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Item 5. Market for Registrant’s Common Equity

2021-03-09 compared with 2020-02-20 · 48 added, 46 removed, 80 unchanged (54% of the section changed)

2 unchanged sentences

Our common stock, $0.01 par value, is traded on The Nasdaq Global Market under the symbol “NCMI”.

There were 190 stockholders of record as of February 14, 2020 (does not include beneficial holders of shares held in “street name”).

There were 194 stockholders of record as of March 1, 2021 (does not include beneficial holders of shares held in “street name”).

Dividend Policy

We intend to distribute substantially all of our free cash flow (distributions from NCM LLC less income taxes and payments under the tax receivable agreement with the founding members) in the form of dividends to our stockholders.

The declaration, payment, timing and amount of any future dividends payable will be at the sole discretion of our Board of Directors who will take into account general economic and advertising market business conditions, our financial condition, our available cash, our current and anticipated cash needs, including opportunities to reinvest in the business and any other factors that the Board of Directors considers relevant.

The declaration, payment, timing and amount of any future dividends payable will be at the sole discretion of our Board of Directors who will take into account general economic and advertising market business conditions, our financial condition, our available cash, our current and anticipated cash needs, including opportunities to reinvest in our business and any other factors that the Board of Directors considers relevant which includes short-term and long-term impacts to the Company related to the COVID-19 pandemic and restrictions under the NCM LLC Credit Agreement.

The Company intends to pay a regular quarterly dividend for the foreseeable future at the discretion of the Board of Directors consistent with the Company’s intention to distribute substantially all its free cash flow to stockholders through its quarterly dividend.

Under Delaware law, dividends may be payable only out of surplus, which is our total assets minus total liabilities less the par value of our common stock, or, if we have no surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

For tax purposes, our dividends paid in 2018 and 2019 were treated as a return of capital to stockholders.

For tax purposes, our dividends paid in 2019 and 2020 were treated as non-dividend distributions to stockholders.

Unregistered Sales of Equity Securities and Use of Proceeds

NCM, Inc.’s Amended and Restated Certificate of Incorporation and the Third Amended and Restated Limited Liability Company Operating Agreement, as amended, of NCM LLC provide a redemption right to the NCM LLC members to exchange common membership units of NCM LLC for shares of NCM, Inc.’s common stock on a one-for-one basis, or at NCM, Inc.’s option, a cash payment equal to the market price of one share of NCM, Inc.’s common stock.

On October 10, 2019, NCM LLC received a Notice of Redemption from AMC, relating to the redemption and exchange of 197,118 units for 197,118 shares of NCM, Inc.

common stock.

In connection with delivering the Notice of Redemption, AMC surrendered common membership units to NCM LLC for cancellation and NCM, Inc.

contributed shares of its common stock to NCM LLC in exchange for an amount of newly issued common units equal to the number of units surrendered by AMC.

NCM LLC distributed the shares of NCM, Inc.’s common stock to AMC to complete the redemption on October 24, 2019.

The issuance of shares in this redemption was exempt from registration as the transaction by NCM, Inc.

did not involve a public offering.

There were no redemptions in 2020.

Issuer Purchases of Equity Securities

The table below provides information about shares delivered to the Company from restricted stock held by Company employees upon vesting for the purpose of funding the recipient’s tax withholding obligations.

Purchased (b)

Average Price

Paid Per Share

Paid Per Share (c)

Part of Publicly

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Purchased under

September 26, 2019 through October 24, 2019

October 25, 2019 through November 28, 2019

November 29, 2019 through December 26, 2019

September 25, 2020 through October 22, 2020 — $ — — N/A

October 23, 2020 through November 26, 2020 1,679 $ 2.04 — N/A

November 27, 2020 through December 31, 2020 — $ — — N/A

Selected Financial Data

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The selected financial and operating data should be read in conjunction with the other information contained in this document, including “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the audited historical Consolidated Financial Statements and the notes thereto included elsewhere in this document, and historical audited Consolidated Financial Statements, which have not been included in this document.

The results of operations data for the years ended December 26, 2019 , December 27, 2018 and December 28, 2017 and the balance sheet data as of December 26, 2019 and December 27, 2018 are derived from the audited Consolidated Financial Statements of NCM, Inc.

The results of operations data for the years ended December 31, 2020 and December 26, 2019 and the balance sheet data as of December 31, 2020 and December 26, 2019 are derived from the audited Consolidated Financial Statements of NCM, Inc.

included elsewhere in this document.

The results of operations data for the years ended December 29, 2016 and December 31, 2015 and the balance sheet data as of December 28, 2017 , December 29, 2016 and December 31, 2015 are derived from the audited Consolidated Financial Statements of NCM, Inc.

