Edgar Filing: Cinemark Holdings, Inc.

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cnk-10q_20170930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

Commission File Number: 001-33401

CINEMARK HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		20-5490327
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3900 Dallas Parkway
Suite 500
Plano, Texas		75093
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (972) 665-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2017, 116,466,904 shares of common stock were issued and outstanding.

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

			Page
PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements	4

		Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016 (unaudited)	4

		Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016 (unaudited)	5

		Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016 (unaudited)	6

		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (unaudited)	7

		Notes to Condensed Consolidated Financial Statements (unaudited)	8

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

	Item 4.	Controls and Procedures	34

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	35

	Item 1A.	Risk Factors	35

	Item 6.	Exhibits	36

SIGNATURES			37

Cautionary Statement Regarding Forward-Looking Statements

Certain matters within this Quarterly Report on Form 10Q include “forward–looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The “forward-looking statements” may include our current expectations, assumptions, estimates and projections about our business and our industry. They may include statements relating to future revenues, expenses and profitability, the future development and expected growth of our business, projected capital expenditures, attendance at movies generally or in any of the markets in which we operate, the number or diversity of popular movies released and our ability to successfully license and exhibit popular films, national and international growth in our industry, competition from other exhibitors and alternative forms of entertainment and determinations in lawsuits in which we are defendants. Forward-looking statements can be identified by the use of words such as “may,” “should,” “could,” “estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “plans,” “expects,” “future” and “intends” and similar expressions. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance to differ from those projected in the forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. For a description of the risk factors, please review the “Risk Factors” section or other sections in the Company’s Annual Report on Form 10-K filed February 23, 2017 and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by such risk factors. We undertake no obligation, other than as required by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

	September 30,			December 31,
	2017			2016
Assets
Current assets
Cash and cash equivalents	$	469,446		$	561,235
Inventories		16,844			16,961
Accounts receivable		82,650			74,993
Current income tax receivable		4,381			7,367
Prepaid expenses and other		17,010			15,761
Total current assets		590,331			676,317

Theatre properties and equipment		3,268,653			3,059,754
Less: accumulated depreciation and amortization		1,477,047			1,355,218
Theatre properties and equipment, net		1,791,606			1,704,536

Other assets
Goodwill		1,294,342			1,262,963
Intangible assets - net		335,657			334,899
Investment in NCM		204,347			189,995
Investments in and advances to affiliates		112,878			98,317
Long-term deferred tax asset		2,098			2,051
Deferred charges and other assets - net		40,391			37,555
Total other assets		1,989,713			1,925,780

Total assets	$	4,371,650		$	4,306,633

Liabilities and equity

Current liabilities
Current portion of long-term debt	$	7,099		$	5,671
Current portion of capital lease obligations		24,836			21,139
Current income tax payable		7,893			5,071
Current liability for uncertain tax positions		11,714			10,085
Accounts payable and accrued expenses		341,132			401,259
Total current liabilities		392,674			443,225

Long-term liabilities
Long-term debt, less current portion		1,781,952			1,782,441
Capital lease obligations, less current portion		252,047			234,281
Long-term deferred tax liability		144,740			135,014
Long-term liability for uncertain tax positions		7,801			8,105
Deferred lease expenses		41,291			42,378
Deferred revenue - NCM		354,419			343,928
Other long-term liabilities		44,906			44,301
Total long-term liabilities		2,627,156			2,590,448

Commitments and contingencies (see Note 16)

Equity
Cinemark Holdings, Inc.'s stockholders' equity:
Common stock, $0.001 par value: 300,000,000 shares authorized, 120,992,302 shares issued and 116,467,227 shares outstanding at September 30, 2017 and 120,657,254 shares issued and 116,210,252 shares outstanding at December 31, 2016		121			121
Additional paid-in-capital		1,137,897			1,128,442
Treasury stock, 4,525,075 and 4,447,002 shares, at cost, at September 30, 2017 and December 31, 2016, respectively		(76,354	)		(73,411	)
Retained earnings		521,058			453,679
Accumulated other comprehensive loss		(242,894	)		(247,013	)
Total Cinemark Holdings, Inc.'s stockholders' equity		1,339,828			1,261,818
Noncontrolling interests		11,992			11,142
Total equity		1,351,820			1,272,960

