with installation, the customer and/or the Company may terminate the arrangement by default or by entering into a consensual buyout. In these situations the parties are released from their future obligations under the arrangement, and the initial payments that the customer previously made to the Company are typically not refunded and are recognized as Other Revenues. In addition, the Company enters into agreements with customers to terminate their obligations for additional theater system configurations, which were in the Company's backlog. Other revenues from settlement arrangements were $nil, $0.4 million and $0.7 million in 2014, 2013 and 2012, respectively.
(b) Foreign Exchange
Included in selling, general and administrative expenses for the year ended December 31, 2014 is $1.5 million for net foreign exchange losses related to the translation of foreign currency denominated monetary assets and liabilities as compared to a net loss of $0.7 million for the year ended December 31, 2013 and a net gain of $1.2 million for the year ended December 31, 2012, respectively. See note 20(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 concession revenues, and in some cases 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 41 exhibitors (2013 — 38) for a total of 672 theater systems (2013 — 645), of which 451 theaters (2013 — 382) were operating as at December 31, 2014. The terms of the Company's joint revenue sharing arrangements are similar in nature, rights and obligations. The accounting policy for the Company's joint revenue sharing arrangements is disclosed in note 2(m).
Amounts attributable to transactions arising between the Company and its customers under joint revenue sharing arrangements are included in Equipment and Product Sales and Rentals revenue and for the year ended December 31, 2014 amounted to $68.4 million (2013 — $64.1 million, 2012 — $57.5 million).
IMAX DMR
In an IMAX DMR arrangement, the Company converts conventional motion pictures into the Company's large screen format, enabling 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 gross box-office receipts of the film, which generally range from 10-15%. The Company does not typically hold distribution rights or the copyright to these films.
In 2014, the majority of IMAX DMR revenue was earned from the exhibition of 40 IMAX DMR films (2013 — 38) throughout the IMAX theater network. The accounting policy for the Company's IMAX DMR arrangements is disclosed in note 2(m).
Amounts attributable to transactions arising between the Company and its customers under IMAX DMR arrangements are included in Services revenues and for December 31, 2014 amounted to $83.2 million (2013 — $83.5 million, 2012 — $78.1 million).
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 certain rights to the film other than exclusive theatrical distribution rights to the film, which are held by the Company. Under these arrangements, both parties contribute funding to the Company's wholly-owned production company for the production of the film and for associated exploitation costs. Clauses in these arrangements generally provide for the third party to take over the production of the film if the cost of the production exceeds its approved budget or if it appears as though the film will not be delivered on a timely basis.
As at December 31, 2014, the Company has one significant co-produced film arrangement which primarily represents the VIE total assets and liabilities balance of $0.4 million and 5 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).
In 2014, amounts totaling $3.5 million (2013 —$2.9 million, 2012 — $6.1 million) 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.
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In a joint revenue sharing arrangement, the Company receives a portion of a theater's box-office and concession revenues, and in some cases 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.
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16. Receivable Provisions, Net of Recoveries
The following table reflects the Company's receivable provisions net of recoveries recorded in the consolidated statements of operations:
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Accounts receivable provisions, net of recoveries | $ | 725 | $ | (35) | $ | 606 | ||
| Financing receivable provisions, net of recoveries | 193 | 480 | (82) | |||||
| Receivable provisions, net of recoveries | $ | 918 | $ | 445 | $ | 524 |
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Accounts receivable provisions, net of recoveries | $ | 725 | $ | (35) | $ | 606 | ||
| Financing receivable provisions, net of recoveries | 193 | 480 | (82) | |||||
| Receivable provisions, net of recoveries | $ | 918 | $ | 445 | $ | 524 |
17. Asset Impairments
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Property, plant and equipment | $ | 314 | $ | - | $ | - | ||
| Total | $ | 314 | $ | - | $ | - | ||
The Company records asset impairment charges against property, plant and equipment after an assessment of the carrying value of certain assets in light of their future expected cash flows.
"}]},{"name":"rpt:f-1302","factDimensions":{"xbrl:concept":"us-gaap:ImpairmentOfLongLivedAssetsHeldForUse","xbrl:period":"2013-01-01T00:00:00/2014-01-01T00:00:00","xbrl:entity":"cik:0000921582","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"0","decimals":-3}]},{"name":"rpt:f-1303","factDimensions":{"xbrl:concept":"us-gaap:ImpairmentOfLongLivedAssetsHeldForUse","xbrl:period":"2012-01-01T00:00:00/2013-01-01T00:00:00","xbrl:entity":"cik:0000921582","xbrl:unit":"iso4217:USD"},"factValues":[{"value":"0","decimals":-3}]},{"name":"rpt:f-1304","factDimensions":{"xbrl:concept":"us-gaap:DetailsOfImpairmentOfLongLivedAssetsHeldAndUsedByAssetTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Property, plant and equipment | $ | 314 | $ | - | $ | - | ||
| Total | $ | 314 | $ | - | $ | - | ||
18. Consolidated Statements of Cash Flows Supplemental Information
(a) Changes in other non-cash operating assets and liabilities are comprised of the following:
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Decrease (increase) in: | |||||||||
| Accounts receivable | $ | (4,318) | $ | (31,032) | $ | 4,110 | |||
| Financing receivables | (40) | (13,397) | (7,349) | ||||||
| Inventories | (7,603) | 1,884 | (422) | ||||||
| Prepaid expenses | (1,346) | 231 | (706) | ||||||
| Commissions and other deferred selling expenses | (769) | 59 | 322 | ||||||
| Insurance recoveries | 10,958 | 380 | 444 | ||||||
| Other assets, prepaid tax | (2,984) | - | - | ||||||
| Other assets | (459) | (341) | (752) | ||||||
| Increase (decrease) in: | |||||||||
| Accounts payable | (5,186) | 7,238 | (8,139) | ||||||
| Accrued and other liabilities(1) | 5,702 | (1,289) | (2,266) | ||||||
| Deferred revenue | 12,102 | 2,512 | (504) | ||||||
| $ | 6,057 | $ | (33,755) | $ | (15,262) |
(1) Decrease in accruals and other liabilities for 2014 includes payments of $nil for stock-based compensation (2013 - $2.4 million, 2012 - $0.3 million).
| (b) Cash payments made on account of: | |||||||||
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Income taxes | $ | 8,885 | $ | 1,056 | $ | 1,283 | |||
| Interest | $ | 48 | $ | 315 | $ | 1,374 |
| (c) Depreciation and amortization are comprised of the following: | |||||||||
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Film assets (1) | $ | 11,851 | $ | 17,000 | $ | 15,515 | |||
| Property, plant and equipment | |||||||||
| Joint revenue sharing arrangements | 12,148 | 11,519 | 10,125 | ||||||
| Other property, plant and equipment | 5,616 | 4,720 | 4,440 | ||||||
| Other intangible assets | 2,988 | 2,854 | 2,006 | ||||||
| Other assets | 627 | 592 | 532 | ||||||
| Deferred financing costs | 526 | 487 | 170 | ||||||
| $ | 33,756 | $ | 37,172 | $ | 32,788 |
__________
(1) Included in film asset amortization is a charge of $0.3 million (2013 —$0.2 million, 2012 —$0.1 million) relating to changes in estimates based on the ultimate recoverability of future films.
| (d) Write-downs, net of recoveries, are comprised of the following: | |||||||||
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Asset impairments | |||||||||
| Property, plant and equipment | $ | 314 | $ | - | $ | - | |||
| Other charges (recoveries) | |||||||||
| Accounts receivables | 725 | (35) | 606 | ||||||
| Financing receivables | 193 | 480 | (82) | ||||||
| Inventories(1) | 359 | 444 | 898 | ||||||
| Impairment of investments | 3,206 | - | 150 | ||||||
| Property, plant and equipment(2) | 440 | 384 | 18 | ||||||
| Other intangible assets | 57 | 63 | 11 | ||||||
| Other assets | - | - | 6 | ||||||
| $ | 5,294 | $ | 1,336 | $ | 1,607 | ||||
| Inventory charges | |||||||||
| Recorded in costs and expenses applicable to revenues - product & equipment sales | $ | 209 | $ | 274 | $ | 795 | |||
| Recorded in costs and expenses applicable to revenues - services | 150 | 170 | 103 | ||||||
| $ | 359 | $ | 444 | $ | 898 |
__________
(1) In 2014, the Company recorded a charge of $0.4 million (2013 — $0.5 million, 2012 — $0.9 million, respectively) in costs and expenses applicable to revenues, primarily for its film-based projector inventories. Specifically, IMAX systems includes an inventory charge of $0.2 million (2013 — $0.3 million, 2012 — $0.8 million). Theater system maintenance includes inventory write-downs of $0.2 million (2013 — $0.2 million, 2012 — $0.1 million).
(2) The Company disposed of assets that were no longer in use. No cash was received for these assets.
"}]},{"name":"rpt:f-1307","factDimensions":{"xbrl:concept":"imax:ChangesInOtherNonCashOperatingAssetsAndLiabilitiesTableTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Decrease (increase) in: | |||||||||
| Accounts receivable | $ | (4,318) | $ | (31,032) | $ | 4,110 | |||
| Financing receivables | (40) | (13,397) | (7,349) | ||||||
| Inventories | (7,603) | 1,884 | (422) | ||||||
| Prepaid expenses | (1,346) | 231 | (706) | ||||||
| Commissions and other deferred selling expenses | (769) | 59 | 322 | ||||||
| Insurance recoveries | 10,958 | 380 | 444 | ||||||
| Other assets, prepaid tax | (2,984) | - | - | ||||||
| Other assets | (459) | (341) | (752) | ||||||
| Increase (decrease) in: | |||||||||
| Accounts payable | (5,186) | 7,238 | (8,139) | ||||||
| Accrued and other liabilities(1) | 5,702 | (1,289) | (2,266) | ||||||
| Deferred revenue | 12,102 | 2,512 | (504) | ||||||
| $ | 6,057 | $ | (33,755) | $ | (15,262) |
| (b) Cash payments made on account of: | |||||||||
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Income taxes | $ | 8,885 | $ | 1,056 | $ | 1,283 | |||
| Interest | $ | 48 | $ | 315 | $ | 1,374 |
| (c) Depreciation and amortization are comprised of the following: | |||||||||
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Film assets (1) | $ | 11,851 | $ | 17,000 | $ | 15,515 | |||
| Property, plant and equipment | |||||||||
| Joint revenue sharing arrangements | 12,148 | 11,519 | 10,125 | ||||||
| Other property, plant and equipment | 5,616 | 4,720 | 4,440 | ||||||
| Other intangible assets | 2,988 | 2,854 | 2,006 | ||||||
| Other assets | 627 | 592 | 532 | ||||||
| Deferred financing costs | 526 | 487 | 170 | ||||||
| $ | 33,756 | $ | 37,172 | $ | 32,788 |
| (d) Write-downs, net of recoveries, are comprised of the following: | |||||||||
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Asset impairments | |||||||||
| Property, plant and equipment | $ | 314 | $ | - | $ | - | |||
| Other charges (recoveries) | |||||||||
| Accounts receivables | 725 | (35) | 606 | ||||||
| Financing receivables | 193 | 480 | (82) | ||||||
| Inventories(1) | 359 | 444 | 898 | ||||||
| Impairment of investments | 3,206 | - | 150 | ||||||
| Property, plant and equipment(2) | 440 | 384 | 18 | ||||||
| Other intangible assets | 57 | 63 | 11 | ||||||
| Other assets | - | - | 6 | ||||||
| $ | 5,294 | $ | 1,336 | $ | 1,607 | ||||
| Inventory charges | |||||||||
| Recorded in costs and expenses applicable to revenues - product & equipment sales | $ | 209 | $ | 274 | $ | 795 | |||
| Recorded in costs and expenses applicable to revenues - services | 150 | 170 | 103 | ||||||
| $ | 359 | $ | 444 | $ | 898 |
19. Segmented Information
The Company has seven reportable segments identified by category of product sold or service provided: IMAX systems; theater system maintenance; joint revenue sharing arrangements; film production and IMAX DMR; film distribution; film post-production; and other. The IMAX systems segment designs, manufactures, sells or leases IMAX theater projection system equipment. The theater system maintenance segment maintains IMAX theater projection system equipment in the IMAX theater network. The joint revenue sharing arrangements segment provides IMAX theater projection system equipment to an exhibitor in exchange for a share of the box-office and concession revenues. The film production and IMAX DMR segment produces films and performs film re-mastering services. The film distribution segment distributes films for which the Company has distribution rights. The film post-production segment provides film post-production and film print services. The other segment includes certain IMAX theaters that the Company owns and operates, camera rentals and other miscellaneous items. The accounting policies of the segments are the same as those described in note 2.
