What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-10 compared with 2020-11-02 · 142 added, 308 removed, 197 unchanged (70% of the section changed)

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Some of the information in this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended.

All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and statements related to the impact of the current COVID-19 Pandemic on our business and results, may constitute forward-looking statements.

In some cases, you can identify these “forward-looking statements” by the specific words, including but not limited to “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of those words and other comparable words.

These forward-looking statements involve risks and uncertainties.

Our actual results could differ materially from those indicated in these statements as a result of certain factors as more fully discussed under the heading “Risk Factors” below and in our annual report on Form 10-K for the Company’s fiscal year ended December 26, 2019 and as updated within our quarterly report on Form 10-Q filed with the SEC on May 5, 2020 for the quarter ended March 26, 2020.

Our actual results could differ materially from those indicated in these statements as a result of certain factors as more fully discussed in our annual report on Form 10-K for the Company’s fiscal year ended December 31, 2020.

Among other risks, we face significant risk and volatility related to the COVID-19 Pandemic as discussed in this report.

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We currently derive revenue principally from the sale of advertising to national, regional and local businesses in Noovie® , our cinema advertising and entertainment pre-show seen on movie screens across the U.S.

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

On September 4, 2020 the Company resumed in-theater advertising and as of September 24, 2020, approximately two-thirds of the theaters within our network were open.

As of October 30, approximately 53% of theaters within our network are open.

Refer to the “Recent Developments” section below for further information regarding the impact of and the Company's response to the COVID-19 Pandemic.

Beginning in November 2019 following the completion of the 2019 ESA Amendments, we now present two different formats of our Noovie pre-show depending on the theater circuit in which it runs.

We present two different formats of our Noovie pre-show depending on the theater circuit in which it runs.

In Regal and Cinemark and 15 of our network affiliates' theaters, Noovie now includes advertising inventory after the advertised showtime consisting of (1) the lights down segment that runs for five minutes after the advertised showtime with trailer lighting and (2) the 30- or 60-second Platinum Spot (together, the “Post-Showtime Inventory”).

As of September 24, 2020, theaters presenting the new Noovie format with Post-Showtime Inventory made up approximately 58% of our network based upon 2019 attendance.

As of April 1, 2021, theaters presenting the new Noovie format with Post-Showtime Inventory made up approximately 59% of our network.

All other NCM network theater circuits, which make up the remaining 41% of our network, present the Classic Noovie pre-show, which ends approximately at the advertised movie showtime when the movie trailers begin.

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We also sell advertising on our 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, we sell online and mobile advertising through our Cinema Accelerator and across our suite of Noovie digital properties, including Noovie.com , Noovie Shuffle , Name That Movie, Noovie Arcade and Fantasy Movie League in order to reach entertainment audiences beyond the theater.

As of September 24, 2020, approximately 4.2 million moviegoers have downloaded our mobile apps.

These downloads and the acquisition of second party data have resulted in first- and second-party data sets of over 146 million as of September 24, 2020.

We have long-term ESAs (approximately 19.0 weighted average years remaining based on 2019 attendance) with the founding members and multi-year agreements with our network affiliates, which 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 is 16.5 years as of September 24, 2020.

In addition, we sell online and mobile advertising through our Noovie Audience Accelerator, across our suite of Noovie digital properties, including Noovie.com , Noovie Shuffle , Name That Movie and Noovie Arcade, as well as a variety of complementary out of home venues, including restaurants, retail locations, convenience stores and office and residential buildings, in order to reach entertainment audiences beyond the theater.

As of April 1, 2021, approximately 5.2 million moviegoers have downloaded our mobile apps.

These downloads and the acquisition of second party data have resulted in first- and second-party data sets of over 183.7 million as of April 1, 2021.

We have long-term ESAs (approximately 18.5 weighted average years remaining based on pre-COVID-19 attendance levels) with the founding members and multi-year agreements with our network affiliates, which expire at various dates between May 2021 and December 2037.

The weighted average remaining term of the ESAs and the network affiliate agreements is 20.9 years as of April 1, 2021.

The ESAs and network affiliate agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions.

Our Noovie pre-show and LEN programming are distributed predominantly via satellite through our proprietary DCN.

Approximately 99% of the aggregate founding member and network affiliate theater attendance is generated by theaters connected to our DCN (the remaining screens receive advertisements on USB drives) and 100% of the Noovie pre-show is projected on digital projectors (96% digital cinema projectors and 4% LCD projectors) as of September 24, 2020.

Our Noovie pre-show and LEN programming are distributed predominantly via satellite through our proprietary digital content network “DCN”.

Management focuses on several measurements that we believe provide us with the necessary ratios and key performance indicators to manage our business, determine how we are performing versus our internal goals and targets, and against the performance of our competitors and other benchmarks in the marketplace in which we operate.

Senior executives hold meetings at least once per quarter with members of management to discuss and analyze operating results and address significant variances to budget and prior year in an effort to identify trends and changes in our business.

We focus on operating metrics including changes in revenue, Adjusted OIBDA and Adjusted OIBDA margin, as defined and discussed below, as some of our primary measurement metrics.

In addition, we monitor our monthly advertising performance measurements, including advertising inventory utilization, national and regional advertising pricing (CPM), local advertising rate per screen per week, national and local and regional and total advertising revenue per attendee.

We also monitor free cash flow, the dividend coverage ratio, financial leverage ratio (net debt divided by Adjusted OIBDA plus integration payments and other encumbered theater payments), cash balances and revolving credit facility availability to ensure financial debt covenant compliance and that there is adequate cash availability to fund our working capital needs and debt obligations and current and future dividends declared by our Board of Directors.

Our operating results may be affected by a variety of internal and external factors and trends described more fully in the section entitled “Risk Factors” below and in our annual report on Form 10-K filed with the SEC on February 20, 2020 for our fiscal year ended December 26, 2019 and as updated within our quarterly report on Form 10-Q filed with the SEC on May 5, 2020 for the quarter ended March 26, 2020.

there is adequate cash availability to fund our working capital needs and debt obligations and current and future dividends declared by our Board of Directors.

Recent Developments

COVID-19 — Following the World Health Organization’s declaration of the COVID-19 virus as a pandemic, the United States’ government and other state and local governments issued precautionary restrictions on travel, public gatherings and other events and issued social distancing guidelines.

Beginning in mid-March 2020, each of our founding members and all of our network affiliates announced that their theaters would be temporarily closed and almost all of the theaters within our network remained closed until late August 2020.

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

Major motion picture releases expected to occur during the temporary closure period were delayed until late 2020 or into 2021 or have been released directly to alternative delivery methods bypassing the theater entirely.

On September 4, 2020 the Company resumed advertising within the theaters that were open in our network;

however in-theater advertising revenue continues to be adversely impacted as attendance at the reopened theaters has been less than normal given COVID-19 restrictions around 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 our network had reopened.

The results of the three and nine months ended September 24, 2020 were significantly impacted by the COVID-19 Pandemic.

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

Many of the open theaters are operating at reduced hours and offering a limited number of movie showtimes and attendance at open theaters has not reached historical levels.

As of the filing date, the COVID-19 virus continues to spread in the United States, and there can be no assurance when theaters within our network will return to normal operations, that the theaters that have reopened will remain open or that patrons will return to the theaters at historical levels.

The Company's ability to advertise has been and will continue to be limited due to the portion of our network that remains closed or has re-closed, reduced movie schedules and patron capacities at many network theaters and the timing and frequency of major motion picture releases as compared to prior years due to the COVID-19 Pandemic.

Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens and/or in-theater advertising revenue, and therefore, were not incurred for the duration of time that the theaters were closed and attendance-based fees will be reduced for the period of time that attendance is lower than historical levels.

COVID-19 —Following the World Health Organization’s declaration of the COVID-19 virus as a pandemic in March 2020, the United States’ government and other state and local governments issued precautionary restrictions on travel, public gatherings and other events and issued social distancing guidelines.

As of April 1, 2021, approximately 60.0% of the theaters within our network had reopened.

Many of the open theaters are operating at reduced hours and offering a limited number of movie showtimes and attendance at open theaters has not returned to historical levels.

Major motion picture releases expected to occur during the temporary closure period were delayed until 2021 or have been released directly to alternative delivery methods bypassing the theater entirely.

As of May 7, 2021, approximately 77.0% of the theaters within our network have reopened.

The Company generated no in-theater advertising revenue for the approximate six months that the theaters were closed and on September 4, 2020 the Company resumed advertising within the theaters that were open in our network;

however, in-theater advertising revenue continues to be adversely impacted as attendance at the reopened theaters has been significantly less than normal given COVID-19 restrictions around patron capacity limitations and a continued lack of new major motion picture releases.

The results of operations for the three months ended April 1, 2021 were significantly impacted by the COVID-19 Pandemic.

The Company's ability to advertise has been and will continue to be limited due to the portion of our network that is closed, reduced movie schedules and patron capacities at many network theaters and the timing and frequency of major motion picture releases as compared to prior years due to the COVID-19 Pandemic.

Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens and/or in-theater advertising revenue, and therefore, were not incurred for the duration of time that the theaters were closed and attendance-based fees will continue to be reduced for the period of time that attendance is lower than historical levels.

