What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-10 compared with 2020-11-02 · 209 added, 287 removed, 504 unchanged (50% of the section changed)

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(In millions, except share and per share data)

September 24, 2020 December 26, 2019

April 1, 2021 December 31, 2020

CURRENT ASSETS:

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Receivables, net of allowance of $ 1.9 and $ 2.3 , respectively

Amounts due from founding members, net — 6.6

Prepaid expenses and other current assets 3.6 3.5

Other current assets and prepaid expenses 14.2 3.1

Total current assets 212.7 199.9

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Deferred tax assets, net of valuation allowance of $ 217.6 and $ 212.0 , respectively

Other investments 0.9 1.0

Long-term marketable securities 1.2 1.2

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(In millions, except share and per share data)

Three Months Ended Nine Months Ended

September 24, 2020 September 26, 2019 September 24, 2020 September 26, 2019

Three Months Ended

April 1, 2021 March 26, 2020

REVENUE (including revenue from related parties of $ 0.4 and $ 4.3 , respectively)

$ 6.0 $ 110.5 $ 74.7 $ 297.6

OPERATING EXPENSES:

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Theater access fees and revenue share to founding members (including fees to related parties of $ 1.3 and $ 12.5 , respectively)

1.8 20.1 19.5 60.8

Selling and marketing costs 7.7 13.9

Administrative and other costs 10.2 9.8

Impairment of long-lived assets — — 1.7 —

Depreciation expense 3.3 3.2

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Interest income — ( 0.2 )

Loss (gain) on modification and retirement of debt, net — — 0.3 ( 0.3 )

Loss on modification and retirement of debt, net 0.4 —

(Gain) loss on re-measurement of the payable to founding members under the tax receivable agreement ( 1.5 ) 0.2

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Total 13.7 13.5

(LOSS) INCOME BEFORE INCOME TAXES ( 34.0 ) 27.1 ( 80.2 ) 47.2

Income tax (benefit) expense ( 3.1 ) 4.3 ( 7.7 ) 6.0

CONSOLIDATED NET (LOSS) INCOME ( 30.9 ) 22.8 ( 72.5 ) 41.2

Net (loss) income attributable to noncontrolling interests ( 18.2 ) 13.6 ( 42.3 ) 24.2

NET (LOSS) INCOME ATTRIBUTABLE TO NCM, INC.

LOSS BEFORE INCOME TAXES ( 42.0 ) ( 8.6 )

Income tax benefit — ( 0.4 )

CONSOLIDATED NET LOSS ( 42.0 ) ( 8.2 )

Net loss attributable to noncontrolling interests ( 22.6 ) ( 4.5 )

NET LOSS ATTRIBUTABLE TO NCM, INC.

$ ( 19.4 ) $ ( 3.7 )

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO NCM, INC.

COMPREHENSIVE LOSS ATTRIBUTABLE TO NCM, INC.

$ ( 19.4 ) $ ( 3.7 )

NET (LOSS) INCOME PER NCM, INC.

NET LOSS PER NCM, INC.

COMMON SHARE:

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(In millions) (UNAUDITED)

Nine Months Ended

September 24, 2020 September 26, 2019

Three Months Ended

April 1, 2021 March 26, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Consolidated net (loss) income $ ( 72.5 ) $ 41.2

Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities:

Deferred income tax (benefit) expense ( 7.7 ) 6.0

Consolidated net loss $ ( 42.0 ) $ ( 8.2 )

Adjustments to reconcile consolidated net loss to net cash (used in) provided by operating activities:

Deferred income tax benefit — ( 0.4 )

Depreciation expense 3.3 3.2

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Non-cash share-based compensation 2.7 0.2

Impairment of long-lived assets 1.7 —

Impairment on investment — 2.0

Amortization of debt issuance costs 0.7 0.6

Loss (gain) on modification and retirement of debt, net 0.3 ( 0.3 )

Loss on modification and retirement of debt, net 0.4 —

Non-cash (gain) loss on re-measurement of the payable to founding members under

the tax receivable agreement ( 1.5 ) 0.2

Other — ( 0.9 )

Payments to third parties for extension of intangible assets — ( 0.6 )

Proceeds from disposition of intangible assets by network affiliates — 0.5

Founding member integration and other encumbered theater payments (including

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payments to related parties of $ 0.6 and $ 0.0 , respectively)

( 12.8 ) ( 14.0 )

Other cash flows from operating activities 0.1 ( 1.3 )

Changes in operating assets and liabilities:

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Other, net ( 1.2 ) ( 0.8 )

Net cash provided by operating activities 85.9 113.6

Net cash (used in) provided by operating activities ( 25.0 ) 58.1

CASH FLOWS FROM INVESTING ACTIVITIES:

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Proceeds from sale and maturities of marketable securities — 11.3

Proceeds from notes receivable - founding members (including payments from

related parties of $ 0.0 and $ 1.4 , respectively)

Net cash provided by investing activities 15.5 10.0

Net cash (used in) provided by investing activities ( 2.0 ) 0.8

CASH FLOWS FROM FINANCING ACTIVITIES:

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Repayments of revolving credit facility — ( 82.0 )

Issuance of term loans 50.0 —

Repayment of term loan facility ( 0.7 ) ( 0.7 )

Repayment of Senior Notes due 2026 — ( 4.6 )

Payment of debt issuance costs ( 6.0 ) ( 0.1 )

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Repurchase of stock for restricted stock tax withholding ( 1.1 ) ( 0.9 )

Net cash provided by (used in) financing activities 60.4 ( 118.7 )

Net cash provided by financing activities 37.4 78.4

CHANGE IN CASH AND CASH EQUIVALENTS:

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(In millions)

Nine Months Ended

September 24, 2020 September 26, 2019

Three Months Ended

April 1, 2021 March 26, 2020

Supplemental disclosure of non-cash financing and investing activity:

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Accrued integration and other encumbered theater payments due from founding members $ — $ 1.2

(Decrease) increase in dividend equivalent accrual not requiring cash in the period $ ( 0.2 ) $ 0.8

Purchase of subsidiary equity with NCM, Inc.

equity $ 6.6 $ —

Increase (decrease) in dividend equivalent accrual not requiring cash in the period $ 0.5 $ ( 0.1 )

Supplemental disclosure of cash flow information:

Cash paid for interest $ 10.9 $ 10.4

Cash paid for income taxes, net of refunds $ 0.5 $ 0.3

Cash (refunds) payments for income taxes $ ( 0.1 ) $ 0.3

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

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Consolidated Shares Amount

Balance—June 27, 2019 $ ( 110.5 ) 77,349,628 $ 0.8 $ ( 211.9 ) $ ( 172.6 ) $ 273.2

Distributions to founding members ( 22.5 ) — — — — ( 22.5 )

Income tax and other impacts of NCM LLC ownership changes — — — 0.1 — ( 0.1 )

Comprehensive income, net of tax 22.8 — — — 9.2 13.6

Share-based compensation issued — 12,759 — — — —

Share-based compensation expensed/capitalized 1.4 — — 1.0 — 0.4

Cash dividends declared $ 0.17 per share

( 13.5 ) — — — ( 13.5 ) —

Balance—September 26, 2019 $ ( 122.3 ) 77,362,387 $ 0.8 $ ( 210.8 ) $ ( 176.9 ) $ 264.6

Balance—June 25, 2020 $ ( 175.0 ) 78,000,338 $ 0.8 $ ( 209.1 ) $ ( 207.4 ) $ 240.7

Comprehensive loss, net of tax ( 30.9 ) — — — ( 12.7 ) ( 18.2 )

Share-based compensation issued — 37,273 — — — —

Share-based compensation expensed/capitalized 1.0 — — 0.7 — 0.3

Cash dividends declared $ 0.07 per share

( 5.5 ) — — — ( 5.5 ) —

Balance—September 24, 2020 $ ( 210.4 ) 78,037,611 $ 0.8 $ ( 208.4 ) $ ( 225.6 ) $ 222.8

Paid in Capital (Deficit) Retained

(Distribution in Excess of Earnings) Noncontrolling Interest

Consolidated Shares Amount

Balance—December 27, 2019 $ ( 121.2 ) 77,568,986 $ 0.8 $ ( 209.2 ) $ ( 171.1 ) $ 258.3

Cumulative-effect adjustment for adoption of ASU 2016-13, net of tax 2.8 — — — 1.2 1.6

Distributions to founding members ( 4.4 ) — — — — ( 4.4 )

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( 14.7 ) — — — ( 14.7 ) —

Balance—September 26, 2019 $ ( 122.3 ) 77,362,387 $ 0.8 $ ( 210.8 ) $ ( 176.9 ) $ 264.6

