Annual report pursuant to Section 13 and 15(d)

Capital Stock

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Capital Stock
12 Months Ended
Dec. 31, 2013
Capital Stock
18. CAPITAL STOCK

Common Stock — Common stockholders are entitled to vote on all matters submitted to a vote of the Company’s stockholders. Subject to the rights of holders of any then outstanding shares of the Company’s preferred stock, the Company’s common stockholders are entitled to any dividends that may be declared by the board of directors. The shares of the Company’s common stock are not subject to any redemption provisions. The Company has no issued and outstanding shares of preferred stock.

The Company’s ability to pay dividends is effectively limited by its status as a holding company and the terms of its subsidiary’s indentures and amended senior secured credit facility, which also significantly restricts the ability of certain of the Company’s subsidiaries to pay dividends directly or indirectly to the Company. See Note 12. Furthermore, certain of the Company’s foreign subsidiaries currently have a deficit in retained earnings which prevents the Company from declaring and paying dividends from those subsidiaries.

Treasury Stock — Treasury stock represents shares of common stock repurchased by the Company and not yet retired. The Company has applied the cost method in recording its treasury shares.

Below is a summary of the Company’s treasury stock activity for the years ended December 31, 2012 and 2013:

 

     Number of
Treasury
Shares
     Cost  

Balance at January 1, 2012

     3,391,592       $ 45,219   

Restricted stock forfeitures (1)

     14,423         —     

Restricted stock withholdings (2)

     147,070         3,263   
  

 

 

    

 

 

 

Balance at December 31, 2012

     3,553,085       $ 48,482   

Restricted stock forfeitures (1)

     22,653         —     

Restricted stock withholdings (2)

     119,197         3,464   
  

 

 

    

 

 

 

Balance at December 31, 2013

     3,694,935       $ 51,946   
  

 

 

    

 

 

 

 

(1) 

The Company repurchased forfeited and canceled restricted shares at a cost of $0.001 per share in accordance with the Company’s Amended and Restated 2006 Long Term Incentive Plan.

(2) 

The Company withheld restricted shares as a result of the election by certain employees to satisfy their tax liabilities upon vesting in restricted stock. The Company determined the number of shares to be withheld based upon market values that ranged from $22.40 to $30.23 per share.

As of December 31, 2013, the Company had no plans to retire any shares of treasury stock.

Stock Options — Below is a summary of stock option activity and related information for the years ended December 31, 2011, 2012 and 2013:

 

      Year Ended
December 31, 2011
     Year Ended
December 31, 2012
     Year Ended
December 31, 2013
        
      Shares     Weighted
Average
Exercise
Price
     Shares     Weighted
Average
Exercise
Price
     Number of
Options
    Weighted
Average
Exercise
Price
     Aggregate
Intrinsic
Value
 

Outstanding at January 1

     140,356      $ 7.63         82,166      $ 7.63         22,022      $ 7.63      

Exercised

     (58,190   $ 7.63         (60,144   $ 7.63         (7,438   $ 7.63      
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Outstanding at December 31

     82,166      $ 7.63         22,022      $ 7.63         14,584      $ 7.63       $ 375   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Vested options at December 31

     82,166      $ 7.63         22,022      $ 7.63         14,584      $ 7.63       $ 375   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

All outstanding stock options were fully vested as of April 2, 2009. There were no options granted or forfeited during any of the periods presented. The total intrinsic value of options exercised during the years ended December 31, 2011, 2012 and 2013, was $699, $1,070 and $168, respectively. The Company recognized tax benefits of approximately $238, $449 and $71 related to the options exercised during the year ended December 31, 2011, 2012 and 2013, respectively. All options outstanding at December 31, 2013 have a remaining contractual life of approximately nine months.

Restricted Stock — Below is a summary of restricted stock activity for the years ended December 31, 2011, 2012 and 2013:

 

     Year Ended
December 31, 2011
     Year Ended
December 31, 2012
     Year Ended
December 31, 2013
 
     Shares     Weighted
Average
Exercise
Price
     Shares     Weighted
Average
Exercise
Price
     Shares of
Restricted
Stock
    Weighted
Average
Grant
Date Fair
Value
 

Outstanding at January 1

     1,254,691      $ 14.60         1,384,390      $ 16.85         1,534,163      $ 18.85   

Granted

     424,436      $ 19.45         653,229      $ 21.70         271,532      $ 30.09   

Vested

     (288,204   $ 10.84         (489,033   $ 17.00         (522,129   $ 17.27   

Canceled

     (4,613   $ 18.35         —        $ —           —        $ —     

Forfeited

     (1,920   $ 14.34         (14,423   $ 18.58         (22,653   $ 22.92   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Outstanding at December 31

     1,384,390      $ 16.85         1,534,163      $ 18.85         1,260,913      $ 21.86   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

During the year ended December 31, 2013, the Company granted 271,532 shares of restricted stock to directors and employees of the Company. The fair value of the restricted stock granted was determined based on the market value of the Company’s common stock on the date of grant, which ranged from $27.92 to $33.74 per share. The Company assumed forfeiture rates ranging from 0% to 5% for the restricted stock awards. Restricted stock granted to directors vests over a one-year period. Certain of the restricted stock granted to employees vests over three years based on continued service and certain of the restricted stock granted to employees vests over four years based on continued service. Certain awards were granted during November 2013 in conjunction with the sale of the Company’s Mexico theatres and vested immediately upon closing of the transaction. The recipients of restricted stock are entitled to receive dividends and to vote their respective shares, however, the sale and transfer of the restricted shares is prohibited during the restriction period.

