UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN THE PROXY STATEMENT

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Exchange Act of 1934 (Amendment No.    )

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Cinemark Holdings, Inc.

(Name of Registrant as Specified In Its Charter)

 

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LETTER TO OUR STOCKHOLDERS

 

		Dear Fellow Stockholders:   On behalf of the Board of Directors (the “Board”), I would like to invite you to the 2019 annual meeting of stockholders (the “Annual Meeting”) of Cinemark Holdings, Inc. (the “Company”) to be held at our West Plano Theatre located at 3800 Dallas Parkway, Plano, TX 75093 on May 23, 2019 at 9:00 a.m. CDT. The accompanying formal notice and proxy statement set forth the details regarding admission and the business to be conducted at the Annual Meeting.

The North-American movie exhibition industry achieved an all-time high box office of $11.9 billion in 2018, an increase of 6.9% over 2017. For the ninth time out of the past ten years, we outperformed the North American industry box office with 7.7% domestic box office growth and a 6.3% increase in attendance. The strength of the film content coupled with our consistent execution of our strategic initiatives led to our fourth consecutive year of all-time highs, including records in all revenue categories and $3.2 billion in worldwide revenues.

During 2018, we served more than 280 million guests worldwide and expanded our footprint through new builds and acquisitions for a total of more than 6,000 screens across our global footprint spanning 16 countries. Our domestic subscription program, Movie Club, achieved more than 530,000 members, which was 250% more than our initial one-year goal and represented nearly 1,600 members per theatre. Additionally, we increased our recliner penetration from 45% to more than 55% of our domestic circuit, the highest among the major exhibitors.

The focus of the executive team has always been to drive stockholder value and to increase the return on your investment in the Company. In that spirit, we increased our cash dividend by $0.08 annually in the fourth quarter of 2018, thus growing our cash dividend by 36% cumulatively and distributing more than $640 million to our stockholders, over the past five years.

The Board, the management team and I would like to thank you for choosing to invest in Cinemark and extend a warm invitation to attend the Annual Meeting.

YOUR VOTE IS VERY IMPORTANT TO US. Whether or not you plan to attend the Annual Meeting, I urge you to please cast your vote as soon as possible via the Internet, telephone or mail.

Warm regards,

Mark Zoradi

Chief Executive Officer

CINEMARK HOLDINGS, INC.

3900 Dallas Parkway, Suite 500

Plano, Texas 75093

NOTICE OF 2019 ANNUAL MEETING AND PROXY STATEMENT

April 8, 2019

Dear Stockholders:

Notice is hereby given that the Annual Meeting of the Company will be held on May 23, 2019 at 9:00 a.m. CDT at our West Plano Theatre located at 3800 Dallas Parkway, Plano, TX 75093, for the following purposes:

 

1.

To elect three Class III directors to serve for three years on our Board;

2.

To ratify the appointment of Deloitte as our independent registered public accounting firm for 2019;

3.

To hold the annual, non-binding, advisory vote on our executive compensation program; and

4.

To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.

Only stockholders of record as of the Record Date will be entitled to notice of, and to vote at, the Annual Meeting.

YOUR VOTE IS IMPORTANT TO US. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented. Therefore, we urge you to promptly vote and submit your proxy in advance of the Annual Meeting. You can vote your shares via the Internet, by telephone, or by signing, dating, and returning the proxy card or voting instruction form. To vote via the Internet or telephone, follow the instructions included in the proxy card or the voting instruction form. You can revoke a proxy at any time prior to its exercise at the Annual Meeting by following the instructions in the proxy statement.

 

 

PROXY STATEMENT TABLE OF CONTENTS

 

PROXY STATEMENT SUMMARY			1
GENERAL INFORMATION			11
ITEM ONE - ELECTION OF DIRECTORS			11
Composition of the Board			11
Director Qualifications			11
Board Diversity			12
Nominations for Election to the Board			12
Annual Meeting Slate			13
CORPORATE GOVERNANCE			19
Board Leadership Structure			19
Board’s Role in Risk Oversight			19
Director Independence			20
Meeting Attendance			21
Executive Sessions			21
Stockholder Communications with the Board			21
Corporate Governance Policies and Charters			22
Code of Business Conduct and Ethics			22
BOARD COMMITTEES			22
DIRECTOR COMPENSATION			25
ITEM TWO - RATIFICATION OF THE APPOINTMENT OF DELOITTE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019			27
ITEM THREE - ANNUAL ADVISORY VOTE ON EXECUTIVE COMPENSATION			27
Executive Summary			27
COMPENSATION DISCUSSION AND ANALYSIS			29
Compensation Philosophy			29
2018 BUSINESS PERFORMANCE HIGHLIGHTS			29
Company Performance Over the 1-Year Period			30
Company Performance Over the 5-Year Period			30
Our Performance As Compared to Our Peers			30
DESIGN OF OUR EXECUTIVE COMPENSATION PROGRAM			32
ANALYSIS OF THE DESIGN OF OUR EXECUTIVE COMPENSATION PROGRAM			32
Base Salary			32
Cash Bonus			33
Long-term Equity Incentive Compensation			36
Compensation Mix			38
THE PROCESS OF SETTING EXECUTIVE COMPENSATION			39
Compensation Risk Assessment			40
Compensation Committee Report			41
SUMMARY COMPENSATION TABLE FOR 2018			42
CEO Pay Ratio for 2018			43
GRANTS OF PLAN-BASED AWARDS IN 2018			44
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2018			45
STOCK OPTION EXERCISES AND STOCK VESTED IN 2018			46
DISCUSSION OF THE TERMS OF THE EMPLOYMENT AGREEMENTS WITH OUR NEOS			47
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION			54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			55
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE			56
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			57
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING			58
DEADLINE FOR STOCKHOLDER PROPOSALS FOR THE 2020 ANNUAL MEETING			62
ADDITIONAL INFORMATION			63
OTHER MATTERS			63
AVAILABILITY OF REPORT ON FORM 10-K			63
QUESTIONS			64

 

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GENERAL INFORMATION

 

 

Solicitation of Proxies

The Board is soliciting proxies in connection with the Annual Meeting (and any adjournment thereof) to be held on May 23, 2019 at 9 a.m. CDT at the Company’s West Plano Theatre located at 3800 Dallas Parkway, Plano, TX 75093. The approximate date on which this proxy statement and the enclosed proxy are first being sent to stockholders is April 8, 2019.

Shares Outstanding and Voting Rights

As of the Record Date, 117,019,540 shares of common stock, par value $0.001 per share of the Company (the “Common Stock”) were outstanding. The Common Stock constitutes the only class of voting securities of the Company. Only stockholders of record as of the Record Date are entitled to receive notice of, and to vote at, the Annual Meeting. Holders of Common Stock are entitled to one vote for each share so held.

 

 

ITEM ONE — ELECTION OF DIRECTORS

Composition of the Board

Our Board is currently comprised of 10 members. The size of the Board may be fixed from time to time exclusively by our Board as provided in our Certificate of Incorporation. Our Certificate of Incorporation also provides that our Board consists of three classes of directors, designated as Class I, Class II and Class III. The members of each class are elected to serve a three-year term, with the term of office of each class ending in successive years.

Director Qualifications

The qualifications for Board membership are set forth in our Fourth Amended and Restated Corporate Governance Guidelines (“Corporate Governance Guidelines”). All candidates nominated for election or re-election to the Board should possess the following qualifications:

 

•

high personal and professional ethics, integrity, practical wisdom, and mature judgment;

•

broad training and experience at the policy-making level in business, government, education, or technology;

•

expertise that is beneficial to the Company and complementary to the background and experience of other Board members;

•

willingness to devote the required amount of time to carrying out duties and responsibilities of Board membership;

•

commitment to serve on the Board over a period of several years to develop knowledge about the Company’s principal operations; and

•

willingness to represent the best interests of all stockholders and objectively appraise management performance.

The Nominating and Corporate Governance Committee (the “Governance Committee”) of the Board which is responsible for nominating members to the Board, does not assign specific weight to any particular factor when evaluating candidates for potential Board nominations. The Board, in selecting members, takes into account such factors as it deems appropriate, which may include the current composition of the Board, the range of talents, experiences and skills that would best complement those already represented on the Board and the need for specialized expertise. The Board seeks to achieve a mix of members whose experience and backgrounds are relevant to the Company’s strategic priorities and the scope and complexity of the Company’s business.

 

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Board Diversity

The Board has not adopted a formal diversity policy. Pursuant to the Corporate Governance Guidelines, the Board broadly construes diversity to mean diverse background, education, skills, age and expertise. Our Board is comprised of directors who bring diverse viewpoints and perspectives, exhibit a variety of skills, professional experience and backgrounds, and effectively represent the interests of our stockholders. The directors complement each other in their mix of skills by bringing to the Board expertise and experience on the entertainment industry, capital markets, cybersecurity, technology, financial management, strategic planning and corporate governance.

The following chart summarizes the core competencies of each director.

 

Skill/Experience Matrix

Experience

Director

Financial Literacy

✓

✓

✓

✓

✓

✓

✓

✓

Financial Management

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

Accounting and Financial Oversight/Enterprise Risk Management

✓

✓

✓

✓

✓

✓

Corporate Governance

✓

✓

✓

✓

✓

CEO Positions Held

✓

✓

✓

✓

✓

✓

Non-CEO Executive Positions

✓

✓

✓

✓

Film, Media and Entertainment Industry

✓

✓

✓

✓

✓

Beverage Industry, Consumer Products

✓

✓

✓

Corporate Finance

✓

✓

✓

Mergers and Acquisitions

✓

✓

✓

Other Public Company Board Service

✓

✓

✓

✓

✓

Leadership

✓

✓

✓

✓

✓

✓

✓

✓

Strategic Planning

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

Real Estate and Retail Business

✓

Information Technology and Cybersecurity

✓

✓

Nominations for Election to the Board

The Governance Committee of our Board receives nominations for Board members which it evaluates based on the standards, qualifications and diversity criteria set forth by the Board in the Corporate Governance Guidelines. The Governance Committee annually evaluates the criteria for the selection of new directors and recommends any proposed changes to the Board. Although the Board retains ultimate responsibility for approving candidates for election, the Governance Committee conducts the initial screening and evaluation. In doing so, the Governance Committee considers candidates recommended by the directors, the CEO and the Company’s stockholders. The Governance Committee also has the authority, to the extent it deems appropriate, to retain one or more search firms to be used to identify director candidates.