Balance—March 26, 2020 $ ( 136.3 ) 77,973,648 $ 0.8 $ ( 209.1 ) $ ( 188.3 ) $ 260.3

Balance—December 31, 2020 $ ( 268.6 ) 78,040,818 $ 0.8 $ ( 207.5 ) $ ( 266.4 ) $ 204.5

Cumulative-effect adjustment for adoption of ASU 2016-13, net of tax 2.9 — — — 1.2 1.7

Distributions to founding members ( 4.4 ) — — — — ( 4.4 )

NCM LLC equity issued for purchase of intangible asset 14.1 — — 6.8 — 7.3

Income tax and other impacts of NCM LLC ownership changes ( 0.1 ) — — 0.7 — ( 0.8 )

Issuance of shares 6.6 1,390,567 — 6.6 — —

NCM LLC common membership unit redemption ( 6.6 ) — — ( 6.6 ) — —

Comprehensive loss, net of tax ( 42.0 ) — — — ( 19.4 ) ( 22.6 )

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( 4.5 ) — — — ( 4.5 ) —

Balance—September 24, 2020 $ ( 210.4 ) 78,037,611 $ 0.8 $ ( 208.4 ) $ ( 225.6 ) $ 222.8

Balance—April 1, 2021 $ ( 299.3 ) 80,017,551 $ 0.8 $ ( 198.9 ) $ ( 290.3 ) $ 189.1

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

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NCM LLC is currently owned by NCM, Inc., Regal Cinemas, Inc.

and Regal CineMedia Corporation, wholly owned subsidiaries of Cineworld Group plc and Regal Entertainment Group (“Regal”), Cinemark Media, Inc.

and Regal CineMedia Corporation, wholly owned subsidiaries of Cineworld Group plc and Regal Entertainment Group (“Regal”) and Cinemark Media, Inc.

and Cinemark USA, Inc., wholly owned subsidiaries of Cinemark Holdings, Inc.

(“Cinemark”) and American Multi-Cinema, Inc., a wholly owned subsidiary of AMC Entertainment, Inc.

(“Cinemark”).

The terms “NCM”, “the Company” or “we” shall, unless the context otherwise requires, be deemed to include the consolidated entity.

On March 23, 2021 American Multi-Cinema, Inc., a wholly owned subsidiary of AMC Entertainment, Inc.

(“AMC”) redeemed 1,390,567 membership units, which were issued to AMC in accordance with the terms of the common unit adjustment agreement with the founding members, in exchange for shares of NCM, Inc.

common stock, reducing AMC’s ownership to 0.0 % as of April 1, 2021.

AMC, Regal, Cinemark and their affiliates are referred to in this document as “founding members”.

The Company operates the largest cinema advertising network reaching movie audiences in the U.S., allowing NCM LLC to sell advertising under long-term exhibitor services agreements (“ESAs”) with the founding members and certain third-party theater circuits, referred to in this document as “network affiliates” under long-term network affiliate agreements.

Beginning in mid-March 2020, each of the Company’s founding members and all of its network affiliates announced that their theaters would be temporarily closed to address the COVID-19 Pandemic and almost all of the theaters within the Company’s network remained closed until late August 2020.

The Company operates the largest cinema advertising network reaching movie audiences in the U.S., allowing NCM LLC to sell advertising under long-term exhibitor service agreements (“ESAs”) with the founding members and certain third-party network affiliates, under long-term network affiliate agreements.

In March 2020, each of the Company’s founding members and all of its network affiliates announced that their theaters would be temporarily closed to address the COVID-19 Pandemic and almost all of the theaters within the Company’s network remained closed until late August 2020.

The Company generated no in-theater advertising revenue for the period that the theaters were closed.

On September 4, 2020, the Company resumed advertising within the theaters that were open in its network, however, in-theater advertising revenue continues to be adversely impacted as attendance remains restricted by government mandated patron capacity limitations and a continued lack of new major motion picture releases.

As of September 24, 2020, approximately two-thirds of the theaters within the Company’s network had reopened.

In October 2020, Regal announced the re-closure of its theaters in the United States and as October 30, 2020, approximately 53 % of theaters within our network are open.

These developments will be referred to as the “COVID-19 Pandemic.”

On September 4, 2020, the Company resumed advertising within the theaters that were open in its network, however, in-theater advertising revenue continues to be adversely impacted as attendance remains lower than historical levels due to government restrictions, including mandated patron capacity limitations and a continued lack of new major motion picture releases.

As of April 1, 2021, approximately 60.0% of the theaters within the Company’s network were open.

These developments are referred to as the “COVID-19 Pandemic.”

On September 17, 2019, NCM LLC entered into amendments to the ESAs with Cinemark and Regal (collectively, the “2019 ESA Amendments”).

The 2019 ESA Amendments extended the contract life of the ESAs with Cinemark and Regal by four years resulting in a weighted average remaining term of the ESAs with the founding members (based on attendance) of approximately 19.0 years as of September 24, 2020.

The network affiliate agreements expire at various dates between January 2021 and July 2031.

The weighted average remaining term (based on 2019 attendance) of the ESAs and the network affiliate agreements together is 16.5 years as of September 24, 2020.

As of September 24, 2020, NCM LLC had 162,568,939 common membership units outstanding, of which 78,037,611 ( 48.0 %) were owned by NCM, Inc., 42,290,694 ( 26.0 %) were owned by Regal, 40,850,068 ( 25.1 %) were owned by Cinemark and 1,390,566 ( 0.9 %) were owned by AMC.

The 2019 ESA Amendments extended the contract life of the ESAs with Cinemark and Regal by four years resulting in a weighted average remaining term of the ESAs with the founding members (based upon pre-COVID-19 attendance levels) of approximately 18.5 years as of April 1, 2021.

The network affiliate agreements expire at various dates between May 2021 and December 2037.

The weighted average remaining term of the ESAs and the network affiliate agreements together is 20.9 years as of April 1, 2021 (based upon pre-COVID-19 attendance levels).

As of April 1, 2021, NCM LLC had 166,205,895 common membership units outstanding, of which 80,017,551 ( 48.1 %) were owned by NCM, Inc., 43,026,794 ( 25.9 %) were owned by Regal and 43,161,550 ( 26.0 %) were owned by Cinemark.

The membership units held by the founding members are exchangeable into NCM, Inc.

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Historically, the Company’s business has been seasonal and for this and other reasons operating results for interim periods have not been indicative of the Company’s full year results or future performance.

Given the temporary closure of the theaters within the Company's network in 2020, management expects the Company's 2020 quarterly results to vary from historical trends.

Given the impact of the COVID-19 Pandemic during 2021, management expects the Company's 2021 quarterly results to vary from historical trends.

As a result of the various related party agreements discussed in Note 5— Related Party Transactions , the operating results as presented are not necessarily indicative of the results that might have occurred if all agreements were with non-related third parties.

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Actual results could differ from those estimates.

Going Concern

The accompanying unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Based on the Company’s current financial position and liquidity sources, including current cash balances, and forecasted future cash flows, management believes the Company can meet its obligations as they become due, including all interest and debt service payments within one year following the date that these financial statements are issued.

Refer to Note 6— Borrowings for information on the Company’s debt obligations, including a current waiver of certain financial covenants.

However, the Company does not expect to meet certain of its financial covenants within one year following the date that these financial statements are issued.

If any of these financial covenants are not met, a majority of the lenders of the Senior Secured Credit Facility are permitted under the agreement to accelerate the debt which could also result in a cross-default under NCM LLC’s senior notes.

Considering current liquidity sources, the Company would not be able to repay the Company’s total outstanding debt balance.

These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

In light of this, the Company is actively pursuing with its administrative agent and expects to obtain an amendment to its Senior Secured Credit Facility to extend a waiver of its financial covenants through at least one year following the date that these financial statements are issued.

Management expects the amendment to be approved during the next several months, however there can be no assurance that the Company will be successful in obtaining the amendment.

As long as an amendment has not been obtained, management’s plan cannot be considered probable and thus does not alleviate the substantial doubt about the Company’s ability to continue as a going concern.

The unaudited Condensed Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Significant Accounting Policies

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Following is additional information related to the Company’s accounting policies.

Revenue Recognition —The Company derives revenue principally from the advertising business, which includes on-screen and lobby network (LEN) advertising and lobby promotions and advertising on websites and mobile applications owned by NCM LLC and other companies.

Revenue Recognition —The Company derives revenue principally from the advertising business, which includes on-screen and lobby network (LEN) advertising and lobby promotions and advertising on websites, mobile applications and out-of-home locations owned by NCM LLC and other companies.