Management, including the Company's Chief Executive Officer (“CEO”) who is the Company's Chief Operating Decision Maker (as defined in the Segment Reporting Topic of the FASB ASC), assesses segment performance based on segment revenues, gross margins and film performance. Selling, general and administrative expenses, research and development costs, amortization of intangibles, receivables provisions (recoveries), write-downs net of recoveries, interest income, interest expense and tax (provision) recovery are not allocated to the segments.
Transactions between the film production and IMAX DMR segment and the film post-production segment are valued at exchange value. Inter-segment profits are eliminated upon consolidation, as well as for the disclosures below.
Transactions between the other segments are not significant.
| (a) Operating Segments | |||||||||
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Revenue(1) | |||||||||
| IMAX theater systems | |||||||||
| IMAX systems | $ | 72,992 | $ | 80,189 | $ | 83,405 | |||
| Theater system maintenance | 34,042 | 31,978 | 28,629 | ||||||
| Joint revenue sharing arrangements | 68,418 | 64,130 | 57,526 | ||||||
| 175,452 | 176,297 | 169,560 | |||||||
| Films | |||||||||
| Production and IMAX DMR | 83,172 | 83,496 | 78,050 | ||||||
| Distribution | 8,932 | 7,770 | 14,222 | ||||||
| Post-production | 10,831 | 9,192 | 7,904 | ||||||
| 102,935 | 100,458 | 100,176 | |||||||
| Other | 12,154 | 11,182 | 13,019 | ||||||
| Total | $ | 290,541 | $ | 287,937 | $ | 282,755 | |||
| Gross margin | |||||||||
| IMAX theater systems | |||||||||
| IMAX systems(2)(3) | $ | 47,928 | $ | 49,040 | $ | 50,245 | |||
| Theater system maintenance(2) | 12,375 | 12,096 | 10,970 | ||||||
| Joint revenue sharing arrangements(3) | 44,714 | 44,565 | 37,308 | ||||||
| 105,017 | 105,701 | 98,523 | |||||||
| Films | |||||||||
| Production and IMAX DMR(3) | 62,922 | 56,088 | 49,355 | ||||||
| Distribution(3) | 2,274 | 1,371 | 2,356 | ||||||
| Post-production | 3,046 | 1,341 | 1,954 | ||||||
| 68,242 | 58,800 | 53,665 | |||||||
| Other | 129 | 102 | 1,057 | ||||||
| Total | $ | 173,388 | $ | 164,603 | $ | 153,245 |
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Depreciation and amortization | |||||||||
| IMAX systems | $ | 1,910 | $ | 3,287 | $ | 2,946 | |||
| Theater systems maintenance | 225 | 141 | 212 | ||||||
| Joint revenue sharing arrangements | 14,614 | 13,535 | 11,836 | ||||||
| Films | |||||||||
| Production and IMAX DMR | 10,751 | 16,298 | 14,471 | ||||||
| Distribution | 1,512 | 1,048 | 1,631 | ||||||
| Post-production | 481 | 424 | 608 | ||||||
| Other | 671 | 347 | 172 | ||||||
| Corporate and other non-segment specific assets | 3,592 | 2,092 | 912 | ||||||
| Total | $ | 33,756 | $ | 37,172 | $ | 32,788 | |||
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Asset impairments and write-downs, net of recoveries | |||||||||
| IMAX systems | $ | 1,128 | $ | 1,109 | $ | 1,480 | |||
| Theater systems maintenance | 150 | 188 | 103 | ||||||
| Joint revenue sharing arrangements | 397 | 39 | 24 | ||||||
| Films | |||||||||
| Other | 314 | - | - | ||||||
| Corporate and other non-segment specific assets | 3,305 | - | - | ||||||
| Total | $ | 5,294 | $ | 1,336 | $ | 1,607 |
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Purchase of property, plant and equipment | |||||||||
| IMAX systems | $ | 8,822 | $ | 6,181 | $ | 2,958 | |||
| Theater system maintenance | 229 | 130 | 36 | ||||||
| Joint revenue sharing arrangements | 16,838 | 22,775 | 23,257 | ||||||
| Films | |||||||||
| Production and IMAX DMR | 15,245 | 408 | 1,175 | ||||||
| Distribution | 1,582 | - | 178 | ||||||
| Post-production | 2,176 | 2,185 | 0 | ||||||
| Other | 1,337 | 2,036 | 0 | ||||||
| Corporate and other non-segment specific assets | 10,713 | 2,076 | 1,708 | ||||||
| Total | $ | 56,942 | $ | 35,791 | $ | 29,312 |
| As at December 31, | ||||||
| 2014 | 2013 | |||||
| Assets | ||||||
| IMAX systems(4) | $ | 174,531 | $ | 170,719 | ||
| Theater systems maintenance(4) | 17,986 | 16,619 | ||||
| Joint revenue sharing arrangements(4) | 162,097 | 153,399 | ||||
| Films | ||||||
| Production and IMAX DMR | 45,549 | 22,315 | ||||
| Distribution | 17,768 | 8,675 | ||||
| Post-production | 13,384 | 5,351 | ||||
| Other | 19,405 | 7,645 | ||||
| Corporate and other non-segment specific assets | 170,813 | 96,422 | ||||
| Total | $ | 621,533 | $ | 481,145 |
__________
(1) The Company's two largest customers as at December 31, 2014 collectively represent 18.3% of total revenues (2013 – 19.9%, 2012 – 15.9%).
(2) In 2014, the Company recorded a charge of $0.4 million (2013 – $0.5 million, 2012 – $0.9 million, respectively) in costs and expenses applicable to revenues, primarily for its film-based projector inventories. Specifically, IMAX systems includes an inventory charge of $0.2 million (2013 – $0.3 million, 2012 – $0.8 million). Theater system maintenance includes inventory write-downs of $0.2 million (2013 – $0.2 million, 2012 – $0.1 million).
(3) IMAX systems include marketing and commission costs of $2.7 million, $2.5 million and $2.7 million in 2014, 2013 and 2012, respectively. Joint revenue sharing arrangements segment margins include advertising, marketing, and commission costs of $3.2 million, $3.6 million and $3.4 million in 2014, 2013 and 2012, respectively. Production and DMR segment margins include marketing costs of $7.1 million, $4.2 million and $3.3 million in 2014, 2013 and 2012, respectively. Distribution segment margins include marketing costs of $0.6 million, $0.4 million and $1.5 million in 2014, 2013 and 2012, respectively.
(4) Goodwill is allocated on a relative fair market value basis to the IMAX systems segment, theater system maintenance segment and joint revenue sharing segment. There has been no change in the allocation of goodwill from the prior year.
b) Geographic Information
Revenue by geographic area is based on the location of the customer. Revenue related to IMAX DMR is presented based upon the geographic location of the theaters that exhibit the re-mastered films. IMAX DMR revenue is generated through contractual relationships with studios and other third parties and these may not be in the same geographical location as the theater.
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Revenue | ||||||||
| United States | $ | 107,282 | $ | 125,166 | $ | 126,547 | ||
| Canada | 10,309 | 11,049 | 19,109 | |||||
| Greater China | 78,766 | 56,480 | 44,922 | |||||
| Western Europe | 30,245 | 26,000 | 26,309 | |||||
| Asia (excluding Greater China) | 26,276 | 30,451 | 28,899 | |||||
| Russia & the CIS | 15,700 | 19,600 | 20,130 | |||||
| Latin America | 12,672 | 13,017 | 9,419 | |||||
| Rest of the World | 9,291 | 6,174 | 7,420 | |||||
| Total | $ | 290,541 | $ | 287,937 | $ | 282,755 |
No single country in the Rest of the World, Western Europe, Latin America and Asia (excluding Greater China) classifications comprise more than 10% of total revenue.
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Property, plant and equipment | |||||
| United States | $ | 101,499 | $ | 60,285 | |
| Canada | 25,795 | 23,687 | |||
| Greater China | 40,065 | 32,958 | |||
| Asia (excluding Greater China) | 8,454 | 9,200 | |||
| Western Europe | 5,720 | 6,012 | |||
| Rest of the World | 1,891 | 705 | |||
| Total | $ | 183,424 | $ | 132,847 |
The Company has seven reportable segments identified by category of product sold or service provided: IMAX systems; theater system maintenance; joint revenue sharing arrangements; film production and IMAX DMR; film distribution; film post-production; and other. The IMAX systems segment designs, manufactures, sells or leases IMAX theater projection system equipment. The theater system maintenance segment maintains IMAX theater projection system equipment in the IMAX theater network. The joint revenue sharing arrangements segment provides IMAX theater projection system equipment to an exhibitor in exchange for a share of the box-office and concession revenues. The film production and IMAX DMR segment produces films and performs film re-mastering services. The film distribution segment distributes films for which the Company has distribution rights. The film post-production segment provides film post-production and film print services. The other segment includes certain IMAX theaters that the Company owns and operates, camera rentals and other miscellaneous items. The accounting policies of the segments are the same as those described in note 2.