 

 

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While typically the Governance Committee recommends candidates to the full Board, under the director nomination agreement which we entered into on April 9, 2007 with certain of our then current stockholders (the “Director Nomination Agreement”), the Mitchell Investors (as defined in the Director Nomination Agreement) have a right to designate two nominees to the Board. The nominees of the Mitchell Investors however, must fulfil the membership criteria set by the Board under the Corporate Governance Guidelines. Currently, Messrs. Mitchell (Class III) and Sepulveda (Class II) are the nominees of the Mitchell Investors.

To recommend a candidate for election to the Board for the 2020 annual meeting of stockholders, a stockholder must submit the following information to the Company Secretary no later than 90 and no earlier than 120 days in advance of the anniversary date of this Annual Meeting:

 

•

the name and address of the stockholder of record and the beneficial owner, if any, on whose behalf the proposal is made;

•

a representation that the stockholder intends to appear in person or by proxy at the annual meeting;

•

the number of shares of capital stock of the Company that are owned beneficially and of record by such stockholder and the beneficial owner, if any, on whose behalf the nomination is made;

•

a description of any arrangements or understandings between the stockholder, the beneficial owner and the nominee or any other person (including their names);

•

the name, age, business and residential addresses of the stockholder’s nominee for director;

•

the biographical and other information about the nominee (including the number of shares of capital stock of the Company owned beneficially or of record by the nominee) that would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission (“SEC”); and

•

the nominee’s consent to be named as a nominee and to serve on the Board.

Candidates recommended by stockholders will be evaluated on the basis of the same qualifications discussed above as candidates recommended by existing directors and the CEO.

Annual Meeting Slate

The terms of the current Class III directors, Messrs. Chereskin, Mitchell and Syufy expire at the Annual Meeting. Mr. Mitchell has been nominated by the Mitchell Investors for election at the Annual Meeting. Messrs. Chereskin and Syufy have been recommended by the Governance Committee and nominated by the Board for election at the Annual Meeting.

Each of Messrs. Chereskin, Mitchell and Syufy has consented to be nominated for re-election to the Board as a Class III director. If elected, they will serve on the Board for a three-year term expiring on the date of our 2022 annual meeting of stockholders. At this time, we have no reason to believe that either Messrs. Chereskin, Mitchell or Syufy will be unable or unwilling to serve if elected. However, should any of them become unavailable or unwilling to serve before the Annual Meeting, your proxy card authorizes us to vote for a replacement nominee if the Board names one.

 

 

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Information on each of our nominees and continuing directors is given below.

NOMINEES FOR CLASS III DIRECTORS

Term Expiring 2019

 

		Benjamin D. Chereskin, 60   Director Since: April 2004   Nominee of: Board   Board Committees: Compensation Committee; Strategic Long-Range Planning Committee (Chair)   Other Public Company Boards: CDW, Corporation; Boulder Brands, Inc. (2013-2016)

Professional Experience: Mr. Chereskin is President of Profile Capital Management LLC (“Profile Management”), an investment management firm, which he founded in 2009. Prior to founding Profile Management, Mr. Chereskin was a Managing Director and Member of Madison Dearborn Partners, LLC, a private equity firm, from 1993 until 2009, having co-founded the firm in 1993.

Qualifications: Mr. Chereskin’s background in private equity is a valuable resource to us in our efforts to attract capital, which helps us implement our business strategies and finance growth opportunities. His knowledge and experience in corporate finance, mergers and acquisitions, and corporate governance contributes to the Board’s expertise on strategic planning and provides valuable input on executive compensation matters.

 

 

 

		Lee Roy Mitchell, 82   Director Since: Founder   Nominee of: Mitchell Investors   Board Committees: Executive Chairman of the Board; New Ventures Committee (Chair)   Other Public Company Boards: National CineMedia, Inc. (“NCMI”)

Professional Experience: Mr. Mitchell is the founder of the Company. He has served as Chairman of the Board since March 1996 and as a director since our inception in 1987.

Qualifications: Mr. Mitchell has been engaged in the motion picture exhibition business for over 50 years. His depth of experience in the motion picture industry has been invaluable to the Board. Additionally, Mr. Mitchell brings a long-term historic industry perspective and leadership experience to the Board.

 

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		Raymond W. Syufy, 56   Director Since: October 2006   Nominee of: Board   Board Committees: Strategic Long-Range Planning Committee; New Ventures Committee   Other Public Company Boards: None

Professional Experience: Mr. Syufy began working for Century Theatres, Inc. (“Century Theatres”), a regional movie exhibitor, in 1977, and held positions in each of the major departments within Century Theatres. In 1994, Mr. Syufy was named President of Century Theatres and was later appointed CEO and Chairman of the board of directors of Century Theatres. Mr. Syufy resigned as an officer and director of Century Theatres upon the consummation of our acquisition of Century Theatres in 2006. Since then Mr. Syufy has presided as CEO of Syufy Enterprises, a retail and real estate holding company with operations in California, Nevada, Arizona, Colorado, and Texas.

Qualifications: Mr. Syufy’s experience in managing a successful, family-owned movie theatre business brings to the Board industry insight and operational experience. Mr. Syufy’s background also brings key strategic planning expertise to the Board, particularly with respect to competition from other forms of entertainment.

 

 

OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ELECTION OF EACH CLASS III NOMINEE

 

 

CONTINUING CLASS I DIRECTORS

Term Expiring 2020

 

 

		Nancy Loewe, 51   Director Since: June 2017   Nominee of: Board   Board Committees: Audit Committee; Governance Committee   Other Public Company Boards: None

Professional Experience: From 2011 until 2017, Ms. Loewe served in a variety of positions of increasing responsibility with Kimberly-Clark Corporation and its international subsidiary, including serving as the Chief Financial Officer (“CFO”) for Kimberly-Clark International and Chief Strategy Officer and Global Treasurer for Kimberly-Clark Corporation. Additionally, Ms. Loewe has held numerous positions during her 20-year tenure at GE, inside and outside the U.S., including Vice President – Strategic Transactions & Cash, as well as CFO for varying business units, such as Plastics Asia, Healthcare, and Consumer & Industrial.

Qualifications: Ms. Loewe’s accounting and financial management expertise has added to the Board’s skillset of strategic planning and financial decision making. Due to her experience in leading large financial teams and financial management including audit, risk and treasury, she provides guidance and direction to the Company on accounting and financial processes and management.

 

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		Steven P. Rosenberg, 60   Director Since: April 2008   Nominee of: Board   Board Committees: Audit Committee; Governance Committee (Chair)   Other Public Company Boards: Texas Capital Bancshares, Inc.; PRGX Global, Inc. (2007-2014)

Professional Experience: From 1997 until 2018, Mr. Rosenberg was the President of SPR Ventures Inc., a private investment firm he founded in 1997. He was also the President of SPR Packaging LLC, a manufacturer of flexible packaging, from 2006 until 2018.

Qualifications: Mr. Rosenberg’s background in corporate leadership, private entrepreneurial investment and public company management brings to the Board strategic planning, risk management, board governance and general management skills that are critical to the implementation of our growth strategies and oversight of our enterprise and operational risk management. His experience in accounting and financial management, having served in corporate leadership positions and on audit committees of other public companies, is valuable to the Board with respect to the oversight of our financial reporting.

 

 

 

 

		Enrique F. Senior, 75   Director Since: April 2004   Nominee of: Board   Board Committees: Strategic Long-Range Planning Committee; New Ventures Committee   Other Public Company Boards: Grupo Televisa S.A.B.; Coca-Cola FEMSA, S.A

Professional Experience: Mr. Senior is a Managing Director of Allen & Company LLC, a boutique investment bank, and has been employed by the firm since 1972. He has served as a financial advisor to several corporations including Coca-Cola Company, General Electric, CapCities/ABC, Columbia Pictures and QVC Networks.

Qualifications: Mr. Senior’s experience in financial advisory services has given him extensive knowledge of the film, media and entertainment and beverage industries. Mr. Senior’s experience has brought key insight into these two critical components of the Company’s business. He also provides strategic guidance to the Board.

 

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		Nina G. Vaca (Ximena Humrichouse), 47   Director Since: November 2014   Nominee of: Board   Board Committees: Governance Committee; Compensation Committee (Chair)   Other Public Company Boards: Comerica, Inc., Kohls, Corp. (2010-2019)

Professional Experience: Ms. Vaca is the founder, Chairman and CEO of the Pinnacle Group of companies, including Pinnacle Technical Resources, Inc. (together “Pinnacle”). Founded in 1996, Pinnacle is an information technology services and solutions provider.

Qualifications: Ms. Vaca is a successful entrepreneur and brings to the Board a wealth of leadership and business expertise, especially with regard to information technology and e-commerce. Her experience as a director of other public companies adds to the governance skill set of the Board particularly in the area of executive compensation.

 

 

CONTINUING CLASS II DIRECTORS

Term Expiring 2021

 

		Darcy Antonellis, 56   Director Since: July 2015   Nominee of: Board   Board Committees: Audit Committee   Other Public Company Boards: XPERI Corporation

Professional Experience: Since 2014, Ms. Antonellis has been the CEO of Vubiquity, Inc. (“Vubiquity”), the largest global provider of premium content services and technical solutions serving clients in 37 countries and reaching more than 100 million households. Prior to Vubiquity, Ms. Antonellis held numerous positions at Warner Bros. Entertainment Inc., (a Time Warner company) including President of Technical Operations and Chief Technology Officer.