Revenue is recognized over time as the customer receives the benefits provided by NCM LLC’s advertising services and the Company has the right to payment for performance to date.

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Local and regional receivables are with smaller companies sometimes with less credit history and represent smaller receivable balances per customer and higher historical and expected credit loss patterns.

The Company has smaller contracts with thousands of local clients that are not individually significant.

The Company has smaller contracts with many local clients that are not individually significant.

The Company also considers current economic conditions and trends to determine whether adjustments to historical loss rates are necessary.

The Company increased the expected rate of default related to local and regional customers within the calculation of the allowance for doubtful accounts as of September 24, 2020, as compared to September 26, 2019, given the expected adverse impact of the COVID-19 Pandemic on certain businesses, in particular, categories of small businesses (i.e.

restaurants, travel, etc.) which the Company expects could lead to an increased rate of default.

The Company also reserves for specific receivable balances that it expects to write off based on known concerns regarding the financial health of the customer.

Receivables are written off when management determines amounts are uncollectible.

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of September 24, 2020 the Company had one agency through which the Company sources advertising revenue that accounted for 12.7 % of the Company's gross outstanding receivable balance.

As of December 26, 2019, there were no advertising agency groups or individual customers through which the Company sourced advertising revenue representing more than 10% of the Company’s outstanding gross receivable balance.

During the three and nine months ended September 24, 2020, the Company had one customer that accounted for 28.8 % and 10.6 %, respectively, of the Company's revenue.

During the three and nine months ended September 26, 2019, the Company had no customers that accounted for more than 10% of revenue.

The Company had one agency through which the Company sourced advertising revenue that accounted for 16.6 % and 10.1 % of the Company's gross outstanding receivable balance as of April 1, 2021 and December 31, 2020, respectively.

During the three months ended April 1, 2021, the Company had one customer that accounted for 14.0 % of the Company's revenue.

During the three months ended March 26, 2020, the Company had no customers that accounted for more than 10% of revenue.

Long-lived Assets —The Company assesses impairment of long-lived assets pursuant to ASC 360 – Property, Plant and Equipment .

This includes determining whether certain triggering events have occurred that could affect the value of an asset.

The Company recorded losses of $ 0.0 million, $ 0.0 million, $ 1.7 million and $ 0.0 million related primarily to the write-off of certain internally developed software during the three months ended September 24, 2020 and September 26, 2019 and the nine months ended September 24, 2020 and September 26, 2019, respectively.

Share-Based Compensation —The Company has issued stock options, restricted stock, and restricted stock units to certain employees and its independent directors.

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Dividends are accrued when declared on unvested restricted stock and restricted stock units that are expected to vest and are only paid with respect to shares that actually vest.

During the three months ended September 24, 2020 and September 26, 2019 and the nine months ended September 24, 2020 and September 26, 2019, 50,052 , 18,889 , 607,733 and 568,584 shares of restricted stock and restricted stock units vested, respectively.

On February 28, 2021 and March 2, 2021, the Company’s Board of Directors approved certain modifications to equity awards awarded under the Company’s 2016 Equity Incentive Plan to adjust performance metrics, vesting amount and future goals performance goals in light of the COVID-19 Pandemic resulting in incremental share-based compensation expense of $ 1.3 million for the three months ended April 1, 2021.

During the three months ended April 1, 2021 and March 26, 2020, 843,729 and 524,303 shares of restricted stock and restricted stock units vested, respectively.

Consolidation —NCM, Inc.

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and transfers to or from noncontrolling interests (in millions):

Three Months Ended Nine Months Ended

September 24, 2020 September 26, 2019 September 24, 2020 September 26, 2019

Net (loss) income attributable to NCM, Inc.

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended

April 1, 2021 March 26, 2020

Net loss attributable to NCM, Inc.

$ ( 19.4 ) $ ( 3.7 )

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Income tax and other impacts of subsidiary ownership changes 0.7 ( 4.0 )

Issuance of shares to founding members 6.6 —

Change from net loss income attributable to NCM, Inc.

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Recently Adopted Accounting Pronouncements

During the first quarter of 2020, the Company adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements (“ASU 2016-13”), which requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

Upon the adoption of ASU 2016-13 on December 27, 2019, the Company recorded a $ 3.2 million cumulative-effect adjustment to retained earnings related to the change in methodology surrounding the historical losses utilized in the calculation of the allowance for credit losses related to trade and unbilled accounts receivable reducing the allowance to $ 3.0 million as of the adoption date.

The Company also recorded a corresponding $ 0.4 million reduction to the corresponding deferred tax asset with the offset also recorded to retained earnings.

The other impacts upon adoption were immaterial to the unaudited Condensed Consolidated Financial Statements.

The Company has incorporated additional disclosures in Note 1— The Company, Note 2— Revenue from Contracts with Customers and Accounts Receivable and Note 9— Fair Value Measurements to its Condensed Consolidated Financial Statements to comply with ASU 2016-13.

The Company has also designed and implemented changes to certain processes and internal controls related to its adoption of ASU 2016-13.

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the first quarter of 2020, the Company adopted Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements.

The Company adoption of ASU 2018-13 did not have a material impact on the unaudited Condensed Consolidated Financial Statements or notes thereto.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update 2019-12, Income Taxes (Topic 740):

During the first quarter of 2021, the Company adopted Accounting Standards Update 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes the following exceptions for the Company to analyze in a given period:

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and the exception in interim periods income tax accounting for year-to-date losses that exceed anticipated losses.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted.

The Company does not expect the adoption of this guidance to have a material impact on the unaudited Condensed Consolidated Financial Statements or notes thereto.

The Company’s adoption of ASU 2019-12 did not have a material impact on the unaudited Condensed Consolidated Financial Statements or notes thereto.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update No.

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The Company also sells advertising through the LEN, a series of strategically placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies.

In addition, the Company sells online and mobile advertising through Cinema Accelerator and NCM's digital gaming products including Noovie ARcade, Name That Movie, Noovie Shuffle and Fantasy Movie League, which can be played on the mobile apps or at Noovie.com .

In addition, the Company sells online and mobile advertising through Noovie Audience Accelerator and NCM's digital gaming products including Noovie Trivia , Noovie ARcade, Name That Movie and Noovie Shuffle, which can be played on the mobile apps or at Noovie.com.

Further the Company sells advertising in a variety of complementary out of home venues, including restaurants, retail locations, convenience stores and office and residential buildings.

The Company also has a long-term agreement to exhibit the advertising of the founding members’ beverage suppliers.

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The make-good provision is recorded within accrued expenses in the unaudited Condensed Consolidated Balance Sheet.

As of September 24, 2020 and December 26, 2019, the Company had a make-good provision of $ 6.4 million and $ 8.7 million, respectively.

The Company does not have any contracts with customers with terms in excess of one year that are noncancellable as of September 24, 2020.

As of April 1, 2021 and December 31, 2020, the Company had a make-good provision of $ 4.5 million and $ 7.1 million, respectively.

The Company does not have any contracts with customers with terms in excess of one year that are noncancellable as of April 1, 2021.

Agreements with a duration less than one year are not included within this disclosure as the Company elected to use the practical expedient in ASC 606-10-50-14 for those contracts.

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Disaggregation of Revenue

The Company disaggregates revenue based upon the type of customer:

national and regional, local and beverage concessionaire.

This method of disaggregation is in alignment with how revenue is reviewed by management and discussed with and historically disclosed to investors.

NATIONAL CINEMEDIA, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes revenue from contracts with customers for the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and September 26, 2019 (in millions):

Three Months Ended Nine Months Ended

September 24, 2020 September 26, 2019 September 24, 2020 September 26, 2019

The Company disaggregates revenue based upon the type of customer:

national and regional, local and beverage concessionaire.

This method of disaggregation is in alignment with how revenue is reviewed by management and discussed with and historically disclosed to investors.

The following table summarizes revenue from contracts with customers for the three months ended April 1, 2021 and March 26, 2020 (in millions):

Three Months Ended

April 1, 2021 March 26, 2020

National and regional advertising revenue $ 3.7 $ 49.8

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Deferred Revenue and Unbilled Accounts Receivable

The changes in deferred revenue for the nine months ended September 24, 2020 were as follows (in millions):

Nine Months Ended

September 24, 2020

The changes in deferred revenue for the three months ended April 1, 2021 were as follows (in millions):

Three Months Ended

April 1, 2021

Balance at beginning of period $ ( 5.1 )

Performance obligations satisfied 6.1

New contract liabilities ( 1.2 )

Performance obligations satisfied 1.4

Balance at end of period $ ( 4.9 )

As of September 24, 2020 and December 26, 2019, the Company had $ 1.2 million and $ 8.0 million in unbilled accounts receivable, respectively.