"}]},{"name":"rpt:f-1404","factDimensions":{"xbrl:concept":"us-gaap:ScheduleOfSegmentReportingInformationBySegmentTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"
| (a) Operating Segments | |||||||||
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Revenue(1) | |||||||||
| IMAX theater systems | |||||||||
| IMAX systems | $ | 72,992 | $ | 80,189 | $ | 83,405 | |||
| Theater system maintenance | 34,042 | 31,978 | 28,629 | ||||||
| Joint revenue sharing arrangements | 68,418 | 64,130 | 57,526 | ||||||
| 175,452 | 176,297 | 169,560 | |||||||
| Films | |||||||||
| Production and IMAX DMR | 83,172 | 83,496 | 78,050 | ||||||
| Distribution | 8,932 | 7,770 | 14,222 | ||||||
| Post-production | 10,831 | 9,192 | 7,904 | ||||||
| 102,935 | 100,458 | 100,176 | |||||||
| Other | 12,154 | 11,182 | 13,019 | ||||||
| Total | $ | 290,541 | $ | 287,937 | $ | 282,755 | |||
| Gross margin | |||||||||
| IMAX theater systems | |||||||||
| IMAX systems(2)(3) | $ | 47,928 | $ | 49,040 | $ | 50,245 | |||
| Theater system maintenance(2) | 12,375 | 12,096 | 10,970 | ||||||
| Joint revenue sharing arrangements(3) | 44,714 | 44,565 | 37,308 | ||||||
| 105,017 | 105,701 | 98,523 | |||||||
| Films | |||||||||
| Production and IMAX DMR(3) | 62,922 | 56,088 | 49,355 | ||||||
| Distribution(3) | 2,274 | 1,371 | 2,356 | ||||||
| Post-production | 3,046 | 1,341 | 1,954 | ||||||
| 68,242 | 58,800 | 53,665 | |||||||
| Other | 129 | 102 | 1,057 | ||||||
| Total | $ | 173,388 | $ | 164,603 | $ | 153,245 |
| As at December 31, | ||||||
| 2014 | 2013 | |||||
| Assets | ||||||
| IMAX systems(4) | $ | 174,531 | $ | 170,719 | ||
| Theater systems maintenance(4) | 17,986 | 16,619 | ||||
| Joint revenue sharing arrangements(4) | 162,097 | 153,399 | ||||
| Films | ||||||
| Production and IMAX DMR | 45,549 | 22,315 | ||||
| Distribution | 17,768 | 8,675 | ||||
| Post-production | 13,384 | 5,351 | ||||
| Other | 19,405 | 7,645 | ||||
| Corporate and other non-segment specific assets | 170,813 | 96,422 | ||||
| Total | $ | 621,533 | $ | 481,145 |
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Depreciation and amortization | |||||||||
| IMAX systems | $ | 1,910 | $ | 3,287 | $ | 2,946 | |||
| Theater systems maintenance | 225 | 141 | 212 | ||||||
| Joint revenue sharing arrangements | 14,614 | 13,535 | 11,836 | ||||||
| Films | |||||||||
| Production and IMAX DMR | 10,751 | 16,298 | 14,471 | ||||||
| Distribution | 1,512 | 1,048 | 1,631 | ||||||
| Post-production | 481 | 424 | 608 | ||||||
| Other | 671 | 347 | 172 | ||||||
| Corporate and other non-segment specific assets | 3,592 | 2,092 | 912 | ||||||
| Total | $ | 33,756 | $ | 37,172 | $ | 32,788 | |||
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Asset impairments and write-downs, net of recoveries | |||||||||
| IMAX systems | $ | 1,128 | $ | 1,109 | $ | 1,480 | |||
| Theater systems maintenance | 150 | 188 | 103 | ||||||
| Joint revenue sharing arrangements | 397 | 39 | 24 | ||||||
| Films | |||||||||
| Other | 314 | - | - | ||||||
| Corporate and other non-segment specific assets | 3,305 | - | - | ||||||
| Total | $ | 5,294 | $ | 1,336 | $ | 1,607 |
| Years Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
| Purchase of property, plant and equipment | |||||||||
| IMAX systems | $ | 8,822 | $ | 6,181 | $ | 2,958 | |||
| Theater system maintenance | 229 | 130 | 36 | ||||||
| Joint revenue sharing arrangements | 16,838 | 22,775 | 23,257 | ||||||
| Films | |||||||||
| Production and IMAX DMR | 15,245 | 408 | 1,175 | ||||||
| Distribution | 1,582 | - | 178 | ||||||
| Post-production | 2,176 | 2,185 | 0 | ||||||
| Other | 1,337 | 2,036 | 0 | ||||||
| Corporate and other non-segment specific assets | 10,713 | 2,076 | 1,708 | ||||||
| Total | $ | 56,942 | $ | 35,791 | $ | 29,312 |
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Revenue | ||||||||
| United States | $ | 107,282 | $ | 125,166 | $ | 126,547 | ||
| Canada | 10,309 | 11,049 | 19,109 | |||||
| Greater China | 78,766 | 56,480 | 44,922 | |||||
| Western Europe | 30,245 | 26,000 | 26,309 | |||||
| Asia (excluding Greater China) | 26,276 | 30,451 | 28,899 | |||||
| Russia & the CIS | 15,700 | 19,600 | 20,130 | |||||
| Latin America | 12,672 | 13,017 | 9,419 | |||||
| Rest of the World | 9,291 | 6,174 | 7,420 | |||||
| Total | $ | 290,541 | $ | 287,937 | $ | 282,755 |
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Property, plant and equipment | |||||
| United States | $ | 101,499 | $ | 60,285 | |
| Canada | 25,795 | 23,687 | |||
| Greater China | 40,065 | 32,958 | |||
| Asia (excluding Greater China) | 8,454 | 9,200 | |||
| Western Europe | 5,720 | 6,012 | |||
| Rest of the World | 1,891 | 705 | |||
| Total | $ | 183,424 | $ | 132,847 |
20. Financial Instruments
The Company maintains cash with various major financial institutions. The Company's cash is invested with highly rated financial institutions.
The Company's accounts receivables and financing receivables are subject to credit risk. The Company's accounts receivable and financing receivables are concentrated with the theater exhibition industry and film entertainment industry. To minimize the Company's credit risk, the Company retains title to underlying theater systems leased, performs initial and ongoing credit evaluations of its customers and makes ongoing provisions for its estimate of potentially uncollectible amounts. The Company believes it has adequately provided for related exposures surrounding receivables and contractual commitments.
The carrying values of the Company's cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities due within one year approximate fair values due to the short-term maturity of these instruments. The Company's other financial instruments at December 31, are comprised of the following:
| As at December 31, 2014 | As at December 31, 2013 | ||||||||||
| Carrying | Estimated | Carrying | Estimated | ||||||||
| Amount | Fair Value | Amount | Fair Value | ||||||||
| Cash and cash equivalents | $ | 106,503 | $ | 106,503 | $ | 29,546 | $ | 29,546 | |||
| Net financed sales receivable | $ | 95,101 | $ | 98,675 | $ | 93,493 | $ | 92,043 | |||
| Net investment in sales-type leases | $ | 10,599 | $ | 10,503 | $ | 13,617 | $ | 13,214 | |||
| Available-for-sale investment | $ | - | $ | - | $ | 1,000 | $ | 1,000 | |||
| Foreign exchange contracts — designated forwards | $ | (1,760) | $ | (1,760) | $ | (421) | $ | (421) | |||
| Borrowings under the Playa Vista construction loan | $ | (4,710) | $ | (4,710) | $ | - | $ | - |
Cash and cash equivalents are comprised of cash and interest-bearing investments with original maturity dates to the Company of 90 days or less. Cash and cash equivalents are recorded at cost, which approximates fair value (Level 1 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at December 31, 2014 and 2013, respectively.
The estimated fair values of the net financed sales receivable and net investment in sales-type leases are estimated based on discounting future cash flows at currently available interest rates with comparable terms (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at December 31, 2014 and 2013, respectively.
The fair value of the Company's available-for-sale investment is determined using the present value of expected cash flows based on projected earnings and other information readily available from the business venture (Level 3 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at December 31, 2014 and 2013, respectively. The discounted cash flow valuation technique is based on significant unobservable inputs of revenue and expense projections, appropriately risk weighted, as the investment is in a start-up entity. The significant unobservable inputs used in the fair value measurement of the Company's available-for-sale investment are long-term revenue growth and pretax operating margin. A significant increase (decrease) in any of those inputs in isolation would result in a lower or higher fair value measurement.
The fair value of foreign currency derivatives are determined using quoted prices in active markets (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at December 31, 2014 and 2013, respectively. These identical instruments are traded on a closed exchange.
The carrying value of borrowings under the Playa Vista construction loan approximates fair value as the interest rates offered under the construction loan are close to December 31, 2014 market rates for the Company for debt of the same remaining maturities (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at December 31, 2014.
There were no significant transfers between Level 1 and Level 2 during the year ended December 31, 2014 or 2013. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. The table below sets forth a summary of changes in the fair value of the Company's available-for-sale investment measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period:
| Available For Sale Investments | |||||||
| 2014 | 2013 | ||||||
| Beginning balance, January 1, | $ | 1,000 | $ | 1,350 | |||
| Transfers into/out of Level 3 | - | - | |||||
| Total gains or losses (realized/unrealized) | |||||||
| Included in earnings | (1,350) | - | |||||
| Included in other comprehensive income | 350 | (350) | |||||
| Purchases, issuances, sales and settlements | - | - | |||||
| Ending balance, December 31, | $ | - | $ | 1,000 | |||
| The amount of total gains or losses for the period included in earnings attributable to the | |||||||
| change in unrealized gains or losses relating to assets still held at the reporting date | $ | (1,350) | $ | - |
There were no transfers in or out of the Company's Level 3 assets during the year ended December 31, 2014.
In the year ended December 31, 2014, the Company recognized a $1.4 million other-than-temporary impairment of its available-for-sale investment, in “Impairment of investments” in the consolidated statement of operations, as the value is not expected to recover based on the length of time and extent to which the market value has been less than cost.
The Company's net investment in leases and its net financed sale receivables are subject to the disclosure requirements of ASC 310 “Receivables”. Due to differing risk profiles of its net investment in leases and its net financed sales receivables, the Company views its net investment in leases and its net financed sale receivables as separate classes of financing receivables. The Company does not aggregate financing receivables to assess impairment.
The Company monitors the credit quality of each customer on a frequent basis through collections and aging analyses. The Company also holds meetings monthly in order to identify credit concerns and whether a change in credit quality classification is required for the customer. A customer may improve in their credit quality classification once a substantial payment is made on overdue balances or the customer has agreed to a payment plan with the Company and payments have commenced in accordance to the payment plan. The change in credit quality indicator is dependent upon management approval.