Even though our ability to generate in-theater advertising revenue will be negatively impacted by government mandated capacity restrictions and the limited new content currently available, we are still required to pay these screen-based fees when theaters are open, which may be reduced for months where screens are in use for only part of the month.

We have been working to preserve cash and ensure sufficient liquidity to endure the impacts of the COVID-19 Pandemic, even if prolonged.

During the temporary theater closures, when we were not running advertising, we temporarily furloughed approximately 30% of our staff and temporarily reduced the pay of the remaining employees by up to 50%, which in aggregate reduced our compensation expense by 50% (“Temporary Salary and Wage Reductions”).

In response to the reopening of a portion of our network, we brought back most of our staff from furlough by September 24, 2020 and lifted some of the Temporary Salary and Wage Reductions.

All full-time employees are still at salary reductions of up to 20%, although the Company expects to restore all salaries for full-time employees over its next two quarters.

In November 2020, given the limited attendance levels and expected delay in new movie releases, we re-implemented a combination of temporary furloughs, permanent layoffs and further salary reductions.

In total, we have permanently reduced our total headcount by approximately 20% from pre-COVID-19 Pandemic headcount levels.

Since the start of the COVID-19 Pandemic, we have also taken the following cash preservation actions that the Company anticipates continuing until the Company’s operations normalize:

• Continued some of the temporary reductions in cash compensation of employees by up to 20%;

• Temporarily reduced cash compensation of the Company's Board of Directors by 20%;

Given the limited attendance levels and delay in new movie releases, during the three months ended April 1, 2021, over 75% of our current employee base continued to be furloughed or had salary reductions of up to 50% (“Temporary Salary and Wage Reductions”).

Further, since the start of the COVID-19 Pandemic our total headcount has been reduced by almost 30% from pre-COVID-19 Pandemic headcount levels.

Since the start of the COVID-19 Pandemic and during the three months ended April 1, 2021, we have also taken the following cash preservation actions that the Company anticipates continuing until the Company’s operations normalize:

• Temporarily reduced cash compensation of the Company's Board of Directors by 20% and offered the option for the Board to receive the cash retainers for the first and second quarter in equivalent value of the Company’s common stock in lieu of cash;

• Suspended certain non-essential operating expenditures, including marketing, research, employee travel and consulting services;

• Implemented a hiring freeze on non-essential positions;

• Temporarily suspended the 401K employee match program;

• Terminated or deferred certain non-essential capital expenditures;

• Strategically worked with our landlords, vendors, and other business partners to manage, defer, and/or abate certain costs during the disruptions caused by the COVID-19 Pandemic;

• Decreased our quarterly dividend to $0.07 per share beginning in the first quarter of 2020 from $0.19 per share in the fourth quarter of 2019.

When compared to the fourth quarter of 2019 this results in quarterly cash savings of $9.3 million and year to date cash savings of $27.9 million for NCM, Inc.;

• Strategically worked with our vendors, and other business partners to manage, defer, and/or abate certain costs during the disruptions caused by the COVID-19 Pandemic;

• Decreased our quarterly dividend to $0.07 per share for the first three quarters of 2020 and to $0.05 for the fourth quarter of 2020 and first quarter of 2021 from $0.19 per share in the fourth quarter of 2019.

When compared to the first quarter of 2020 this results in a cash savings of $11.2 million in the first quarter of 2021 and cash savings of $41.6 million for NCM, Inc.

since the beginning of the pandemic;

• Introduced an active cash management process, which, among other things, requires CEO approval of all outgoing payments.

The Company's ability to normalize operations is dependent upon the reopening of the remaining theaters within our network, the release of major motion pictures to the theaters, and the attendance of theater patrons.

However, there can be no assurance that theater patrons will return to movie theaters or the overall attendance will return to levels comparable to those prior to the COVID-19 Pandemic.

In March 2020, we drew down an additional $110.0 million on our revolving credit facility increasing our cash and marketable securities balance to $215.3 million as of March 26, 2020 ($132.2 million at NCM LLC).

Further, as of March 26, 2020, we had approximately $112.3 million of trade accounts receivable outstanding from customers, of which we have collected approximately $103.3 million as of September 24, 2020, increasing our cash and marketable securities balance to $220.7 million as of September 24, 2020 ($157.4 million at NCM LLC) and decreasing our trade accounts receivable outstanding, net of the allowance for doubtful accounts, to $9.0 million.

The $157.4 million of cash at NCM LLC will be used to fund operations during the period of expected reduced cash flows.

Cash at NCM, Inc.

is held for future payment of dividends to NCM, Inc.

shareholders, income tax payments, income tax receivable payments to NCM LLC’s founding members and other obligations.

On April 30, 2020, NCM LLC amended its Credit Agreement, dated as of June 20, 2018 (“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.

NCM LLC may continue to reimburse NCM, Inc.

for its services provided under the management services agreement during the period of the automatic waiver.

Management is currently actively pursuing with its administrative agent an additional amendment to its Senior Secured Credit Facility to obtain a waiver to its financial covenants.

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.

On March 27, 2020, the U.S.

Government enacted various relief and stimulus measures in response to the unprecedented adverse economic impacts of the COVID-19 Pandemic commonly referred to as the CARES Act.

We currently have recognized or expect to recognize the following benefits under the CARES Act:

• Deferral of the payment of the 6.2% FICA portion of Company's payroll taxes beginning on the enactment date through December 31, 2020 until the end of 2021 for one-half of the tax and the remaining half to the end of 2022.

The Company deferred $0.4 million and $0.4 million in qualifying payments in the second and third quarter of 2020, respectively;

• A refundable Employee Retention Payroll Tax Credit for the Company's portion of the 6.2% FICA payroll tax for certain qualifying employees from March 13, 2020 through December 31, 2020.

The Company will continue to monitor the provisions of the CARES Act and associated regulations and any other government action and intends to seek available potential benefits that would positively impact the Company.

As of the filing date, multiple COVID-19 vaccines have been developed and immunizations are under way throughout the United States.

Because of this, cases of the COVID-19 virus have decreased from the peak numbers experienced in late 2020 and government restrictions have lessened allowing theaters in key markets to reopen.

Regal also began a phased reopening of its theaters within our network beginning in April 2021 and multiple major motion picture releases are scheduled beginning in May 2021.

However, there can be no assurance that the cases of the COVID-19 virus will continue to decline, when theaters within our network will return to normal operations, that the theaters which have reopened will remain open or that patrons will return to the theaters at historical levels.

We believe that the exhibition industry has historically fared well during periods of economic stress, and we remain optimistic, though cannot guarantee, that our founding members and network affiliates will rebound and attendance figures will benefit from pent-up social demand as state and local restrictions or other social distancing orders subside and people seek togetherness with a return to normalcy.

However, the ultimate significance of the COVID-19 Pandemic, including the extent of the adverse impact on our financial and operational results, will be dictated by the currently unknowable duration of the pandemic, the effect of the pandemic on the overall economy and the advertising market and responsive governmental regulations, including mandated business closures which could recur after the initial reopening causing subsequent closure periods, social distancing guidelines, theater capacity restrictions, shifting movie slates, voluntary theater closures and the level of theater attendance.

However, the ultimate significance of the COVID-19 Pandemic, including the extent of the adverse impact on our financial and operational results, will be dictated by the currently unknowable duration of the pandemic, the effect of the pandemic on the overall economy and the advertising market and responsive governmental regulations, including mandated business closures which could recur after a reopening causing subsequent closure periods, social distancing guidelines, theater capacity restrictions, shifting movie slates, voluntary theater closures and the level of theater attendance.

Our business also could be significantly affected should the disruptions caused by the COVID-19 Pandemic lead to changes in consumer behavior (such as the movie audience’s willingness to return to the movie theaters and the impacts of social distancing, facemask requirements and other measures on the movie going experience), or further reductions or impacts to the customary theatrical release window.

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We are monitoring the rapidly evolving situation and its potential impacts on our financial position, results of operations, liquidity and cash flows.

On March 8, 2021, NCM LLC entered into the 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”.

Summary Historical and Operating Data

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Our Operating Data —The following table presents operating data and Adjusted OIBDA (dollars in millions, except share and margin data):

Q3 2020 Q3 2019 YTD 2020 YTD 2019 Q3 2020 to Q3 2019 YTD 2020 to YTD 2019

Q1 2021 Q1 2020 Q1 2021 to Q1 2020

Revenue $ 5.4 $ 64.7 (91.7) %

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Non-operating expenses 13.7 13.5 1.5 %

Income tax (benefit) expense (3.1) 4.3 (7.7) 6.0 (172.1) % (228.3) %

Net (loss) income attributable to noncontrolling interests (18.2) 13.6 (42.3) 24.2 (233.8) % (274.8) %

Net (loss) income attributable to NCM, Inc.

Income tax benefit — (0.4) (100.0) %

Net loss attributable to noncontrolling interests (22.6) (4.5) 402.2 %

Net loss attributable to NCM, Inc.

$ (19.4) $ (3.7) 424.3 %

Net (loss) income per NCM, Inc.

Net loss per NCM, Inc.

basic share $ (0.25) $ (0.05) 400.0 %

Net (loss) income per NCM, Inc.