As of April 1, 2021 and December 31, 2020, the Company had $ 2.1 million and $ 2.5 million in unbilled accounts receivable, respectively.

Allowance for Doubtful Accounts

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The Company has determined that two pools, national customers and local/ regional customers, is appropriate.

The changes within the allowance for doubtful accounts balances for the nine months ended September 24, 2020 were as follows (in millions):

Nine Months Ended

September 24, 2020

The changes within the allowance for doubtful accounts balances for the three months ended April 1, 2021 were as follows (in millions):

Three Months Ended

April 1, 2021

Allowance for National Customer Receivables Allowance for Local/ Regional Customer Receivables

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Balance at end of period $ 0.2 $ 1.7

(LOSS) EARNINGS PER SHARE

LOSS PER SHARE

Basic loss per share is computed on the basis of the weighted average number of common shares outstanding.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Nine Months Ended

September 24, 2020 September 26, 2019 September 24, 2020 September 26, 2019

Net (loss) income attributable to NCM, Inc.

Three Months Ended

April 1, 2021 March 26, 2020

Net loss attributable to NCM, Inc.

(in millions) $ ( 19.4 ) $ ( 3.7 )

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Diluted $ ( 0.25 ) $ ( 0.05 )

The effect of 84,531,328 , 81,705,487 , 83,678,699 and 81,410,838 weighted average exchangeable NCM LLC common units held by the founding members for the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and September 26, 2019, respectively, have been excluded from the calculation of diluted weighted average shares and loss per NCM, Inc.

The effect of 84,427,289 and 81,973,440 weighted average exchangeable NCM LLC common units held by the founding members for the three months ended April 1, 2021 and March 26, 2020, respectively, have been excluded from the calculation of diluted weighted average shares and loss per NCM, Inc.

share as they were anti-dilutive.

NCM LLC common units do not participate in dividends paid on NCM, Inc.’s common stock.

In addition, there were 4,484,702 , 2,553,449 , 4,484,702 and 2,593,231 stock options and non-vested (restricted) shares for the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and September 26, 2019, respectively, excluded from the calculation as they were anti-dilutive.

In addition, there were 5,523,285 and 3,821,388 , stock options and non-vested (restricted) shares for the three months ended April 1, 2021 and March 26, 2020, respectively, excluded from the calculation as they were anti-dilutive.

The Company’s non-vested (restricted) shares do not meet the definition of a participating security as the dividends will not be paid if the shares do not vest.

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The Company’s intangible assets have a finite useful life and the Company amortizes the assets over the remaining useful life corresponding with the ESAs or the term of the network affiliate agreement.

The Company determined that recent adverse changes in macroeconomic trends, reduced cash flows as a consequence of the temporary closure of the theaters within the Company's network in response to the outbreak of the COVID-19 Pandemic, a decline in the fair value of NCM LLC’s debt and the further sustained decline in the market price of NCM, Inc.'s common stock as of September 24, 2020 constituted a triggering event for its intangible assets under Accounting Standards Certification No.

During 2020, the Company determined that recent adverse changes in macroeconomic trends, reduced cash flows as a consequence of the temporary closure of the theaters within the Company's network in response to the outbreak of the COVID-19 Pandemic, a decline in the fair value of NCM LLC’s debt and the further sustained decline in the market price of NCM, Inc.'s common stock constituted a triggering event for its intangible assets under Accounting Standards Certification No.

360, Impairment and Disposal of Long-Lived Assets.

Management considered possible scenarios in a probability-weighted estimated future undiscounted cash flow analysis, including the potential of further delays in major motion picture releases, a recurrence of the temporary theater closures and other potential adverse impacts to NCM LLC's founding members' and affiliates' financial liquidity related to the COVID-19 Pandemic.

The estimated future cash flows from the affiliate agreements and ESAs calculated within the probability-weighted analyses were in excess of the net book value of these intangible assets and no impairment charges were recorded for the three and nine months ended September 24, 2020.

Such analysis required management to make estimates and assumptions based on historical data and consideration of future market conditions.

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Common Unit Adjustments —In accordance with NCM LLC’s Common Unit Adjustment Agreement with its founding members, on an annual basis NCM LLC determines the amount of common membership units to be issued to or returned by the founding members based on theater additions or dispositions during the previous year.

In the event a founding member does not have sufficient common membership units to return, the adjustment is satisfied in cash in an amount calculated pursuant to NCM LLC’s Common Unit Adjustment Agreement.

In addition, NCM LLC’s Common Unit Adjustment Agreement requires that a Common Unit Adjustment occur for a specific founding member if its acquisition or disposition of theaters, in a single transaction or cumulatively since the most recent Common Unit Adjustment, results in an attendance increase or decrease in excess of two percent of the annual total attendance at the prior adjustment date.

During the first quarter of 2021, NCM LLC issued 3,047,582 common membership units to two founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions, to NCM LLC’s network during the 2020 fiscal year and calculated a negative common membership unit adjustment for one founding member resulting in a

NATIONAL CINEMEDIA, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

LLC’s network during the 2019 fiscal year and NCM LLC recorded a net intangible asset of $ 10.5 million during the first quarter of 2020 as a result of the Common Unit Adjustment.

receivable included within “Other assets and prepaid expenses” on the unaudited Consolidated Balance Sheet.

The net impact as a result of the Common Unit Adjustment to the intangible asset was $ 4.8 million during the first quarter of 2021.

During the first quarter of 2020, NCM LLC issued 3,022,959 common membership units to its founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions by the founding members to NCM LLC’s network during the 2019 fiscal year and NCM LLC recorded a net intangible asset of $ 10.5 million during the first quarter of 2020 as a result of the Common Unit Adjustment.

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The integration payments will continue until the earlier of (i) the date the theaters are transferred to NCM LLC’s network or (ii) the expiration of the ESA.

In 2019, AMC and Cinemark also made integration payments to NCM LLC related to their respective acquisitions of theaters from Rave Cinemas.

The advertising agreements with an alternative provider for these theaters ended during 2019 and the theaters were transferred to our network.

Integration payments are no longer due related to these theaters.

Integration payments are calculated based upon the advertising cash flow that the Company would have generated if it had exclusive access to sell advertising in the theaters with pre-existing advertising agreements.

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These payments are also accounted for as a reduction to the intangible assets.

During the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and September 26, 2019, the Company recorded a reduction to net intangible assets of $ 0.0 million, $ 5.6 million, $ 1.4 million and $ 13.7 million, respectively, related to integration and other encumbered theater payments.

No integrations payments were earned for the three and nine months ended September 24, 2020 because the Company generated negative Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”) during these periods.

During the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and September 26, 2019, AMC and Cinemark paid a total of $ 0.0 million, $ 5.7 million, $ 9.7 million and $ 16.3 million respectively, in integration and other encumbered theater payments (as payments are made one quarter and one month in arrears, respectively).

The payments received during the three and nine months ended September 24, 2020 primarily relate to AMC's acquisition of theaters from Carmike.

The payments received during the three and nine months ended September 26, 2019 relate to AMC's acquisitions of theaters from Carmike and Rave Cinemas and from Cinemark related primarily to its acquisition of theaters from Rave Cinemas.

During the three months ended April 1, 2021 and March 26, 2020, the Company recorded a reduction to net intangible assets of $ 0.0 million and $ 1.4 million, respectively, related to integration and other encumbered theater payments.

No integrations payments were earned for the three months ended April 1, 2021 because the Company generated negative Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”) during this period.

During the three months ended April 1, 2021 and March 26, 2020, AMC and Cinemark paid a total of $ 0.0 million and $ 8.5 million, respectively, in integration and other encumbered theater payments (as payments are made one quarter and one month in arrears, respectively).

The payments received during the three months ended March 26, 2020 primarily relate to AMC's acquisition of theaters from Carmike.

If common membership units are issued to a founding member for newly acquired theaters that are subject to an existing on-screen advertising agreement with an alternative provider, the amortization of the intangible asset commences after the existing agreement expires and NCM LLC can utilize the theaters for all of its services.

NATIONAL CINEMEDIA, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RELATED PARTY TRANSACTIONS

Founding Member Transactions —In connection with NCM, Inc.’s initial public offering (“IPO”), the Company entered into several agreements to define and regulate the relationships among NCM, Inc., NCM LLC and the founding members which are outlined below.

As AMC owns less than 5% of NCM LLC as of September 24, 2020, AMC is no longer a related party.

As AMC owns less than 5% of NCM LLC as of April 1, 2021, AMC is no longer a related party.