The Company classifies its customers into four categories to indicate the credit quality worthiness of its financing receivables for internal purposes only:
Good standing — Theater continues to be in good standing with the Company as the client's payments and reporting are up-to-date.
Credit Watch — Theater operator has begun to demonstrate a delay in payments, and has been placed on the Company's credit watch list for continued monitoring, but active communication continues with the Company. Depending on the size of outstanding balance, length of time in arrears and other factors, transactions may need to be approved by management. These financing receivables are considered to be in better condition than those receivables related to theaters in the \"Pre-approved transactions\" category, but not in as good of condition as those receivables in \"Good standing.\"
Pre-approved transactions only — Theater operator is demonstrating a delay in payments with little or no communication with the Company. All service or shipments to the theater must be reviewed and approved by management. These financing receivables are considered to be in better condition than those receivables related to theaters in the \"All transactions suspended\" category, but not in as good of condition as those receivables in \"Credit Watch.\" Depending on the individual facts and circumstances of each customer, finance income recognition may be suspended if management believes the receivable to be impaired.
All transactions suspended — Theater is severely delinquent, non-responsive or not negotiating in good faith with the Company. Once a theater is classified as “All transactions suspended” the theater is placed on nonaccrual status and all revenue recognitions related to the theater are stopped.
The following table discloses the recorded investment in financing receivables by credit quality indicator:
| As at December 31, 2014 | As at December 31, 2013 | ||||||||||||||||
| Minimum | Financed | Minimum | Financed | ||||||||||||||
| Lease | Sales | Lease | Sales | ||||||||||||||
| Payments | Receivables | Total | Payments | Receivables | Total | ||||||||||||
| In good standing | $ | 10,457 | $ | 94,212 | $ | 104,669 | $ | 12,318 | $ | 89,017 | $ | 101,335 | |||||
| Credit Watch | - | - | - | 420 | 3,895 | 4,315 | |||||||||||
| Pre-approved transactions | - | 855 | 855 | 288 | - | 288 | |||||||||||
| Transactions suspended | 1,114 | 528 | 1,642 | 1,397 | 817 | 2,214 | |||||||||||
| $ | 11,571 | $ | 95,595 | $ | 107,166 | $ | 14,423 | $ | 93,729 | $ | 108,152 |
While recognition of finance income is suspended, payments received by a customer are applied against the outstanding balance owed. If payments are sufficient to cover any unreserved receivables, a recovery of provision taken on the billed amount, if applicable, is recorded to the extent of the residual cash received. Once the collectibility issues are resolved and the customer has returned to being in good standing, the Company will resume recognition of finance income.
The Company's investment in financing receivables on nonaccrual status is as follows:
| As at December 31, 2014 | As at December 31, 2013 | ||||||||||||
| Recorded | Related | Recorded | Related | ||||||||||
| Investment | Allowance | Investment | Allowance | ||||||||||
| Net investment in leases | $ | 1,114 | $ | (972) | $ | 1,684 | $ | (606) | |||||
| Net financed sales receivables | 528 | (494) | 817 | (236) | |||||||||
| Total | $ | 1,642 | $ | (1,466) | $ | 2,501 | $ | (842) |
The Company considers financing receivables with aging between 60-89 days as indications of theaters with potential collection concerns. The Company will begin to focus its review on these financing receivables and increase its discussions internally and with the theater regarding payment status. Once a theater's aging exceeds 90 days, the Company's policy is to review and assess collectibility on the theater's past due accounts. Over 90 days past due is used by the Company as an indicator of potential impairment as invoices up to 90 days outstanding could be considered reasonable due to the time required for dispute resolution or for the provision of further information or supporting documentation to the customer.
The Company's aged financing receivables are as follows:
| As at December 31, 2014 | ||||||||||||||||||||||||
| Related | Recorded | |||||||||||||||||||||||
| Accrued | Billed | Unbilled | Total | Investment | ||||||||||||||||||||
| and | Financing | Recorded | Recorded | Related | Net of | |||||||||||||||||||
| Current | 30-89 Days | 90+ Days | Receivables | Investment | Investment | Allowances | Allowances | |||||||||||||||||
| Net investment in leases | $ | 420 | $ | 175 | $ | 253 | $ | 848 | $ | 10,723 | $ | 11,571 | $ | (972) | $ | 10,599 | ||||||||
| Net financed sales receivables | 1,558 | 1,260 | 2,659 | 5,477 | 90,118 | 95,595 | (494) | 95,101 | ||||||||||||||||
| Total | $ | 1,978 | $ | 1,435 | $ | 2,912 | $ | 6,325 | $ | 100,841 | $ | 107,166 | $ | (1,466) | $ | 105,700 | ||||||||
| As at December 31, 2013 | ||||||||||||||||||||||||
| Related | Recorded | |||||||||||||||||||||||
| Accrued | Billed | Unbilled | Total | Investment | ||||||||||||||||||||
| and | Financing | Recorded | Recorded | Related | Net of | |||||||||||||||||||
| Current | 30-89 Days | 90+ Days | Receivables | Investment | Investment | Allowances | Allowances | |||||||||||||||||
| Net investment in leases | $ | 444 | $ | 218 | $ | 841 | $ | 1,503 | $ | 12,920 | $ | 14,423 | $ | (806) | $ | 13,617 | ||||||||
| Net financed sales receivables | 2,502 | 1,211 | 3,018 | 6,731 | 86,998 | 93,729 | (236) | 93,493 | ||||||||||||||||
| Total | $ | 2,946 | $ | 1,429 | $ | 3,859 | $ | 8,234 | $ | 99,918 | $ | 108,152 | $ | (1,042) | $ | 107,110 |
The Company's recorded investment in past due financing receivables for which the Company continues to accrue finance income is as follows:
| As at December 31, 2014 | |||||||||||||||||||||
| Related | Recorded | ||||||||||||||||||||
| Accrued | Billed | Unbilled | Investment | ||||||||||||||||||
| and | Financing | Recorded | Related | Past Due | |||||||||||||||||
| Current | 30-89 Days | 90+ Days | Receivables | Investment | Allowance | and Accruing | |||||||||||||||
| Net investment in leases | $ | 90 | $ | 102 | $ | 130 | $ | 322 | $ | 2,024 | $ | - | $ | 2,346 | |||||||
| Net financed sales receivables | 258 | 425 | 1,671 | 2,354 | 12,512 | - | 14,866 | ||||||||||||||
| Total | $ | 348 | $ | 527 | $ | 1,801 | $ | 2,676 | $ | 14,536 | $ | - | $ | 17,212 | |||||||
| As at December 31, 2013 | |||||||||||||||||||||
| Related | Recorded | ||||||||||||||||||||
| Accrued | Billed | Unbilled | Investment | ||||||||||||||||||
| and | Financing | Recorded | Related | Past Due | |||||||||||||||||
| Current | 30-89 Days | 90+ Days | Receivables | Investment | Allowance | and Accruing | |||||||||||||||
| Net investment in leases | $ | 168 | $ | 108 | $ | 205 | $ | 481 | $ | 4,865 | $ | (200) | $ | 5,146 | |||||||
| Net financed sales receivables | 450 | 469 | 2,056 | 2,975 | 19,282 | - | 22,257 | ||||||||||||||
| Total | $ | 618 | $ | 577 | $ | 2,261 | $ | 3,456 | $ | 24,147 | $ | (200) | $ | 27,403 |
The Company considers financing receivables to be impaired when it believes it to be probable that it will not recover the full amount of principal or interest owing under the arrangement. The Company uses its knowledge of the industry and economic trends, as well as its prior experiences to determine the amount recoverable for impaired financing receivables. The following table discloses information regarding the Company's impaired financing receivables:
| Impaired Financing Receivables | ||||||||||||||||
| For the Year Ended December 31, 2014 | ||||||||||||||||
| Average | Interest | |||||||||||||||
| Recorded | Unpaid | Related | Recorded | Income | ||||||||||||
| Investment | Principal | Allowance | Investment | Recognized | ||||||||||||
| Recorded investment for which there is a related allowance: | ||||||||||||||||
| Net financed sales receivables | $ | 525 | $ | 2 | $ | (494) | $ | 526 | $ | - | ||||||
| Recorded investment for which there is no related allowance: | ||||||||||||||||
| Net financed sales receivables | - | - | - | - | - | |||||||||||
| Total recorded investment in impaired loans: | ||||||||||||||||
| Net financed sales receivables | $ | 525 | $ | 2 | $ | (494) | $ | 526 | $ | - | ||||||
| Impaired Financing Receivables | ||||||||||||||||
| For the Year Ended December 31, 2013 | ||||||||||||||||
| Average | Interest | |||||||||||||||
| Recorded | Unpaid | Related | Recorded | Income | ||||||||||||
| Investment | Principal | Allowance | Investment | Recognized | ||||||||||||
| Recorded investment for which there is a related | ||||||||||||||||
| allowance: | ||||||||||||||||
| Net financed sales receivables | $ | 535 | $ | 283 | $ | (236) | $ | 545 | $ | 34 | ||||||
| Recorded investment for which there is no related allowance: | ||||||||||||||||
| Net financed sales receivables | - | - | - | - | - | |||||||||||
| Total recorded investment in impaired loans: | ||||||||||||||||
| Net financed sales receivables | $ | 535 | $ | 283 | $ | (236) | $ | 545 | $ | 34 |
The Company's activity in the allowance for credit losses for the period and the Company's recorded investment in financing receivables is as follows:
| Year Ended December 31, 2014 | |||||||
| Net Investment | Net Financed | ||||||
| in Leases | Sales Receivables | ||||||
| Allowance for credit losses: | |||||||
| Beginning balance | $ | 806 | $ | 236 | |||
| Charge-offs | (20) | - | |||||
| Recoveries | (74) | - | |||||
| Provision | 260 | 258 | |||||
| Ending balance | $ | 972 | $ | 494 | |||
| Ending balance: individually evaluated for impairment | $ | 972 | $ | 494 | |||
| Financing receivables: | |||||||
| Ending balance: individually evaluated for impairment | $ | 11,571 | $ | 95,595 | |||
| Year Ended December 31, 2013 | |||||||
| Net Investment | Net Financed | ||||||
| in Leases | Sales Receivables | ||||||
| Allowance for credit losses: | |||||||
| Beginning balance | $ | 1,130 | $ | 66 | |||
| Charge-offs | (624) | - | |||||
| Provision | 300 | 170 | |||||
| Ending balance | $ | 806 | $ | 236 | |||
| Ending balance: individually evaluated for impairment | $ | 806 | $ | 236 | |||
| Financing receivables: | |||||||
| Ending balance: individually evaluated for impairment | $ | 14,423 | $ | 93,729 | |||
The Company is exposed to market risk from changes in foreign currency rates. A majority portion of the Company's revenues is denominated in U.S. dollars while a substantial portion of its costs and expenses is denominated in Canadian dollars. A portion of the net U.S. dollar cash flows of the Company is periodically converted to Canadian dollars to fund Canadian dollar expenses through the spot market. In China and Japan the Company has ongoing operating expenses related to its operations in Chinese Renminbi and Japanese yen, respectively. Net cash flows are converted to and from U.S. dollars through the spot market. The Company also has cash receipts under leases denominated in Chinese Renminbi, Japanese yen, Canadian dollar and Euros which are converted to U.S. dollars through the spot market. The Company's policy is to not use any financial instruments for trading or other speculative purposes.
