CINEMARK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In thousands, except share and per share data
16. Related Party Transactions
The Company manages theatres for Laredo Theatres, Ltd. (Laredo). The Company is the sole general partner and
owns 75% of the limited partnership interests of Laredo. Lone Star Theatres, Inc. owns the remaining 25% of the limited partnership interests in Laredo and is 100% owned by Mr. David Roberts, Lee Roy Mitchells son-in-law. Lee Roy Mitchell
is the Companys Chairman of the Board and directly and indirectly owns approximately 9% of the Companys common stock. Under the agreement, management fees are paid by Laredo to the Company at a rate of 5% of annual theatre revenues up to
$50,000 and 3% of annual theatre revenues in excess of $50,000. The Company recorded $128 and $135 of management fee revenues during the three months ended March 31, 2016 and 2015, respectively. All such amounts are included in the
Companys condensed consolidated financial statements with the intercompany amounts eliminated in consolidation.
The Company has an
Aircraft Time Sharing Agreement with Copper Beech Capital, LLC to use, on occasion, a private aircraft owned by Copper Beech Capital, LLC. Copper Beech Capital, LLC is owned by Mr. Mitchell and his wife, Tandy Mitchell. The private aircraft is
used by Mr. Mitchell and other executives who accompany Mr. Mitchell to business meetings for the Company. The Company reimburses Copper Beech Capital, LLC for the actual costs of fuel usage and the expenses of the pilots, landing fees,
storage fees and similar expenses incurred during the trip. For the three months ended March 31, 2016 and 2015, the aggregate amounts paid to Copper Beech Capital, LLC for the use of the aircraft was $24 and $37, respectively.
The Company currently leases 15 theatres and one parking facility from Syufy Enterprises, LP (Syufy) or affiliates of Syufy.
Raymond Syufy is one of the Companys directors and is an officer of the general partner of Syufy. Of these 16 leases, 15 have fixed minimum annual rent. The one lease without minimum annual rent has rent based upon a specified percentage of
gross sales as defined in the lease. For the three months ended March 31, 2016 and 2015, the Company paid total rent of $6,857 and $5,566, respectively, to Syufy.
17. Commitments and Contingencies
Effective March 4, 2016, the Companys former President and Chief Operating Officer Robert Copple resigned with
good reason as defined within his employment agreement. The Company paid Mr. Copple the payments and benefits pursuant to the terms set forth in his employment agreement. The Companys post-termination obligations, such as providing
continued participation in the Companys welfare benefit plans and insurance programs, remain in effect for a limited period of time under the employment agreement.
Joseph 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 attorneys 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 Company denies any violation of law and plans to vigorously defend against all claims. The Court recently
determined that class certification is not appropriate and determined that a PAGA representative action is not appropriate. The plaintiff may appeal these rulings. The Company is unable to predict the outcome of the litigation or the range of
The Company received a Civil Investigative Demand (CID) from the Antitrust Division of the United
States Department of Justice. The CID relates to an investigation under Sections 1 and 2 of the Sherman Act. The Company also received CIDs from the Antitrust Section of the Office of the Attorney General of the State of Ohio and later from other
states regarding similar inquiries under state antitrust laws. The CIDs request the Company to answer interrogatories, and produce documents, or both, related to the investigation of matters including film clearances, potential coordination and/or
communication with other major theatre circuits and related joint ventures. The Company intends to fully cooperate with all federal and state government agencies. Although the Company does not believe that it has violated any federal or state
antitrust or competition laws, it cannot predict the ultimate scope, duration or outcome of these investigations.
From time to time, the
Company is involved in various other legal proceedings arising from the ordinary course of its business operations, such as personal injury claims, employment matters, landlord-tenant disputes, patent claims