Qualifications: Ms. Antonellis’s background in engineering and experience in technology and cybersecurity is invaluable to the Board. In addition to her management experience in the positions of CEO and senior executive of one of the largest studios, her success in digital media, as well as her strong understanding of our industry helps provide strategic guidance to our Board in the area of digital marketing.

 

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		Carlos M. Sepulveda, 61   Director Since: June 2007   Nominee of: Mitchell Investors pursuant to the Director Nomination Agreement   Board Committees: Audit Committee (Chair and financial expert); Compensation Committee; Strategic Long-Range Planning Committee; lead independent director   Other Public Company Boards: Triumph Bancorp Inc.; Matador Resources Company (2013-2017)

Professional Experience: Since 2010, Mr. Sepulveda has been the Chairman of the board of directors of Triumph Bancorp, Inc. (“Triumph Bancorp”), a bank holding company with interests in wholesale banking, commercial finance and real estate investments. Prior to Triumph Bancorp, Mr. Sepulveda was the President and CEO of Interstate Battery System International, Inc. (“Interstate Battery”), a seller of automotive and commercial batteries. Prior to joining Interstate Battery, Mr. Sepulveda was an audit partner with the accounting firm of KPMG Peat Marwick in Austin, New York and San Francisco for 11 years.

Qualifications: Mr. Sepulveda’s extensive public accounting background provides the Board critical financial and accounting expertise. As a certified public accountant with proven management and leadership skills and having served as the CEO of a major corporation, Mr. Sepulveda brings to the Board strong accounting and financial oversight skills coupled with experience in strategic planning and enterprise and operational risk management.

 

 

 

 

		Mark Zoradi, 65   Director Since: June 2015   Nominee of: Board   Board Committees: New Ventures Committee   Other Public Company Boards: None

Professional Experience: Since 2015, Mr. Zoradi has served as our CEO. Mr. Zoradi spent 30 years at The Walt Disney Company, including serving as the President of Walt Disney Studios Motion Picture Group. Prior to that, Mr. Zoradi served in a variety of positions of increasing responsibility with The Walt Disney Company, including as the General Manager of Buena Vista Television and President of Buena Vista International with responsibility for the international theatrical and home entertainment marketing and distribution of Disney, Touchstone and Pixar films. Mr. Zoradi also served as the President and Chief Operating Officer (“COO”) of Dick Cook Studios from 2011 until 2014 and the Chief Operating Officer of Dreamworks Animation SKG, Inc. from 2014 until 2015.

Qualifications: A veteran motion picture executive with a background in distribution, Mr. Zoradi brings a wealth of knowledge to the Board with regards to strategic partnerships and relationships with the movie studios. Additionally, his experience in operations of large entertainment industry companies brings management expertise to the Board.

 

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CORPORATE GOVERNANCE

The Board oversees our executive management, reviews our long-term strategic plans and exercises oversight over all major decisions.

Board Leadership Structure

We believe that a key factor in a company’s performance is a leadership structure that provides a balance between independent oversight by an engaged Board and day-to-day operations by management to implement the Board’s strategic vision. To achieve this balance, we have split the roles of the Chairman of the Board and the CEO such that the Board is separated from the day-to-day operations of the Company.

In addition to the separation of the positions of the Chairman of the Board and the CEO, the Board has a lead independent director, which role provides leadership and an organizational structure to the non-management directors. The position of the lead independent director has the following significant authority and responsibilities under our Corporate Governance Guidelines:

 

•

to act as a liaison between the non-management directors and the Company’s management;

•

to call meetings of non-management directors;

•

chair the executive sessions of non-management directors;

•

chair Board meetings when the Chairman is not present;

•

consult with the Chairman and the CEO and approve the schedules, agendas and information provided to the Board for each meeting;

•

be available for consultation and communication with stockholders upon request; and

•

provide the Chairman and the CEO with the results of the Board’s annual performance review.

Board’s Role in Risk Oversight

Responsibility for risk oversight rests with the Board. The Board has oversight responsibility of the processes established to identify, report and mitigate material risks applicable to the Company, including strategic, competitive, economic, operational, financial, legal, regulatory, compliance, and reputational risks. In addition, Board committees oversee and review risk areas that are particularly relevant to their respective areas of responsibility and oversight. The risk oversight responsibility of the Board and its Committees is supported by our management reporting processes, which are designed to provide visibility to the Board to those Company personnel responsible for risk assessment, and information about management’s identification, assessment and mitigation strategies for critical risks. While the Board considers risk in all its decisions, it also recognizes that appropriate and measured risk-taking may be required for the Company to retain its competitiveness and increase stockholder value.

 

 

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The Board implements its risk oversight function both as a whole and through delegation to certain Board committees. The risk management function of the various committees is as follows:

 

Board
Audit		Compensation		Governance
•  Assesses financial and accounting risk exposures and management’s risk management procedures to address those risks •  Reviews and assess information technology and cybersecurity risk exposures and the steps taken to monitor and control those exposures •  Reviews risks, identified during the external auditor’ risk assessment procedures.		•  Oversees risk management related to employee compensation plans and arrangements •  Assesses whether the Company’s compensation plans and practices may incentivize excessive risk-taking. The Compensation Committee has determined that the risks arising from the Company’s compensation plans and policies are not reasonably likely to have a material adverse effect on the Company.		•  Manages risks associated with governance structure and processes •  Oversees succession planning

In order to provide oversight of the risks associated with strategic planning and business development initiatives, the Board has established two additional committees, the Strategic Long-Range Planning Committee and the New Ventures Committee. The Strategic Long- Range Planning Committee assists management in the analysis of alternative strategic options and reviews with management key industry and market issues and external developments impacting the Company. The New Ventures Committee monitors the strategic direction of the Company. It evaluates new development programs or business growth and diversification opportunities within established strategic plan targets and applicable regulatory boundaries.

Director Independence

We comply with the independence requirements of the New York Stock Exchange (the “NYSE”). The NYSE bright-line tests for independence are whether the director:

 

1.

is, or has been within the last three years, an employee of the Company, or an immediate family member is, or has been within the last three years, an executive officer of the Company;

2.

has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from the Company (other than director and committee fees and pension or other forms of deferred compensation for prior service, provided such compensation is not contingent in any way on continued service);

3.

(a) is a current partner or employee that is the Company’s internal or external auditor; (b) has an immediate family member who is a current partner of such a firm; (c) has an immediate family member who is a current employee of such firm and personally works on the Company’s audit; or (d) is or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the Company’s audit within that time;

4.

is, or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the Company’s present executive officers at the same time serves or has served on that company’s compensation committee; or

5.

is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenues.

 

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With the assistance of the Company’s legal counsel, the Governance Committee and the Board reviews the NYSE Standards for Board and committee member independence. On the basis of this review, the Board has affirmatively determined, in its business judgment, that (a) the majority of the Board was, and continues to be, independent, (b) each of Mmes. Antonellis, Loewe and Vaca and Messrs. Chereskin, Rosenberg, Senior and Sepulveda are independent, (c) Mr. Syufy is not independent due to him being a current employee of Syufy Enterprises that receives payment from the Company exceeding the greater of $1 million or 2% of it’s consolidated gross revenues, (d) Messrs. Mitchell and Zoradi are not independent because they are employees of the Company, (e) each of Mmes. Antonellis and Loewe and Messrs. Rosenberg and Sepulveda meet all applicable requirements for membership in the Audit Committee, (f) Mr. Sepulveda is an “audit committee financial expert” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC and satisfies the NYSE’s financial experience requirements, and (g) each of Ms. Vaca and Messrs. Chereskin and Sepulveda meet all applicable requirements for membership in the Compensation Committee.

Meeting Attendance

During 2018, the Board held four (4) meetings and took action by written consent on six (6) occasions. All directors attended at least seventy-five percent (75%) of all meetings held by the Board and all meetings held by committees of the Board on which such director served.

All directors are strongly encouraged to attend the Annual Meeting, but we do not have a formal attendance requirement. All directors, except Mr. Senior, attended the annual meeting held in May 2018.

Executive Sessions

Pursuant to our Corporate Governance Guidelines and the rules of the NYSE, our non-management directors meet periodically in executive sessions with no Company personnel present. Our Corporate Governance Guidelines require separate sessions of the non-management directors at least twice a year.

The presiding director of the executive sessions is currently our lead independent director, Mr. Sepulveda. During 2018, our non-management directors met twice and our independent directors met once in executive sessions.

Stockholder Communications with the Board

As stated in our Corporate Governance Guidelines, any Company stockholder or other interested party who wishes to communicate with the non-management directors as a group may direct such communications by writing to the:

Company Secretary

Cinemark Holdings, Inc.

3900 Dallas Parkway, Suite 500

Plano, TX 75093

The communication must be clearly addressed to the Board or to a specific director. If a response is desired, the individual should also provide contact information such as name, address and telephone number.

All such communications will be reviewed initially by the Company Secretary. The Company Secretary will forward to the appropriate director(s) all correspondence, except for items of the following nature:

 

•

advertising;

•

promotions of a product or service;

 

21

•

patently offensive material; and

•

matters completely unrelated to the Board’s functions, Company performance, Company policies or that could not reasonably be expected to affect the Company’s public perception.

The Company Secretary will prepare a periodic summary report of all such communications for the Board. Correspondence not forwarded to the Board will be retained by the Company and will be made available to any director upon request.

