Fair Value Of Financial Instruments

12 Months Ended

Dec. 31, 2013

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

Note 16 – Fair Value of Financial Instruments

ASC 820-10 applies to existing accounting pronouncements in which fair value measurements are already required and defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. 

ASC 820-10 (see Note 2 –Summary of Significant Accounting Policies) establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The statement requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

We use appropriate valuation techniques based on the available inputs to measure the fair values of our assets and liabilities.  When available, we measure fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value.

Level 1 Fair Value Measurements – are based on market quotes of our marketable securities.

Level 2 Fair Value Measurements – Interest Rate Swaps and cap – The fair value of interest rate swaps and cap are estimated using internal discounted cash flow calculations based upon forward interest rate curves, which are corroborated by market data, and quotes obtained from counterparties to the agreements.

Level 3 Fair Value Measurements – Impaired Property – For assets measured on a non-recurring basis, such as real estate assets that are required to be recorded at fair value as a result of an impairment, our estimates of fair value are based on management’s best estimate derived from evaluating market sales data for comparable properties developed by a third party appraiser and arriving at management’s estimate of fair value based on such comparable data primarily based on properties with similar characteristics.  For the years ended December 31, 2012 and 2011, the fair value of our impaired properties was estimated to be $4.1 million and $1.9 million, respectively, which we used to record our impairment expense and was based on level 3 inputs in developing management’s estimate of fair value.  For the year ended December 31, 2011, the fair value of our Rialto Cinemas investment was $1.6 million (NZ$2.0 million) resulting in an impairment charge of $2.9 million (NZ$3.8 million).  We did not record an impairment charge for our properties during 2013. 

As of December 31, 2013, we held certain items that are required to be measured at fair value on a recurring basis.  These included available for sale securities and interest rate derivative contracts.    Derivative instruments are related to our economic hedge of interest rates.  Our available-for-sale securities primarily consist of investments associated with the ownership of marketable securities in Australia.

The fair values of the interest rate swap and cap agreements are determined using the market standard methodology of discounting the future expected cash receipts or payments that would occur if variable interest rate fell above or below the strike rate of the interest rate swap and cap agreements.  The variable interest rates used in the calculation of projected receipts or payments on the interest rate swap and cap agreements are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.  To comply with the provisions of ASC 820-10, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements.  Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties.  However, as of December 31, 2013, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation and determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.  As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.  We have consistently applied these valuation techniques in all periods presented and believe we have obtained the most accurate information available for the types of derivative contracts we hold.

On a recurring basis, we used the above methods and assumptions on the following items to measure fair value subject to the disclosure requirements of ASC 820-10 at December 31, 2013 and 2012, respectively (dollars in thousands):

			Book Value				Fair Value
Financial Instrument	Level		2013		2012		2013		2012
Investment in marketable securities	1	$	55	$	55	$	55	$	55
Interest rate cap asset	2	$	75	$	--	$	75	$	--
Interest rate swap liabilities	2	$	3,288	$	5,855	$	3,288	$	5,855

Financial Instruments Disclosed at Fair Value

The following table sets forth the carrying value and the fair value of our financial assets and liabilities at December 31, 2013 and 2012 (dollars in thousands):

		Book Value				Fair Value
Financial Instrument	Level		2013		2012		2013		2012
Cash	1	$	37,696	$	38,531	$	37,696	$	38,531
Time deposits	1	$	--	$	8,000	$	--	$	8,000
Accounts receivable	1	$	9,087	$	8,514	$	9,087	$	8,514
Other assets - notes receivable	1	$	--	$	2,000	$	--	$	2,000
Restricted cash	1	$	782	$	2,465	$	782	$	2,465
Accounts and film rent payable	1	$	25,046	$	25,566	$	25,046	$	25,566
Notes payable	3	$	140,547	$	159,684	$	121,411	$	154,795
Notes payable to related party	N/A	$	--	$	9,000	$	N/A	$	N/A
Subordinated debt	3	$	27,913	$	27,913	$	11,067	$	12,268

For purposes of this fair value disclosure, we based our fair value estimate for notes payable and subordinated debt on our internal valuation whereby we apply the discounted cash flow method to our expected cash flow payments due under our existing debt agreements based on a representative sample of our lenders’ market interest rate quotes as of December 31, 2013 and 2012, respectively, for debt with similar risk characteristics and maturities.