Total liabilities and equity	$	4,371,650		$	4,306,633

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data, unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues
Admissions	$	425,128		$	472,842		$	1,351,477		$	1,364,737
Concession		247,027			261,391			777,573			752,798
Other		38,593			34,341			112,503			100,312
Total revenues		710,748			768,574			2,241,553			2,217,847

Cost of operations
Film rentals and advertising		226,229			249,766			725,603			733,101
Concession supplies		40,178			41,888			124,117			116,999
Salaries and wages		87,305			84,460			261,318			243,833
Facility lease expense		81,919			82,848			248,569			241,904
Utilities and other		92,341			94,999			271,751			265,506
General and administrative expenses		36,947			35,290			112,997			109,143
Depreciation and amortization		58,052			54,187			174,545			155,874
Impairment of long-lived assets		5,026			406			9,600			2,323
Loss on sale of assets and other		8,576			6,940			9,464			10,985
Total cost of operations		636,573			650,784			1,937,964			1,879,668

Operating income		74,175			117,790			303,589			338,179

Other income (expense)
Interest expense		(26,317	)		(26,659	)		(79,208	)		(81,980	)
Loss on debt amendments and refinancing		—			—			(246	)		(13,284	)
Interest income		1,682			1,665			4,395			5,030
Foreign currency exchange gain		584			485			2,018			2,883
Distributions from NCM		2,144			1,381			11,704			10,117
Equity in income of affiliates		10,902			12,390			26,767			24,597
Total other expense		(11,005	)		(10,738	)		(34,570	)		(52,637	)

Income before income taxes		63,170			107,052			269,019			285,542
Income taxes		24,630			40,926			98,475			106,002
Net income	$	38,540		$	66,126		$	170,544		$	179,540
Less: Net income attributable to noncontrolling interests		401			471			1,438			1,454
Net income attributable to Cinemark Holdings, Inc.	$	38,139		$	65,655		$	169,106		$	178,086

Weighted average shares outstanding
Basic		115,823			115,601			115,746			115,475
Diluted		116,104			115,793			116,063			115,706

Earnings per share attributable to Cinemark Holdings, Inc.'s common stockholders
Basic	$	0.33		$	0.56		$	1.45		$	1.53
Diluted	$	0.33		$	0.56		$	1.45		$	1.53

Dividends declared per common share	$	0.29		$	0.27		$	0.87		$	0.81

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income	$	38,540		$	66,126		$	170,544		$	179,540
Other comprehensive income (loss), net of tax
Unrealized gain due to fair value adjustments on interest rate swap agreements, net of settlements, net of taxes of $0, $0, $0 and $138		—			—			—			234
Other comprehensive income (loss) in equity method investments		(11	)		(7	)		92			(183	)
Foreign currency translation adjustments		9,085			(3,669	)		5,578			34,998
Total other comprehensive income (loss), net of tax		9,074			(3,676	)		5,670			35,049
Total comprehensive income, net of tax		47,614			62,450			176,214			214,589
Comprehensive income attributable to noncontrolling interests		(401	)		(475	)		(1,438	)		(1,478	)
Comprehensive income attributable to Cinemark Holdings, Inc.	$	47,213		$	61,975		$	174,776		$	213,111

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

	Nine Months Ended September 30,
	2017			2016
Operating activities
Net income	$	170,544		$	179,540
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		173,378			154,308
Amortization of intangible and other assets and favorable/unfavorable leases		1,167			1,566
Amortization of long-term prepaid rents		1,540			1,357
Amortization of debt issue costs		4,619			4,068
Amortization of deferred revenues, deferred lease incentives and other		(12,037	)		(13,017	)
Impairment of long-lived assets		9,600			2,323
Share based awards compensation expense		9,487			10,247
Loss on sale of assets and other		9,464			10,985
Write-off of unamortized debt issue costs associated with early retirement of debt		—			2,369
Deferred lease expenses		(1,019	)		(809	)
Equity in income of affiliates		(26,767	)		(24,597	)
Deferred income tax expenses		9,541			16,382
Distributions from equity investees		17,321			9,660
Changes in assets and liabilities and other		(55,433	)		(76,102	)
Net cash provided by operating activities		311,405			278,280

