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SEC Filings

10-Q
CINEMARK HOLDINGS, INC. filed this Form 10-Q on 05/10/2016
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Table of Contents

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

 

Below is a table summarizing the potential number of shares that could vest under restricted stock unit awards granted during the three months ended March 31, 2016 at each of the three target levels of financial performance (excluding forfeiture assumptions):

 

     Number of         
     Shares      Value at  
     Vesting      Grant  

at IRR of at least 6.0%

     84,554       $ 2,522   

at IRR of at least 8.0%

     169,107       $ 5,044   

at IRR of at least 10.0%

     253,661       $ 7,568   

Due to the fact that the IRR for the two-year performance period could not be determined at the time of the 2016 grant, the Company estimated that the most likely outcome is the achievement of the target IRR level. The fair value of the restricted stock unit awards was determined based on the closing price of the Company’s common stock on the date of grant, which was $29.83 per share. The Company assumed forfeiture rates ranging from 0% to 10% for the restricted stock unit awards. If during the service period, additional information becomes available to lead the Company to believe a different IRR level will be achieved for the two-year performance period, the Company will reassess the number of units that will vest for the grant and adjust its compensation expense accordingly on a prospective basis over the remaining service period.

 

     Three Months Ended March 31,  
     2016      2015  

Number of restricted stock unit awards that vested during the period

     143,872         123,769   

Fair value of restricted stock unit awards that vested during the period

   $ 4,747       $ 5,501   

Accumulated dividends paid upon vesting of restricted stock unit awards (1)

   $ 404       $ 46   

Income tax benefit recognized upon vesting of restricted stock unit awards

   $ 1,993       $ 2,303   

Compensation expense recognized during the period

   $ 2,217       $ 908   

 

(1) Additional dividends of approximately $396 were paid during April 2015 related to the restricted stock unit awards that vested during the three months ended March 31, 2015.

As of March 31, 2016, the estimated remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $8,492. The weighted average period over which this remaining compensation expense will be recognized is approximately two years. As of March 31, 2016, the Company had restricted stock units outstanding that represented a total of 643,400 hypothetical shares of common stock, net of actual cumulative forfeitures of 17,917 units, assuming the maximum IRR level is achieved for all grants outstanding.

Effective March 4, 2016, the Company’s former President and Chief Operating Officer resigned with good reason as defined within his employment agreement. As a result, certain of his restricted stock and restricted stock unit awards vested upon his resignation. The accelerated vesting of these awards were considered a modification of such awards, therefore the Company revalued the vested awards at their fair value upon modification. The revaluation of these awards resulted in incremental share based award compensation expense of approximately $994 for the three months ended March 31, 2016.

9. Interest Rate Swap Agreements

The Company is currently a party to one interest rate swap agreement that is used to hedge interest rate risk associated with the variable interest rates on the Company’s term loan debt and qualify for cash flow hedge accounting. The fair value of the interest rate swap is recorded on the Company’s condensed consolidated balance sheet as an asset or liability with the effective portion of the interest rate swap’s gains or losses reported as a component of accumulated other comprehensive loss and the ineffective portion reported in earnings. The changes in fair values are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged item affects earnings.

The valuation technique used to determine fair value is the income approach and under this approach, the Company uses projected future interest rates as provided by its swap counterparty and the fixed rate that the Company is obligated to pay under the agreement. Therefore, the Company’s measurements use significant unobservable inputs,

 

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