Annual report pursuant to Section 13 and 15(d)

COMMITMENTS AND CONTINGENCIES

v2.4.1.9
COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2014
COMMITMENTS AND CONTINGENCIES
19. COMMITMENTS AND CONTINGENCIES

Leases —   The Company conducts a significant part of its theatre operations in leased properties under noncancelable operating and capital leases with terms generally ranging from 10 to 25 years. In addition to the minimum annual lease payments, some of the leases provide for contingent rentals based on operating results of the theatre and most require the payment of taxes, insurance and other costs applicable to the property. The Company can renew, at its option, a substantial portion of the leases at defined or then market rental rates for various periods. Some leases also provide for escalating rent payments throughout the lease term. A liability for deferred lease expenses of $43,552 and $46,003 at December 31, 2013 and 2014, respectively, has been provided to account for lease expenses on a straight-line basis, where lease payments are not made on such a basis. Theatre rent expense was as follows:

 

     Year Ended December 31,  
     2012      2013      2014  

Fixed rent expense

   $ 205,770       $ 224,056       $ 237,891   

Contingent rent and other facility lease expenses

     75,845         83,795         79,205   
  

 

 

    

 

 

    

 

 

 

Total facility lease expense

   $ 281,615       $ 307,851       $ 317,096   
  

 

 

    

 

 

    

 

 

 

Future minimum lease payments under noncancelable operating and capital leases that have initial or remaining terms in excess of one year at December 31, 2014 are due as follows:

 

     Operating
Leases
     Capital
Leases
 

2015

   $ 256,206       $ 33,227   

2016

     248,369         33,185   

2017

     225,900         31,580   

2018

     195,930         31,923   

2019

     162,816         31,542   

Thereafter

     725,046         158,071   
  

 

 

    

 

 

 

Total

   $ 1,814,267         319,528   
  

 

 

    

Amounts representing interest payments

        (101,056
     

 

 

 

Present value of future minimum payments

        218,472   

Current portion of capital lease obligations

        (16,494
     

 

 

 

Capital lease obligations, less current portion

      $ 201,978   
     

 

 

 

Employment Agreements —   The Company has employment agreements with Lee Roy Mitchell, Timothy Warner, Robert Copple, Valmir Fernandes, Michael Cavalier, Steve Bunnell and Rob Carmony that are subject to automatic extensions for a one-year period, unless the employment agreements are terminated. The base salaries stipulated in the employment agreements are subject to review at least annually during the term of the agreements for increase (but not decrease) by the Company’s Compensation Committee. Management personnel subject to these employment agreements are eligible to receive annual cash incentive bonuses upon the Company meeting certain performance targets established by the Compensation Committee in the first quarter of the fiscal year.

Effective January 21, 2014, the Company amended its employment agreements with Tim Warner and Robert Copple. Under these agreements, Tim Warner continues as the Company’s Chief Executive Officer and Robert Copple assumed the role of President and Chief Operating Officer. On November 12, 2014, the Company amended its employment agreement with Lee Roy Mitchell.

On June 23, 2014 the Company’s board of directors announced that Mr. Sean Gamble will be the Company’s Executive Vice President – Chief Financial Officer. The Company and Mr. Gamble entered into an Employment Agreement effective as of August 25, 2014 (the “Agreement”). The term of the Agreement is three years provided, however, that at the end of each year of the term, the term shall be automatically extended for an additional one-year period. The base salary stipulated in the Agreement is subject to review during the term of the Agreement for increase (but not decrease) each year by the compensation committee of the Company’s board of directors. Mr. Gamble will be eligible to receive annual cash incentive bonuses upon the Company meeting certain performance targets established by the compensation committee and will be eligible to participate in, and receive grants of equity incentive awards under, the Company’s long-term incentive plan.

Retirement Savings Plan — The Company has a 401(k) retirement savings plan for the benefit of all employees and makes contributions as determined annually by the board of directors. Employer contribution payments of $2,483 and $2,718 were made in 2013 (for plan year 2012) and 2014 (for plan year 2013), respectively. A liability of approximately $3,176 has been recorded at December 31, 2014 for employer contribution payments to be made in 2015 (for plan year 2014).

Litigation and Litigation SettlementsJoseph Amey, et al. v. Cinemark USA, Inc., Case No. 3:13cv05669, In the United States District Court for the Northern District of California, San Francisco Division. The case presents putative class action claims for damages and attorney’s fees arising from employee wage and hour claims under California law for alleged meal period, rest break, reporting time pay, unpaid wages, pay upon termination, and wage statements violations. The claims are also asserted as a representative action under the California Private Attorney General Act (“PAGA”). The Company denies the claims, denies that class certification is appropriate and denies that a PAGA representative action is appropriate, and is vigorously defending against the claims. The case is in pretrial discovery, no class action has been certified, and no representative action has been quantified or recognized. The Company denies any violation of law and plans to vigorously defend against all claims. The Company is unable to predict the outcome of the litigation or the range of potential loss, if any; however, the Company believes that its potential liability with respect to such proceeding is not material in the aggregate to its financial position, results of operations and cash flows. Accordingly, the Company has not established a reserve for loss in connection with this proceeding.

From time to time, the Company is involved in other various legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters, landlord-tenant disputes, patent claims and contractual disputes, some of which are covered by insurance or by indemnification from vendors. The Company believes its potential liability with respect to these types of proceedings currently pending is not material, individually or in the aggregate, to the Company’s financial position, results of operations and cash flows.