Net loss per NCM, Inc.

diluted share $ (0.25) $ (0.05) 400.0 %

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(1) Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike, AMC Rave and Cinemark Rave theaters that were part of another cinema advertising network for certain periods presented.

(1) Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike theaters that were part of another cinema advertising network for certain periods presented.

Refer to Note 4 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document.

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Adjusted Operating Income Before Depreciation and Amortization (“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 expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation costs, impairment of long-lived assets and Chief Executive Officer transition costs.

Adjusted OIBDA represents operating income before depreciation expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases and non-cash share-based compensation costs.

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 the Company's operating performance and so 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 policies, amortization of intangibles recorded for network theater screen leases, non-cash share based compensation programs, impairments of long-lived assets, CEO turnover, interest rates, debt levels or income tax rates.

A limitation of these measures, however, is that they exclude depreciation and amortization of intangibles recorded for network theater screen leases, 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 share-based payment costs, impairments of long-lived assets or costs associated with the resignation of the Company’s former Chief Executive Officer.

In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s share-based payment costs.

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

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

Q3 2020 Q3 2019 YTD 2020 YTD 2019

Q1 2021 Q1 2020

Operating (loss) income $ (28.3) $ 4.9

Depreciation expense 3.3 3.2

Amortization of intangibles recorded for network theater screen

leases 6.2 6.8 18.4 20.7

Amortization of intangibles recorded for network theater screen leases 6.1 6.1

Share-based compensation costs (1)

0.8 1.4 1.1 4.3

Impairment of long-lived assets (2)

CEO transition costs (3)

Adjusted OIBDA $ (16.2) $ 14.4

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(1) Share-based compensation costs are included in network operations, selling and marketing and administrative expense in the accompanying unaudited Condensed Consolidated Financial Statements.

(2) The impairments of long-lived assets primarily relate to the write-off of certain internally developed software.

(3) Chief Executive Officer transition costs represents costs associated with the search for a new Company CEO during the beginning of 2019.

Our Network —The change in the number of screens in our network by the founding members and network affiliates during the nine months ended September 24, 2020 was as follows.

Our Network —The change in the number of screens in our network by the founding members and network affiliates during the three months ended April 1, 2021 was as follows.

Number of screens

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Balance as of December 31, 2020 16,515 3,935 20,450

Lost affiliates, net of new affiliates (1)

— (183) (183)

New affiliates, net of lost affiliates (1)

Closures, net of openings (2)

(81) (51) (132)

Balance as of September 24, 2020 16,752 3,946 20,698

Balance as of April 1, 2021 16,434 4,224 20,658

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(1) Represents the loss of three of our affiliates that did not renew their contracts as of the end of the first nine months of 2020 resulting in a reduction of 193 affiliate screens to our network, offset by the addition of two new affiliates which added 10 new screens to our network during the nine months ended September 24, 2020.

(1) Represents the addition of one new affiliate which added 363 new screens to our network, offset by the loss of one of our affiliates that closed as of the end of the first three months of 2021 resulting in a reduction of 23 affiliate screens to our network during the three months ended April 1, 2021.

(2) Excludes the temporary theater closures in response to the COVID-19 Pandemic.

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Basis of Presentation

The results of operations data for the three months ended September 24, 2020 (third quarter of 2020) and September 26, 2019 (third quarter of 2019) and the nine months ended September 24, 2020 and September 26, 2019 was derived from the unaudited Condensed Consolidated Financial Statements and accounting records of NCM, Inc.

The results of operations data for the three months ended April 1, 2021 (first quarter of 2021) and March 26, 2020 (first quarter of 2020) was derived from the unaudited Condensed Consolidated Financial Statements and accounting records of NCM, Inc.

and should be read in conjunction with the notes thereto.

Results of Operations

Third Quarter of 2020 and Third Quarter of 2019

Total revenue decreased 94.6%, from $110.5 million for the third quarter of 2019 to $6.0 million for the third quarter of 2020.

First Quarter of 2021 and First Quarter of 2020

Total revenue decreased 91.7%, from $64.7 million for the first quarter of 2020 to $5.4 million for the first quarter of 2021.

The following is a summary of revenue by category (in millions):

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Total revenue $ 5.4 $ 64.7 $ (59.3) (91.7) %

The following table shows data on theater attendance and revenue per attendee for the nine months ended September 24, 2020 and September 26, 2019:

Three Months Ended % Change

Q3 2019 Q3 2020 to Q3 2019

The following table shows data on theater attendance and revenue per attendee for the three months ended April 1, 2021 and March 26, 2020:

Q1 2021 Q1 2020 Q1 2021 to Q1 2020

National and regional advertising revenue per attendee $ 0.268 $ 0.414 (35.3) %

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________________________________________________________

National and regional advertising revenue.

The $82.9 million, or 95.9%, decrease in national and regional advertising revenue (excluding beverage revenue from founding members) was due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic preventing the Company from performing in-theater advertising for over three-fourths of the third quarter of 2020.

The national and regional advertising revenue recognized in the third quarter of 2020 was primarily related to revenue associated with our digital service offerings and onscreen revenue during the last three weeks of the quarter when some of the theaters within our network that had reopened.

The $46.1 million, or 92.6%, decrease in national and regional advertising revenue (excluding beverage revenue from founding members) was due to an 95.4% decrease in impressions sold due to the continued temporary closure of approximately 40% of the theaters within our network in response to the COVID-19 Pandemic and the significant decrease in attendance from historical levels at open theaters during the first quarter of 2021.

Local advertising revenue.

The $14.5 million, or 86.3%, decrease in local advertising revenue was due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic and preventing the Company from performing in-theater advertising for over three-fourths of the third quarter of 2020.

The local advertising revenue recognized in the third quarter of 2020 was primarily related to revenue associated with our digital service offerings.

The $8.2 million, or 87.2%, decrease in local advertising revenue was due to the continued temporary closure of approximately 40% the theaters within our network in response to the COVID-19 Pandemic and the significant decrease in attendance from historical levels at open theaters during the first quarter of 2021.

Founding member beverage revenue.

The $7.1 million, or 97.3%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to a 96.9% decrease in founding member attendance for the third quarter of 2020, compared to the third quarter of 2019.

The decrease in founding member attendance was due to the temporary theater closure described above related to the COVID-19 Pandemic.

The $5.0 million, or 90.9%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to an 89.7% decrease in founding member attendance for the first quarter of 2021, as compared to the first quarter of 2020, due to the continued temporary theater closures described above related to the COVID-19 Pandemic.

Operating expenses.

Total operating expenses decreased $43.2 million, or 61.3%, from $70.5 million for the third quarter of 2019 to $27.3 million for the third quarter of 2020.

The following table shows the changes in operating expense for the third quarter of 2020 (in millions):

Total operating expenses decreased $26.1 million, or 43.6%, from $59.8 million for the first quarter of 2020 to $33.7 million for the first quarter of 2021.

The following table shows the changes in operating expense for the first quarter of 2021 (in millions):

$ Change % Change

11 unchanged sentences

Advertising operating costs.

Advertising operating costs decreased $8.5 million, or 88.5%, from $9.6 million for the third quarter of 2019 to $1.1 million for the third quarter of 2020.

The decrease was due to a $7.8 million decrease in advertising affiliate expense due to the limited attendance at affiliate theaters during the third quarter of 2020 due to the COVID-19 Pandemic and the corresponding lower revenue.

The decrease was also due to a $0.5 million decrease in personnel primarily related expenses related to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic.

Advertising operating costs decreased $4.7 million, or 75.8%, from $6.2 million for the first quarter of 2020 to $1.5 million for the first quarter of 2021.

The decrease was due primarily to a $4.0 million decrease in advertising affiliate expense due to lower revenue in the first quarter of 2021 as compared to the first quarter of 2020 due to the COVID-19 Pandemic, and a $0.4 million decrease in personnel related expenses due to the Temporary Salary and Wage Reductions in place during the first quarter of 2021 in response to the COVID-19 Pandemic.

Network costs.

Network costs decreased $1.4 million, or 43.8%, from $3.2 million for the third quarter of 2019 to $1.8 million for the third quarter of 2020.

The decrease was primarily related to a $1.0 million decrease in personnel expenses primarily related to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic and a $0.2 million decrease in maintenance expenses related to our Digital Content Network due to the temporary closure of almost all the theaters within our network for the majority of the third quarter of 2020 in response to the COVID-19 Pandemic.

Network costs decreased $1.1 million, or 37.9%, from $2.9 million for the first quarter of 2020 to $1.8 million for the first quarter of 2021.

The decrease was primarily related to a $0.9 million decrease in personnel related expenses related to the Temporary Salary and Wage Reductions in place during the first quarter of 2021 in response to the COVID-19 Pandemic and a $0.1 million decrease related to non-essential operating expenditures, including employee travel that was suspended as part of the measures taken to reduce expenses and preserve cash during the COVID-19 Pandemic.

Theater access fees and revenue share—founding members.

Theater access fees and revenue share decreased $18.3 million, or 91.0%, from $20.1 million in the third quarter of 2019 to $1.8 million in the third quarter of 2020.