AMC remains a party to the ESA, Common Unit Adjustment Agreement, Tax Receivable Agreement (“TRA”) and certain other original agreements and is a member under the terms of the NCM LLC Operating Agreement, subject to fulfilling the requirements of Section 3.1 of the NCM LLC Operating Agreement.

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AMC's ownership percentage does not impact future integration payments and other encumbered theater payments owed to NCM LLC by AMC.

As of April 1, 2021, AMC’s ownership was 0.0 %.

The material agreements with the founding members are as follows:

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In consideration for access to the founding members’ theaters, theater patrons, the network equipment required to display on-screen and LEN video advertising and the use of theaters for lobby promotions, the founding members receive a monthly theater access fee.

In conjunction with the 2019 ESA Amendments, NCM LLC agreed to pay Cinemark and Regal incremental monthly theater access fees and, subject to NCM LLC's use of specified inventory, a revenue share in consideration for NCM LLC's access to certain on-screen advertising inventory after the advertised showtime of a feature film beginning November 1, 2019 and the underlying term of the ESAs were extended until 2041.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

advertised showtime of a feature film beginning November 1, 2019 and the underlying term of the ESAs were extended until 2041.

The ESAs and 2019 ESA Amendments with Cinemark and Regal are considered leases with related parties under ASC 842.

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The following tables provide summaries of the transactions between the Company and the founding members (in millions):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Nine Months Ended

Three Months Ended

Included in the unaudited Condensed Consolidated Statements of Income:

September 24, 2020 September 26, 2019 September 24, 2020 September 26, 2019

April 1, 2021 March 26, 2020

Beverage concessionaire revenue (included in advertising revenue) (1)

$ 0.2 $ 5.7 $ 4.5 $ 17.5

Operating expenses:

Theater access fee and revenue share to founding members (2)

$ 1.0 $ 13.5 $ 13.6 $ 40.9

Selling and marketing costs (3)

$ — $ 0.1 $ 0.1 $ 0.3

Advertising operating costs (3)

________________________________________

Non-operating expenses:

Interest income from notes receivable (included in interest

$ — $ 0.1 $ — $ 0.2

________________________________________

(1) For the three and nine months ended September 24, 2020 and September 26, 2019, Cinemark and Regal purchased 60 seconds of on-screen advertising time from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 seconds equivalent CPM rate specified by the ESA.

No beverage revenue was generated for the period of time that the theaters within NCM LLC's network were temporarily closed as there were no attendees upon which beverage revenue is generated.

(1) For the three months ended April 1, 2021 and March 26, 2020, Cinemark and Regal purchased 60 seconds of on-screen advertising time from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 seconds equivalent CPM rate specified by the ESA.

No beverage revenue was generated for the period of time that the theaters within NCM LLC's network were temporarily closed as there were no attendees upon which beverage revenue is generated and limited for periods of reduced attendance due to the COVID-19 Pandemic.

(2) Comprised of payments per theater attendee, payments per digital screen with respect to the founding member theaters included in the Company’s network and payments for access to higher quality digital cinema equipment.

Following the 2019 ESA Amendments in September of 2019 this also includes payments to Cinemark and Regal for their share of the revenue from the sale of an additional single unit that is either 30 or 60 seconds of the Noovie pre-show in the trailer position directly prior to the “attached” trailers preceding the feature film (the “Platinum Spot”).

There was no theater access fee or revenue share expense for the period of time that the theaters within NCM LLC's network were temporarily closed.

Following the 2019 ESA Amendments this also includes payments to Cinemark and Regal for their share of the revenue from the sale of an additional single unit that is either 30 or 60 seconds of the Noovie pre-show in the trailer position directly prior to the “attached” trailers preceding the feature film (the “Platinum Spot”).

There was no theater access fee or revenue share expense for the period of time that the theaters within NCM LLC's network were temporarily closed and reduced fees for periods of reduced attendance due to the COVID-19 Pandemic.

(3) Includes purchase of movie tickets, concession products, rental of theater space primarily for marketing to NCM LLC’s advertising clients and other payments made to the founding members in the ordinary course of business.

(4) On December 26, 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability company (AC JV, LLC) owned 32 % by each of the founding members and 4 % by NCM LLC.

In consideration for the sale, NCM LLC received a total of $ 25.0 million in promissory notes from its founding members (one-third or approximately $ 8.3 million from each founding member).

The notes bear interest at a fixed rate of 5.0 % per annum, compounded annually.

Interest and principal payments were due annually in six equal installments commencing on the first anniversary of the closing and ended on December 26, 2019.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Included in the unaudited Condensed Consolidated Balance Sheets:

September 24, 2020 December 26, 2019

April 1, 2021 December 31, 2020

Common unit adjustments and ESA extension costs, net of amortization and integration payments (included in intangible assets) (1)

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This balance includes common unit adjustments issued to all of the founding members (including AMC) as the Company's intangible balance is considered one asset inclusive of all common unit adjustment activity.

(2) The Company paid Cinemark and Regal $ 3.2 million and $ 5.8 million, respectively, in payments pursuant to the TRA during 2020 which was for the 2019 tax year.

The Company paid Cinemark and Regal $ 3.7 million and $ 6.7 million, respectively, in payments pursuant to the TRA during 2019 which was for the 2018 tax year.

(2) The Company paid Cinemark and Regal $ 0.2 million and $ 0.4 million during 2021 and $ 3.2 million and $ 5.8 million during 2020, respectively, in payments pursuant to the TRA which were for the 2019 tax year.

(3) Includes other payments made to the founding members in the ordinary course of business.

Pursuant to the terms of the NCM LLC Operating Agreement in place since the completion of the Company’s IPO, NCM LLC is required to make mandatory distributions on a proportionate basis to its members of available cash, as defined in the NCM LLC Operating Agreement, on a quarterly basis in arrears.

Mandatory distributions of available cash for the three and nine months ended September 24, 2020 and September 26, 2019 were as follows (in millions):

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Nine Months Ended

September 24, 2020 September 26, 2019 September 24, 2020 September 26, 2019

Mandatory distributions of available cash for the three months ended April 1, 2021 and March 26, 2020 were as follows (in millions):

Three Months Ended

April 1, 2021 March 26, 2020

Cinemark $ — $ 2.1

Regal — 11.5 2.2 22.5

Total distributions to related parties — 4.3

— 21.3 4.1 41.7

Total $ — $ 8.4

Due to the temporary closure of the theaters within NCM LLC's network during a portion of the three months ended September 24, 2020, the mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc.

for the three months ended September 24, 2020 were calculated as negative $ 24.3 million (including negative $ 6.1 million for Cinemark, negative $ 6.4 million for Regal and negative $ 11.8 million for NCM, Inc.).

Therefore, there will be no payment made for the third quarter of 2020.

The mandatory distributions of available cash by NCM LLC for the three months ended June 25, 2020 and the three months ended September 24, 2020 were calculated as negative $ 54.1 million (including negative $13.7 million for Cinemark, negative $14.2 million for Regal and negative $26.2 million for NCM, Inc.).

Under the terms of the NCM LLC Operating Agreement, this negative amount will be netted against the available cash distributions for the second quarter of 2021, which would be paid in the third quarter of 2021, contingent upon the Company's compliance with the covenants outlined within the Credit Agreement Amendment defined within Note 6— Borrowings and the Company's generation of future positive available cash to which the above negative amounts above can be applied.

Amounts due to related party founding members, net as of September 24, 2020 were comprised of the following (in millions):

Due to the temporary closure of the theaters within NCM LLC's network during a portion of the three months ended April 1, 2021, the mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc.

for the three months ended April 1, 2021 were calculated as negative $ 30.9 million (including negative $ 8.0 million for Cinemark, negative $ 8.0 million for Regal and negative $ 14.9 million for NCM, Inc.).

Therefore, there will be no payment made for the first quarter of 2021.

Under the terms of the NCM LLC Operating Agreement, these negative amounts will be netted against future positive available cash distributions after the extended covenant waiver holiday, contingent upon the Company's compliance with the covenants outlined within the Credit Agreement Second Amendment defined within Note 6— Borrowings and in accordance with the NCM LLC Operating Agreement.

Amounts due to related party founding members, net, as of April 1, 2021 were comprised of the following (in millions):

Cinemark Regal Total

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Theater access fees and revenue share, net of beverage revenues and other encumbered theater payments $ 0.6 $ 0.9 $ 1.5

Distributions payable to founding members 15.8 16.6 32.4

Integration payments due from founding members ( 0.1 ) ( 0.1 ) ( 0.2 )

Total amounts due to founding members, net $ 0.5 $ 0.8 $ 1.3

Network Affiliate Transactions —NCM LLC paid a network affiliate owned by a family member of a director on the Company's Board of Directors $ 0.1 million, $ 0.2 million, $ 0.4 million and $ 0.4 million, in circuit share payments during the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and September 26, 2019, respectively.

