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SEC Filings

10-Q
CINEMARK HOLDINGS, INC. filed this Form 10-Q on 08/09/2016
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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

 

As of June 30, 2016, the estimated remaining unrecognized compensation expense related to restricted stock awards was $16,244 and the weighted average period over which this remaining compensation expense will be recognized is approximately 3 years.

Restricted Stock Units – During the six months ended June 30, 2016, the Company granted restricted stock units representing 253,661 hypothetical shares of common stock to employees. The restricted stock units vest based on a combination of financial performance factors and continued service. The financial performance factors are based on an implied equity value concept that determines an internal rate of return (“IRR”) during the two fiscal year periods ending December 31, 2017 based on a formula utilizing a multiple of Adjusted EBITDA subject to certain specified adjustments as specified by the Compensation Committee prior to the grant date. The financial performance factors for the restricted stock units have a threshold, target and maximum level of payment opportunity and vest on a pro-rata basis according to the IRR achieved by the Company during the performance period. If the IRR for the two-year period is at least 6.0%, which is the threshold, one-third of the maximum restricted stock units vest. If the IRR for the two-year period is at least 8.0%, which is the target, two-thirds of the maximum restricted stock units vest. If the IRR for the two-year period is at least 10.0%, which is the maximum, 100% of the maximum restricted stock units vest. Grantees are eligible to receive a ratable portion of the common stock issuable if the IRR is within the targets previously noted. Further, as an example, if the Company achieves an IRR equal to 9.0%, the number of restricted stock units that shall vest will be greater than the target but less than the maximum number that would have vested had the Company achieved the highest IRR. In accordance with their respective employment agreements, the awards granted to the Company’s former Chief Executive Officer and former President and Chief Operating Officer will vest upon the certification of the IRR for the 2016 award by the Compensation Committee. All other restricted stock units granted during 2016 will vest subject to an additional two-year service requirement and will be paid in the form of common stock if the participant continues to provide services through February 2020, which is the fourth anniversary of the grant date. Restricted stock unit award participants are eligible to receive dividend equivalent payments from the grant date if, and at the time that, the restricted stock unit awards vest.

Below is a table summarizing the potential number of shares that could vest under restricted stock unit awards granted during the six months ended June 30, 2016 at each of the three target levels of financial performance (excluding forfeiture assumptions):

 

     Number of
Shares
Vesting
     Value at
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.

 

     Six Months Ended June 30,  
     2016      2015  

Number of restricted stock unit awards that vested during the period

     213,984         123,769   

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

   $ 7,260       $ 5,483   

Accumulated dividends paid upon vesting of restricted stock unit awards

   $ 662       $ 442   

Income tax benefit recognized upon vesting of restricted stock unit awards

   $ 3,049       $ 2,303   

Compensation expense recognized during the period

   $ 2,952       $ 1,739   

 

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