The decrease was due to the temporary closure of almost all the founding member theaters in response to the COVID-19 Pandemic until a portion of founding member theaters reopened in late August 2020.

The Company did not owe the founding members any theater access fees for the period the theaters were not open and these fees were reduced, as compared to the third quarter of 2019, after theaters opened due to lower attendance and fewer open theaters.

Theater access fees and revenue share decreased $14.6 million, or 82.5%, from $17.7 million in the first quarter of 2020 to $3.1 million in the first quarter of 2021.

The decrease was due to an 89.7% decrease in founding member attendance for the first quarter of 2021, as compared to first quarter of 2020, and fewer active founding member screens during the first quarter of 2021 due to the temporary closure of certain founding member theaters in response to the COVID-19 Pandemic.

Selling and marketing costs.

Selling and marketing costs decreased $9.5 million, or 55.9%, from $17.0 million for the third quarter of 2019 to $7.5 million for the third quarter of 2020.

This decrease was primarily related to a $4.3 million decrease in personnel related expenses related to a decrease in commission and bonus expense due to lower revenue generated in the third quarter of 2020, as compared to the third quarter of 2019, as well as, the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic.

Selling and marketing costs also decreased 1) $2.0 million related to non-cash impairment expense realized in the third quarter of 2019 related to investments obtained in prior years in exchange for advertising services, 2) $1.2 million related to a reduction in non-essential operating expenditures including marketing, research and employee travel that were suspended as part of the measures taken to reduce expenses and preserve cash during the COVID-19 Pandemic, 3) $0.9 million due to a decrease in barter

expense for the third quarter of 2020, as compared to the third quarter of 2019 and 4) $0.4 million due to a decrease in bad debt expense resulting from lower revenue in the third quarter of 2020, as compared to the third quarter of 2019.

Selling and marketing costs decreased $6.2 million, or 44.6%, from $13.9 million for the first quarter of 2020 to $7.7 million for the first quarter of 2021.

This decrease was primarily related to a $2.9 million decrease in personnel related expenses primarily due to a decrease in commission expense driven by the revenue declines during the first quarter of 2021, as compared to the first quarter of 2020, as well as other lower personnel related expenses related to the Temporary Salary and Wage Reductions in place during the first quarter of 2021 in response to the COVID-19 Pandemic, a $2.3 million decrease related to non-essential operating expenditures, including marketing, training, research, consulting and employee travel that were suspended as part of the measures taken to reduce expenses and preserve cash during the COVID-19 Pandemic and a $1.5 million decrease in bad debt expense and production and royalty related costs resulting from lower revenue in the first quarter of 2021, compared to the first quarter of 2020.

These decreases were partially offset by a $0.5 million increase in expense associated with our Noovie® Audience Accelerator service offering in 2021, compared to 2020 due to higher digital revenue and a change in the mix of digital products sold.

Administrative and other costs.

Administrative and other costs decreased $4.6 million, or 44.2%, from $10.4 million in the third quarter of 2019 to $5.8 million in the third quarter of 2020.

This decrease was primarily due to a $4.0 million decrease in personnel related expenses due to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic and a decrease in performance based compensation expense related to lower projected performance against internal bonus and performance based restricted stock targets as of the third quarter of 2020, compared to the third quarter of 2019.

Administrative and other costs also decreased $0.4 million due to a decrease in consulting services.

Administrative and other costs increased $0.4 million, or 4.1%, from $9.8 million in the first quarter of 2020 to $10.2 million in the first quarter of 2021.

This increase was primarily due to a $3.2 million increase in performance-based compensation expense following the modification of certain of the Company’s performance-based stock grants during the first quarter of 2021, issuance of retention related stock grants and higher projected performance against internal bonus targets, partially offset by a $1.9 million decrease in salary and other personnel related expenses related to the Temporary Salary and Wage Reductions in place during the first quarter of 2021 in response to the COVID-19 Pandemic, a $0.6 million decrease in legal and professional fees for the first quarter of 2021, as compared to the first quarter of 2020 and a $0.3 million decrease related to non-essential operating expenditures, including employee travel that was suspended as part of the measures taken to reduce expenses and preserve cash during the COVID-19 Pandemic.

Depreciation expense.

Depreciation expense decreased $0.3 million, or 8.8%, from $3.4 million for the third quarter of 2019 to $3.1 million for the third quarter of 2020, as assets became fully depreciated.

Depreciation expense increased $0.1 million, or 3.1%, from $3.2 million for the first quarter of 2020 to $3.3 million in the first quarter of 2021.

Amortization of intangibles recorded for network theater screen leases.

Amortization of intangibles recorded for network theater screen leases decreased $0.6 million, or 8.8%, from $6.8 million for the third quarter of 2019, to $6.2 million for the third quarter of 2020, primarily due to the four year extension of the contractual life of the intangible assets for Cinemark and Regal following the 2019 ESA Amendments at the end of the third quarter of 2019.

Amortization of intangibles recorded for network theater screen leases remained consistent at $6.1 million for the first quarter of 2021 and 2020.

Non-operating expenses.

Total non-operating expenses decreased $0.2 million, or 1.6%, from $12.9 million for the third quarter of 2019 to $12.7 million for the third quarter of 2020.

The following table shows the changes in non-operating expense for the third quarter of 2020 and the third quarter of 2019 (in millions):

Total non-operating expenses increased $0.2 million, or 1.5%, from $13.5 million for the first quarter of 2020 to $13.7 million for the first quarter of 2021.

The following table shows the changes in non-operating expense for the first quarter of 2021 and the first quarter of 2020 (in millions):

$ Change % Change

2 unchanged sentences

Interest income — (0.2) 0.2 (100.0) %

Gain on the re-measurement of the payable

to founding members under the tax receivable

agreement (1.0) (0.5) (0.5) 100.0 %

Other non-operating expense 0.1 — 0.1 100.0 %

Total non-operating expenses $ 12.7 $ 12.9 $ (0.2) (1.6) %

The decrease in non-operating expense was primarily due to a $0.5 million increase in the gain on the re-measurement of the payable to founding members under the tax receivable agreement due to the reduction of the payable balance related to certain state net operating losses which the Company expects to expire prior to utilization and a $0.3 million decrease in interest income on the Company's marketable securities due to a decrease in the rate of return and the outstanding balance of securities in the third quarter of 2020 as compared to the third quarter of 2019.

Income Tax Benefit.

Income Tax Benefit increased from income tax expense of $4.3 million for the third quarter of 2019 to $3.1 million of income tax benefit for the third quarter of 2020.

The increase in income tax benefit was primarily due to the decrease in pretax book income attributable to NCM Inc.

from income of $13.1 million for the third quarter of 2019 to loss of $15.8 million for the third quarter of 2020.

Net loss increased $21.9 million from net income of $9.2 million for the third quarter of 2019 to net loss of $12.7 million for the third quarter of 2020.

The increase in net loss was due to a $61.3 million increase in operating loss, partially offset by a $31.8 million increase in net loss attributable to noncontrolling interests, a $7.4 million increase in income tax benefit and a $0.2 million decrease in non-operating expenses.

Nine months ended September 24, 2020 and September 26, 2019

Total revenue decreased 74.9%, from $297.6 million for the nine months ended September 26, 2019 to $74.7 million for the nine months ended September 24, 2020.

The following is a summary of revenue by category (in millions):

Nine Months Ended $ Change % Change

September 24, 2020 September 26, 2019 YTD 2020 to YTD 2019 YTD 2020 to YTD 2019

National and regional advertising revenue $ 55.0 $ 228.1 $ (173.1) (75.9) %

Local advertising revenue 14.0 47.3 (33.3) (70.4) %

Founding member advertising revenue from

beverage concessionaire agreements 5.7 22.2 (16.5) (74.3) %

Total revenue $ 74.7 $ 297.6 $ (222.9) (74.9) %

The following table shows data on theater attendance and revenue per attendee for the nine months ended September 24, 2020 and September 26, 2019:

Nine Months Ended % Change

September 24, 2020 September 26, 2019 YTD 2020 to YTD 2019

National and regional advertising revenue per attendee $ 0.437 $ 0.459 (4.8) %

Local advertising revenue per attendee $ 0.111 $ 0.095 16.8 %

Total advertising revenue (excluding founding

member beverage revenue) per attendee $ 0.548 $ 0.554 (1.1) %

Total advertising revenue per attendee $ 0.594 $ 0.598 (0.7) %

Total theater attendance (in millions) (1)

125.8 497.4 (74.7) %

________________________________________________________

National and regional advertising revenue.

The $173.1 million, or 75.9%, decrease in national and regional advertising revenue (excluding beverage revenue from founding members) was primarily due to a 74.9% decrease in impressions sold due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic preventing the Company from performing in-theater advertising beginning in mid-March 2020 until the beginning of September 2020 when some of the theaters within our network reopened and in-theater advertising resumed.

National advertising CPMs for the impressions delivered for the portion of the nine months ended September 24, 2020 the theaters were open decreased 8.8% driven by 1) a decrease in upfront and scatter market CPMs due to the churn of certain higher CPM deals, that were replaced by lower CPM deals, as well as, 2) a change in the mix of clients with a higher proportion of upfront clients and fewer higher CPM scatter market and content partner clients in the nine months ended September 24, 2020, as compared to the nine months ended September 26, 2019.