AC JV, LLC Transactions —In December 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability company, AC JV, LLC, owned 32 % by each of the founding members and 4 % by NCM LLC.

The Company accounts for its investment in AC JV, LLC under the equity method of accounting in accordance with ASC 323-30, Investments—Equity Method and Joint Ventures (“ASC 323-30”) because AC JV, LLC is a limited liability company with the characteristics of a limited partnership and ASC 323-30 requires the use of equity method accounting unless the Company’s interest is so minor that it would have virtually no influence over partnership operating and financial policies.

Although NCM LLC does not have a representative on AC JV, LLC’s Board of Directors or any voting, consent or blocking rights with respect to the governance or operations of AC JV, LLC, the Company concluded that its interest was more than minor under the accounting guidance.

The Company’s investment in AC JV, LLC was $ 0.8 million and $ 0.9 million as of September 24, 2020 and December 26, 2019, respectively.

Equity in (losses) earnings from AC JV, LLC of $( 0.1 ) million, $ 0.0 million, $( 0.1 ) million and $ 0.3 million for the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 26, 2019, respectively, is included in “Other non-operating income” in the unaudited Condensed Consolidated Statements of Income.

The following table summarizes NCM LLC’s total outstanding debt as of September 24, 2020 and December 26, 2019 and the significant terms of its borrowing arrangements (in millions):

The Company’s investment in AC JV, LLC was $ 0.7 million and $ 0.7 million as of April 1, 2021 and December 31, 2020, respectively.

Equity in (losses) earnings from AC JV, LLC of $( 0.1 ) million and $ 0.1 million for the three months ended April 1, 2021 and March 26, 2020, respectively, is included in “Other non-operating income” in the unaudited Condensed Consolidated Statements of Income.

The following table summarizes NCM LLC’s total outstanding debt as of April 1, 2021 and December 31, 2020 and the significant terms of its borrowing arrangements (in millions):

Outstanding Balance as of

Borrowings September 24, 2020 December 26, 2019 Maturity

Borrowings April 1, 2021 December 31, 2020 Maturity

Date Interest

Revolving credit facility $ 167.0 $ 167.0 June 20, 2023 (1)

Term loans 264.6 266.6 June 20, 2025 (1)

Term loans - first tranche 262.6 263.3 June 20, 2025 (1)

Term loans - second tranche 50.0 — December 20, 2024 (1)

Senior unsecured notes due 2026 230.0 230.0 August 15, 2026 5.750 %

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Total borrowings 1,109.6 1,060.3

debt issuance costs related to term loans and

senior notes ( 8.4 ) ( 9.0 )

debt issuance costs and debt discounts related to term loans and senior notes ( 12.3 ) ( 8.0 )

Total borrowings, net 1,097.3 1,052.3

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(1) The interest rates on the revolving credit facility and term loan are described below.

Senior Secured Credit Facility —On June 20, 2018, NCM LLC entered into a credit agreement (the “Credit Agreement”) to replace NCM LLC's senior secured credit facility, dated as of February 13, 2007, as amended (the “previous facility”).

Consistent with the structure of the previous facility, the Credit Agreement consists of a term loan facility and a revolving credit facility.

As of September 24, 2020, NCM LLC’s senior secured credit facility consisted of a $ 175.0 million revolving credit facility and a $ 264.6 million term loan.

(1) The interest rates on the revolving credit facility and term loans are described below.

Senior Secured Credit Facility —NCM LLC’s credit agreement (the “Credit Agreement”) consists of a term loan facility and a revolving credit facility.

As of April 1, 2021, NCM LLC’s senior secured credit facility consisted of a $ 175.0 million revolving credit facility, a $ 262.6 million term loan (first tranche) and a $ 50.0 million term loan (second tranche).

The obligations under the senior secured credit facility are secured by a lien on substantially all of the assets of NCM LLC.

On April 30, 2020, NCM LLC amended the Credit Agreement (the “Credit Agreement Amendment”) to allow for the automatic waiver of any non-compliance with its Consolidated Net Senior Secured Leverage Ratio and Consolidated Total Leverage Ratio financial covenants occurring from the quarter ending June 25, 2020 until and including the quarter ending July 1, 2021 (the “Covenant Holiday Period”).

The Credit Agreement Amendment requires that, until the fiscal quarter ending July 1, 2021, NCM LLC must not permit the sum of unrestricted cash on hand at NCM LLC and availability under its Revolving Credit Facility to be less than $ 55.0 million.

Further, NCM LLC can make available cash distributions to its members (AMC, Cinemark, Regal and NCM, Inc.) during the Covenant Holiday Period only if trailing 12-month Consolidated EBITDA (as defined in the Credit Agreement) equals or exceeds $ 277.0 million and outstanding loans under the Revolving Credit Facility are equal to or less than $ 39.0 million.

NCM LLC can make available cash distributions to its members outside of the Covenant Holiday Period so long as NCM LLC’s Consolidated Net Senior Secured Leverage Ratio is equal to or less than 5.00 to 1.00 and no default or event of default under the Credit Agreement has occurred and is continuing.

On March 8, 2021, NCM LLC entered into an amendment to its Credit Agreement (“Credit Agreement Second Amendment”).

Among other things, the Credit Agreement Second Amendment provides for certain modifications to the negative covenants, with respect to NCM LLC’s audited financial statements for the fiscal year ended December 31, 2020, a waiver of the requirement to deliver such financial statements without a “going concern” or like qualification or exception, additional waivers and term changes outlined below and grants security interests in certain assets of NCM LLC and other potential loan parties that are not currently pledged to the lenders.

In addition, pursuant to the Credit Agreement Second Amendment, NCM LLC incurred a second tranche of the term loans in an aggregate principal amount of $ 50.0 million, the net proceeds of $ 43.8 million will be used for general corporate purposes.

Upon execution of the Credit Agreement Second Amendment, the Company recorded $ 2.3 million as a discount, $ 3.5 million as debt issuance costs and $ 0.4 million within “Loss on modification and retirement of debt, net”.

Revolving Credit Facility —The revolving credit facility portion of NCM LLC’s total borrowings is available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the senior secured credit facility, and a portion is available for letters of credit.

During March 2020, NCM LLC drew down an additional $ 110.0 million on the revolving credit facility to fund operations during the period of expected disrupted cash flows due to the temporary closure of the theaters within NCM LLC's network to address the COVID-19 Pandemic.

As of September 24, 2020, NCM LLC’s total availability under the $ 175.0 million revolving credit facility was $ 4.4 million, net of $ 167.0 million outstanding and $ 3.6 million in letters of credit.

The unused line fee is 0.50 % per annum which is consistent with the previous facility.

Borrowings under the revolving credit facility bear interest at NCM LLC’s option of either the LIBOR index plus an applicable margin ranging from 1.75 % to 2.25 % or the base rate plus an applicable margin ranging from 0.75 % to 1.25 %.

The applicable margin for the revolving credit facility is determined quarterly and is subject to adjustment based upon a consolidated net senior secured leverage ratio for NCM LLC (the ratio of secured funded debt less unrestricted cash and cash equivalents of up to $ 100.0 million, divided by Adjusted EBITDA for debt purposes, defined as NCM LLC's net income before depreciation and amortization expense adjusted to also exclude non-cash share based compensation costs for NCM LLC plus integration payments received).

The revolving credit facility will mature on June 20, 2023.

The weighted-average interest rate on the revolving credit facility as of September 24, 2020 was 3.00 %.

NATIONAL CINEMEDIA, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Term Loans —The interest rate on the term loans is a rate chosen at NCM LLC’s option of either the LIBOR index plus 3.00 % or the base rate plus 2.00 %.

The interest rate on the term loans as of September 24, 2020 was 4.00 %.

As of April 1, 2021, NCM LLC’s total availability under the $ 175.0 million revolving credit facility was $ 5.6 million, net of $ 167.0 million outstanding and $ 2.4 million in letters of credit.

The unused line fee is 0.50 % per annum which is consistent with the previous facility.

Following the Credit Agreement Second Amendment effective March 8, 2021, the applicable margin for the LIBOR index increased from a range of 1.75 % to 2.25 % to a range of 2.75 % to 3.25 % and the applicable margin for the base rate increased from a range of 0.75 % to 1.25 % to a range of 1.75 % to 2.25 %.

The weighted-average interest rate on the revolving credit facility as of April 1, 2021 was 4.50 %.