Investing activities
Additions to theatre properties and equipment and other		(262,730	)		(230,346	)
Acquisitions of theatres in the U.S. and international markets		(41,000	)		(15,300	)
Proceeds from sale of theatre properties and equipment and other		14,816			3,398
Proceeds from sale of marketable securities		—			13,451
Investment in joint ventures and other		(1,178	)		(1,703	)
Net cash used for investing activities		(290,092	)		(230,500	)

Financing activities
Dividends paid to stockholders		(101,304	)		(94,117	)
Payroll taxes paid as a result of restricted stock withholdings		(2,943	)		(6,828	)
Proceeds from issuance of Senior Notes, net of discount		—			222,750
Retirement of Senior Subordinated Notes		—			(200,000	)
Repayments of long-term debt		(2,855	)		(15,217	)
Payment of debt issue costs		(817	)		(4,504	)
Payments on capital leases		(15,814	)		(14,655	)
Proceeds from financing lease		10,200			—
Other		(620	)		1,282
Net cash used for financing activities		(114,153	)		(111,289	)

Effect of exchange rate changes on cash and cash equivalents		1,051			2,081

Decrease in cash and cash equivalents		(91,789	)		(61,428	)

Cash and cash equivalents:
Beginning of period		561,235			588,539
End of period	$	469,446		$	527,111

Supplemental information (see Note 13)

The accompanying notes are an integral part of the condensed consolidated financial statements.

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

1.	The Company and Basis of Presentation

Cinemark Holdings, Inc. and subsidiaries (the “Company”) operates in the motion picture exhibition industry, with theatres in the United States (“U.S.”), Brazil, Argentina, Chile, Colombia, Peru, Ecuador, Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Guatemala, Bolivia, Curacao and Paraguay.

The accompanying condensed consolidated balance sheet as of December 31, 2016, which was derived from audited financial statements, and the unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from these estimates. Majority-owned subsidiaries that the Company has control of are consolidated while those affiliates of which the Company owns between 20% and 50% and does not control are accounted for under the equity method. Those affiliates of which the Company owns less than 20% are generally accounted for under the cost method, unless the Company is deemed to have the ability to exercise significant influence over the affiliate, in which case the Company would account for its investment under the equity method. The results of these subsidiaries and affiliates are included in the condensed consolidated financial statements effective with their formation or from their dates of acquisition. Intercompany balances and transactions are eliminated in consolidation.

These condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and the notes thereto for the year ended December 31, 2016, included in the Annual Report on Form 10-K filed February 23, 2017 by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be achieved for the full year.

2.	New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09”). The purpose of ASU 2014-09 is to clarify the principles for recognizing revenue and create a common revenue standard for U.S. GAAP and International Financial Reporting Standards. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The following subsequent Accounting Standards Updates either clarified or revised guidance set forth in ASU 2014-09:

•

In August 2015, the FASB issued Accounting Standards Update 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, (“ASU 2015-14”). ASU 2015-14 deferred the effective date of ASU 2014-09. The guidance in ASU 2014-09 is now effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.

•

In March 2016, the FASB issued Accounting Standards Update 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenues Gross versus Net), (“ASU 2016-08”). The purpose of ASU 2016-08 is to clarify the implementation of revenue recognition guidance for principal versus agent considerations.

•

In April 2016, the FASB issued Accounting Standards Update 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, (“ASU 2016-10”). The purpose of ASU 2016-10 is to clarify certain aspects of identifying performance obligations and licensing implementation guidance.

•

In May 2016, the FASB issued Accounting Standards Update 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, (“ASU 2016-12”). The purpose of ASU 2016-12 is to address certain narrow aspects of Accounting Standards Codification (“ASC”) Topic 606 including assessing collectability, presentation of sales taxes, noncash considerations, contract modifications and completed contracts at transition.

•

In December 2016, the FASB issued Accounting Standards Update 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, (“ASU 2016-20”). The purpose of ASU 2016-20 is to amend certain narrow aspects of the guidance issued in ASU 2014-09 related to the disclosure of performance obligations, as well as

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

other amendments related to loan guarantee fees, contract costs, refund liabilities, advertising costs and the clarification of certain examples.

The amendments in these accounting standards updates may be applied either using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective or retrospectively to each period presented. Early adoption is permitted.