The Company entered into a series of foreign currency forward contracts to manage the Company's risks associated with the volatility of foreign currencies. Certain of these foreign currency forward contracts met the criteria required for hedge accounting under the Derivatives and Hedging Topic of the FASB ASC at inception, and continue to meet hedge effectiveness tests at December 31, 2014 (the “Foreign Currency Hedges”), with settlement dates throughout 2016. Foreign currency derivatives are recognized and measured in the balance sheet at fair value. Changes in the fair value (gains or losses) are recognized in the consolidated statement of operations except for derivatives designated and qualifying as foreign currency hedging instruments. For foreign currency hedging instruments, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in other comprehensive income and reclassified to the consolidated statement of operations when the forecasted transaction occurs. Any ineffective portion is recognized immediately in the consolidated statement of operations. The Company currently does not hold any derivatives which are not designated as hedging instruments and therefore no gain or loss pertaining to an ineffective portion has been recognized.
The following tabular disclosures reflect the impact that derivative instruments and hedging activities have on the Company's consolidated financial statements:
Notional value of foreign exchange contracts:
| As at December 31, | ||||||
| 2014 | 2013 | |||||
| Derivatives designated as hedging instruments: | ||||||
| Foreign exchange contracts — Forwards | $ | 36,754 | $ | 23,555 |
| Fair value of derivatives in foreign exchange contracts: | |||||||
| As at December 31, | |||||||
| Balance Sheet Location | 2014 | 2013 | |||||
| Derivatives designated as hedging instruments: | |||||||
| Foreign exchange contracts — Forwards | Accrued and other liabilities | (1,760) | (421) | ||||
| $ | (1,760) | $ | (421) | ||||
Derivatives in Foreign Currency Hedging relationships are as follows:
| Years Ended December 31, | ||||||||||
| 2014 | 2013 | 2012 | ||||||||
| Foreign exchange contracts - Forwards | Derivative (Loss) Gain Recognized in OCI (Effective Portion) | $ | (2,524) | $ | (1,031) | $ | 716 | |||
| $ | (2,524) | $ | (1,031) | $ | 716 | |||||
| Location of Derivative (Loss) Gain | ||||||||||
| Reclassified from AOCI | Years Ended December 31, | |||||||||
| into Income (Effective Portion) | 2014 | 2013 | 2012 | |||||||
| Foreign exchange contracts - Forwards | Selling, general and administrative expenses | $ | (1,186) | $ | (312) | $ | 236 | |||
| $ | (1,186) | $ | (312) | $ | 236 |
| Years Ended December 31, | ||||||||||
| 2014 | 2013 | |||||||||
| Foreign exchange contracts - Forwards | Derivative Loss Recognized In and Out of OCI (Effective Portion) | $ | - | $ | (486) | |||||
| $ | - | $ | (486) | |||||||
Non Designated Derivatives in Foreign Currency relationships are as follows:
| Years Ended December 31, | ||||||||||
| Location of Derivative Gain (Loss) | 2014 | 2013 | 2012 | |||||||
| Foreign exchange contracts - Forwards | Selling, general and administrative expenses | $ | - | $ | - | $ | 1,184 | |||
| $ | - | $ | - | $ | 1,184 | |||||
The Company accounts for investments in new business ventures using the guidance of the FASB ASC 323 and the FASB ASC 320, as appropriate. As at December 31, 2014, the equity method of accounting is being utilized for investments with a total carrying value of $2.8 million (December 31, 2013 ─ $0.4 million). In 2013, the Company contributed $1.4 million, net of its share of costs, to a new business venture in the early-stage of start-up. In the first quarter of 2014, this new business venture was operational. For the year ended December 31, 2014, gross revenues, cost of revenue and net loss for the investment were $3.1 million, $5.9 million and $4.9 million, respectively (2013 ─ $6.6 million, $26.0 million, and $26.3 million, respectively). The Company has determined it is not the primary beneficiary of these VIEs, and therefore it has not been consolidated. In 2014, the Company sold its investment in an equity-accounted investment. The Company disposed of the related carrying value and recognized a gain of $0.4 million and $0.1 million, respectively. In addition, the Company has an investment in preferred stock of another business venture of $1.5 million which meets the criteria for classification as a debt security under the FASB ASC 320 and is recorded at a fair value of $nil at December 31, 2014 (December 31, 2013 — $1.0 million). For the year ended December 31, 2014, the Company recognized an other-than-temporary impairment for its investment of $1.4 million (2013 — $nil, 2012 — $0.2 million) of which $0.4 million was recognized out of other comprehensive income and $1.0 million as a direct impairment in the consolidated statement of operations. This investment was classified as an available-for-sale investment. The Company has invested $2.5 million in the preferred shares of an enterprise which meet the criteria for classification as an equity security under FASB ASC 325. In 2014, the Company recognized a $1.9 million impairment of its investment. As at December 31, 2014, the carrying value of the Company's investment in preferred shares is $0.6 million (December 31, 2013 — investment of $2.5 million and $0.5 million pertaining to warrants). The total carrying value of investments in new business ventures at December 31, 2014 and 2013 is $3.4 million and $5.8 million, respectively, and is recorded in Other Assets.
"}]},{"name":"rpt:f-1605","factDimensions":{"xbrl:concept":"us-gaap:FairValueAssetsMeasuredOnNonrecurringBasisTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"| As at December 31, 2014 | As at December 31, 2013 | ||||||||||
| Carrying | Estimated | Carrying | Estimated | ||||||||
| Amount | Fair Value | Amount | Fair Value | ||||||||
| Cash and cash equivalents | $ | 106,503 | $ | 106,503 | $ | 29,546 | $ | 29,546 | |||
| Net financed sales receivable | $ | 95,101 | $ | 98,675 | $ | 93,493 | $ | 92,043 | |||
| Net investment in sales-type leases | $ | 10,599 | $ | 10,503 | $ | 13,617 | $ | 13,214 | |||
| Available-for-sale investment | $ | - | $ | - | $ | 1,000 | $ | 1,000 | |||
| Foreign exchange contracts — designated forwards | $ | (1,760) | $ | (1,760) | $ | (421) | $ | (421) | |||
| Borrowings under the Playa Vista construction loan | $ | (4,710) | $ | (4,710) | $ | - | $ | - |
Cash and cash equivalents are comprised of cash and interest-bearing investments with original maturity dates to the Company of 90 days or less. Cash and cash equivalents are recorded at cost, which approximates fair value (Level 1 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at December 31, 2014 and 2013, respectively.
The estimated fair values of the net financed sales receivable and net investment in sales-type leases are estimated based on discounting future cash flows at currently available interest rates with comparable terms (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at December 31, 2014 and 2013, respectively.
The fair value of the Company's available-for-sale investment is determined using the present value of expected cash flows based on projected earnings and other information readily available from the business venture (Level 3 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at December 31, 2014 and 2013, respectively. The discounted cash flow valuation technique is based on significant unobservable inputs of revenue and expense projections, appropriately risk weighted, as the investment is in a start-up entity. The significant unobservable inputs used in the fair value measurement of the Company's available-for-sale investment are long-term revenue growth and pretax operating margin. A significant increase (decrease) in any of those inputs in isolation would result in a lower or higher fair value measurement.
The fair value of foreign currency derivatives are determined using quoted prices in active markets (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at December 31, 2014 and 2013, respectively. These identical instruments are traded on a closed exchange.
The carrying value of borrowings under the Playa Vista construction loan approximates fair value as the interest rates offered under the construction loan are close to December 31, 2014 market rates for the Company for debt of the same remaining maturities (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at December 31, 2014.
"}]},{"name":"rpt:f-1631","factDimensions":{"xbrl:concept":"us-gaap:FairValueTransferPolicyPolicyTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"There were no significant transfers between Level 1 and Level 2 during the year ended December 31, 2014 or 2013. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.
"}]},{"name":"rpt:f-1632","factDimensions":{"xbrl:concept":"us-gaap:FairValueAssetsMeasuredOnRecurringBasisUnobservableInputReconciliationTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"| Available For Sale Investments | |||||||
| 2014 | 2013 | ||||||
| Beginning balance, January 1, | $ | 1,000 | $ | 1,350 | |||
| Transfers into/out of Level 3 | - | - | |||||
| Total gains or losses (realized/unrealized) | |||||||
| Included in earnings | (1,350) | - | |||||
| Included in other comprehensive income | 350 | (350) | |||||
| Purchases, issuances, sales and settlements | - | - | |||||
| Ending balance, December 31, | $ | - | $ | 1,000 | |||
| The amount of total gains or losses for the period included in earnings attributable to the | |||||||
| change in unrealized gains or losses relating to assets still held at the reporting date | $ | (1,350) | $ | - |
The Company's net investment in leases and its net financed sale receivables are subject to the disclosure requirements of ASC 310 “Receivables”. Due to differing risk profiles of its net investment in leases and its net financed sales receivables, the Company views its net investment in leases and its net financed sale receivables as separate classes of financing receivables. The Company does not aggregate financing receivables to assess impairment.
The Company monitors the credit quality of each customer on a frequent basis through collections and aging analyses. The Company also holds meetings monthly in order to identify credit concerns and whether a change in credit quality classification is required for the customer. A customer may improve in their credit quality classification once a substantial payment is made on overdue balances or the customer has agreed to a payment plan with the Company and payments have commenced in accordance to the payment plan. The change in credit quality indicator is dependent upon management approval.
The Company classifies its customers into four categories to indicate the credit quality worthiness of its financing receivables for internal purposes only:
Good standing — Theater continues to be in good standing with the Company as the client's payments and reporting are up-to-date.
Credit Watch — Theater operator has begun to demonstrate a delay in payments, and has been placed on the Company's credit watch list for continued monitoring, but active communication continues with the Company. Depending on the size of outstanding balance, length of time in arrears and other factors, transactions may need to be approved by management. These financing receivables are considered to be in better condition than those receivables related to theaters in the \"Pre-approved transactions\" category, but not in as good of condition as those receivables in \"Good standing.\"
Pre-approved transactions only — Theater operator is demonstrating a delay in payments with little or no communication with the Company. All service or shipments to the theater must be reviewed and approved by management. These financing receivables are considered to be in better condition than those receivables related to theaters in the \"All transactions suspended\" category, but not in as good of condition as those receivables in \"Credit Watch.\" Depending on the individual facts and circumstances of each customer, finance income recognition may be suspended if management believes the receivable to be impaired.