Term Loans — First Tranche —The interest rate on the initial tranche of term loans was originally a rate chosen at NCM LLC’s option of either the LIBOR index plus 3.00 % or the base rate plus 2.00 %.

Following the Credit Agreement Second Amendment effective March 8, 2021, the rate is either the LIBOR index plus 4.00 % or the base rate plus 3.00 %.

The interest rate on the term loans as of April 1, 2021 was 5.00 %.

The term loans amortize at a rate equal to 1.00 % annually, to be paid in equal quarterly installments.

As of September 24, 2020, NCM LLC has paid principal of $ 5.4 million, reducing the outstanding balance to $ 264.6 million.

The term loans will mature on June 20, 2025.

As of April 1, 2021, NCM LLC has paid principal of $ 7.4 million, reducing the outstanding balance to $ 262.6 million.

Term Loans — Second Tranche —The interest rate on the second tranche of term loans is the LIBOR index plus 8.00 %.

The interest rate on the term loans as of April 1, 2021 was 9.00 %.

The term loans amortize at a rate equal to 1.00 % annually, to be paid in equal quarterly installments.

The senior secured credit facility contains a number of covenants and various financial ratio requirements including, (i) a consolidated net total leverage ratio covenant of 6.25 times for each quarterly period and (ii) with respect to the revolving credit facility, maintaining a consolidated net senior secured leverage ratio of equal to or less than 4.50 times on a quarterly basis for each quarterly period in which a balance is outstanding on the revolving credit facility.

In addition, NCM LLC is permitted to make quarterly dividend payments and other restricted payments with its available cash as long as NCM LLC’s consolidated net senior secured leverage ratio (after giving effect to any such payment) is below 5.50 times and no default or event of default has occurred and continues to occur under the senior secured credit facility.

As of September 24, 2020, NCM LLC’s consolidated net senior secured leverage ratio was 7.93 times (versus the dividend payment restriction of 5.50 times and the covenant of 4.50 times) and NCM LLC's consolidated net total leverage ratio was 10.43 times (versus the covenant of 6.25 times).

As of September 24, 2020, NCM LLC was in compliance with the requirements of the Credit Agreement Amendment described above and the noncompliance with the financial covenants was automatically waived.

Following the Credit Agreement Second Amendment, the Company has a waiver of non-compliance with the consolidated Net Total Leverage and Consolidated Net Senior Secured Leverage financial covenants through the quarter ending June 30, 2022 (“Extended Covenant Waiver Holiday”) and the Consolidated Net Total Leverage Ratio and Consolidated Net Senior Secured Leverage Ratio financial covenants to be set to 6.75 to 1.00 and 5.50 to 1.00, respectively, for the quarter ending on or about September 29, 2022.

Under the Credit Agreement, NCM LLC is permitted to make quarterly dividend payments and other restricted payments with its available cash as long as NCM LLC’s consolidated net senior secured leverage ratio (after giving effect to any such payment) is below 5.50 times and no default or event of default has occurred and continues to occur under the senior secured credit facility.

Pursuant to the terms of the Credit Agreement Second Amendment, NCM LLC is restricted from making available cash distributions until after NCM LLC delivers a compliance certificate for the quarter ending on or about September 29, 2022, and, thereafter, NCM LLC may only make available cash distributions if:

(i) no default or event of default under the Credit Agreement has occurred and is continuing;

(ii) the senior secured financial covenant leverage ratio is equal to or less than 4.00 to 1.00;

and (iii) the aggregate principal amount of all outstanding revolving loans under the Credit Agreement is $39.0 million or less.

As of April 1, 2021, NCM LLC was in compliance with the requirements of the Credit Agreement Second Amendment described above and the noncompliance with the financial covenants was automatically waived.

Senior Unsecured Notes due 2026 —On August 19, 2016, NCM LLC completed a private placement of $ 250.0 million in aggregate principal amount of 5.750 % Senior Unsecured Notes (the “Notes due 2026”) for which the registered exchange offering was completed on November 8, 2016.

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The Notes due 2026 were issued at 100 % of the face amount thereof and are the senior unsecured obligations of NCM LLC.

NCM LLC repurchased and canceled a total of $ 5.0 million and $ 15.0 million of the Notes due 2026 during 2019 and 2018, respectively, reducing the principal amount to $ 230.0 million as of September 24, 2020.

These repurchases were treated as partial debt extinguishments and resulted in the realization of a non-operating gain, net of written off debt issuance costs, of $ 0.0 million, $ 0.0 million, $ 0.0 million and $ 0.3 million during the three months and nine months ended September 24, 2020 and September 26, 2019, respectively.

NCM LLC repurchased and canceled a total of $ 20.0 million of the Notes due 2026 during 2019 and 2018, respectively, reducing the principal amount to $ 230.0 million as of April 1, 2021.

Senior Secured Notes due 2028 —On October 8, 2019, NCM LLC completed a private offering of $ 400.0 million aggregate principal amount of 5.875 % Senior Secured Notes due 2028 (the “Notes due 2028”) to eligible purchasers.

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The Notes due 2028 were issued at 100 % of the face amount thereof and share in the same collateral that secures NCM LLC's obligations under the senior secured credit facility.

Changes in the Company’s Effective Tax Rate —The Company recorded an income tax benefit of $ 7.7 million for the nine months ended September 24, 2020 compared to income tax expense of $ 6.0 million for the nine months ended September 26, 2019 resulting in an effective tax rate of 20.4 % for the nine months ended September 24, 2020 as compared to 26.9 % for the nine months ended September 26, 2019.

The decrease in the effective tax rate was primarily due to the relative impact of the tax benefit recorded on pretax book losses attributable to NCM Inc.

of $ 37.8 million for the nine months ended September 24, 2020 compared to tax expense recorded on pretax book income of $ 22.5 million for the nine months ended September 26, 2019.

The Company's current blended state and federal rate (net of federal benefit) was 24.4 % as of September 24, 2020 and 24.3 % as of September 26, 2019.

Changes in the Company’s Effective Tax Rate —The Company recorded an income tax benefit of $ 0.0 million for the three months ended April 1, 2021 compared to $ 0.4 million for the three months ended March 26, 2020 resulting in an effective

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tax rate of 0.0 % for the three months ended April 1, 2021 as compared to 8.8 % for the three months ended March 26, 2020.

The Company recorded a full valuation allowance on its net deferred tax assets as of December 31, 2020 following the determination it was more-likely-than-not that the Company will not be able to realize the benefit of those assets.

The Company maintained a full valuation allowance as of April 1, 2021, reducing deferred tax expense to $ 0.0 million for the three months ended April 1, 2021 and the Company’s effective tax rate to 0.0 %.

The Company's current blended state and federal rate (net of federal benefit) was 24.6 % as of April 1, 2021 and 24.4 % as of March 26, 2020.

COMMITMENTS AND CONTINGENCIES

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Operating Commitments - Facilities —The Company has entered into operating lease agreements for its corporate headquarters and other regional offices.

The Company has right-of-use (“ROU”) assets of $ 20.9 million and short-term and long-term lease liabilities of $ 1.8 million and $ 23.2 million, respectively, on the balance sheet as of September 24, 2020 for all material leases with terms longer than twelve months.

The Company has right-of-use (“ROU”) assets of $ 20.1 million and short-term and long-term lease liabilities of $ 1.8 million and $ 22.2 million, respectively, on the balance sheet as of April 1, 2021 for all material leases with terms longer than twelve months.

These balances are included within “Other assets”, “Other current liabilities” and “Other liabilities”, respectively, on the unaudited Condensed Consolidated Balance Sheets.

As of September 24, 2020, the Company had a weighted average remaining lease term of 9.4 years on these leases.

As of April 1, 2021, the Company had a weighted average remaining lease term of 8.9 years on these leases.

When measuring the ROU assets and lease liabilities recorded, the Company utilized its incremental borrowing rate in order to determine the present value of the lease payments as the leases do not provide an implicit rate.

The Company used the rate of interest that it would have paid to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic

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As of September 24, 2020, the Company’s weighted average annual discount rate used to establish the ROU assets and lease liabilities was 7.34 %.

During the three and nine months ended September 24, 2020 and September 26, 2019, the Company recognized the following components of total lease cost (in millions).

The Company used the rate of interest that it would have paid to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment.

As of April 1, 2021, the Company’s weighted average annual discount rate used to establish the ROU assets and lease liabilities was 7.35 %.

During the three months ended April 1, 2021 and March 26, 2020, the Company recognized the following components of total lease cost (in millions).

These costs are presented within “Selling and marketing costs” and “Administrative and other costs” within the unaudited Condensed Consolidated Statements of Income depending upon the nature of the use of the facility.