Corporate Governance Policies and Charters

The following documents make up our corporate governance framework:

 

•

Corporate Governance Guidelines;

•

Amended and Restated Charter of the Audit Committee (the “Audit Committee Charter”);

•

Charter of the Governance Committee (the “Governance Committee Charter”); and

•

First Amendment to Amended and Restated Compensation Committee Charter (the “Compensation Committee Charter”).

Current copies of the above policies and guidelines are available publicly on the Company’s website at http://investors.cinemark.com under the “Corporate Governance” tab.

Code of Business Conduct and Ethics

The Company has also adopted a Code of Business Conduct and Ethics, which applies to directors, executive officers and employees. The Code of Business Conduct and Ethics sets forth the Company’s policies on critical issues such as conflicts of interest, insider trading, protection of our property, business opportunities and proprietary information. We will post on our website any amendment to, or a waiver from, a provision of the Code of Business Conduct and Ethics for executive officers and directors that have been approved by our Board or any Board committee. The Code of Business Conduct and Ethics is available on our website at http://investors.cinemark.com under the “Corporate Governance” tab.

BOARD COMMITTEES

Our Board currently has five standing committees – Audit Committee, Compensation Committee, Governance Committee, Strategic Long-Range Planning Committee and the New Ventures Committee. The current composition of each of the committees is set forth below:

 

Name of Director		Audit		Compensation		Governance		Strategic       Planning		New Ventures
Darcy Antonellis		Member
Benjamin Chereskin				Member				Chair
Nancy Loewe		Member				Member
Lee Roy Mitchell										Chair
Steven Rosenberg		Member				Chair
Enrique Senior								Member		Member
Carlos Sepulveda		Chair		Member				Member
Raymond Syufy								Member		Member
Nina Vaca				Chair		Member
Mark Zoradi		-		-		-		-		-

 

22

Audit Committee		Number of Meetings Held During 2018: 4   Number of Decisions by Consent During 2018: 1

Each of the Audit Committee members satisfies the standards for independence of the NYSE and the SEC as they relate to audit committees. Our Board has determined that each member of the Audit Committee is financially literate and that Mr. Sepulveda, a licensed certified public accountant with extensive public company accounting experience, qualifies as an “audit committee financial expert” within the meaning of Item 407(d)(5)(ii) of Regulation S-K promulgated by the SEC. See Mr. Sepulveda’s biography on page 18 for further information regarding his qualifications to be an “audit committee financial expert”.

The Audit Committee is governed by the Audit Committee Charter which sets forth the purpose and responsibilities of this committee.

Functions:

The functions of the Audit Committee include the following:

 

•

assisting the Board in its oversight responsibilities regarding (1) the integrity of our financial statements, (2) our risk management compliance with legal and regulatory requirements, (3) our systems of internal control and (4) our accounting, auditing and financial reporting processes generally, including the qualifications, independence and performance of the independent registered public accountants;

•

approving the report required by the SEC for inclusion in our annual proxy or information statement;

•

appointing, retaining, compensating, evaluating and replacing our independent registered public accountants;

•

approving audit and non-audit services to be performed by the independent registered public accountants;

•

establishing procedures for the receipt, retention and resolution of complaints regarding accounting, internal control or auditing matters submitted confidentially and anonymously by employees through the whistleblower hotline; and

•

performing such other functions as the Board may from time to time assign to the Audit Committee.

The Audit Committee meets on a quarterly basis with Company management and Deloitte, to discuss, among other items, the earnings press release related to the quarter and the year (as applicable), the Company’s financial statements for the applicable period and any changes in significant accounting policies and its impact on the Company’s financial statements. The Audit Committee also meets, on a periodic basis, with Deloitte in executive sessions without the presence of members of management.

As part of the Board’s duty of risk oversight, the Board has delegated authority of cybersecurity oversight to the Audit Committee. To monitor and evaluate the cybersecurity threats and the effectiveness of the Company’s controls to address those risks, the Audit Committee is updated by Company management twice a year.

The Board has also delegated its authority to approve related party transactions to the Audit Committee. The Company’s written policy regarding approval of related party transactions provides that management must present to the Audit Committee all potential related party transactions including the nature of the transaction, material terms and the maximum dollar value of the transaction. The Audit Committee approves based upon the determination whether the transaction is fair and in the best interest of the Company. See Certain Relationships and Related Party Transactions on page 57 for further details on the approval of related party transactions.

Approval of Audit and Non-Audit Services:

The Audit Committee approves all audit and permissible non-audit services (including the fees and terms of the services) performed for the Company by its independent registered public accounting firm prior to the time that those services are commenced. The Audit Committee may, when it deems appropriate, form and delegate this authority to a sub-committee consisting of one or more Audit Committee members, including the

 

23

authority to grant pre-approvals of audit and permitted non-audit services. The decision of such sub-committee is presented to the full Audit Committee at its next meeting. The Audit Committee pre-approved all fees for 2018 noted in the table below.

Fees Paid to Independent Registered Public Accounting Firm:

We paid the following fees (in thousands) to Deloitte and its affiliates for professional services rendered by them during 2018 and 2017, respectively:

 

Fees		2018				2017
Audit		$	1,837.2			$	1,781.0
Audit Related		$	10.4			$	10.4
Tax(1)		$	66.4			$	145.5
Other		$	-			$	-
Total		$	1,914.0			$	1,936.9

⁽¹⁾ Fees primarily include transfer pricing studies and tax compliance services.

Audit Committee Report

Our committee has reviewed and discussed with management the Company’s audited financial statements for 2018. We have discussed with Deloitte the matters required to be discussed by the Statement on Auditing Standard No. 1301, Communications with Audit Committees, and Related and Transitional Amendments to PCAOB Standards. We have received the written disclosures and the letter from Deloitte as required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and have discussed with Deloitte its independence. Based on the review and discussions referred to above, we recommended to the Board that the audited financial statements for the Company be included in the Company’s 2018 Form 10-K for filing with the SEC.

Respectfully submitted,

Carlos Sepulveda (Chair)

Steven Rosenberg

Darcy Antonellis

Nancy Loewe

 

Compensation Committee		Number of Meetings Held During 2018: 3   Number of Decisions by Consent During 2018: 4

Each member of the Compensation Committee satisfies the standards for independence of the NYSE as they relate to compensation committees, qualify as “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code (the “Code”) and “non-employee directors” within the meaning of Rule 16b-3 promulgated under Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Compensation Committee is governed by the Compensation Committee Charter, which sets forth the purpose and responsibilities of this committee.

Functions

The functions of the Compensation Committee include the following:

 

•

making recommendations to the Board on the Company’s general compensation philosophy and objectives and on all matters of policy and procedures relating to executive compensation;

 

24

•

reviewing and approving corporate goals and objectives relevant to the CEO’s compensation, and determining and approving the CEO’s compensation level;

•

determining and approving the compensation of the other executive officers;

•

administering (to the extent such authority is delegated to the Compensation Committee by the Board) the incentive compensation and equity-based plans and recommending to the Board any modifications of such plans;

•

validating and approving the achievement of performance levels under the Company’s incentive compensation plans;

•

reviewing, recommending, and discussing with management the Compensation Discussion and Analysis (the “CD&A”) section included in the Company’s annual proxy statement; and

•

developing a succession planning program for the CEO and senior management.

 

Governance Committee		Number of Meetings Held During 2018: 5   Number of Decisions by Consent During 2018: 1

The Governance Committee is composed solely of directors who satisfy all criteria for independence under the rules of the NYSE. The Governance Committee is governed by the Governance Committee Charter setting forth the purpose and responsibilities of this committee.

Functions

The functions of the Governance Committee include the following:

 

•

identifying individuals qualified to become Board members and evaluate candidates for Board membership, including those recommended by stockholders in compliance with the Company’s by-laws;

•

recommending to the Board the director nominees for election or to fill any vacancies and newly created directorships on the Board;

•

identifying and recommending to the Board members qualified to fill any vacancies on a committee of the Board;

•

developing and recommending to the Board a set of corporate governance guidelines and reviewing and reassessing the adequacy of such guidelines at least annually;

•

overseeing the Board’s annual self-evaluation process and the Board’s evaluation of management;

•

periodically reviewing the criteria for the selection of new directors to serve on the Board and recommending any proposed changes to the Board for approval;

•

periodically reviewing and making recommendations regarding the composition and size of the Board;

•

periodically reviewing and making recommendations regarding the composition, size, purpose, structure, operations and charter of each of the Board’s committees, including the creation of additional committees or elimination of existing committees;

•

annually recommending to the Board the chairpersons and members of each of the Board’s committees; and

•

reviewing and reassessing the adequacy of the Governance Committee Charter on an annual basis and recommend any proposed changes to the Board for approval.

DIRECTOR COMPENSATION

The compensation of the non-employee directors for 2018 was governed by our Third Amended and Restated Non-Employee Director Compensation Policy (the “Director Compensation Policy”) adopted by the Board in February 2017. A non-employee director is one who is not (i) an employee of the Company or any of our subsidiaries, or (ii) an employee of any of the Company’s stockholders which has contractual rights to

 

25

nominate directors. Therefore, as Company employees, Messrs. Mitchell and Zoradi do not receive any compensation for their services on the Board or any of its committees. See the compensation tables beginning on page 42 for the compensation paid to Messrs. Mitchell and Zoradi.

Each non-employee director received the following annual cash retainers, as applicable, for services as a Board member during 2018:

 

(a)

a base director retainer of $60,000;

(b)

additional retainer of $35,000 for the non-employee director who serves as the lead independent director;

(c)

additional cash retainer for services on the committees as follows:

 

Committee		Chairperson				Member
Audit		$	20,000			$	10,000
Compensation		$	15,000			$	10,000
Governance		$	10,000			$	7,500
Strategic Long-Range Planning		$	10,000			$	5,000
New Ventures		$	10,000			$	5,000

Annual cash retainers are paid in four equal quarterly installments at the end of each quarter for services rendered during the quarter. All directors are reimbursed for travel related expenses incurred for each Board meeting they attend.