The Company recorded total compensation expense of $6,591, $10,637 and $12,738 related to restricted stock awards during the years ended December 31, 2011, 2012 and 2013, respectively. Upon vesting of certain of the awards to employees, the Company receives an income tax deduction. The total fair value of shares vested during the years ended December 31, 2011, 2012 and 2013 was $5,658, $9,702 and $10,161, respectively. The Company recognized tax benefits of approximately $2,188, $4,075 and $4,268, related to shares that vested during the years ended December 2011, 2012 and 2013, respectively.

As of December 31, 2013, the remaining unrecognized compensation expense related to these restricted stock awards was approximately $14,395. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.

Restricted Stock Units — During the years ended December 31, 2011, 2012 and 2013, the Company granted restricted stock units representing 153,727, 152,955 and 115,107 hypothetical shares of common stock, respectively, 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 a three fiscal year period based on a formula utilizing a multiple of Adjusted EBITDA subject to certain specified adjustments (as defined in the restricted stock unit award agreement). The financial performance factors for the restricted stock units have a threshold, target and maximum level of payment opportunity and vest on a prorata basis according to the IRR achieved by the Company during the performance period. If the IRR for the three year period is at least 8.5%, which is the threshold, at least one-third of the restricted stock units vest. If the IRR for the three year period is at least 10.5%, which is the target, at least two-thirds of the restricted stock units vest. If the IRR for the three year period is at least 12.5%, which is the maximum, at least 100% of the restricted stock units vest. Further, as an example, if the Company achieves an IRR equal to 11.5%, 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. All payouts of restricted stock units that vest will be subject to an additional one year service requirement and will be paid in the form of common stock if the participant continues to provide services through the fourth anniversary of the grant date. At the time of each of the restricted stock unit grants, the Company was not able to determine which IRR level would be reached for the respective three year performance period, therefore the Company assumed the mid-point IRR level for these grants in determining the amount of compensation expense to record for such grants. The fair values of the restricted stock unit awards granted were determined based on the market values of the Company’s common stock on the dates of grant, which ranged from $19.35 to $29.44 per share. The Company assumed forfeiture rates ranging from 0% to 5% for the restricted stock unit awards. Restricted stock unit award participants are eligible to receive dividend equivalent payments if and at the time 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 years ended December 31, 2011, 2012 and 2013 at each of the three levels of financial performance (excluding forfeitures):

 

     Granted During the Year Ended December 31,  
     2011      2012      2013  
     Number of
Shares
Vesting
     Value at
Grant
     Number of
Shares
Vesting
     Value at
Grant
     Number of
Shares
Vesting
     Value at
Grant
 

at IRR of at least 8.5%

     51,239       $ 991         50,981       $ 1,103         38,366       $ 1,129   

at IRR of at least 10.5%

     102,488       $ 1,983         101,974       $ 2,206         76,741       $ 2,259   

at IRR of at least 12.5%

     153,727       $ 2,975         152,955       $ 3,308         115,107       $ 3,389   

During the year ended December 31, 2012, 196,051 restricted stock unit awards vested. Upon vesting, each restricted stock unit was converted into one share of the Company’s common stock. In addition, the Company paid approximately $600 in dividends on the vested restricted stock units, which represented dividends that had accumulated on the awards since they were granted in 2008. The fair value of the restricted stock unit awards that vested during the year ended December 31, 2012 was approximately $4,400. The Company recognized a tax benefit of approximately $1,848 during the year ended December 31, 2012 related to these vested awards. There were no forfeitures of restricted stock unit awards during the year ended December 31, 2012.

During the year ended December 31, 2013, 11,498 restricted stock unit awards were forfeited. During the year ended December 31, 2013, 295,751 restricted stock unit awards vested. Upon vesting, each restricted stock unit was converted into one share of the Company’s common stock. In addition, the Company paid approximately $939 in dividends on the vested restricted stock units, which represented dividends that had accumulated on the awards since they were granted. The fair value of the restricted stock unit awards that vested during the year ended December 31, 2013 was approximately $8,723. The Company recognized a tax benefit of approximately $3,663 during the year ended December 31, 2013 related to these vested awards.

The Company recorded total compensation expense of $3,101, $4,433 and $4,148 related to these restricted stock unit awards during the years ended December 31, 2011, 2012 and 2013, respectively. As of December 31, 2013, the Company had restricted stock units outstanding that represented a total of 802,529 hypothetical shares of common stock, net of actual cumulative forfeitures of 11,498 units, assuming the maximum IRR of at least 12.5% is achieved for all of the outstanding restricted stock unit awards. As of December 31, 2013, the remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $4,048, which assumes the high-point IRR level will be achieved for the 2010 and 2011 grants and the mid-point IRR level will be achieved for the 2012 and 2013 grants. The weighted average period over which this remaining compensation expense will be recognized is approximately one year.