We are subject to uncertainties relating to future expansion plans, including our
ability to identify suitable acquisition candidates or site locations, and to obtain financing for such activities on favorable terms or at all.
We have greatly expanded our operations over the last decade through targeted worldwide theatre development and acquisitions. We will continue to pursue a strategy of expansion that will involve the
development of new theatres and may involve acquisitions of existing theatres and theatre circuits both in the U.S. and internationally. There is significant competition for new site locations and for existing theatre and theatre circuit acquisition
opportunities. As a result of such competition, we may not be able to acquire attractive site locations, existing theatres or theatre circuits on terms we consider acceptable. The pace of our growth may also be impacted by delays in site development
caused by other parties. Acquisitions and expansion opportunities may divert a significant amount of managements time away from the operation of our business. Growth by acquisition also involves risks relating to difficulties in integrating
the operations and personnel of acquired companies and the potential loss of key employees of acquired companies. Our expansion strategy may not result in improvements to our business, financial condition, profitability, or cash flows. Further, our
expansion programs may require financing above our existing borrowing capacity and operating cash flows. We may not be able to obtain such financing or that such financing will be available to us on acceptable terms or at all.
If we do not comply with the ADA and the safe harbor framework included in the consent order we entered into with the Department of
Justice, or the DOJ, we could be subject to further litigation.
Our theatres must comply with Title III of the ADA and
analogous state and local laws. Compliance with the ADA requires among other things that public facilities reasonably accommodate individuals with disabilities and that new construction or alterations made to commercial
facilities conform to accessibility guidelines unless structurally impracticable for new construction or technically infeasible for alterations. On November 15, 2004, Cinemark and the Department of Justice, or DOJ, entered
into a consent order, which was filed with the U.S. District Court for the Northern District of Ohio, Eastern Division. Under the consent order, the DOJ approved a safe harbor framework for us to construct all of our future stadium-style movie
theatres. The DOJ has stipulated that all theatres built in compliance with the consent order will comply with the wheelchair seating requirements of the ADA. If we fail to comply with the ADA, remedies could include imposition of injunctive relief,
fines, awards for damages to private litigants and additional capital expenditures to remedy non-compliance. Imposition of significant fines, damage awards or capital expenditures to cure non-compliance could adversely affect our business and
We may be subject to increased labor and benefits costs.
We are subject to United States federal and state laws governing such matters as minimum wages, working conditions and overtime. As
federal and state minimum wage rates increase, we may need to increase not only the wages of our minimum wage employees, but also the wages paid to employees at wage rates that are above minimum wage. Labor shortages, increased employee turnover and
health care mandates could also increase our labor costs. This in turn could lead us to increase prices which could impact our sales. Conversely, if competitive pressures or other factors prevent us from offsetting increased labor costs by increases
in prices, our results of operations may be adversely impacted. We are also subject to certain union regulations in certain of our international markets. As union wage rates and other requirements change, our results of operations could be adversely
We are subject to impairment losses due to potential declines in the fair value of our assets.
We have a significant amount of long-lived assets. We evaluate long-lived assets for impairment at the theatre level,
therefore if a theatre is directly and individually impacted by increased competition, adverse changes in market demographics or adverse changes in the development or condition of the areas surrounding the theatre, we may record impairment charges
to reflect the decline in estimated fair value of that theatre.