In addition to the annual cash retainers, the non-employee directors receive an annual grant of restricted stock valued at $115,000. The number of shares of restricted stock is determined by dividing $115,000 by the closing price of Common Stock on the grant date, rounded down to the nearest whole share. The annual awards fully vest on the first anniversary of the grant date subject to continued service to the Company through the vest date.

The following table sets forth summary information regarding the compensation of our non-employee directors for 2018.

 

 

(1)

Includes all annual cash retainers, as applicable.

(2)

The grant date fair values were calculated based upon the closing price of Common Stock on June 15, 2018 of $35.81 per share. This calculation is in accordance with FASB ASC Topic 718.

See Note 15 to the Company’s 2018 Form 10-K, for discussion of the assumptions used in determining the grant date fair values of these share based awards, including forfeiture assumptions and the period over which the Company will recognize compensation expense for such awards.

At December 31, 2018, each of the directors owned 3,211 shares of restricted stock. See Security Ownership of Certain Beneficial Owners and Management table on page 55 for total stock ownership of each of the directors.

(3)

The amounts reported are dividends paid during 2018 on the shares of unvested restricted stock granted in 2017 and 2018.

 

 

26

ITEM TWO — RATIFICATION OF THE APPOINTMENT OF DELOITTE AS OUR

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019

The Audit Committee has appointed and the Board has ratified the appointment of Deloitte as the Company’s independent registered public accounting firm for 2019. As a matter of good corporate governance, we are seeking stockholder ratification of the appointment of Deloitte. If the stockholders do not ratify the appointment of Deloitte, the Audit Committee may review its future selection of auditors. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interests of the Company and its stockholders.

One or more representatives of Deloitte are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to answer appropriate questions. Please refer to page 24 for the fees paid to Deloitte in 2018 and 2017.

Unless marked to the contrary, proxies received will be voted “FOR” ratification of the appointment of Deloitte as the independent registered public accounting firm for 2019.

OUR BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT OF DELOITTE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2019.

ITEM THREE — ANNUAL ADVISORY VOTE ON EXECUTIVE COMPENSATION

Executive Summary

Our Board believes that we have created a compensation program that is tied to performance, aligns with stockholder interests and merits stockholder approval. Accordingly, we are seeking approval of the compensation paid to our NEOs (“say-on-pay”) for 2018 as disclosed in this proxy statement, the CD&A, the compensation tables and the narrative discussion following the compensation tables. Our executive compensation program has consistently received high stockholder approval. At the 2018 annual meeting, approximately 95% of our stockholders present in person or represented by proxy and entitled to vote at the annual meeting, approved our executive compensation program and the compensation paid to our NEOs for 2017.

 

How did we perform?		✓Fourth consecutive year of all-time highs, including records in all revenue categories ✓Total worldwide revenues exceeding $3 billion for the first time ✓Domestic box office over-indexing North American box office by 80 basis points ✓Increasing domestic food and beverage revenue by more than $100 million, the highest one-year growth in our history and achieving 12 consecutive years of domestic per cap growth ✓Outperforming industry for nine out of the past ten years
How do we determine pay?		✓Design pay programs to reward for Company performance and business unit results ✓Set pay levels commensurate with performance and the need to attract and retain talent ✓Focus on key drivers of sustainable performance ✓View value creation over multiple overlapping timeframes ✓Consider total compensation as one package rather than viewing each component independently ✓Balance stockholder expectations by motivating executives to drive the right behaviors and discouraging undue risk-taking

 

27

What did we change from 2017?		✓  Increased base salaries between 1.7% and 5.3% for all NEOs except Mr. Gamble for whom the increase was 14.3% to reflect his appointment as COO and to align with market ✓  Introduced individual performance payout multiplier to provide “clear line of sight” between individual and Company performance ✓  Raised performance hurdle for cash bonus maximum payout for non-CEO NEOs to 110% from 108%; Mr. Zoradi’s maximum payout target has been 110% since 2017 ✓  Raised target cash bonus opportunity for Messrs. Gamble and Cavalier to 90% of their respective base salary given their evolving roles within the Company and to better align with industry peers ✓  Shifted split of performance-based and time-based equity awards for non-CEO NEOs to 60%/40% in favor of performance-based from 50%/50%; Mr. Zoradi’s mix had been 75%/25% since 2017 ✓  Increased target value of long-term equity incentive compensation for Messrs. Zoradi, Gamble and Cavalier to 250%, 175% and 150% of their base salary respectively, to increase emphasis on long-term value creation
How did we pay our NEOs?		✓  Payouts aligned with 2018 performance ✓  Base salaries align with each NEOs role, responsibility and experience and market median ✓  Due to higher hurdle for maximum payout, cash bonus payout for NEOs was at 106.3% of individual target opportunity ✓  Equity to vest over the long-term - time-based awards vesting 50% on second anniversary and 50% on fourth anniversary of grant date; performance-based awards earned based on IRR over two-year performance period and vesting after additional two years of employment ✓  No excessive perks for any of our NEOs
How do we address risk and governance?		✓  Provide appropriate balance of short-term and long-term compensation ✓  Follow practices that promote good governance with maximum payout caps for incentive compensation ✓  Policies on anti-pledging, anti-hedging, stock ownership guidelines and insider trading ✓  Annual say-on-pay stockholder vote
Why stockholders should approve the say-on-pay proposal		✓  2018 Company financial performance continues to drive value for stockholders ✓  2018 payouts align with performance ✓  Performance bars raised for NEOs compared to non-NEOs under the cash bonus and long-term equity incentive award programs ✓  Robust corporate governance following industry best practices

Our NEOs covered by the executive compensation program for 2018 were the following executives:

 

Name		Age		Position
Lee Roy Mitchell		82		Executive Chairman of the Board
Mark Zoradi		65		Chief Executive Officer; Director
Sean Gamble		44		Chief Operating Officer; Chief Financial Officer
Michael Cavalier		52		Executive Vice President-General Counsel and Secretary
Valmir Fernandes		58		President-Cinemark International

Lee Roy Mitchell is the founder of the Company. He has served as our Chairman of the Board since March 1996 and as a director since our inception in 1987. Mr. Mitchell has been engaged in the motion picture exhibition business for over 50 years. Mr. Mitchell is the husband of Tandy Mitchell, an employee of the Company, and the brother-in-law of Walter Hebert III, the Executive Vice President–Purchasing, of the Company. Mr. Mitchell currently serves on the board of directors of NCMI.

Mark Zoradi has served as our director since June 2015 and our CEO since August 2015. Mr. Zoradi spent 30 years at The Walt Disney Company, including serving as the President of Walt Disney Studios Motion Picture Group. Prior to that, Mr. Zoradi served in a variety of positions of increasing responsibility with The Walt Disney Company, including as the General Manager of Buena Vista Television and President of Buena Vista International with responsibility for the international theatrical and home entertainment marketing and distribution of Disney, Touchstone and Pixar films. Mr. Zoradi also served as the President and COO of Dick Cook Studios from January 2011 until July 2014 and the COO of Dreamworks Animation SKG, Inc. from August 2014 until January 2015.

 

28

Sean Gamble has served as our COO and CFO since January 2018 and as our Executive Vice President and CFO since August 2014. Prior to joining Cinemark, from February 2009 until April 2014, Mr. Gamble worked for the Comcast Corporation as Executive Vice President and CFO of Universal pictures within NBCUniversal, one of the world’s leading media and entertainment companies. He joined Comcast after 15 years at the General Electric Company where he held multiple senior leadership positions, including CFO of GE Oil & Gas Equipment business based in Florence, Italy from May 2007 until January 2009.

Michael Cavalier has served as our Executive Vice President-General Counsel and Secretary since February 2014 and as our Senior Vice President-General Counsel and Secretary since January 2006. He has been with Cinemark for 25 years.

Valmir Fernandes has served as our President of Cinemark International, L.L.C. since March 2007 and has been with Cinemark for more than 20 years.

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Philosophy

Our executive compensation program is structured to attract, motivate, reward and retain high caliber talent who will lead the Company to increase our competitive advantage and deliver sustainable profitability. This includes building a solid foundation for long-term growth while consistently achieving near-term results. While formulating an effective pay strategy, the Compensation Committee takes a holistic view of pay and performance and ensures that there is appropriate alignment with Company performance, overall business strategy and culture. The three principal tenets of our executive compensation program are: Retention, Performance and Balance.

We have built our compensation program using traditional compensation elements of base salary, cash bonus and long-term equity awards. The chart below identifies the hallmarks of our executive compensation program:

 

Characteristics		Description
Competitive Base Salary		Base salary is aligned with industry median to retain valued employees
Balanced Mix of Pay Components		The target compensation mix is not overly weighted towards short-term cash bonus but is balanced with long-term equity-based compensation vesting over four years
Balanced Approach to Performance-based Awards		Performance targets are tied to multiple financial metrics of the Company as well as individual performance
Overlap of Performance Periods and Vesting Schedules		The performance periods for long-term equity incentive awards overlap and, therefore, reduce the motivation to maximize performance in any one period
Stock Ownership Guidelines		CEO required to own, directly or indirectly, Company equity five times base salary; other NEOs to own two times the respective base salary
Hedging in or Pledging Common Stock Prohibited; No Margin Account		NEOs prohibited to trade in puts, calls or other derivative securities with respect to Company securities and short sales of Company securities. They may not also hold Company securities in a margin account, and may not, without prior approval, pledge Company securities as collateral for any other loan

2018 BUSINESS PERFORMANCE HIGHLIGHTS

The Company has delivered record results for the stockholders over the past few years. This has been possible due to disciplined execution of our strategic initiatives led by our executive leadership. We have tailored our executive compensation program such that our executives continue to be motivated to perform and deliver stellar performance without having to undertake undue risks that would impact long-term stockholder value. The discussion below tracks our financial performance over the past one- and five- years and also our performance as compared to our peers.