All transactions suspended — Theater is severely delinquent, non-responsive or not negotiating in good faith with the Company. Once a theater is classified as “All transactions suspended” the theater is placed on nonaccrual status and all revenue recognitions related to the theater are stopped.
"}]},{"name":"rpt:f-1647","factDimensions":{"xbrl:concept":"us-gaap:FinancingReceivableCreditQualityIndicatorsTableTextBlock","xbrl:period":"2014-01-01T00:00:00/2015-01-01T00:00:00","xbrl:entity":"cik:0000921582"},"factValues":[{"value":"| As at December 31, 2014 | As at December 31, 2013 | ||||||||||||||||
| Minimum | Financed | Minimum | Financed | ||||||||||||||
| Lease | Sales | Lease | Sales | ||||||||||||||
| Payments | Receivables | Total | Payments | Receivables | Total | ||||||||||||
| In good standing | $ | 10,457 | $ | 94,212 | $ | 104,669 | $ | 12,318 | $ | 89,017 | $ | 101,335 | |||||
| Credit Watch | - | - | - | 420 | 3,895 | 4,315 | |||||||||||
| Pre-approved transactions | - | 855 | 855 | 288 | - | 288 | |||||||||||
| Transactions suspended | 1,114 | 528 | 1,642 | 1,397 | 817 | 2,214 | |||||||||||
| $ | 11,571 | $ | 95,595 | $ | 107,166 | $ | 14,423 | $ | 93,729 | $ | 108,152 |
| As at December 31, 2014 | As at December 31, 2013 | ||||||||||||
| Recorded | Related | Recorded | Related | ||||||||||
| Investment | Allowance | Investment | Allowance | ||||||||||
| Net investment in leases | $ | 1,114 | $ | (972) | $ | 1,684 | $ | (606) | |||||
| Net financed sales receivables | 528 | (494) | 817 | (236) | |||||||||
| Total | $ | 1,642 | $ | (1,466) | $ | 2,501 | $ | (842) |
| As at December 31, 2014 | ||||||||||||||||||||||||
| Related | Recorded | |||||||||||||||||||||||
| Accrued | Billed | Unbilled | Total | Investment | ||||||||||||||||||||
| and | Financing | Recorded | Recorded | Related | Net of | |||||||||||||||||||
| Current | 30-89 Days | 90+ Days | Receivables | Investment | Investment | Allowances | Allowances | |||||||||||||||||
| Net investment in leases | $ | 420 | $ | 175 | $ | 253 | $ | 848 | $ | 10,723 | $ | 11,571 | $ | (972) | $ | 10,599 | ||||||||
| Net financed sales receivables | 1,558 | 1,260 | 2,659 | 5,477 | 90,118 | 95,595 | (494) | 95,101 | ||||||||||||||||
| Total | $ | 1,978 | $ | 1,435 | $ | 2,912 | $ | 6,325 | $ | 100,841 | $ | 107,166 | $ | (1,466) | $ | 105,700 | ||||||||
| As at December 31, 2013 | ||||||||||||||||||||||||
| Related | Recorded | |||||||||||||||||||||||
| Accrued | Billed | Unbilled | Total | Investment | ||||||||||||||||||||
| and | Financing | Recorded | Recorded | Related | Net of | |||||||||||||||||||
| Current | 30-89 Days | 90+ Days | Receivables | Investment | Investment | Allowances | Allowances | |||||||||||||||||
| Net investment in leases | $ | 444 | $ | 218 | $ | 841 | $ | 1,503 | $ | 12,920 | $ | 14,423 | $ | (806) | $ | 13,617 | ||||||||
| Net financed sales receivables | 2,502 | 1,211 | 3,018 | 6,731 | 86,998 | 93,729 | (236) | 93,493 | ||||||||||||||||
| Total | $ | 2,946 | $ | 1,429 | $ | 3,859 | $ | 8,234 | $ | 99,918 | $ | 108,152 | $ | (1,042) | $ | 107,110 |
| As at December 31, 2014 | |||||||||||||||||||||
| Related | Recorded | ||||||||||||||||||||
| Accrued | Billed | Unbilled | Investment | ||||||||||||||||||
| and | Financing | Recorded | Related | Past Due | |||||||||||||||||
| Current | 30-89 Days | 90+ Days | Receivables | Investment | Allowance | and Accruing | |||||||||||||||
| Net investment in leases | $ | 90 | $ | 102 | $ | 130 | $ | 322 | $ | 2,024 | $ | - | $ | 2,346 | |||||||
| Net financed sales receivables | 258 | 425 | 1,671 | 2,354 | 12,512 | - | 14,866 | ||||||||||||||
| Total | $ | 348 | $ | 527 | $ | 1,801 | $ | 2,676 | $ | 14,536 | $ | - | $ | 17,212 | |||||||
| As at December 31, 2013 | |||||||||||||||||||||
| Related | Recorded | ||||||||||||||||||||
| Accrued | Billed | Unbilled | Investment | ||||||||||||||||||
| and | Financing | Recorded | Related | Past Due | |||||||||||||||||
| Current | 30-89 Days | 90+ Days | Receivables | Investment | Allowance | and Accruing | |||||||||||||||
| Net investment in leases | $ | 168 | $ | 108 | $ | 205 | $ | 481 | $ | 4,865 | $ | (200) | $ | 5,146 | |||||||
| Net financed sales receivables | 450 | 469 | 2,056 | 2,975 | 19,282 | - | 22,257 | ||||||||||||||
| Total | $ | 618 | $ | 577 | $ | 2,261 | $ | 3,456 | $ | 24,147 | $ | (200) | $ | 27,403 |
| Impaired Financing Receivables | ||||||||||||||||
| For the Year Ended December 31, 2014 | ||||||||||||||||
| Average | Interest | |||||||||||||||
| Recorded | Unpaid | Related | Recorded | Income | ||||||||||||
| Investment | Principal | Allowance | Investment | Recognized | ||||||||||||
| Recorded investment for which there is a related allowance: | ||||||||||||||||
| Net financed sales receivables | $ | 525 | $ | 2 | $ | (494) | $ | 526 | $ | - | ||||||
| Recorded investment for which there is no related allowance: | ||||||||||||||||
| Net financed sales receivables | - | - | - | - | - | |||||||||||
| Total recorded investment in impaired loans: | ||||||||||||||||
| Net financed sales receivables | $ | 525 | $ | 2 | $ | (494) | $ | 526 | $ | - | ||||||
| Impaired Financing Receivables | ||||||||||||||||
| For the Year Ended December 31, 2013 | ||||||||||||||||
| Average | Interest | |||||||||||||||
| Recorded | Unpaid | Related | Recorded | Income | ||||||||||||
| Investment | Principal | Allowance | Investment | Recognized | ||||||||||||
| Recorded investment for which there is a related | ||||||||||||||||
| allowance: | ||||||||||||||||
| Net financed sales receivables | $ | 535 | $ | 283 | $ | (236) | $ | 545 | $ | 34 | ||||||
| Recorded investment for which there is no related allowance: | ||||||||||||||||
| Net financed sales receivables | - | - | - | - | - | |||||||||||
| Total recorded investment in impaired loans: | ||||||||||||||||
| Net financed sales receivables | $ | 535 | $ | 283 | $ | (236) | $ | 545 | $ | 34 |
| Year Ended December 31, 2014 | |||||||
| Net Investment | Net Financed | ||||||
| in Leases | Sales Receivables | ||||||
| Allowance for credit losses: | |||||||
| Beginning balance | $ | 806 | $ | 236 | |||
| Charge-offs | (20) | - | |||||
| Recoveries | (74) | - | |||||
| Provision | 260 | 258 | |||||
| Ending balance | $ | 972 | $ | 494 | |||
| Ending balance: individually evaluated for impairment | $ | 972 | $ | 494 | |||
| Financing receivables: | |||||||
| Ending balance: individually evaluated for impairment | $ | 11,571 | $ | 95,595 | |||
| Year Ended December 31, 2013 | |||||||
| Net Investment | Net Financed | ||||||
| in Leases | Sales Receivables | ||||||
| Allowance for credit losses: | |||||||
| Beginning balance | $ | 1,130 | $ | 66 | |||
| Charge-offs | (624) | - | |||||
| Provision | 300 | 170 | |||||
| Ending balance | $ | 806 | $ | 236 | |||
| Ending balance: individually evaluated for impairment | $ | 806 | $ | 236 | |||
| Financing receivables: | |||||||
| Ending balance: individually evaluated for impairment | $ | 14,423 | $ | 93,729 | |||
| As at December 31, | ||||||
| 2014 | 2013 | |||||
| Derivatives designated as hedging instruments: | ||||||
| Foreign exchange contracts — Forwards | $ | 36,754 | $ | 23,555 |
| Fair value of derivatives in foreign exchange contracts: | |||||||
| As at December 31, | |||||||
| Balance Sheet Location | 2014 | 2013 | |||||
| Derivatives designated as hedging instruments: | |||||||
| Foreign exchange contracts — Forwards | Accrued and other liabilities | (1,760) | (421) | ||||
| $ | (1,760) | $ | (421) | ||||
| Years Ended December 31, | ||||||||||
| 2014 | 2013 | 2012 | ||||||||
| Foreign exchange contracts - Forwards | Derivative (Loss) Gain Recognized in OCI (Effective Portion) | $ | (2,524) | $ | (1,031) | $ | 716 | |||
| $ | (2,524) | $ | (1,031) | $ | 716 | |||||
| Location of Derivative (Loss) Gain | ||||||||||
| Reclassified from AOCI | Years Ended December 31, | |||||||||
| into Income (Effective Portion) | 2014 | 2013 | 2012 | |||||||
| Foreign exchange contracts - Forwards | Selling, general and administrative expenses | $ | (1,186) | $ | (312) | $ | 236 | |||
| $ | (1,186) | $ | (312) | $ | 236 |
| Years Ended December 31, | ||||||||||
| 2014 | 2013 | |||||||||
| Foreign exchange contracts - Forwards | Derivative Loss Recognized In and Out of OCI (Effective Portion) | $ | - | $ | (486) | |||||
| $ | - | $ | (486) | |||||||
| Years Ended December 31, | ||||||||||
| Location of Derivative Gain (Loss) | 2014 | 2013 | 2012 | |||||||
| Foreign exchange contracts - Forwards | Selling, general and administrative expenses | $ | - | $ | - | $ | 1,184 | |||
| $ | - | $ | - | $ | 1,184 | |||||
21. Employees' Pension and Postretirement Benefits
(a) Defined Benefit Plan
The Company has an unfunded U.S. defined benefit pension plan, the SERP, covering Richard L. Gelfond, Chief Executive Officer (“CEO”) of the Company and Bradley J. Wechsler, Chairman of the Company's Board of Directors. The SERP provides for a lifetime retirement benefit from age 55 determined as 75% of the member's best average 60 consecutive months of earnings over the member's employment history. The benefits were 50% vested as at July 2000, the SERP initiation date. The vesting percentage increases on a straight-line basis from inception until age 55. As at December 31, 2014, the benefits of Mr. Gelfond were 100% vested. Upon a termination for cause, prior to a change of control, the executive shall forfeit any and all benefits to which such executive may have been entitled, whether or not vested.