Three Months Ended Nine Months Ended

September 24, 2020 September 26, 2019 September 24, 2020 September 26, 2019

Three Months Ended

April 1, 2021 March 26, 2020

Operating lease cost $ 0.9 $ 0.9

Short-term lease cost — 0.1 — 0.2

Variable lease cost 0.1 0.1

Total lease cost $ 1.0 $ 1.0

The Company made total lease payments of $ 0.9 million, $ 0.9 million, $ 2.7 million and $ 2.5 million during the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and September 26, 2019, respectively.

The Company made total lease payments of $ 0.9 million and $ 0.9 million during the three months ended April 1, 2021 and March 26, 2020, respectively.

These payments are included within cash flows from operating activities within the unaudited Condensed Consolidated Statement of Cash Flows.

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The theater access fee is composed of a fixed payment per patron, a fixed payment per digital screen (connected to the DCN) and a fee for access to higher quality digital cinema equipment.

The payment per theater patron increases by 8 % every five years , with this next increase occurring in fiscal year 2022, and the payment per digital screen and for digital cinema equipment increases annually by 5 %.

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payment per theater patron increases by 8 % every five years , with this next increase occurring in fiscal year 2022, and the payment per digital screen and for digital cinema equipment increases annually by 5 %.

The theater access fee paid in the aggregate to all founding members cannot be less than 12 % of NCM LLC’s aggregate advertising revenue (as defined in the ESA), or it will be adjusted upward to reach this minimum payment.

As of September 24, 2020 and December 26, 2019, the Company had no liabilities recorded for the minimum payment, as the theater access fee was in excess of the minimum.

As of April 1, 2021 and December 31, 2020, the Company had no liabilities recorded for the minimum payment, as the theater access fee was in excess of the minimum.

Following the 2019 ESA Amendments, Cinemark and Regal receive an additional monthly theater access fee that began on November 1, 2019 in consideration for NCM LLC's access to certain on-screen advertising inventory after the advertised showtime of a feature film.

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If NCM LLC runs advertising in more than one concurrent advertisers’ Platinum Spot for any portion of the network over a period of time, then NCM LLC will be required to satisfy a minimum average CPM for that period of time.

The Company does not owe the founding members any theater access fees or any Platinum Spot revenue share when the theaters are not displaying the Company's pre-show or

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when the Company does not have access to the theaters.

The Company does not owe the founding members any theater access fees or any Platinum Spot revenue share when the theaters are not displaying the Company's pre-show or when the Company does not have access to the theaters.

As such, the Company did not and will not owe these fees for the period of time the founding members' theaters were temporarily closed due to the COVID-19 Pandemic and future fees will be reduced if attendance remains lower than historical levels.

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If a network affiliate achieves the attendance set forth in their respective agreement, the Company has guaranteed minimum revenue for the network affiliate per attendee if such amount paid under the revenue share arrangement is less than its guaranteed amount.

As of September 24, 2020, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $ 64.0 million over the remaining terms of the network affiliate agreements.

As of April 1, 2021, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $ 113.3 million over the remaining terms of the network affiliate agreements.

These minimum guarantees relate to various affiliate agreements ranging in term from three years to twenty years , prior to any renewal periods of which some are at the option of the Company.

The Company accrued $ 0.2 million and $ 0.5 million related to affiliate agreements with guaranteed minimums in excess of the revenue share agreement as of September 24, 2020 and December 26, 2019, respectively.

The Company accrued $ 0.0 million and $ 0.0 million related to affiliate agreements with guaranteed minimums in excess of the revenue share agreement as of April 1, 2021 and December 31, 2020, respectively.

As the guaranteed minimums are based upon agreed upon minimum attendance or affiliate revenue levels, the Company did not incur minimum revenue share fees during the period of time the respective affiliate's theaters were temporarily closed due to the COVID-19 Pandemic and will not for the remaining duration an affiliate's theater attendance or revenue levels are low as the minimum levels must first be met by the affiliate.

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Level 3 —Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

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Non-Recurring Measurements —Certain assets are measured at fair value on a non-recurring basis.

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Other investments consisted of the following (in millions):

September 24, 2020 December 26, 2019

April 1, 2021 December 31, 2020

Investment in AC JV, LLC (1)

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This investment is accounted for utilizing the equity method.

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During the three months ended September 24, 2020 and September 26, 2019 and the nine months ended September 24, 2020 and September 26, 2019, the Company recorded impairment charges of $ 0.0 million, $ 2.0 million, $ 0.0 million and $ 2.0 million, respectively, on certain of its investments due to a significant deterioration in the business prospects of the investee or new information regarding the fair value of the investee, which brought the total remaining value of the respective impaired investments to $ 0.0 million as of September 24, 2020 and September 26, 2019.

As of September 24, 2020, no observable price changes or impairments have been recorded as a result of the Company’s qualitative assessment of identified events or changes in the circumstances of the remaining investments.

As of April 1, 2021, no observable price changes or impairments have been recorded as a result of the Company’s qualitative assessment of identified events or changes in the circumstances of the remaining investments.

The investment in AC JV, LLC was initially valued using comparative market multiples.

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The estimated fair values of the Company’s financial instruments where carrying values do not approximate fair value were as follows (in millions):

As of September 24, 2020 As of December 26, 2019

As of April 1, 2021 As of December 31, 2020

Carrying Value Fair Value (1)

Term loans $ 264.6 $ 217.0 $ 266.6 $ 266.9

Term loans - first tranche $ 262.6 $ 246.8 $ 263.3 $ 217.2

Term loans - second tranche 50.0 50.0 — —

Notes due 2026 230.0 200.7 230.0 160.7

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Fair Value Measurements at Reporting Date Using

Fair Value as of September 24, 2020 Quoted Prices in Active Markets for Identical Assets

Fair Value as of April 1, 2021 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other

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Total assets $ 51.3 $ 49.8 $ 1.5 $ —

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Fair Value Measurements at Reporting Date Using

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Short-term marketable securities (2)

17.5 — 17.5 —

Long-term marketable securities (2)

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The Company’s government agency bonds, commercial paper and certificates of deposit are valued using third party broker quotes.

The value of the

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Company’s government agency bonds is derived from quoted market information.

The value of the Company’s government agency bonds is derived from quoted market information.

The inputs in the valuation are classified as Level 1 if there is an active market for these securities;

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The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy.

As of September 24, 2020, there was $ 2.8 million of available-for-sale debt securities in unrealized loss positions without an allowance for credit losses.

The Company has not recorded an allowance for credit losses for the marketable securities balance as of September 24, 2020 given the immaterial difference between the amortized cost basis and the aggregate fair value of the Company's securities.

The amortized cost basis, aggregate fair value and maturities of the marketable securities the Company held as of September 24, 2020 and December 26, 2019 were as follows:

As of September 24, 2020

As of April 1, 2021 and December 31, 2020, there were $ 0.0 million and $ 1.3 million, respectively, of available-for-sale debt securities in unrealized loss positions without an allowance for credit losses.

The Company has not recorded an allowance for credit losses for the marketable securities balance as of April 1, 2021 or December 31, 2020 given the immaterial difference between the amortized cost basis and the aggregate fair value of the Company's securities.

The amortized cost basis, aggregate fair value and maturities of the marketable securities the Company held as of April 1, 2021 and December 31, 2020 were as follows:

As of April 1, 2021

Amortized Cost

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Total marketable securities $ 1.6 $ 1.5

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As of December 31, 2020

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MARKETABLE SECURITIES:

Short-term U.S.

government agency bonds $ 3.5 $ 3.5 0.4

Short-term certificates of deposit 0.3 0.3 0.6

Short-term municipal bonds 1.2 1.2 0.5

Short-term commercial paper:

Financial 8.0 7.9 0.3

Industrial 4.0 4.0 0.2

Total short-term marketable securities 0.3 0.3

Long-term U.S.

government agency bonds 4.5 4.5 2.2

Long-term certificates of deposit 1.3 1.2 2.8

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SUBSEQUENT EVENT

On October 30, 2020, the Company declared a cash dividend of $ 0.07 per share (approximately $ 5.5 million) on each share of the Company’s common stock (not including outstanding restricted stock which will accrue dividends until the shares vest) to stockholders of record on November 16, 2020 to be paid on December 1, 2020.

On May 10, 2021, the Company declared a cash dividend of $ 0.05 per share (approximately $ 4.0 million) on each share of the Company’s common stock (not including outstanding restricted stock which will accrue dividends until the shares vest) to stockholders of record on May 21, 2021 to be paid on June 7, 2021.

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-Q

Item 1. Financial Statements