 

29

Company Performance Over the 1-Year Period

In 2018, the North American industry box office grew by 6.9% to reach an all-time high of $11.9 billion, bolstered by sizeable increase in year-over-year attendance. Cinemark’s domestic box office over-indexed the North American industry box office by 80 basis points, growing 7.7%, for the full-year 2018. This follows our industry outperformance of 90, 100 and 200 basis points respectively for the prior three years and nine out of the past ten years of industry outperformance. We also reported the fourth consecutive year of all-time highs, including records in all of our revenue categories, that collectively delivered total worldwide revenues of more than $3.2 billion, exceeding the $3 billion mark for the first time.

As compared to 2017, our performance in 2018 in these key financial metrics were as follows:

 

Worldwide (in millions)		2018 (in millions)		2017 (in millions)		% Change
Attendance		282.1		277.0		1.8%
Revenue
Admissions		$                          1,834.2		$                         1,795.0		2.2%
Concessions		$                          1,108.8		$                         1,038.8		6.7%
Total		$                          3,221.8		$                         2,991.6		7.7%
Net Income*		$                             213.8		$                            264.2		(19%)
Adjusted EBITDA**		$                             781.5		$                            723.8		8.0%

*Net income for 2018 included $19.2 million of non-cash tax expense associated with true-ups to 2017’s provisional tax reform calculations, as well as recently issued tax guidance that modified the treatment of foreign tax credit utilization and resulted in an increased valuation allowance for the Company. Additionally, net income for 2017 included a $45 million tax benefit driven by a reduction of net deferred income tax liabilities as a result of the 2017 tax reform legislation that went into effect during December 2017.

**Adjusted EBITDA is a non-GAAP financial measure. This non-GAAP financial measure should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. A reconciliation of Net Income to Adjusted EBITDA is provided in footnote 19 to the Company’s 2018 Form 10-K.

Company Performance Over the 5-Year Period

The following tabular and graphical presentations below demonstrate our growth in certain key performance metrics over the past five years.

 

Year		Revenue				Net Income Attributable to Cinemark Holdings, Inc.				Adjusted EBITDA
2014		$	2,627.0			$	192.6			$	615.7
2015		$	2,852.6			$	216.9			$	682.8
2016		$	2,918.8			$	255.1			$	706.1
2017		$	2,991.6			$	264.2			$	723.8
2018		$	3,221.8			$	213.8			$	781.5

Our Performance As Compared to Our Peers

We also compare our performance to our direct competitors that were publicly-held during the fiscal year (“Theatre Peers”) in terms of Total Stockholder Return (“TSR”). Our Theatre Peers for 2018 included the

 

30

two currently publicly-held companies in our industry, namely, AMC Entertainment Holdings, Inc. (AMC) and IMAX Corporation (IMAX). For purposes of evaluating our fiscal performance over five years as of FYE 2018, we believe that this peer group is an appropriate benchmark since we directly competed with these companies for business and investor capital. While we do also compete with Regal Cinemas (“Regal”), we do not have comparable TSR metrics for Regal given its acquisition by Cineworld, a privately-held company, as of December 2017.

As compared to our Theatre Peers, our TSR (with dividends reinvested) for the one-year and cumulative three-year and cumulative five-year periods as of FYE 2018 has been as follows:

 

			1 Yr. TSR				3 Yr. TSR				5 Yr. TSR
Cinemark			6.5%				17.6%				24.0%
AMC			(4.4%)				(33.2%)				(15.2%)
IMAX			(18.7%)				(47.1%)				(36.2%)
S&P 500			(4.4%)				30.4%				50.3%
Theatre Peers			(13.1%)				(41.5%)				(27.6%)

Our cumulative total return between FYE 2013 and FYE 2018 as compared to our Theatre Peers and S&P 500 is presented below:

 

 

31

DESIGN OF OUR EXECUTIVE COMPENSATION PROGRAM

The design of our executive compensation program is consistent with the compensation structure used in our industry:

 

•

base salary;

•

performance-based cash bonus;

•

long-term equity incentive awards;

•

standard benefits; and

•

limited perks

Base salary and benefits are the only fixed components of our compensation program. Cash bonus and long-term equity incentive awards are the variable/performance-based components of our compensation. We believe the allocation between fixed and variable/performance-based components offers a competitive compensation program while appropriately mitigating risk.

The following chart summarizes the components and associated objectives of our executive compensation program:

 

Pay Element						Objective		Performance Metric and Payment
Fixed		Annual		Base Salary		Retain executive talent and recognize individual’s role and responsibilities		Individual performance and market competitiveness
Variable		Annual		Cash Bonus		Achieve annual goals measured in terms of Company and individual performance		Adjusted EBITDA @Threshold, Target, Maximum   Pro rata payment
		Long-Term		Restricted Stock		Retain executive talent and align with long-term interest of stockholders		Increase in value of Common Stock   Time-based; 4 year vesting
				Restricted Stock Units		Validate Company’s investment decisions and ensure alignment with long-term value creation		Based on achievement of IRR hurdles   Pro rata payment based on 2 year Company performance + 2 year service

ANALYSIS OF THE DESIGN OF OUR EXECUTIVE COMPENSATION PROGRAM

Tenet 1 - Retention

Base Salary

Base salary component of our compensation program is designed to attract and retain key talent. Base salaries are determined by the Compensation Committee based on a variety of factors including:

 

•

Nature and responsibility of the position;

•

Expertise of the executive and competition in the market for the executive’s services;

•

Potential for driving the Company’s success in the future;

•

Peer Group compensation data;

•

Performance reviews and recommendations of the CEO (except in the case of his own compensation); and

•

Other judgmental factors deemed relevant by the Compensation Committee

 

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The Compensation Committee has not adopted any formula with specific weightings assigned to any of the factors above. The Company has employment agreements with each NEO according to which the Compensation Committee annually reviews the base salaries, which can be increased but not decreased.

In February 2018, as part of the annual compensation review process, the Compensation Committee considered factors relevant to determining an executive’s compensation such as the NEO’s role in Company management, performance in prior years, leadership in implementing Company’s strategic goals and initiatives and contribution to the Company’s overall business. In addition, our compensation consultant, Pearl Meyer, provided to the Compensation Committee the appropriate market data for comparison. Based on such review, the Compensation Committee adjusted the base salaries of the NEOs for 2018 to better align with market and to address the evolving role of certain executives in Company management. Mr. Gamble’s base salary had a higher adjustment than the other NEOs to reflect his additional responsibilities upon appointment as our COO in January 2018. The base salaries for 2018 and the changes from 2017 were as follows:

 

Name		Base Salary				Change from 2017
Lee Roy Mitchell		$	975,000			Up by 1.7%
Mark Zoradi		$	1,000,000			Up by 5.3%
Sean Gamble		$	600,000			Up by 14.3%
Michael Cavalier		$	525,000			Up by 5.0%
Valmir Fernandes		$	525,000			Up by 3.3%

Tenet 2: Performance

Cash Bonus

We provide participants to our cash bonus program an opportunity to earn a cash bonus tied to annual Company performance, measured against pre-established performance metrics set for the year by the Compensation Committee. This opportunity is intended to compensate participants for achieving short-term financial and operational goals of the Company with individual targets based on the participant’s position and potential contribution to the achievement of the Company’s goals. As discussed later, beginning 2018, payout is also subject to an upward or downward adjustment based on the individual’s ABO rating which ties individual contribution to Company performance. The cash bonus related goals are established in writing by the Compensation Committee, with the expectation that attainment of these goals would require significant effort in light of the business environment.

How does the cash bonus program work?

Per the terms of our 2017 Omnibus Incentive Plan, the Compensation Committee sets the Company’s target performance metric for the year and the target cash bonus for the year within the first 90 days of the fiscal year.

A participant’s target cash bonus is a percentage of his/her base salary. In setting the target cash bonus percentages of each NEO, the Compensation Committee takes into consideration market data and such other factors as deemed relevant, such as the individual’s potential contribution to the Company’s performance, the individual’s prior performance, overall market conditions, market variables in a specific sector, and recommendations from the CEO (except for himself).

Each participant is entitled to receive a ratable portion of the participant’s target cash bonus based upon the Company’s level of achievement, within the range of threshold and maximum percentages, of the target performance metric set by the Compensation Committee. The actual amount of cash bonuses paid, if any, may result in a cash bonus that is greater or less than the stated individual target (and could be zero) depending on whether, and to what extent, the applicable performance metric and other conditions are satisfied.

 

 

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How does the Compensation Committee set the Company’s pre-established performance metric?

The Compensation Committee sets the cash bonus target based upon the Company’s budgeted Adjusted EBITDA which is regarded as a key performance indicator of a company in our industry and is highly correlated to long-term stockholder value. The cash bonus achievement is determined using the Company’s reported Adjusted EBITDA with certain add-backs and adjustments for cash bonus accruals, certain severance payments, if any, unusual expenses such as those related to accounting changes and a +/- 5% collar for foreign exchange fluctuation (the “Bonus Adjusted EBITDA”) compared to the budgeted Adjusted EBITDA. At the end of the fiscal year, the budgeted Adjusted EBITDA may be adjusted, upward or downward, to eliminate any variance between the actual North American industry box office for the fiscal year and the industry forecast used to set the cash bonus target in the first quarter.

The cash bonus payout structure and the Bonus Adjusted EBITDA hurdles, as adjusted, for 2018 were as follows:

 

 

How do we measure performance and determine cash bonus payouts for the year?

