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Treasury Stock and Share Based Awards | 9 Months Ended
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Sep. 30, 2012
Treasury Stock and Share Based Awards [Abstract] |
Treasury Stock and Share Based Awards |
10. | Treasury Stock and Share Based Awards
Treasury Stock — Treasury stock represents shares of common stock repurchased or withheld 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 nine months ended September 30, 2012:
|  | 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 September 30, 2012 |  |  | 3,553,085 |  |  | $ | 48,482 |
(1) | The Company repurchased forfeited restricted shares at a cost of $0.001 per share in accordance with the Amended and Restated 2006 Cinemark Holdings, Inc. 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 ranging from $21.95 to $22.50 per share.
As of September 30, 2012, the Company had no plans to retire any shares of treasury stock. Stock Options – A summary of stock option activity and related information for the nine months ended September 30, 2012 is as follows:
|  | Number of Options |  |  | Weighted Average Exercise Price |  |  | Aggregate Intrinsic Value |
Outstanding at January 1, 2012 |  |  | 82,166 |  |  | $ | 7.63 |  |  |  |  |
Exercised |  |  | (450 | ) |  | $ | 7.63 |  |  |  |  |
Outstanding at September 30, 2012 |  |  | 81,716 |  |  | $ | 7.63 |  |  | $ | 1,209 |
Options exercisable at September 30, 2012 |  |  | 81,716 |  |  | $ | 7.63 |  |  | $ | 1,209 |
There were no options granted or forfeited during the nine months ended September 30, 2012. The total intrinsic value of options exercised during the nine months ended September 30, 2012 was $7. As of September 30, 2012, there was no remaining unrecognized compensation expense related to outstanding stock options as all outstanding options fully vested on April 2, 2009. Options outstanding at September 30, 2012 have an average remaining contractual life of approximately two years. Restricted Stock – During the nine months ended September 30, 2012, the Company granted 653,229 shares of restricted stock to employees and directors 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 dates of grant, which ranged from $21.63 to $22.97 per share. The Company assumed forfeiture rates ranging from 0% to 5% for the restricted stock awards. Certain of the restricted stock granted to employees vests over three years based on continued service and the remaining restricted stock granted to employees vests over four years based on continued service. The restricted stock granted to the directors vests over one year based on continued service. 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. Below is a summary of restricted stock activity for the nine months ended September 30, 2012:
|  | Shares of Restricted Stock |  |  | Weighted Average Grant Date Fair Value |
Outstanding at January 1, 2012 |  |  | 1,384,390 |  |  | $ | 16.85 |
Granted |  |  | 653,229 |  |  | $ | 21.70 |
Forfeited |  |  | (14,423 | ) |  | $ | 18.58 |
Vested |  |  | (488,328 | ) |  | $ | 17.01 |
Outstanding at September 30, 2012 |  |  | 1,534,868 |  |  | $ | 18.85 |
Unvested restricted stock at September 30, 2012 |  |  | 1,534,868 |  |  | $ | 18.85 |
The Company receives an income tax deduction upon vesting of certain of the restricted stock awards. The total fair value of shares that vested during the nine months ended September 30, 2012 was $10,829. The Company recognized a tax benefit of approximately $4,067 during the nine months ended September 30, 2012 related to these vested shares. The Company recorded compensation expense of $8,004 and $4,832 related to restricted stock awards during the nine months ended September 30, 2012 and 2011, respectively. As of September 30, 2012, the remaining unrecognized compensation expense related to restricted stock awards was $20,863 and the weighted average period over which this remaining compensation expense will be recognized is approximately two years. Restricted Stock Units – During the nine months ended September 30, 2012, the Company granted restricted stock units representing 152,955 hypothetical shares of common stock to employees of the Company. 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 three fiscal year period ending December 31, 2014 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. If the IRR for the three year period is at least 8.5%, which is the threshold, 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, 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, 100% of the 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. 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 March 2016, which is the fourth anniversary of the grant date. 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 nine months ended September 30, 2012 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 8.5% |  |  | 50,981 |  |  | $ | 1,103 |
at IRR of at least 10.5% |  |  | 101,974 |  |  | $ | 2,206 |
at IRR of at least 12.5% |  |  | 152,955 |  |  | $ | 3,308 |
Due to the fact that the IRR for the three year performance period could not be determined at the time of grant, the Company estimated that the most likely outcome is the achievement of the mid-point IRR level. The fair value of the restricted stock unit awards was determined based on the market value of the Company’s common stock on the date of grant, which was $21.63 per share. The Company assumed a forfeiture rate of 5% 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 three-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. There were no forfeitures of restricted stock unit awards during the nine months ended September 30, 2012. The Company recorded compensation expense of $2,161 and $2,300 related to restricted stock unit awards during the nine months ended September 30, 2012 and 2011, respectively. During the nine months ended September 30, 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 nine months ended September 30, 2012 was approximately $4,400. The Company recognized a tax benefit of approximately $1,848 during the nine months ended September 30, 2012 related to these vested awards. As of September 30, 2012, the remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $4,860. The weighted average period over which this remaining compensation expense will be recognized is approximately two years. As of September 30, 2012, the Company had restricted stock units outstanding that represented a total of 994,674 hypothetical shares of common stock, net of actual cumulative forfeitures of 11,608 units, assuming the maximum IRR of at least 12.5% is achieved for all of the grants.

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