Under the terms of the SERP, if Mr. Gelfond's employment terminated other than for cause (as defined in his employment agreement), he is entitled to receive SERP benefits in the form of a lump sum payment. SERP benefit payments to Mr. Gelfond are subject to a deferral for six months after the termination of his employment, at which time Mr. Gelfond will be entitled to receive interest on the deferred amount credited at the applicable federal rate for short-term obligations. Pursuant to an employment agreement dated January 1, 2014, the term of Mr. Gelfond's employment was extended through December 31, 2016, although Mr. Gelfond has not informed the Company that he intends to retire at that time. Under the terms of the arrangement, no compensation earned beginning in 2011 is included in calculating his entitlement under the SERP.
The following assumptions were used to determine the obligation and cost of the Company's SERP at the plan measurement dates:
| As at December 31, | ||||||
| 2014 | 2013 | 2012 | ||||
| Discount rate | 1.30% | 1.45% | 0.96% | |||
| Lump sum interest rate: | ||||||
| First 20 years | 2.89% | 3.35% | 2.67% | |||
| Thereafter | 3.12% | 3.50% | 3.01% | |||
| Cost of living adjustment on benefits | 1.20% | 1.20% | 1.20% |
The amounts accrued for the SERP are determined as follows:
| Years Ended December 31, | ||||||
| 2014 | 2013 | |||||
| Projected benefit obligation: | ||||||
| Obligation, beginning of year | $ | 18,284 | $ | 20,366 | ||
| Interest cost | 264 | 195 | ||||
| Actuarial loss (gain) | 857 | (2,277) | ||||
| Obligation, end of year and unfunded status | $ | 19,405 | $ | 18,284 |
The following table provides disclosure of the pension benefit obligation recorded in the consolidated balance sheets:
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Accrued benefits cost | $ | (19,405) | $ | (18,284) | |
| Accumulated other comprehensive loss | 1,503 | 646 | |||
| Net amount recognized in the consolidated balance sheets | $ | (17,902) | $ | (17,638) |
The following table provides disclosure of pension expense for the SERP for the year ended December 31:
| Years ended December 31 | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Interest cost | 264 | 195 | 272 | |||||
| Amortization of actuarial loss | - | 444 | 365 | |||||
| Pension expense | $ | 264 | $ | 639 | $ | 637 |
The accumulated benefit obligation for the SERP was $19.4 million at December 31, 2014 (2013 — $18.3 million).
The following amounts were included in accumulated other comprehensive income and will be recognized as components of net periodic benefit cost in future periods:
| As at December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Unrealized actuarial loss | $ | 1,503 | $ | 646 | $ | 3,367 |
No contributions were made for the SERP during 2014. The Company expects interest costs of $0.3 million to be recognized as a component of net periodic benefit cost in 2015.
The following benefit payments are expected to be made as per the current SERP assumptions and the terms of the SERP in each of the next five years, and in the aggregate:
| 2015 | $ | - | |
| 2016 | - | ||
| 2017 | 20,042 | ||
| 2018 | - | ||
| 2019 | - | ||
| Thereafter | - | ||
| $ | 20,042 |
(b) Defined Contribution Pension Plan
The Company also maintains defined contribution pension plans for its employees, including its executive officers. The Company makes contributions to these plans on behalf of employees in an amount up to 5% of their base salary subject to certain prescribed maximums. During 2014, the Company contributed and expensed an aggregate of $1.4 million (2013 — $1.3 million, 2012 — $1.1 million) to its Canadian plan and an aggregate of $0.4 million (2013 — $0.3 million, 2012 — $0.3 million) to its defined contribution employee pension plan under Section 401(k) of the U.S. Internal Revenue Code.
(c) Postretirement Benefits - Executives
The Company has an unfunded postretirement plan for Messrs. Gelfond and Wechsler. The plan provides that the Company will maintain health benefits for Messrs. Gelfond and Wechsler until they become eligible for Medicare and, thereafter, the Company will provide Medicare supplemental coverage as selected by Messrs. Gelfond and Wechsler.
The amounts accrued for the plan are determined as follows:
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Obligation, beginning of year | $ | 392 | $ | 524 | |
| Interest cost | 17 | 19 | |||
| Benefits paid | (27) | (17) | |||
| Actuarial loss (gain) | 448 | (134) | |||
| Obligation, end of year | $ | 830 | $ | 392 |
The following details the net cost components, all related to continuing operations, and underlying assumptions of postretirement benefits other than pensions:
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Interest cost | $ | 17 | $ | 19 | $ | 13 | ||
| Amortization of actuarial (gain) loss | (32) | - | 9 | |||||
| $ | (15) | $ | 19 | $ | 22 |
The following amounts were included in accumulated other comprehensive income and will be recognized as components of net periodic benefit cost in future periods:
| As at December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Unrealized actuarial loss (gain) | $ | 346 | $ | (134) | $ | - |
| Weighted average assumptions used to determine the benefit obligation are: | ||||||||
| As at December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Discount rate | 3.70 | % | 4.50 | % | 3.75 | % |
| Weighted average assumptions used to determine the net postretirement benefit expense are: | ||||||||
| Years Ended December 31 | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Discount rate | 4.50 | % | 3.75 | % | 4.20 | % |
The following benefit payments are expected to be made as per the current plan assumptions in each of the next five years:
| 2015 | $ | 32 |
| 2016 | 43 | |
| 2017 | 70 | |
| 2018 | 77 | |
| 2019 | 84 | |
| Thereafter | 524 | |
| Total | $ | 830 |
(d) Postretirement Benefits – Canadian Employees
The Company has an unfunded postretirement plan for its Canadian employees upon meeting specific eligibility requirements. The Company will provide eligible participants, upon retirement, with health and welfare benefits.
In 2013, the Company amended the Canadian post-retirement plan to reduce future benefits provided under the plan. As a result of this change, the Company recognized a pre-tax curtailment gain in 2013 of $2.2 million (included in selling, general and administrative expenses) and a reduction in the postretirement liability of $2.6 million.
The amounts accrued for the plan are determined as follows:
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Obligation, beginning of year | $ | 2,179 | $ | 4,606 | |
| Curtailment gain | - | (2,185) | |||
| Interest cost | 93 | 72 | |||
| Service cost | 6 | 27 | |||
| Benefits paid | (84) | (81) | |||
| Actuarial loss (gain) | 126 | (95) | |||
| Unrealized foreign exchange gain | (181) | (165) | |||
| Obligation, end of year | $ | 2,139 | $ | 2,179 |
The following details the net cost components, all related to continuing operations, and underlying assumptions of postretirement benefits other than pensions:
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Curtailment gain | $ | - | $ | (2,185) | $ | - | ||
| Interest cost | 93 | 72 | 194 | |||||
| Service cost | 6 | 27 | 231 | |||||
| $ | 99 | $ | (2,086) | $ | 425 |
The following amounts were included in accumulated other comprehensive income and will be recognized as components of net periodic benefit cost in future periods:
| As at December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Unrealized actuarial loss | $ | 429 | $ | 303 | $ | 129 |
| Weighted average assumptions used to determine the benefit obligation are: | ||||||||
| As at December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Discount rate | 3.75 | % | 4.50 | % | 4.00 | % |
| Weighted average assumptions used to determine the net postretirement benefit expense are: | ||||||||
| Years Ended December 31 | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Discount rate | 4.50 | % | 4.00 | % | 4.50 | % |
The Company expects interest costs of $0.1 million and service costs of less than $0.1 million to be recognized as a component of net periodic benefit cost in 2015.
The following benefit payments are expected to be made as per the current plan assumptions in each of the next five years:
| 2015 | $ | 95 |
| 2016 | $ | 107 |
| 2017 | $ | 118 |
| 2018 | $ | 128 |
| 2019 | $ | 128 |
| Thereafter | $ | 1,563 |
| Total | $ | 2,139 |
| As at December 31, | ||||||
| 2014 | 2013 | 2012 | ||||
| Discount rate | 1.30% | 1.45% | 0.96% | |||
| Lump sum interest rate: | ||||||
| First 20 years | 2.89% | 3.35% | 2.67% | |||
| Thereafter | 3.12% | 3.50% | 3.01% | |||
| Cost of living adjustment on benefits | 1.20% | 1.20% | 1.20% |
| Years Ended December 31, | ||||||
| 2014 | 2013 | |||||
| Projected benefit obligation: | ||||||
| Obligation, beginning of year | $ | 18,284 | $ | 20,366 | ||
| Interest cost | 264 | 195 | ||||
| Actuarial loss (gain) | 857 | (2,277) | ||||
| Obligation, end of year and unfunded status | $ | 19,405 | $ | 18,284 |
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Accrued benefits cost | $ | (19,405) | $ | (18,284) | |
| Accumulated other comprehensive loss | 1,503 | 646 | |||
| Net amount recognized in the consolidated balance sheets | $ | (17,902) | $ | (17,638) |
| Years ended December 31 | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Interest cost | 264 | 195 | 272 | |||||
| Amortization of actuarial loss | - | 444 | 365 | |||||
| Pension expense | $ | 264 | $ | 639 | $ | 637 |
| As at December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Unrealized actuarial loss | $ | 1,503 | $ | 646 | $ | 3,367 |
| 2015 | $ | - | |
| 2016 | - | ||
| 2017 | 20,042 | ||
| 2018 | - | ||
| 2019 | - | ||
| Thereafter | - | ||
| $ | 20,042 |
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Obligation, beginning of year | $ | 392 | $ | 524 | |
| Interest cost | 17 | 19 | |||
| Benefits paid | (27) | (17) | |||
| Actuarial loss (gain) | 448 | (134) | |||
| Obligation, end of year | $ | 830 | $ | 392 |
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Interest cost | $ | 17 | $ | 19 | $ | 13 | ||
| Amortization of actuarial (gain) loss | (32) | - | 9 | |||||
| $ | (15) | $ | 19 | $ | 22 |
| As at December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Unrealized actuarial loss (gain) | $ | 346 | $ | (134) | $ | - |
| Weighted average assumptions used to determine the benefit obligation are: | ||||||||
| As at December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Discount rate | 3.70 | % | 4.50 | % | 3.75 | % |
| Weighted average assumptions used to determine the net postretirement benefit expense are: | ||||||||
| Years Ended December 31 | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Discount rate | 4.50 | % | 3.75 | % | 4.20 | % |
| 2015 | $ | 32 |
| 2016 | 43 | |
| 2017 | 70 | |
| 2018 | 77 | |
| 2019 | 84 | |
| Thereafter | 524 | |
| Total | $ | 830 |
| As at December 31, | |||||
| 2014 | 2013 | ||||
| Obligation, beginning of year | $ | 2,179 | $ | 4,606 | |
| Curtailment gain | - | (2,185) | |||
| Interest cost | 93 | 72 | |||
| Service cost | 6 | 27 | |||
| Benefits paid | (84) | (81) | |||
| Actuarial loss (gain) | 126 | (95) | |||
| Unrealized foreign exchange gain | (181) | (165) | |||
| Obligation, end of year | $ | 2,139 | $ | 2,179 |
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Curtailment gain | $ | - | $ | (2,185) | $ | - | ||
| Interest cost | 93 | 72 | 194 | |||||
| Service cost | 6 | 27 | 231 | |||||
| $ | 99 | $ | (2,086) | $ | 425 |
| As at December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Unrealized actuarial loss | $ | 429 | $ | 303 | $ | 129 |
| Weighted average assumptions used to determine the benefit obligation are: | ||||||||
| As at December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Discount rate | 3.75 | % | 4.50 | % | 4.00 | % |
| Weighted average assumptions used to determine the net postretirement benefit expense are: | ||||||||
| Years Ended December 31 | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Discount rate | 4.50 | % | 4.00 | % | 4.50 | % |
| 2015 | $ | 95 |
| 2016 | $ | 107 |
| 2017 | $ | 118 |
| 2018 | $ | 128 |
| 2019 | $ | 128 |
| Thereafter | $ | 1,563 |
| Total | $ | 2,139 |
22. Non-Controlling Interests
(a) IMAX China Non-Controlling Interest
On April 8, 2014, the Company announced the investment (the “IMAX China Investment”) in its Greater China business by CMC Capital Partners (“CMC”), an investment fund that is focused on media and entertainment, and FountainVest Partners (“FountainVest”), a China-focused private equity firm. The IMAX China Investment provides for the sale and issuance of 20.0% of the shares in IMAX China to entities owned and controlled by CMC and FountainVest, with the intent of further strengthening the Company's competitive position in China.