Prior to making any payouts, the Compensation Committee assesses and certifies the Company’s performance for the bonus year in the first quarter of the payout year which follows the bonus year. In its assessment, in addition to the adjustments discussed above, the Compensation Committee may make further adjustments as permitted by the bonus program under the Company’s 2017 Omnibus Incentive Plan. Such adjustments include, but are not limited to, factors such as extraordinary, unusual or non-recurring events that were not included in the operating budget for the year being considered (such as the disposition of a theatre or theatres or the cessation of operation of a theatre as a result of a natural disaster). The Compensation Committee may, in its discretion, at any time, establish (and, once established, rescind, waive or amend) additional conditions and terms of payment of the cash bonus (including, but not limited to, the achievement of other financial, strategic or individual goals, which may be objective or subjective) as it may deem desirable in carrying out the purposes of the cash bonus program. The Compensation Committee may also take into account such other factors as it deems appropriate in administering any aspect of the cash bonus program, including reducing the amount of the cash bonus at any time prior to payout based on such criteria as it shall determine, including, but not limited to, individual merit and the attainment of specified levels of one or any combination of the performance factors. However, the Compensation Committee cannot waive, accelerate or amend the performance goals for a NEO except in the event of the death or disability of the executive or a sale of the Company.

Beginning 2018, the Compensation Committee added the ABO modifier to an individual payout. See discussion below on 2018 changes to the cash bonus program for the details.

 

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How was cash bonus calibrated in 2018 and why?

In 2018, the Compensation Committee calibrated the cash bonus program to enhance alignment of payout with performance. The adjustments were as follows:

 

a.

Increased the Budgeted Adjusted EBITDA target for maximum payout for all non-CEO NEOs to 110% from 108%. Mr. Zoradi’s payout has been at 110% of target since 2017. By raising the bar for performance, the Compensation Committee ensured continued focus by the top executives on driving industry-leading results.

 

b.

Tied a portion of the cash bonus payout to the ABO ratings of the individual for the year. The ABO modifier rates the individual’s performance against the Company’s strategic objectives and goals for the year. The ABO modifier is applicable to all bonus-eligible employees, including the NEOs. Based on the ABO modifier, the individual’s cash bonus payout is adjusted up to a maximum of (+/-)15 percentage points. However, maximum bonus payout (Adjusted EBITDA-based + ABO modifier) cannot exceed 165% of the individual’s target bonus opportunity. The ABO modifier provides for higher compensation for those who have contributed more to the business during the year and thus aligns individual and Company performance.

 

c.

Raised the target bonus percentages for Messrs. Gamble and Cavalier to 90% from 85% of their respective base salary given their evolving roles in the Company and to better align with industry peers.

What was the cash bonus payout for the NEOs for 2018?

In February 2019, the Compensation Committee certified the worldwide Bonus Adjusted EBITDA for 2018 at $754.2 million which is 101.3% of the target Bonus Adjusted EBITDA of $744.8 million. This yielded a payout for Messrs. Mitchell, Zoradi, Gamble and Cavalier at 106.3% of their individual target opportunity and for Mr. Fernandes at 80% of his target opportunity. Similar to prior years, Mr. Fernandes’s cash bonus was split 50%/50% between worldwide and Latin America Adjusted EBITDA. Latin America performance resulted in a payout just above the threshold at 50%. The individual cash bonus payouts for 2018 were calculated for each of the NEOs as follows:

What was the cash bonus payout for the NEOs for 2018?

 

Name		2018 Base Salary				Individual Target (Percentage of Base Salary)				Payout Percentage of Individual Target				ABO Modifier				Cash Bonus     Payout
Lee Roy Mitchell		$	975,000				100	%			106.3	%			-			$	1,036,425
Mark Zoradi		$	1,000,000				100	%			106.3	%			-			$	1,063,000
Sean Gamble		$	600,000				90	%			106.3	%			7.5	%		$	617,072
Michael Cavalier		$	525,000				90	%			106.3	%			7.5	%		$	539,938
Valmir Fernandes		$	525,000				85	%			80	%			-			$	357,000

 

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Long-term Equity Incentive Compensation

The Compensation Committee annually awards time-based and performance-based equity incentive compensation to certain eligible employees, including the NEOs. The combination of the two, with an emphasis placed on performance-based equity, ensures both balance and alignment within our long-term incentive program. Equity compensation encourages Company’s long-term growth and aligns the executive’s interests with the interests of our stockholders. Grants to all eligible employees, including the NEOs, are made within the first 90 days of the year.

How is the long-term incentive program structured?

The target value of long-term equity incentive awards is based on a percentage of the executive’s base salary. The target value and the percentage split between time-based and performance-based awards is determined by the Compensation Committee by taking into consideration various factors such as individual’s leadership and role in Company operations, projected state of the economy over the performance period and overall business environment.

Restricted Stock. All participants to our equity incentive plan are eligible to receive restricted stock. Time-based restricted stock enables us to attract and retain highly qualified individuals while tying their pay with continued growth of the Company over the long-term. Restricted stock grants typically vest 50% on each of the second and fourth anniversaries of the grant date subject to continuous employment through the vest dates.

Recipients of restricted stock awards are permitted to:

 

(i)

receive dividends on the restricted stock to the extent dividends are paid by the Company on shares of its Common Stock, and

 

(ii)

to vote such Common Stock during the restriction period.

As of the Record Date, the Company’s dividend rate is $0.34 per common share per quarter.

Performance Awards. Performance awards are granted in the form of restricted stock units. The goals for the performance shares are based on one or more pre-established objective criteria. At the time of grant, the performance-based awards are hypothetical shares of Common Stock subject to issuance only upon attainment of the performance goals.

The performance goal is based on an implied equity value concept that measures the change in an IRR during a performance period of two years beginning on January 1 of the grant year and ending on December 31 of the following year. The performance goal is set within the first 90 days of the grant year.

The implied equity value is based on a valuation model utilizing a multiple of Adjusted EBITDA (subject to certain specified adjustments) and other factors that produce a fundamental valuation of Cinemark equity. IRR represents the growth in this implied equity value during the performance period. The structure of the performance award program is similar to that of cash bonus. Each performance target underlying the performance awards has a threshold, target and maximum level and vest on a pro rata basis according to the IRR achieved during the performance period, with the maximum level equal to 150% of the individual’s target. The target IRR goal for the performance-based award is set by the Compensation Committee based on projected value creation with a substantial degree of difficulty to attain the performance level. The IRR for the performance period is calculated applying a 7.5% cap for fluctuation in foreign currency translation adjustments.

 

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If, at the end of the performance period, the Compensation Committee certifies that the performance target has been met, the shares of Common Stock underlying the restricted stock units are subject to an additional time-based vesting restriction contingent upon the employee’s continued service until the vest date.

Any dividends that are attributable to the underlying Common Stock will be accrued and paid to the recipient, to the extent the performance award vests, at the end of the four years when the Common Stock is issued.

How was long-term equity incentive compensation calibrated in 2018 and why?

The Compensation Committee annually reviews each NEO’s compensation to determine the percentage of base salary to be awarded as long-term equity awards and the appropriate mix of time-based and performance-based awards. Upon such review, in 2018, the Compensation Committee made the following changes:

 

a.

Increased the long-term equity incentive compensation target value for Messrs. Zoradi, Gamble and Cavalier. The percentage of base salary for purposes of determining the target value of the long-term equity incentive awards for 2018 for each NEO was as follows:

 

NEO			Percentage of   Base Salary
Lee Roy Mitchell			N/A
Mark Zoradi			250%
Sean Gamble			175%
Michael Cavalier			150%
Valmir Fernandes			125%

 

b.

Shifted the split of performance-based and time-based equity awards, at target, for all non-CEO NEOs to 60% performance-based and 40% time-based from the 50%/50% split in prior years. Mr. Zoradi’s split has been 75% performance-based and 25% time-based since 2017.

The number of time-based and performance-based (at target) shares of Common Stock granted to each of the NEOs in 2018 were as follows:

 

Name		Time-based Restricted Stock				Performance-based Restricted Stock Units
Lee Roy Mitchell			N/A				N/A
Mark Zoradi			16,013				48,039
Sean Gamble			10,760				16,141
Michael Cavalier			8,070				12,106
Valmir Fernandes			6,725				10,088

 

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c.

The IRR goals for the 2018 performance-based awards remained unchanged from 2017 and are as follows with straight-line interpolation used to determine payout between threshold, target and maximum goals:

 

Performance Metric and Payout		Goals
		Threshold		Target		Maximum
IRR		7.0%		9.5%		13.0%
Percentage of Individual   Target Payout		50%		100%		150%

The performance period for the 2018 grants is from January 1, 2018 to December 31, 2019. Once the Compensation Committee certifies the IRR achieved for the performance period, the award recipient must satisfy an additional two-year service period until the anniversary of the grant date in February 2022.

In line with our compensation philosophy of rewarding performance, the Compensation Committee awarded a special grant of restricted stock to all employees, including the NEOs, who received performance-based awards in 2016. This was in recognition of the Company’s significant and sustained outperformance on key performance metrics relative to its peers since 2016. The Compensation Committee determined that the special grant appropriately rewarded the employees based upon the three tenets of the Company’s compensation philosophy. The time-based restricted shares granted under the special grant vest fully on the second anniversary of the grant date and were of the following amounts:

 

Name			Special Grant
Lee Roy Mitchell			N/A
Mark Zoradi			14,081
Sean Gamble			3,489
Michael Cavalier			3,346
Valmir Fernandes			3,574

Tenet 3: Balance

Compensation Mix

The presentations below show the mix of the variable and fixed components of compensation as a percentage of target total compensation. The ‘Total Equity Target’ category does not include the restricted stock awarded under the special grant since it was awarded in addition to the regular compensation. Mr. Zoradi is presented individually while Messrs. Gamble, Cavalier and Fernandes are presented as a group. Since Mr. Mitchell does not receive any equity grant on an annual basis due to his substantial ownership in the Company, he has not been included in the non-CEO NEO group. His compensation is 49% each of base salary and target cash bonus and 1% benefits.