The scatter market represents inventory not included within an upfront or content partner commitment sold closer to the advertisement air date for typically higher CPMs.

Local advertising revenue.

The $33.3 million, or 70.4%, decrease in local advertising revenue was primarily due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic preventing the Company from performing in-theater advertising beginning in mid-March 2020 until the beginning of September 2020 when some of the theaters within our network reopened and in-theater advertising resumed.

The decrease is also due to a decrease in the volume of contracts and the average contract value for the portion of the nine months ended September 24, 2020 that the theaters were open, compared to the same time period during the nine months ended September 26, 2019.

Founding member beverage revenue.

The $16.5 million, or 74.3%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to a 74.8% decrease in founding member attendance for the nine months ended September 24, 2020, as compared to nine months ended September 26, 2019, due to the temporary theater closures describe above related to the COVID-19 Pandemic.

The national advertising revenue from the founding members’ beverage concessionaire agreements recognized in the nine months ended September 24, 2020 was due to founding member attendance that occurred in the first quarter of 2020 and the latter part of the third quarter of 2020.

Operating expenses.

Total operating expenses decreased $94.1 million, or 45.0%, from $209.0 million for the nine months ended September 26, 2019 to $114.9 million for the nine months ended September 24, 2020.

The following table shows the changes in operating expense for the nine months ended September 24, 2020 and September 26, 2019 (in millions):

Nine Months Ended $ Change % Change

September 24, 2020 September 26, 2019 YTD 2020 to YTD 2019 YTD 2020 to YTD 2019

Advertising operating costs $ 8.4 $ 26.8 $ (18.4) (68.7) %

Network costs 6.3 10.1 (3.8) (37.6) %

Theater access fees and revenue share—founding members 19.5 60.8 (41.3) (67.9) %

Selling and marketing costs 28.1 48.4 (20.3) (41.9) %

Administrative and other costs 23.0 32.2 (9.2) (28.6) %

Impairment of long-lived assets 1.7 — 1.7 100.0 %

Depreciation expense 9.5 10.0 (0.5) (5.0) %

Amortization of intangibles recorded for

network theater screen leases 18.4 20.7 (2.3) (11.1) %

Total operating expenses

$ 114.9 $ 209.0 $ (94.1) (45.0) %

Advertising operating costs.

Advertising operating costs decreased $18.4 million, or 68.7%, from $26.8 million for the nine months ended September 26, 2019 to $8.4 million for the nine months ended September 24, 2020.

The decrease was due to a $17.4 million decrease in advertising affiliate expense due to the temporary closure of almost all the affiliate theaters within our network in response to the COVID-19 Pandemic and the corresponding lower revenue and a $0.8 million decrease in personnel related expenses primarily related to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic.

Network costs.

Network costs decreased $3.8 million, or 37.6%, from $10.1 million for the nine months ended September 26, 2019 to $6.3 million for the nine months ended September 24, 2020.

The decrease was primarily related to a $2.8 million decrease in personnel related expenses related to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic and a decrease in performance based compensation expense related to lower projected performance against internal bonus and performance based restricted stock targets as of September 24, 2020, as compared to September 26, 2019, and a $0.6 million decrease in maintenance expense primarily related to our Digital Content Network due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic.

Theater access fees and revenue share—founding members.

Theater access fees and revenue share decreased $41.3 million, or 67.9%, from $60.8 million for the nine months ended September 26, 2019 to $19.5 million for the nine months ended September 24, 2020.

The decrease was primarily due to a 74.8% decrease in founding member attendance for the nine months ended September 24, 2020, as compared to nine months ended September 26, 2019, due to the temporary closure of almost all the founding member theaters in response to the COVID-19 Pandemic beginning in mid-March 2020 until late August when a portion of the founding member theaters reopened.

The Company did not owe the founding members any theater access fees for the period the theaters were not open.

This decrease was partially offset by $1.7 million of higher expense in the nine months ended September 24, 2020 to Cinemark and Regal as compensation for post-showtime advertising in accordance with the 2019 ESA Amendments.

Selling and marketing costs.

Selling and marketing costs decreased $20.3 million, or 41.9%, from $48.4 million for the nine months ended September 26, 2019 to $28.1 million for the nine months ended September 24, 2020.

This decrease was primarily related to a $11.8 million decrease in personnel related expenses primarily due to a decrease in commission and bonus expense due to the revenue declines in the nine months ended September 24, 2020, as compared to the nine months ended September 26, 2019, as well as, the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic.

Selling and marketing costs also decreased $3.2 million related to non-essential operating expenditures, including marketing, research, consulting and employee travel that were suspended as part of the measures taken to reduce expenses and preserve cash during the COVID-19 Pandemic, $2.2 million due to a decrease in barter expense for the nine months ended September 24, 2020, compared to the nine months ended September 26, 2019, a $2.0 million decrease in non-cash impairment expense realized in the third quarter of 2019 related to investments obtained in prior years in exchange for advertising services, $0.5 million decrease in production and royalty related costs due to the decrease in revenue generated in the nine months ended September 24, 2020, compared to the nine months ended September 26, 2019 and $0.4 million due to a decrease in bad debt expense resulting from lower revenue in the nine months ended September 24, 2020, compared to the nine months ended

September 26, 2019.

These decreases were partially offset by a $0.9 million increase in expense associated with our Cinema Accelerator service offering for the nine months ended September 24, 2020, compared to the nine months ended September 26, 2019.

Administrative and other costs.

Administrative and other costs decreased $9.2 million, or 28.6%, from $32.2 million for the nine months ended September 26, 2019 to $23.0 million for the nine months ended September 24, 2020.

Administrative and other costs decreased primarily due to a $7.4 million decrease in personnel related expenses due to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic and a decrease in performance based compensation expense related to lower projected performance against internal bonus and performance based restricted stock targets as of September 24, 2020, as compared to September 26, 2019.

Administrative and other costs also decreased $1.1 million due to a decrease in consulting services and $0.4 million decrease in CEO transition fees related to costs incurred in the first nine months of 2019.

Impairment of long-lived assets.

Impairment of long-lived assets increased $1.7 million, or 100.0%, from $0.0 million in the nine months ended September 26, 2019 to $1.7 million in the nine months ended September 24, 2020.

This increase in impairment expense was primarily related to the write-off of certain long-lived assets during the nine months ended September 24, 2020.

Depreciation expense.

Depreciation expense decreased $0.5 million, or 5.0%, from $10.0 million for the nine months ended September 26, 2019 to $9.5 million for the nine months ended September 24, 2020, as assets became fully depreciated.

Amortization of intangibles recorded for network theater screen leases.

Amortization of intangibles recorded for network theater screen leases decreased $2.3 million, or 11.1%, from $20.7 million for the nine months ended September 26, 2019, to $18.4 million for the nine months ended September 24, 2020, primarily due to the four year extension of the contractual life of the intangible assets for Cinemark and Regal following the 2019 ESA Amendments during the end of the third quarter of 2019.

Non-operating expenses.

Total non-operating expenses decreased $1.4 million, or 3.4%, from $41.4 million for the nine months ended September 26, 2019 to $40.0 million for the nine months ended September 24, 2020.

The following table shows the changes in non-operating expense for the nine months ended September 24, 2020 and September 26, 2019 (in millions):

Nine Months Ended $ Change % Change

September 24, 2020 September 26, 2019 YTD 2020 to YTD 2019 YTD 2020 to YTD 2019

Interest on borrowings $ 40.9 $ 42.4 $ (1.5) (3.5) %

Interest income (0.6) (1.4) 0.8 (57.1) %

Loss (gain) on modification and retirement of

debt, net 0.3 (0.3) 0.6 (200.0) %

Loss on modification and retirement of debt, net 0.4 — 0.4 (100.0) %

(Gain) loss on the re-measurement of the payable

3 unchanged sentences

Total non-operating expenses $ 13.7 $ 13.5 $ 0.2 1.5 %

The decrease in non-operating expense was primarily due to a decrease of $1.5 million in interest on borrowings due to a 0.69% decrease in the weighted average interest rate, partially offset by an increase in the weighted average balance of debt outstanding for the nine months ended September 24, 2020, as compared to the nine months ended September 26, 2019 and a decrease of $1.7 million in the loss on the re-measurement of the payable to founding members under the TRA due to the reduction of the payable balance related to certain state net operating losses which the Company no longer expects to utilize and a smaller increase in the deferred state tax rate in the nine months ended September 24, 2020 as compared to the nine months ended September 26, 2019.

These decreases were partially offset by a 1) $0.6 increase in the loss (gain) on modification and retirement of debt, net primarily related to the Credit Agreement Amendment that occurred in the second quarter of 2020 and the absence of a gain realized on the repurchase of a portion of the Notes due 2026 in the first quarter of 2019 and 2) a $0.8 million decrease in interest income on the Company's marketable securities due to a decrease in the rate of return and the outstanding balance of securities in the nine months ended September 24, 2020 as compared to the nine months ended September 26, 2019.