The Company will adopt the amendments within these accounting standards updates in the first quarter of 2018 using the modified retrospective transition method. The Company is continuing to evaluate the impact of these accounting standards updates on its condensed consolidated financial statements, specifically with respect to the Company’s Exhibitor Services Agreement (“ESA”) with NCM, loyalty program accounting, breakage income for stored value cards as well as other ancillary and contractual revenues. The Company believes its ESA with NCM includes a significant financing component and, as a result, other revenues will increase with a similar offsetting increase in interest expense each year until the ESA term expires. In addition, the amortization method used to amortize the deferred revenue associated with the ESA will change to straight-line under the new accounting standards due to the nature of the Company’s performance obligation under the ESA. The change in amortization method will result in a cumulative effect adjustment upon adoption, the value of which the Company is currently evaluating.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842), (“ASU 2016-02”). The purpose of ASU 2016-02 is to provide financial statement users a better understanding of the amount, timing, and uncertainty of cash flows arising from leases. The adoption of ASU 2016-02 will result in the recognition of a right-of-use asset and a lease liability for most operating leases. New disclosure requirements include qualitative and quantitative information about the amounts recorded in the financial statements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. ASU 2016-02 requires a modified retrospective transition by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective with the option to elect certain practical expedients. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2016-02 on its condensed consolidated financial statements. The most significant impact of the amendments in ASU 2016-02 will be the recognition of new right-of-use assets and lease liabilities for assets currently subject to operating leases. The Company will adopt the amendments in ASU 2016-02 in the first quarter of 2019.

In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, (“ASU 2016-09”). The purpose of ASU 2016-09 is to simplify the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification of such activity on the statement of cash flows. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, including interim periods within that year. Prospective, retrospective, or modified retrospective application may be used dependent on the specific requirements of the amendments within ASU 2016-09. Effective January 1, 2017, the Company adopted ASU 2016-09 on a prospective basis (see Note 3). As such, prior periods have not been adjusted.

In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments – a consensus of the FASB Emerging Issues Task Force, (“ASU 2016-15”). The purpose of ASU 2016-15 is to reduce the diversity in practice regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. A retrospective transition method should be used in the application of the amendments within ASU 2016-15. Early adoption is permitted. The Company does not expect ASU 2016-15 to have a material impact on its condensed consolidated financial statements.

In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, (“ASU 2017-04”). The purpose of ASU 2017-04 is to simplify the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendments should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within that year. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company adopted the amendments in ASU 2017-04 during the second quarter of 2017 in order to reduce the complexity of performing its goodwill impairment tests. As discussed in Note 9, these tests are generally performed in the fourth quarter of each year. The Company does not expect ASU 2017-04 to have a material impact on its condensed consolidated financial statements.

In May 2017, the FASB issued Accounting Standards Update 2017-09, Compensation – Stock Compensation (Topic 718): Scope Modification Accounting, (“ASU 2017-09”). The amendments in ASU 2017-09 provide guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting as described in ASC Topic

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

718. The amendments should be applied on a prospective basis. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted. The Company does not expect ASU 2017-09 to have a material impact on its condensed consolidated financial statements.

In August 2017, the FASB issued Accounting Standards Update 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, (“ASU 2017-12”). The amendments in ASU 2017-12 improve the financial reporting of hedging relationships to better reflect the economic results of an entity’s risk management activities in its financial statements. Additionally, the amendments in ASU 2017-12 simplify certain steps of applying hedge accounting guidance. ASU 2017-04 is effective for fiscal years beginning after December 15, 2017, including interim periods within that year. Early adoption is permitted. The Company does not expect ASU 2017-12 to have a material impact on its condensed consolidated financial statements.

3.	Earnings Per Share

The Company considers its unvested restricted stock awards, which contain non-forfeitable rights to dividends, participating securities, and includes such participating securities in its computation of earnings per share pursuant to the two-class method. Basic earnings per share for the two classes of stock (common stock and unvested restricted stock) is calculated by dividing net income by the weighted average number of shares of common stock and unvested restricted stock outstanding during the reporting period. Diluted earnings per share is calculated using the weighted average number of shares of common stock plus the potentially dilutive effect of common equivalent shares outstanding determined under both the two class method and the treasury stock method.