 

		Variable				Fixed
CEO			76%				24%
Non-CEO NEO group			67%				33%

 

 

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THE PROCESS OF SETTING EXECUTIVE COMPENSATION

Role of the Compensation Committee and the Compensation Consultant: The Compensation Committee oversees and provides strategic direction to management regarding all aspects of our pay program for senior executives. It sets the compensation of the CEO and the non-CEO NEOs. If deemed appropriate, the Compensation Committee advises the Board of its determination of the compensation of the CEO and certain other executive officers, prior to its implementation. But, while the Compensation Committee may consider input provided by the Board, the compensation decisions and determinations are made solely by the Compensation Committee.

Each year the Compensation Committee engages in extensive executive compensation discussions with our independent compensation consultant to review best practices and receive a competitive assessment of executive compensation compared to peers. The Committee reviews total compensation and approves each of the elements of executive compensation, and reviews whether compensation programs and practices carry undue risk. During 2018, the Compensation Committee continued to engage Pearl Meyer as its independent compensation consultant. The Compensation Committee determined the independence of Pearl Meyer using the NYSE listing standards regarding independence of compensation consultants. Pearl Meyer evaluates the competitiveness of the design of the Company’s executive compensation program, including that for directors and recommends appropriate changes; reviews the competitiveness of the compensation of individual NEOs and certain other executive officers; evaluates market pay data and competitive-positioning; provides analyses and inputs on program structure, performance measures, and goals; provides updates on market trends and the regulatory environment as it relates to executive compensation; reviews various management proposals presented to the Compensation Committee related to executive compensation and provides objective analysis and recommendations; and works with the Compensation Committee to validate and strengthen the pay-for-performance relationship and alignment with stockholder interests. Pearl Meyer does not perform other services for Cinemark, and will not do so without the prior consent of the Compensation Committee. Pearl Meyer meets with the Compensation Committee, outside the presence of management, in executive sessions.

Role of Management and the CEO in Setting Executive Compensation: The Compensation Committee solicits the views of our CEO when making compensation decisions for his direct reports. The CEO may also

 

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provide input to the Compensation Committee regarding performance metrics and the setting of appropriate performance targets for executives who report directly to him. The CEO, however, does not make recommendations to the Compensation Committee about his own compensation and none of our executive officers are involved in the Compensation Committee’s determination of their own compensation.

Use of Peer Review in Setting Our Executive Compensation: The Compensation Committee believes the management team’s compensation should be aligned to similarly situated executives within a peer group of companies in order to attract, retain and motivate the highest caliber executive management team critical to our long-term success. While we do not rely solely on benchmark compensation to establish target pay levels, Pearl Meyer conducts a review, annually, of the compensation programs of peers selected based on size-appropriate comparators operating in entertainment and retail industries (the “peer group”) that are also traded publicly. We believe the resulting peer group provides the Compensation Committee with a valid comparison for the Company’s executive compensation program. A blended market data using the most recent proxy data and size-appropriate survey information provided by Pearl Meyer was used by the Compensation Committee to determine 2018 compensation for each of the NEOs.

Our Peer Group for 2018 was as follows:

 

AMC Entertainment Holdings, Inc.		Lions Gate Entertainment Corp.		Discovery, Inc.
AMC Networks Inc.		Live Nation Entertainment, Inc.		IMAX Corporation
Brinker International, Inc.		The Madison Square Garden Company		Six Flags Entertainment Corporation
Cineplex, Inc.		Regal Entertainment Group
Dave & Buster’s Entertainment, Inc.		E.W. Scripps Company

Compensation Risk Assessment

Our compensation program provides strategic direction to the participant and engages them in the Company’s success, which contributes to stockholder value. We believe our approach to goal setting, establishing targets with payouts at multiple levels of performance, evaluation of performance results and negative discretion in the payout of incentives help to mitigate excessive risk-taking that could harm Company value or reward poor judgment by our executives. Below are some additional highlights of the Company’s compensation program which mitigate risks associated with compensation:

 

•

Appropriate mix of “short- vs. long-term” pay and “fixed vs. variable” pay” to reward overall performance;

•

Measuring Company performance against objective financial metrics;

•

Capped payout levels for incentive compensation;

•

Stock ownership guidelines for directors, NEOs and executive vice-presidents – directors required to retain Common Stock ownership five times the value of their cash retainer, the CEO five times his/her base salary and other executive officers two time their respective base salary;

•

Linking vest of a significant portion of long-term equity incentive awards to performance over a significant period of time (with overlapping performance periods);

•

Validating pay-for-performance on an annual basis by stockholders; and

•

Prohibiting our NEOs and those employees covered by the Supplemental Insider Trading Policy to trade in short sales of Company securities, hold Company securities in a margin account and pledge or hedge Company securities.

Our Compensation Committee monitors and considers the risk mitigating factors when setting executive compensation. Based on such review, the Compensation Committee has concluded that the compensation program does not create risks that are reasonably likely to have a materially adverse effect on the Company or put the Company at-risk.

 

 

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Compensation Committee Report

The Compensation Committee has reviewed and discussed the CD&A as required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement and incorporated by reference in the Company’s 2018 Form 10-K, and the Board has approved the recommendation.

Respectfully submitted,

Nina Vaca (Chair)

Benjamin Chereskin

Carlos Sepulveda

Securities Authorized for Issuance Under Equity Compensation Plans

 

Plan Category			Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (1)				Weighted Average Exercise Price of Outstanding Options, Warrants and Rights				Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column)
Equity compensation plans approved by security holders			594,266				N/A				7,700,363
Equity compensation plans not approved by security holders			-				-				-
Total			594,266				N/A				7,700,363

 

(1)

Represents unearned shares underlying restricted stock units, assuming the achievement of maximum performance goals.

 

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SUMMARY COMPENSATION TABLE FOR 2018

The following table sets forth summary information concerning the total compensation earned by our NEOs for each of the last three completed fiscal years.

 

Name and Principal Position		Year		Salary ($)(1)				Stock Awards ($)(2)				Non-Equity Incentive Plan Compensation ($)(3)				All Other Compensation ($)(4)				Total ($)
Lee Roy Mitchell Chairman of the Board		2018			975,000				-				1,036,426				23,900				2,035,326
		2017			958,645				-				1,426,464				21,586				2,406,695
		2016			930,723				-				1,396,085				21,122				2,347,930
Mark Zoradi Chief Executive Officer		2018			1,000,000				3,049,518				1,063,000				132,738				5,245,256
		2017			950,000				2,114,475				1,320,500				104,845				4,489,820
		2016			816,000				2,031,947				1,224,000				88,691				4,160,638
Sean Gamble Chief Operating Officer & Chief Financial Officer		2018			600,000				1,186,109				617,072				61,796				2,464,977
		2017			525,000				779,015				664,020				47,280				2,015,315
		2016			482,040				602,526				542,295				40,219				1,667,080
Michael Cavalier Executive Vice President – General Counsel & Secretary		2018			525,000				918,064				539,938				123,311				2,106,313
		2017			500,000				667,666				632,400				96,969				1,897,035
		2016			462,264				577,805				589,387				99,544				1,729,000
Valmir Fernandes President – Cinemark International		2018			525,000				795,705				357,000				128,448				1,806,153
		2017			508,000				628,178				538,455				103,858				1,778,491
		2016			493,782				617,206				629,572				107,576				1,848,136

 

(1)	See Analysis of the Design of the Executive Compensation Program – Base Salary for a discussion of how the base salary is determined. See Compensation Mix for the percentage of target total compensation for 2018 paid as base salary.

 

(2)

The reported amounts reflect the aggregate grant date fair values of the long-term equity incentive awards, at target as the most probable outcome, computed in accordance with FASB ASC Topic 718. The amounts shown exclude the impact of estimated forfeitures. See Note 15 to the Company’s 2018 Form 10-K for a discussion of the assumptions used in determining the grant date fair values of these long-term equity incentive awards, including forfeiture assumptions and the period over which the Company will recognize compensation expense for such awards.

The long-term equity incentive awards granted were restricted stock and restricted stock units. The restricted stock includes the special grant discussed on page 38. Similar to previous years, Mr. Mitchell was not awarded any equity due to his substantial equity ownership in the Company.

The grant date fair values were calculated based upon the closing price of Common Stock on February 16, 2018 of $39.03, February 14, 2017 of $42.37 and February 19, 2016 of $29.36 per share.

As required by the rules of the SEC, the table below provides the grant date fair values of the restricted stock units at the maximum level of payment. However, as certified by the Compensation Committee, only 86% and 96% of the target opportunity of the restricted stock units awarded to each NEO in 2016 and 2017 respectively, shall vest.

 

Name		2018				2017				2016
Lee Roy Mitchell			N/A				N/A				N/A
Mark Zoradi		$	2,812,424			$	2,378,800			$	1,823,961
Sean Gamble		$	944,955			$	584,261			$	451,880
Mike Cavalier		$	708,746			$	500,750			$	433,354
Valmir Fernandes		$	590,602			$	471,133			$	462,890

The terms of the restricted stock and restricted stock units are discussed under Analysis of the Design of the Executive Compensation Program – Long-term Equity Incentive Compensation and the footnote disclosures to the Grants of Plan-Based Awards in 2018 table. See also Compensation Mix for the percentage of target total compensation for 2018 granted as long-term equity incentive awards.

 

(3)

The reported amounts are the cash bonuses earned for the respective fiscal years. The cash bonuses earned for a fiscal year are paid in the first quarter of the following year subject to the attainment of performance targets set by the Compensation Committee at the beginning of the covered fiscal year. The cash bonuses were paid on February 28, 2019, February 27, 2018 and February 24, 2017 respectively. See Analysis of the Design of the Executive Compensation Program – Cash Bonus for a discussion of how cash bonus is set. See also Compensation Mix for the percentage of the target total compensation paid as cash bonus.

 

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