The increase in non-operating expense was primarily due to a $1.1 million increase in interest on borrowings primarily due to the increase in debt outstanding following the $110.0 million draw down on the revolving credit facility in late March 2020 and issuance of the second tranche of the terms loans under the Credit Agreement Second Amendment entered into on March 8, 2021 and a $0.4 million increase in the loss on modification and retirement of debt, net related to certain third party fees incurred in conjunction with the Credit Agreement Second Amendment, partially offset by a $1.7 million increase in the gain on the re-measurement of the payable to founding members under the Tax Receivable Agreement (“TRA”) due to a reduction in the payable to the founding members under the TRA following the recognition of certain deferred tax assets related to cancellation of debt income recognized for tax purposes in the first quarter of 2021 related to the Credit Agreement Second Amendment.

Income Tax Benefit.

Income Tax Benefit increased from income tax expense of $6.0 million for the nine months ended September 26, 2019 to income tax benefit of $7.7 million for the nine months ended September 24, 2020.

The increase in income tax benefit was primarily due to the decrease in pretax book income attributable to NCM Inc.

from income of $22.5 million for the nine months ended September 26, 2019 to loss of $37.8 million for the nine months ended September 24, 2020.

Net loss increased $47.2 million from net income of $17.0 million for the nine months ended September 26, 2019 to net loss of $30.2 million for the nine months ended September 24, 2020.

The increase in net loss was due to a $128.8 million increase in operating loss, partially offset by a $66.5 million increase in net loss attributable to noncontrolling interests, a $13.7 million increase in income tax benefit and a $1.4 million decrease in non-operating expenses.

Income tax benefit decreased from income tax benefit of $0.4 million for the first quarter of 2020 to $0.0 million of income tax benefit for the first quarter of 2021.

The decrease in income tax benefit was primarily due to the full valuation allowance recorded against the Company’s deferred tax assets as of April 1, 2021 which reduced deferred tax expense to $0.0 million for the three months ended April 1, 2021.

Net loss increased $15.7 million from net loss of $3.7 million for the first quarter of 2020 to $19.4 million for the first quarter of 2021.

The increase in net loss was due to a $33.2 million increase in operating loss, a $0.4 million decrease in income tax benefit and a $0.2 million increase in non-operating expense, partially offset by an $18.1 million increase in net loss attributable to noncontrolling interests.

Known Trends and Uncertainties

COVID-19 —As discussed within the ' Recent Developments ' section, due to the COVID-19 Pandemic, the Company was unable to advertise in the theaters, and thus generate the majority of its revenue, for the approximate six months of 2020 that the theaters were closed.

The Company's ability to advertise within the reopened theaters has been and will continue to be limited due to reduced movie schedules and patron capacities at many network theaters and the timing and frequency of new major motion picture releases as compared to prior years due to the COVID-19 Pandemic.

Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens and/or revenue, and therefore, were not incurred for the duration of time that the theaters were closed and attendance-based fees will be reduced for the period of time that attendance is lower than historical levels.

Due to the rapidly changing business environment, unprecedented market volatility, and other circumstances resulting from the COVID-19 Pandemic, we are currently unable to fully determine the extent of COVID-19’s impact on our business in future periods.

COVID-19 —As discussed within the ‘ Recent Developments ’ section, due to the COVID-19 Pandemic, approximately 40% of the theaters within the Company’s network remained temporarily closed as of April 1, 2021 and the Company's ability to advertise within the opened theaters has been and will continue to be limited due to reduced movie schedules and patron capacities at many network theaters and the timing and frequency of new major motion picture releases as compared to prior years due to the COVID-19 Pandemic.

Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens and/or revenue, and therefore, are not incurred when theaters are closed and attendance-based fees will be reduced for the period of time that attendance is lower than historical levels.

Due to the rapidly changing business environment, unprecedented market volatility, and other circumstances resulting from the COVID-19 Pandemic, we are currently unable to fully determine the extent of the COVID-19 Pandemic’s impact on our business in future periods.

However, we are monitoring the rapidly evolving situation and its potential impacts on our financial position, results of operations, liquidity and cash flows.

2 unchanged sentences

The CARES Act made changes to the U.S.

tax code that affect our fiscal year ending December 31, 2020, including, but not limited to, (1) reducing the limitation on deductible interest expense, (2) changing uses and limitations of net operating losses generated in tax years 2018, 2019, and 2020, (3) deferring the payment of the 6.2% FICA portion of Company's payroll taxes beginning on the enactment date through December 31, 2020 until the end of 2021 for one-half of the tax and the remaining half to the end of 2022 and (4) creating the Employee Retention Payroll Tax Credit for the Company's portion of the 6.2% FICA payroll tax for certain qualifying employees from March 13, 2020 through December 31, 2020.

The impact of these relief measures that are estimable as of September 24, 2020 have been incorporated within the Company's financial statements.

tax code that affect our fiscal year ending December 31, 2020, including, but not limited to, (1) reducing the limitation on deductible interest expense, (2) changing uses and limitations of net operating losses generated in tax years 2018, 2019, and 2020, (3) deferring the payment of the 6.2% FICA portion of Company's payroll taxes beginning on the enactment date through December 31, 2020 until the end of 2021 for one-half of the tax and the remaining half to the end of 2022 resulting in the deferral of $1.3 million in qualifying payments in the year ended December 31, 2020 for the Company and (4) creating the Employee Retention Payroll Tax Credit for the Company's portion of the 6.2% FICA payroll tax for certain qualifying employees from March 13, 2020 through December 31, 2020.

Beverage Revenue —Under the ESAs, up to 90 seconds of the Noovie® pre-show program can be sold to the founding members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements.

For the first three and nine months of 2020 and 2019, two of the founding members purchased 60 seconds of on-screen advertising time and one founding member purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements.

For the first three months of 2021 and 2020, two of the founding members purchased 60 seconds of on-screen advertising time and one founding member purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements.

The founding members’ current long-term contracts with their beverage suppliers require the 30 or 60 seconds of beverage advertising, although such commitments could change in the future.

Should the amount of time required as part of these beverage concessionaire agreements decline, this premium time will be available for sale to other clients.

The time sold to the beverage supplier for AMC is priced equal to the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of the Noovie pre-show, limited to the highest advertising CPM being then-charged by NCM LLC, which in 2019 decreased 0.3%.

Thus, the CPM on our beverage concessionaire revenue related to AMC in 2020 will decrease by 0.3% compared to 2019.

Per the ESA with AMC, the time sold to the founding member beverage supplier is priced equal to the greater of (1) the advertising CPM charged by NCM LLC in the previous year for the time sold to the founding member beverage supplier and (2) the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of the Noovie pre-show in the founding member’s theaters, limited to the highest advertising CPM being then-charged by NCM LLC.

The CPM on our beverage concessionaire revenue related to AMC in 2021 did not change compared to 2020.

Beginning in 2020 and in accordance with the 2019 ESA Amendments, the price for the time sold to Cinemark and Regal's beverage suppliers instead increased at a fixed rate of 2.0%.

The Company did not recognize any beverage revenue for the period of time that our founding members' theaters were closed due to the COVID-19 Pandemic.

Further, attendance has been and may continue to be lower than historical levels following the re-opening of theaters which could reduce the Company’s beverage revenue.

Founding member attendance has been and may continue to be lower than historical levels following the re-opening of theaters due to the COVID-19 Pandemic which could reduce the Company’s beverage revenue.

Theater Access Fees —In consideration for NCM LLC’s access to the founding members’ theater attendees for on-screen advertising and use of lobbies and other space within the founding members’ theaters for the LEN and lobby promotions, the founding members receive a monthly theater access fee under the ESAs.

2 unchanged sentences

Pursuant to the ESAs, the payment per digital screen increases annually by 5%.

Pursuant to the 2019 ESA Amendments, Cinemark and Regal each receive an additional monthly theater access fee beginning November 1, 2019 in consideration for NCM LLC's access to certain on-screen advertising

inventory after the advertised showtime of a feature film.

These fees are also based upon a fixed payment per patron:

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The Company does not owe the founding members any theater access fees when the theaters are closed.

As such, the Company did not owe these fees for the approximate 6 months the founding member theaters were closed and will not owe these fees during the duration of time a founding member's theaters are closed in connection with the COVID-19 Pandemic.

The digital screen fee is calculated based upon screens in use during each month.

No digital screen fees were incurred for approximately 6 months the founding member theaters were closed and no fees will be incurred for the months where no screens are in use and fees may be reduced for months where screens are in use for only part of the month.

Further, attendance has been and may continue to be lower than historical levels following the re-opening of theaters which could reduce the Company’s theater access fees.

No digital screen fees will be incurred for the months where a screen is not in use and fees may be reduced for months where screens are in use for only part of the month.

Further, founding member attendance has been and may continue to be lower than historical levels following the re-opening of theaters which could reduce the Company’s theater access fees.

Platinum Spot —In consideration for the utilization of the theaters post-showtime for Platinum Spots, Cinemark and Regal receive 25% of all revenue generated for the actual display of Platinum Spots in their applicable theaters, subject to a specified minimum.

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Liquidity and Capital Resources

Our cash balances can fluctuate due to the seasonality of our business and related timing of collections of accounts receivable balances and operating expenditure payments, as well as available cash payments (as defined in the NCM LLC Operating Agreement) to NCM LLC’s founding members, interest or principal payments on our term loan and the Notes due 2026 and Notes due 2028, income tax payments, TRA payments to NCM LLC’s founding members and amount of quarterly dividends to NCM, Inc.’s common stockholders.

As discussed within the ' Recent Developments ' section, due to the COVID-19 Pandemic, the Company was unable to advertise in the theaters, and thus generate the majority of its revenue, for the approximate 6 months that the theaters were generally closed.

The Company's ability to advertise within the reopened theaters has been and will continue to be limited due to reduced movie schedules and patron capacities at many network theaters and the timing and frequency of major motion picture releases as compared to prior years due to the COVID-19 Pandemic.

Our cash balances can fluctuate due to the seasonality of our business and related timing of collections of accounts receivable balances and operating expenditure payments, as well as available cash payments (as defined in the NCM LLC Operating Agreement) to NCM LLC’s founding members, interest or principal payments on our term loans and the Notes due 2026 and Notes due 2028, income tax payments, TRA payments to NCM LLC’s founding members and amount of quarterly dividends to NCM, Inc.’s common stockholders.

As discussed within the ‘ Recent Developments’ section, due to the COVID-19 Pandemic, approximately 40% of the theaters within the Company’s network remained temporarily closed as of April 1, 2021 and the Company's ability to advertise within the reopened theaters has been and will continue to be limited due to reduced movie schedules and patron capacities at many network theaters and the timing and frequency of major motion picture releases as compared to prior years due to the COVID-19 Pandemic.

The Company will have limited cash receipts until the full network of theaters reopen, major motion pictures are released and theater patrons feel comfortable returning to the theaters allowing attendance levels to normalize.

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The Company also implemented a number of cost-saving measures in order to preserve cash as further outlined within the ‘ Recent Developments’ section above.

In March 2020, we drew down an additional $110.0 million on our revolving credit facility.

Further, as of March 26, 2020, we had approximately $112.3 million of trade accounts receivable outstanding from customers, of which we have collected approximately $103.3 million as of September 24, 2020, increasing our cash and marketable securities balance to $220.7 million as of September 24, 2020 ($157.4 million at NCM LLC) and reducing trade accounts receivable to $9.0 million.

The $157.4 million of cash at NCM LLC will be used to fund operations during the period of expected reduced cash flows.

In March 2020, we drew down an additional $110.0 million on our revolving credit facility and in March 2021 we received $43.8 million in proceeds under incremental term loans that

mature on December 20, 2024.

The $139.4 million of cash at NCM LLC as of April 1, 2021 will be used to fund operations during the period of expected reduced cash flows.

Cash at NCM, Inc.

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shareholders, income tax payments, income tax receivable payments to NCM LLC’s founding members and other obligations.

In accordance with the Credit Agreement Amendment entered into in order to obtain a waiver of the financial covenants for the period beginning in the second quarter of 2020 through the second quarter of 2021, NCM LLC must maintain a total balance of $55.0 million of a combination of unrestricted cash on hand and availability under NCM LLC's revolving credit facility.

As of September 24, 2020, NCM LLC was in compliance with the requirements of the Credit Agreement Amendment.

In accordance with the Credit Agreement amendment entered into on April 30, 2020 (“the Credit Agreement First Amendment”) and the Credit Agreement Second Amendment, for the period beginning in the second quarter of 2020 through the date that NCM LLC delivers a compliance certificate for the third quarter of 2022, NCM LLC must maintain a total balance of $55.0 million of a combination of unrestricted cash on hand and availability under NCM LLC's revolving credit facility.

As of April 1, 2021, NCM LLC was in compliance with the requirements of the Credit Agreement, as amended.

Management believes the Company can meet its obligations, including all interest and debt service payments within the twelve months following the date of issuance of these financial statements, based on its current financial position and liquidity sources, including current cash balances, and forecasted future cash flows.

The Company may not be able 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 it 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.

A summary of our financial liquidity is as follows (in millions):

As of $ Change $ Change

September 24, 2020 December 26, 2019 September 26, 2019 Q3 2020 to YE 2019 Q3 2020 to Q3 2019

April 1, 2021 December 31, 2020 March 26, 2020 Q1 2021 to YE 2020 Q1 2021 to Q1 2020

Cash, cash equivalents and marketable securities (1)

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_________________________

(1) Included in cash, cash equivalents and marketable securities as of September 24, 2020, December 26, 2019 and September 26, 2019, was $157.4 million, $11.4 million and $2.0 million, respectively, of cash held by NCM LLC that is not available to satisfy dividends declared by NCM, Inc., income tax, tax receivable payments to NCM LLC’s founding members and other obligations.

(1) Included in cash, cash equivalents and marketable securities as of April 1, 2021, December 31, 2020 and March 26, 2020, was $139.4 million, $123.9 million and $132.2 million, respectively, of cash held by NCM LLC that is not available to satisfy dividends declared by NCM, Inc., income tax, tax receivable payments to NCM LLC’s founding members and other obligations.

(2) 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.

NCM LLC’s total capacity under the revolving credit facility was $175.0 million as of September 24, 2020, December 26, 2019 and September 26, 2019.

As of September 24, 2020, December 26, 2019 and September 26, 2019, the amount available under the NCM LLC revolving credit facility in the table above, was net of the amount outstanding under the revolving credit facility of $167.0 million, $39.0 million and $6.0 million, respectively, and net letters of credit of $3.6 million, $3.6 million and $4.8 million, respectively.

As of September 24, 2020, the weighted average remaining maturity of our debt was 5.7 years.

As of September 24, 2020, approximately 59% of our total borrowings bear interest at fixed rates.

NCM LLC’s total capacity under the revolving credit facility was $175.0 million as of April 1, 2021, December 31, 2020 and March 26, 2020.

As of April 1, 2021, December 31, 2020 and March 26, 2020, the amount available under the NCM LLC revolving credit facility in the table above, was net of the amount outstanding under the revolving credit facility of $167.0 million, $167.0 million and $167.0 million, respectively, and net letters of credit of $2.4 million, $3.6 million and $3.6 million, respectively.

As of April 1, 2021, the weighted average remaining maturity of our debt was 5.2 years.

As of April 1, 2021, approximately 57% of our total borrowings bear interest at fixed rates.

The remaining 43% of our borrowings bear interest at variable rates and our net income and earnings per share could fluctuate with market interest rate fluctuations that could increase or decrease the interest paid on our borrowings.

We have generated and used cash as follows (in millions):

Nine Months Ended

September 24, 2020 September 26, 2019

We have used and generated cash as follows (in millions):

Three Months Ended

April 1, 2021 March 26, 2020

Operating cash flow $ (25.0) $ 58.1

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• Operating Activities.

The $27.7 million decrease in cash provided by operating activities for the nine months ended September 24, 2020, compared to the nine months ended September 26, 2019 was primarily due to 1) a $113.7 million decrease in consolidated net income due the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic during the period, 2) a $15.7 million larger decrease in accounts payable and accrued expenses during the nine months ended September 24, 2020 as compared to the nine months ended September 26, 2019, related to the decrease in operating expenses for the corresponding periods as described above, 3) a $15.4 million increase in deferred income tax benefit and the gain on re-measurement of the payable to founding members under the TRA primarily due to the Company recognizing an income tax benefit in the nine months ended September 24, 2020 driven by the Company's consolidated net loss for the period and 4) a $6.6 million decrease in founding member integration and other encumbered theater payments.

These decreases in cash provided by operating activities were partially offset by $135.0 million larger decrease in the accounts receivable balance during the nine months ended September 24, 2020, as compared to the nine months ended September 26, 2019, related to the collection of the accounts receivable balance and the decrease in revenue described above.

The $83.1 million increase in cash used in operating activities for the first quarter of 2021, compared to the first quarter of 2020 was primarily due to a $51.7 million decrease in accounts receivable collections during the first quarter of 2021, as compared to the first quarter of 2020, a $33.8 million increase in consolidated net loss, and a $8.5 million decrease in founding member integration and other encumbered theater payments.

These decreases were due to the temporary closure of the theaters within our network in response to the COVID-19 Pandemic resulting in significantly decreased revenue and negative Adjusted OIBDA, from which integration payments are calculated.

These decreased cash inflows were partially offset by a $10.9 million decrease in accounts payable and accrued expenses payments due to the cash preservation actions taken by the Company to mitigate the impact of the COVID-19 Pandemic.

• Investing Activities.

The $5.5 million increase in cash provided by investing activities for the nine months ended September 24, 2020, compared to the nine months ended September 26, 2019 was primarily due to a $3.7 million increase in proceeds from the sale of marketable securities, net of purchases and a $3.2 million decrease in purchases of property and equipment for the nine months ended September 24, 2020, compared to the nine

months ended September 26, 2019 driven by the Company's measures to preserve cash in response to the COVID-19 Pandemic, partially offset by a $1.4 million decrease in proceeds from the founding member notes receivable.

The $2.8 million increase in cash used in investing activities for the first quarter of 2021, compared to the first quarter of 2020 was primarily due to a $4.1 million decrease in proceeds from the sale of

marketable securities, net of purchases.

This decrease was partially offset by a $1.3 million decrease in purchases of property and equipment in 2021, compared to 2020 due to the cash preservation actions taken by the Company to mitigate the impact of the COVID-19 Pandemic.

• Financing Activities.

The $179.1 million increase in cash provided by financing activities for the nine months ended September 24, 2020, compared to the nine months ended September 26, 2019 was primarily due to a $149.0 million increase in proceeds from our revolving credit facility, net of repayments made early in 2020, in order to fund operations during the period of expected reduced cash flows due to the temporary closure of the theaters within NCM LLC's network to address the COVID-19 Pandemic.

The increase was also due to a $13.9 million decrease in dividends paid related to the a decrease in the dividend amounts declared from $0.51 per share during the nine months ended September 26, 2019 to $0.33 per share during the nine months ended September 24, 2020, a $12.6 million decrease in distributions to founding members in the nine months ended September 24, 2020, compared to the nine months ended September 26, 2019 and the absence of a $4.6 million repurchase of the retired Notes due 2026 that occurred in the first quarter of 2019.

The $41.0 million decrease in cash provided by financing activities for the first quarter of 2021, compared to the first quarter of 2020 was primarily due to a $128.0 million decrease in proceeds from the revolving credit facility, net of repayments and a $5.9 million increase in the payment of debt issuance costs related to Credit Agreement Second Amendment executed in the first quarter of 2021.

These were partially offset by a $50.0 million increase in the issuance of term loans, a $32.4 million decrease in distributions to founding members in the first quarter of 2021, compared to the first quarter of 2020, and a $10.7 million decrease in dividends paid related to the decrease in the dividend amounts declared from $0.19 per share during the first quarter of 2020 to $0.05 per share during the first quarter of 2021.

Sources of Capital and Capital Requirements

NCM, Inc.’s primary source of liquidity and capital resources is the quarterly available cash distributions from NCM LLC as well as its existing cash balances and marketable securities, which as of September 24, 2020 were $63.3 million (excluding NCM LLC).

NCM, Inc.’s primary source of liquidity and capital resources is the quarterly available cash distributions from NCM LLC as well as its existing cash balances and marketable securities, which as of April 1, 2021 were $52.8 million (excluding $139.4 million of cash held by NCM LLC).

NCM LLC’s primary sources of liquidity and capital resources are its cash provided by operating activities, availability under its revolving credit facility and cash on hand.

NCM LLC drew down an additional $110.0 million of its revolving credit facility in March 2020 in order to supplement the decrease in cash provided by operating activities during the period our network theaters are closed.

NCM LLC drew down an additional $110.0 million of its revolving credit facility in March 2020 and received net proceeds of $43.8 million from incremental terms loans in March 2021 in order to supplement the decrease in cash provided by operating activities during the period a portion or all of our network theaters are closed.

The $139.4 million of cash at NCM LLC will be used to fund operations during the period of expected reduced cash flows.

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shareholders.

On April 30, 2020, NCM LLC entered into 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.

As of September 24, 2020, NCM LLC was in compliance with the requirements of the Credit Agreement Amendment.

Cash flows generated by NCM LLC’s distributions to NCM, Inc.

and the founding members will be impacted by the temporary closure of our network theaters and may even be deferred for the quarter ending June 25, 2020 through the quarter ending July 1, 2021 until at least August 2021 due to the limitations instituted by the Credit Agreement Amendment.

NCM LLC is required pursuant to the terms of the NCM LLC Operating Agreement to distribute its available cash, as defined in the operating agreement and unless prohibited by NCM LLC's Credit Agreement, quarterly to its members (Regal, Cinemark, AMC and NCM, Inc.).

The available cash distribution to the members of NCM LLC for the three months ended September 24, 2020 was calculated as approximately negative $24.5 million, of which NCM Inc.'s share is approximately negative $11.8 million.

The available cash distribution to the members of NCM LLC for the combined three months ended June 25, 2020 and three months ended September 24, 2020 was calculated as approximately negative $54.5 million, of which NCM Inc.'s share is approximately negative $26.2 million.

Pursuant to the NCM LLC Operating Agreement and the Credit Agreement Amendment, there will be no available cash distributions made for the third quarter of 2020.

These negative available cash distributions for the third quarter of 2020 are expected to be netted against any positive available cash distribution related to the second quarter of 2021, to be paid in the third quarter of 2021, if the Company is in compliance with the Credit Agreement Amendment requirements noted above and sufficient positive available cash is generated.

expects to use its cash balances and cash received from future available cash distributions (as allowed for under the Amended Credit Agreement) to fund income taxes, payments associated with the TRA with the founding members, including the TRA payment of $12.8 million made on July 15, 2020, and current and future dividends as declared by the Board of Directors, including a dividend declared on November 2, 2020 of $0.07 per share (approximately $5.5 million) on each share of the Company’s common stock (not including outstanding restricted stock) to stockholders of record on November 16, 2020 to be paid on December 1, 2020.

and the founding members will be impacted by the temporary closure of our network theaters and may be deferred through the quarter ending September 29, 2022 or longer if NCM LLC is not in compliance with the following limitations:

(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.

NCM LLC is required pursuant to the terms of the NCM LLC Operating Agreement to distribute its available cash, as defined in the operating agreement, unless prohibited by NCM LLC's Credit Agreement, quarterly to its members (Regal, Cinemark and NCM, Inc.).

The available cash distribution to the members of NCM LLC for the three months ended April 1, 2021 was calculated as approximately negative $30.9 million, of which NCM, Inc.'s share is approximately negative $14.9 million.

Further there was $85.9 million of negative available cash generated in during 2020.

Pursuant to the NCM LLC Operating Agreement and the Credit Agreement amendments, there will be no available cash distributions made for the first quarter of 2021.

Negative available cash distributions for the first quarter of 2021 and the negative available cash from 2020 are expected to be netted in accordance with the NCM LLC Operating Agreement against future positive available cash distributions after the Extended Covenant Waiver Holiday.

expects to use its cash balances and cash received from future available cash distributions (as allowed for under the Amended Credit Agreement) to fund income taxes, payments associated with the TRA with the founding members, and current and future dividends as declared by the Board of Directors, including a dividend declared on May 10, 2021 of $0.05 per share (approximately $4.0 million) on each share of the Company’s common stock (not including outstanding restricted stock) to stockholders of record on May 21, 2021 to be paid on June 7, 2021.

These items should be sufficient to fund payments associated with the TRA with the founding members, income taxes and its quarterly dividend for the foreseeable future at the discretion of the Board of Directors.

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.

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.

The declaration, payment, timing and amount of any future dividends payable will be at the sole discretion of the Board of Directors who will consider general economic and advertising market business conditions, the Company’s financial condition, available cash, current and anticipated cash needs 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.

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For a discussion of accounting policies that we consider critical to our business operations and understanding of our results of operations, and that affect the more significant judgments and estimates used in the preparation of our unaudited Condensed Consolidated Financial Statements, see Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” contained in our annual report on Form 10-K filed for the fiscal year ended December 26, 2019 and incorporated by reference herein.

As of September 24, 2020, there were no significant changes in those critical accounting policies except for the change in allowance for doubtful accounts upon the adoption of ASC 326 in the first quarter of 2020 and discussed further within Note 1— The Company , to the unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” contained in our annual report on Form 10-K filed for the fiscal year

ended December 31, 2020 and incorporated by reference herein.

As of April 1, 2021, there were no significant changes in those critical accounting policies.

Recent Accounting Pronouncements

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“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual and Other Obligations” contained in our annual report on Form 10-K for the fiscal year ended December 31, 2020 and incorporated by reference herein.

There were no material changes to our contractual obligations during the nine months ended September 24, 2020.

Our revenue and operating results are seasonal in nature, coinciding with the timing of marketing expenditures by our advertising clients and to a lesser extent the attendance patterns within the film exhibition industry.

Historically, both advertising expenditures and theater attendance have tended to be higher during the second, third, and fourth fiscal quarters.

Advertising revenue is primarily correlated with advertising clients' new product releases, advertising client marketing priorities and economic cycles and to a lesser extent theater attendance levels.

Seasonal demand during the summer is driven by the absence of alternative attractive advertising mediums and during the winter holiday season due to high client demand across all advertising mediums.

The actual quarterly results for each quarter could differ materially depending on these factors or other risks and uncertainties.

Based on our historical experience, our first quarter typically has less revenue than the other quarters of a given year due primarily to lower advertising client demand and increased inventory availability in competitive advertising mediums.

Given the temporary closure of our theaters, we expect our 2020 quarterly results to vary from the historical trend.

Accordingly, there can be no assurances that seasonal variations will not materially affect our results of operations in the future.

The following table reflects the quarterly percentage of total revenue for the fiscal years ended 2017, 2018 and 2019.

Quarter Second

Quarter Third

Quarter Fourth

FY 2017 16.9 % 22.8 % 27.3 % 33.0 %

FY 2018 18.2 % 25.8 % 24.9 % 31.1 %

FY 2019 17.3 % 24.8 % 24.8 % 33.1 %

There were no material changes to our contractual obligations during the three months ended April 1, 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 2. Management’s Discussion and Analysis