The results of operations data for the years ended December 27, 2018, December 28, 2017 and December 29, 2016 and the balance sheet data as of December 27, 2018, December 28, 2017 and December 29, 2016 are derived from the audited Consolidated Financial Statements of NCM, Inc.

that are not included in this document.

Results of Operations Data

($ in millions, except per share data)

Results of Operations Data Years Ended

($ in millions, except per share data) Dec.

Revenue $ 90.4 $ 444.8 $ 441.4 $ 426.1 $ 447.6

OPERATING EXPENSES:

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Selling and marketing costs 37.6 64.9 66.5 72.0 72.8

Merger termination fee and related merger costs

Administrative and other costs 30.9 43.8 48.3 37.9 43.8

Impairment of long-lived assets 1.7 — — — —

Depreciation expense 13.1 13.6 12.6 11.0 8.8

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Amortization of intangibles recorded for network theater screen leases 24.6 26.7 — — —

OPERATING INCOME

NON-OPERATING EXPENSES (INCOME)

Total 151.4 283.5 287.1 272.2 274.6

OPERATING (LOSS) INCOME (61.0) 161.3 154.3 153.9 173.0

NON-OPERATING (INCOME) EXPENSE (96.9) 62.2 50.6 (140.9) 64.1

INCOME BEFORE INCOME TAXES 35.9 99.1 103.7 294.8 108.9

Provision for income taxes

CONSOLIDATED NET INCOME

Net income attributable to noncontrolling

NET INCOME ATTRIBUTABLE TO NCM, Inc.

EARNINGS PER NCM, INC.

162.2 12.4 23.5 180.3 14.4

CONSOLIDATED NET (LOSS) INCOME (126.3) 86.7 80.2 114.5 94.5

Net (loss) income attributable to noncontrolling

interests (60.9) 50.6 50.4 56.2 61.6

NET (LOSS) INCOME ATTRIBUTABLE TO NCM, Inc.

$ (65.4) $ 36.1 $ 29.8 $ 58.3 $ 32.9

(LOSS) EARNINGS PER NCM, INC.

COMMON SHARE:

Balance Sheet Data (in millions)

Basic $ (0.84) $ 0.47 $ 0.39 $ 0.89 $ 0.55

Diluted $ (0.84) $ 0.46 $ 0.37 $ 0.48 $ 0.54

Balance Sheet Data (in millions) Dec.

Cash, cash equivalents and marketable securities (1)

$ 181.8 $ 80.9 $ 75.6 $ 59.5 $ 68.7

Receivables, net $ 16.2 $ 170.8 $ 149.9 $ 160.6 $ 160.5

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Payable to founding members under tax receivable

agreement $ 33.5 $ 198.0 $ 211.1 $ 232.2 $ 419.1

Equity/(deficit) $ (268.6) $ (121.2) $ (89.2) $ (74.8) $ (232.2)

Total liabilities and equity $ 886.2 $ 1,130.0 $ 1,141.8 $ 1,173.1 $ 1,215.5

Other Financial and Operating Data

(in millions, except cash dividend declared per common share and screen data)

Other Financial and Operating Data Years Ended

(in millions, except cash dividend declared per common share and screen data) Dec.

Adjusted OIBDA (2)

$ (19.4) $ 207.5 $ 205.4 $ 205.1 $ 230.7

Adjusted OIBDA margin (2)

(21.5) % 46.7 % 46.5 % 48.1 % 51.5 %

Capital expenditures $ 11.2 $ 15.3 $ 15.4 $ 12.3 $ 13.3

1 unchanged sentence

Founding member screens at period end (3) (6)

16,515 16,880 16,768 16,808 17,022

Total screens at period end (4) (6)

DCN screens at period end (7) (9)

20,450 21,208 21,172 20,850 20,548

Total attendance for period (5) (6)

138.2 651.4 705.1 655.8 688.8

Notes to the Selected Historical Financial and Operating Data

Following the adoption of ASC 842, as discussed within Note 1 to the audited Consolidated Financial Statements included elsewhere in this document, amortization of the ESA and affiliate intangible balances is considered a form of lease expense and has been reclassified to this account as of the adoption date, December 28, 2018.

The Company adopted ASC 842 prospectively and thus, prior period balances remain within amortization expense.

(1) Includes short-term and long-term marketable securities.

During the first quarter of 2016, the Company adopted Accounting Standards Update 2015-03, Interest – Imputation of Interest (Subtopic 835-30):

Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”) and Accounting Standards Update 2015-15, Interest – Imputation of Interest (“ASU 2015-15”), on a retrospective basis, which provide guidance for simplifying the presentation of debt issuance costs.