Pursuant to the transaction, IMAX China issued the investors 337,500 Common C Shares of par value $0.01 each in the authorized capital of IMAX China (the “Class C Shares”) for an aggregate subscription price of $40.0 million (the “First Closing”) on April 8, 2014 (the “First Completion Date”), and issued the investors another 337,500 Class C Shares for an aggregate subscription price of $40.0 million (the “Second Closing”) on February 10, 2015 (the “Second Completion Date”). IMAX China remains a consolidated subsidiary of the Company. Beginning in the second quarter of 2014, the Company's condensed consolidated financial statements include the non-controlling interest in the net income of IMAX China resulting from this transaction and the net proceeds are classified as redeemable non-controlling interest in temporary equity.
Under the shareholders' agreement, except under limited circumstances, holders of Class C Shares were not permitted to transfer any Class C Shares prior to the Second Completion Date. After the Second Completion Date, holders of Class C Shares may not transfer any Class C Shares except (i) to certain permitted transferees, (ii) pursuant to any sale of Class C Shares on the public market in connection with or following an IPO, and (iii) subject to the right of first offer of the holder of common A shares of par value $0.01 each in the authorized capital of IMAX China (the “Class A Shares”). With respect to transfers Class A Shares prior to an IPO, the shareholders' agreement also provides certain drag-along rights to the holder of Class A Shares and certain tag-along rights and put rights to holders of Class C Shares.
The board of directors of IMAX China currently consists of nine members. The shareholders' agreement provides that each of FountainVest and CMC has the right to nominate one member of IMAX China's board of directors if it owns, (a) at any time prior to the Second Completion Date, at least 90.0% of the Class C Shares issued to such Person at the First Completion Date and (b) at any time following the Second Completion Date, at least 90.0% of the Class C Shares issued to such Person at both the First Completion Date and Second Completion Date. The holder of Class A Shares has the right to nominate seven members, among which one nominee shall be an independent director reasonably satisfactory to the holders of Class C Shares.
The shareholders' agreement entered into in connection with the transaction contains restrictions on the transfer of IMAX China's common shares, certain provisions related to the composition of IMAX China's board of directors and certain provisions relating to the redemption and share issuance in lieu of an initial public offering of IMAX China's shares and put and call rights relating to a change of control of the Company.
The shareholders' agreement entered into in connection with the transaction provides that IMAX China intends to conduct an IPO of its shares by the fifth anniversary of the First Completion Date. If a qualified IPO (as defined in the shareholders' agreement) has not occurred by such date, each holder of Class C Shares may request that all of such holders' Class C Shares be, at their election, either: (i) redeemed by IMAX China at par value together with the issuance of 2,846,000 of the Company's common shares, (ii) redeemed by IMAX China at par value together with the payment by the Company in cash of the consideration paid by the holders of the Class C Shares, or (iii) exchanged and/or redeemed by IMAX China in a combination of cash and the shares of the Company equal to the pro rata fair market value of IMAX China.
In the event that the Company reasonably believes that a transaction involving a change of control of the Company will occur, the Company will serve a notice on each holder of Class C Shares. Upon receipt of such notice, each holder of Class C Shares will have the right to cause the Company to purchase all of its Class C Shares, and the holder of Class A Shares will also have the right to purchase from each holder of Class C Shares all of its Class C Shares, each for consideration based upon the pro rata equity value of IMAX China.
The shareholders' agreement will terminate on the earliest to occur of (i) an IPO, (ii) a redemption or share exchange in lieu of an IPO after the fifth anniversary on the First Completion Date, (iii) completion of a put or call transaction pursuant to a change of control of the Company, and (iv) any date agreed upon in writing by all of the parties to the shareholders' agreement. The shareholders' agreement will also terminate with respect to any shareholder at such time as such shareholder no longer beneficially and legally holds any shares.
The following summarizes the movement of the non-controlling interest in the Company's subsidiary for the year ended December 31, 2014:
| Balance as at December 31, 2013 | $ | - | |||||||
| Issuance of subsidiary shares to a non-controlling interest | 40,000 | ||||||||
| Share issuance costs from the issuance of subsidiary shares to a non-controlling interest | (2,843) | ||||||||
| Net income | 2,631 | ||||||||
| Other comprehensive loss, net of tax | 58 | ||||||||
| Accretion charges associated with redeemable common stock | 426 | ||||||||
| Balance as at December 31, 2014 | $ | 40,272 | |||||||
(b) Other Non-Controlling Interest
In 2014, the Company announced the creation of the Film Fund to co-finance a portfolio of 10 original large-format films. The Film Fund, which is intended to be capitalized with up to $50.0 million, will finance an ongoing supply of original films that the Company believes will be more exciting and compelling than traditional documentaries. The initial investment in the Film Fund was committed to by a third party in the amount of $25.0 million, with the possibility of contributing additional funds. The Company, which will contribute $9.0 million to the Film Fund over five years, anticipates the Film Fund will be self-perpetuating, with a portion of box office proceeds reinvested into the Film Fund to generate a continuous, steady flow of high-quality documentary content. The related production, financing and distribution agreement includes put and call rights relating to change of control of the rights, title and interest in the co-financed pictures. For the year ended December 31, 2014, the Film Fund has contributed $7.5 million toward an investment in film assets.
| Balance as at December 31, 2013 | $ | - | |||
| Issuance of subsidiary shares to a non-controlling interest | 4,551 | ||||
| Share issuance costs from the issuance of subsidiary shares to a non-controlling interest | (713) | ||||
| Net loss | (198) | ||||
| Balance as at December 31, 2014 | $ | 3,640 | |||
| Balance as at December 31, 2013 | $ | - | |||||||
| Issuance of subsidiary shares to a non-controlling interest | 40,000 | ||||||||
| Share issuance costs from the issuance of subsidiary shares to a non-controlling interest | (2,843) | ||||||||
| Net income | 2,631 | ||||||||
| Other comprehensive loss, net of tax | 58 | ||||||||
| Accretion charges associated with redeemable common stock | 426 | ||||||||
| Balance as at December 31, 2014 | $ | 40,272 | |||||||
| Balance as at December 31, 2013 | $ | - | |||
| Issuance of subsidiary shares to a non-controlling interest | 4,551 | ||||
| Share issuance costs from the issuance of subsidiary shares to a non-controlling interest | (713) | ||||
| Net loss | (198) | ||||
| Balance as at December 31, 2014 | $ | 3,640 | |||
23. Discontinued Operations
In 2014, the Company's lease with respect to its owned and operated Nyack IMAX Theater ended and the Company decided not to renew the lease. The transactions of the Company's owned and operated Nyack theater are reflected as a discontinued operation.
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Services revenue | $ | 35 | $ | 1,291 | $ | 1,535 | ||
| Services cost of sales applicable to revenues(1) | 537 | (1,758) | (2,047) | |||||
| Selling, general and administrative expenses | - | (2) | - | |||||
| Interest recovery | - | 1 | - | |||||
| Tax (expense) recovery | (217) | 159 | - | |||||
| Income (loss) from discontinued operations, net of tax | $ | 355 | $ | (309) | $ | (512) | ||
__________
(1) Upon the expiration of the lease, lease inducements contingent upon the completion of the full term of the lease were recognized as a reduction in rent expense of $0.8 million (2013 ― $nil, 2012 ― $nil).
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| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Services revenue | $ | 35 | $ | 1,291 | $ | 1,535 | ||
| Services cost of sales applicable to revenues(1) | 537 | (1,758) | (2,047) | |||||
| Selling, general and administrative expenses | - | (2) | - | |||||
| Interest recovery | - | 1 | - | |||||
| Tax (expense) recovery | (217) | 159 | - | |||||
| Income (loss) from discontinued operations, net of tax | $ | 355 | $ | (309) | $ | (512) | ||
24. Asset Retirement Obligations
The Company has accrued costs related to obligations in respect of required reversion costs for its owned and operated theaters under long-term real estate leases which will become due in the future. The Company does not have any legal restrictions with respect to settling any of these long-term leases. A reconciliation of the Company's liability in respect of required reversion costs is shown below:
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Beginning balance, January 1 | $ | 143 | $ | 249 | $ | 230 | ||
| Accretion expense | 12 | 6 | 19 | |||||
| Reduction in asset retirement obligation | (6) | (112) | - | |||||
| Ending balance, December 31 | $ | 149 | $ | 143 | $ | 249 | ||
| Years Ended December 31, | ||||||||
| 2014 | 2013 | 2012 | ||||||
| Beginning balance, January 1 | $ | 143 | $ | 249 | $ | 230 | ||
| Accretion expense | 12 | 6 | 19 | |||||
| Reduction in asset retirement obligation | (6) | (112) | - | |||||
| Ending balance, December 31 | $ | 149 | $ | 143 | $ | 249 | ||
25. Prior Years' Figures
Certain of the prior years' figures have been reclassified to conform to the current year's presentation.
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