Effective January 1, 2017, the Company adopted ASU 2016-09 on a prospective basis. In accordance with the amendments in ASU 2016-09, the Company’s diluted earnings per share calculation for the three and nine months ended September 30, 2017 excludes the estimated income tax benefits and deficiencies in the application of the treasury stock method. Excess income tax benefits or deficiencies related to share based awards are recognized as discrete items in the income statement during the period in which they occur. See Note 8 for a discussion of share based awards and related income tax benefits recognized during the nine months ended September 30, 2017 and 2016.

The following table presents computations of basic and diluted earnings per share under the two-class method:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Numerator:
Net income attributable to Cinemark Holdings, Inc.	$	38,139		$	65,655		$	169,106		$	178,086
Earnings allocated to participating share-based awards ⁽¹⁾		(209	)		(336	)		(842	)		(805	)
Net income attributable to common stockholders	$	37,930		$	65,319		$	168,264		$	177,281

Denominator (shares in thousands):
Basic weighted average common stock outstanding		115,823			115,601			115,746			115,475
Common equivalent shares for restricted stock units		281			192			317			231
Diluted		116,104			115,793			116,063			115,706

Basic earnings per share attributable to common stockholders	$	0.33		$	0.56		$	1.45		$	1.53
Diluted earnings per share attributable to common stockholders	$	0.33		$	0.56		$	1.45		$	1.53

(1)

For the three months ended September 30, 2017 and 2016, a weighted average of approximately 643 and 596 shares of unvested restricted stock, respectively, were considered participating securities. For the nine months ended September 30, 2017 and 2016, a weighted average of approximately 581 and 526 shares of unvested restricted stock, respectively, were considered participating securities.

CINEMARK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In thousands, except share and per share data

4.	Long Term Debt Activity

Senior Secured Credit Facility

On June 16, 2017, Cinemark USA, Inc., our wholly-owned subsidiary, amended its senior secured credit facility to reduce the rate at which the term loan bears interest by 0.25% and to modify certain covenant definitions within the agreement. The Company incurred debt issue costs of approximately $521 in connection with the amendment, which are reflected as a reduction of long term debt on the condensed consolidated balance sheet as of September 30, 2017. In addition, the Company incurred approximately $246 in legal fees that are reflected as loss on debt amendments and refinancing on the condensed consolidated statements of income for the nine months ended September 30, 2017.

Fair Value of Long-Term Debt

The Company estimates the fair value of its long-term debt using the market approach, which utilizes quoted market prices that fall under Level 2 of the U.S. GAAP fair value hierarchy as defined by ASC Topic 820. The carrying value of the Company’s long-term debt was $1,820,112 and $1,822,966 as of September 30, 2017 and December 31, 2016, respectively, excluding unamortized debt discounts and debt issue costs. The fair value of the Company’s long-term debt was $1,840,641 and $1,850,212 as of September 30, 2017 and December 31, 2016, respectively.

Equity

Below is a summary of changes in stockholders’ equity attributable to Cinemark Holdings, Inc., noncontrolling interests and total equity for the nine months ended September 30, 2017 and 2016:

	Cinemark
	Holdings, Inc.
	Stockholders’			Noncontrolling			Total
	Equity			Interests			Equity
Balance at January 1, 2017	$	1,261,818		$	11,142		$	1,272,960
Share based awards compensation expense		9,487			—			9,487
Stock withholdings related to share based awards that vested during the nine months ended September 30, 2017		(2,943	)		—			(2,943	)
Tax expense related to share based awards vesting		(32	)	―				(32	)
Dividends paid to stockholders ⁽¹⁾		(101,304	)		—			(101,304	)
Dividends accrued on unvested restricted stock unit awards ⁽¹⁾		(423	)		—			(423	)
Dividends paid to noncontrolling interests		—			(588	)		(588	)
Net income		169,106			1,438			170,544
Other comprehensive income in equity method investees		92			—			92
Foreign currency translation adjustments (see Note 12)		4,027			—			4,027
Balance at September 30, 2017	$	1,339,828		$	11,992		$	1,351,820

(1)

Below is a summary of dividends paid to stockholders and accrued on unvested restricted stock unit awards during the nine months ended September 30, 2017:

Amount per Share

Declaration Date

Record Date

Payable Date

of Common Stock

Total

2/23/2017

3/8/2017