In connection with the adoption of ASU 2015-03 and ASU 2015-15, the Company reclassified net deferred financing costs related to NCM LLC’s term loans, secured and unsecured notes in the Consolidated Balance Sheet as a direct deduction from the carrying amount of those borrowings, while net deferred financing costs related to the revolving credit facility remained an asset in the Consolidated Balance Sheet.

The amounts presented above for total assets and total liabilities and equity reflect this reclassification as of December 26, 2019 , December 27, 2018 , December 28, 2017 and December 29, 2016 .

Amounts presented as of December 31, 2015 do not reflect the reclassification.

If adjusted, the reclassification for ASU 2015-03 and ASU 2015-15 would reduce both total assets and total liabilities and equity shown above by $12.7 million as of December 31, 2015 .

(2) Adjusted OIBDA and Adjusted OIBDA margin are not financial measures calculated in accordance with GAAP in the United States.

Adjusted OIBDA represents operating income before depreciation and amortization expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share based compensation costs, the merger termination fee and related merger costs, early lease termination expense and Chief Executive Officer transition costs.

Adjusted OIBDA represents operating income before depreciation and amortization expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation costs, early lease termination expense, Chief Executive Officer transition costs and impairments of long-lived assets.

Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue.

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The Company believes these are important supplemental measures of operating performance because they eliminate items that have less bearing on its operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measures.

The Company believes the presentation of these measures is relevant and useful for investors because it enables them to view performance in a manner similar to the method used by the Company’s management, helps improve their ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that may have different depreciation and amortization policies, amounts of amortization of intangibles recorded for network theater screen leases, non-cash share based compensation programs, levels of mergers and acquisitions, CEO turnover, early lease termination expense, interest rates, debt levels or income tax rates.

The Company believes the presentation of these measures is relevant and useful for investors because it enables them to view performance in a manner similar to the method used by the Company’s management, helps improve their ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that may have different depreciation and amortization policies, amounts of amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation programs, CEO turnover, early lease termination expense, impairments of long-lived assets, interest rates, debt levels or income tax rates.

A limitation of these measures, however, is that they exclude depreciation and amortization, which represent a proxy for the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company’s business.

In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s amortization of intangibles recorded for network theater screen leases, share-based payment costs, costs associated with the terminated merger with Screenvision, LLC (“Screenvision”), costs associated with the resignation of the Company’s former Chief Executive Officers, or early lease termination expense.

In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s amortization of intangibles recorded for network theater screen leases, share-based payment costs, costs associated with the resignation of the Company’s former Chief Executive Officers, early lease termination expense, or impairments of long-lived assets.

Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as indicators of operating performance, nor should they be considered in isolation of, or as substitutes for financial measures prepared in accordance with GAAP.

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(4) Represents the total screens within NCM LLC’s advertising network.

Represents the total number of screens that are connected to the DCN.

(5) Represents the total attendance within NCM LLC’s advertising network as provided by our founding members and affiliate partners.

(6) Excludes screens and attendance associated with certain AMC Rave, AMC Carmike Cinemas, Inc.

(“Carmike”) and Cinemark Rave theaters for all periods presented.

(“Carmike”) and Cinemark Rave theaters for certain periods presented.

Refer to Note 5 to the audited Consolidated Financial Statements included elsewhere in this document.

The following table reconciles operating income to Adjusted OIBDA for the periods presented (dollars in millions):

Operating income

Operating (loss) income $ (61.0) $ 161.3 $ 154.3 $ 153.9 $ 173.0

Depreciation expense 13.1 13.6 12.6 11.0 8.8

Amortization expense (1)

— — 27.3 26.6 27.0

Amortization of intangibles recorded for network theater screen leases (1)

24.6 26.7 — — —

Share-based compensation costs (2)

Merger-related administrative costs (3)

2.2 5.5 7.8 11.2 18.3

CEO transition costs — 0.4 3.4 0.6 3.6

Early lease termination expense (3)

Impairment of long-lived assets (4)

Adjusted OIBDA $ (19.4) $ 207.5 $ 205.4 $ 205.1 $ 230.7

4 unchanged sentences

(2) Share-based payments costs are included in network operations, selling and marketing and administrative expense in the accompanying audited Consolidated Financial Statements.

Merger termination fee and related merger costs primarily include the merger termination payment and legal, accounting, advisory and other professional fees associated with the terminated merger with Screenvision.

(3) Early lease termination expense represents an expense recorded upon the early termination of the lease of our corporate headquarters because the early termination payment made by the Company was reimbursed by the landlord of the new building.

(4) The impairment of long-lived assets primarily relates to the write-off of certain internally developed software.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity