What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 222 added, 175 removed, 538 unchanged (42% of the section changed)

4 unchanged sentences

(In millions, except share and per share data)

April 1, 2021 December 31, 2020

July 1, 2021 December 31, 2020

CURRENT ASSETS:

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(In millions, except share and per share data)

Three Months Ended

April 1, 2021 March 26, 2020

Three Months Ended Six Months Ended

July 1, 2021 June 25, 2020 July 1, 2021 June 25, 2020

REVENUE (including revenue from related parties of $ 1.6 , $ 0.0 , $ 2.0 and $ 4.3 , respectively)

$ 14.0 $ 4.0 $ 19.4 $ 68.7

OPERATING EXPENSES:

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Theater access fees and revenue share to founding members (including fees to related parties of $ 7.1 , $ 0.0 , $ 8.4 and $ 12.5 , respectively)

11.2 — 14.3 17.7

Selling and marketing costs 8.9 6.7 16.6 20.6

Administrative and other costs 9.6 7.4 19.8 17.2

Impairment of long-lived assets — 1.7 — 1.7

Depreciation expense 2.6 3.2 5.9 6.4

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Total 43.6 27.8 77.3 87.6

OPERATING (LOSS) INCOME ( 28.3 ) 4.9

OPERATING LOSS ( 29.6 ) ( 23.8 ) ( 57.9 ) ( 18.9 )

NON-OPERATING EXPENSES:

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Loss on modification and retirement of debt, net 0.4 0.3 0.8 0.3

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

Other non-operating expense (income) 0.1 ( 0.1 )

Loss (gain) on re-measurement of the payable to founding members under the tax receivable agreement 0.1 0.1 ( 1.4 ) 0.3

Other non-operating expense — 0.1 0.1 —

Total 17.3 13.8 31.0 27.3

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(In millions) (UNAUDITED)

Three Months Ended

April 1, 2021 March 26, 2020

Six Months Ended

July 1, 2021 June 25, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

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Non-cash share-based compensation 4.8 0.3

Impairment of long-lived assets — 1.7

Amortization of debt issuance costs 1.9 1.2

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the tax receivable agreement ( 1.4 ) 0.3

Other ( 0.1 )

Founding member integration and other encumbered theater payments (including

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Receivables, net 4.4 147.3

Accounts payable and accrued expenses ( 0.2 ) ( 11.1 )

Accounts payable and accrued expenses (including payments to related parties of $ 0.6 and $ 0.0 , respectively)

Amounts due to/from founding members, net 2.3 ( 6.2 )

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CHANGE IN CASH AND CASH EQUIVALENTS:

( 32.9 ) 189.5

Cash and cash equivalents at beginning of period 180.3 55.9

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(In millions)

Three Months Ended

April 1, 2021 March 26, 2020

Six Months Ended

July 1, 2021 June 25, 2020

Supplemental disclosure of non-cash financing and investing activity:

Purchase of an intangible asset with NCM LLC equity $ 14.1 $ 10.5

Accrued distributions to founding members (including accrued distributions to related parties of $ 0.0

and $ 4.3 , respectively)

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

Purchase of subsidiary equity with NCM, Inc.

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Consolidated Shares Amount

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

Distributions to founding members — — — — — —

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

Comprehensive loss, net of tax ( 33.4 ) — — — ( 13.8 ) ( 19.6 )

Share-based compensation issued ( 0.1 ) 26,690 — ( 0.1 ) — —

Share-based compensation expensed/capitalized 0.1 — — — — 0.1

Cash dividends declared $ 0.07 per share

( 5.3 ) — — — ( 5.3 ) —

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

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

Income tax and other impacts of NCM LLC ownership changes ( 0.2 ) — — 0.2 — ( 0.4 )

Comprehensive loss, net of tax ( 46.9 ) — — — ( 22.7 ) ( 24.2 )

Share-based compensation issued ( 0.3 ) 221,200 — ( 0.3 ) — —

Share-based compensation expensed/capitalized 2.1 — — 1.4 — 0.7

Cash dividends declared $ 0.05 per share

( 4.4 ) — — — ( 4.4 ) —

Balance—July 1, 2021 $ ( 349.0 ) 80,238,751 $ 0.8 $ ( 197.6 ) $ ( 317.4 ) $ 165.2

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

Paid in Capital (Deficit) Retained

(Distribution in Excess of Earnings) Noncontrolling Interest

Consolidated Shares Amount

Balance—December 26, 2019 $ ( 121.2 ) 77,568,986 $ 0.8 $ ( 209.2 ) $ ( 171.1 ) $ 258.3

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Income tax and other impacts of NCM LLC ownership changes ( 0.5 ) — — ( 3.9 ) — 3.4

Comprehensive income, net of tax ( 8.2 ) — — — ( 3.7 ) ( 4.5 )

Comprehensive loss, net of tax ( 41.6 ) — — — ( 17.5 ) ( 24.1 )

Share-based compensation issued ( 1.0 ) 431,352 — ( 1.0 ) — —

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( 20.0 ) — — — ( 20.0 ) —

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

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

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

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( 8.9 ) — — — ( 8.9 ) —

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

Balance—July 1, 2021 $ ( 349.0 ) 80,238,751 $ 0.8 $ ( 197.6 ) $ ( 317.4 ) $ 165.2

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

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

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

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

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

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

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

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

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

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

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

As previously disclosed, the COVID-19 pandemic has had a significant impact on the world and the Company’s business beginning in March 2020 as 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.

These governmental restrictions resulted in the closure of most of the theaters within the Company’s network for approximately six months and thus the Company generated no in-theater advertising revenue during that time.

When theaters began to reopen late in the third quarter of 2020, in-theater advertising revenue continued to be adversely impacted as attendance at the reopened theaters was significantly less than normal given COVID-19 restrictions around patron capacity limitations and a continued lack of new major motion picture releases.

These and subsequent developments are referred to as the “COVID-19 Pandemic.” Beginning in 2021, multiple COVID-19 vaccines were approved and have been widely administered throughout the United States.

As a result, during the second quarter of 2021, government restrictions lessened allowing theaters in key larger markets to fully reopen over the course of the second quarter of 2021.

As of July 1, 2021, approximately 97.0 % of the theaters within the Company’s network were open.

With nearly all U.S.

theaters reopened, multiple successful major motion pictures were released during the second quarter of 2021 resulting in the highest theater attendance since the start of the COVID-19 Pandemic.

Despite the increase in network attendance, second quarter of 2021 in-theater advertising revenue remained significantly below historical levels as management believes many advertisers continued to delay making commitments until they confirmed that industry attendance had achieved necessary critical mass.

In addition, the Company was not able to participate in the 2021 advertising upfront marketplace during the summer of 2020 while theaters were closed.

As of the filing date, variants of the COVID-19 virus have been spreading throughout the United States resulting in mask mandates being reinstated in certain areas with increased infection rates.

It remains unclear how future theater attendance and revenue will be impacted by these developments.

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

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

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

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

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

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

The weighted average remaining term of the ESAs and the network affiliate agreements together is 15.9 years as of July 1, 2021 (based upon pre-COVID-19 attendance levels).

As of July 1, 2021, NCM LLC had 166,427,095 common membership units outstanding, of which 80,238,751 ( 48.2 %) were owned by NCM, Inc., 43,026,794 ( 25.9 %) were owned by Regal and 43,161,550 ( 25.9 %) were owned by Cinemark and 0 ( 0.0 %) were owned by AMC.

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

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Therefore, the unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s annual report on Form 10-K filed for the fiscal year ended December 31, 2020.

NATIONAL CINEMEDIA, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of management, all adjustments necessary to present fairly in all material respects the financial position, results of operations and cash flows for all periods presented have been made.

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The Company manages its business under one reportable segment of advertising.

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liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Estimates —The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates include those related to the reserve for uncollectible accounts receivable, share-based compensation and income taxes.

Actual results could differ from those estimates.

Actual results could differ from estimates.

Significant Accounting Policies

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Receivables are written off when management determines amounts are uncollectible.

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

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

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

The Company had no agencies through which the Company sourced advertising revenue that accounted for more than 10 % of the Company’s gross outstanding receivable balance as of July 1, 2021.

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

During the three months ended July 1, 2021 and June 25, 2020, the Company had one customer that accounted for 14.1 % and 18.0 % of the Company's revenue, respectively.

During the six months ended July 1, 2021 and June 25, 2020, the Company had one customer that account for 11.3 % and no customers that accounted for more than 10 % of revenue, respectively.

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

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

The Company recorded losses of $ 0.0 million, $ 1.7 million, $ 0.0 million and $ 1.7 million related to the write-off of certain internally developed software during the three months ended July 1, 2021 and June 25, 2020 and the six months ended July 1, 2021 and June 25, 2020, respectively.

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

The restricted stock and restricted stock unit grants for Company management vest upon the achievement of Company performance measures and/or service conditions, while non-management grants vest only upon the achievement of service conditions.

The restricted stock and restricted stock unit grants for Company management vest upon the achievement of Company performance measures and/or service conditions, while non-management grants vest

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

only upon the achievement of service conditions.

Compensation expense of restricted stock and restricted stock units that vest upon the achievement of Company performance measures is based on management’s financial projections and the probability of achieving the projections, which require considerable judgment.

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

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

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

On February 28, 2021 and March 2, 2021, the Company’s Board of Directors approved certain modifications to equity awards awarded under the Company’s 2016 Equity Incentive Plan to adjust performance metrics, vesting amount and future performance goals in light of the COVID-19 Pandemic resulting in incremental share-based compensation expense of $ 0.2 million and $1.5 million for the three months and six months ended July 1, 2021, respectively.

During the three months ended July 1, 2021 and June 25, 2020 and the six months ended July 1, 2021 and June 25, 2020, 281,810 , 33,378 , 1,125,539 and 557,681 shares of restricted stock and restricted stock units vested, respectively.

Consolidation —NCM, Inc.

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

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Three Months Ended

April 1, 2021 March 26, 2020

Three Months Ended Six Months Ended

July 1, 2021 June 25, 2020 July 1, 2021 June 25, 2020

Net loss attributable to NCM, Inc.

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Income tax and other impacts of subsidiary ownership changes 0.2 0.1 0.9 ( 3.9 )

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

Issuance of shares to founding members — — 6.6 —

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The Company derives revenue principally from the sale of advertising to national, regional and local businesses in Noovie® , the Company’s cinema advertising and entertainment pre-show.

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

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

promotions in theater lobbies.

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

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

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

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The deferred portion of the revenue associated with undelivered impressions is referred to as a make-good provision.

The Company defers the revenue associated with the make-good until the advertising airs to the theater attendance specified in the advertising contract.

The Company defers the revenue associated with the make-good until the advertising airs to the audience specified in the advertising contract.

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

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

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

As of July 1, 2021 and December 31, 2020, the Company had a make-good provision of $ 3.1 million and $ 7.1 million, respectively.

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

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

In addition, other of the Company’s contracts longer than one year that are cancellable are not included within this disclosure.

In addition, the Company’s other contracts longer than one year that are cancellable are not included within this disclosure.

Disaggregation of Revenue

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The Company disaggregates revenue based upon the type of customer:

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

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

Three Months Ended

April 1, 2021 March 26, 2020

The following table summarizes revenue from contracts with customers for the three and six months ended July 1, 2021 and June 25, 2020 (in millions):

Three Months Ended Six Months Ended

July 1, 2021 June 25, 2020 July 1, 2021 June 25, 2020

National and regional advertising revenue $ 8.9 $ 1.7 $ 12.6 $ 51.5

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Deferred Revenue and Unbilled Accounts Receivable

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

Three Months Ended

April 1, 2021

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

Six Months Ended

Balance at beginning of period $ ( 5.1 )

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Balance at end of period $ ( 6.4 )

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

As of July 1, 2021 and December 31, 2020, the Company had $ 3.5 million and $ 2.5 million in unbilled accounts receivable, respectively.

Allowance for Doubtful Accounts

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

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

Three Months Ended

April 1, 2021

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

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Six Months Ended

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

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share are as follows:

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Three Months Ended

April 1, 2021 March 26, 2020

Three Months Ended Six Months Ended

July 1, 2021 June 25, 2020 July 1, 2021 June 25, 2020

Net loss attributable to NCM, Inc.

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Diluted 80,115,377 77,995,951 79,298,366 77,879,959

(Loss) earnings per NCM, Inc.

Loss per NCM, Inc.

Basic $ ( 0.28 ) $ ( 0.18 ) $ ( 0.53 ) $ ( 0.22 )

Diluted $ ( 0.28 ) $ ( 0.18 ) $ ( 0.53 ) $ ( 0.22 )

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

The effect of 86,084,305 , 84,531,328 , 85,307,817 and 83,252,384 weighted average exchangeable NCM LLC common units held by the founding members for the three months ended July 1, 2021 and June 25, 2020 and six months ended July 1, 2021 and June 25, 2020, respectively, have been excluded from the calculation of diluted weighted average shares and loss per NCM, Inc.

share as they were anti-dilutive.

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

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

In addition, there were 4,376,000 , 3,777,240 , 4,376,000 and 3,777,240 , stock options and non-vested (restricted) shares for the three months ended July 1, 2021 and June 25, 2020 and six months ended July 1, 2021 and June 25, 2020, respectively, excluded from the calculation as they were anti-dilutive.

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

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

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

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

360, Impairment and Disposal of Long-Lived Assets.

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The estimated future cash flows from the affiliate agreements and ESAs calculated within the probability-weighted analyses were in excess of the net book value of these intangible assets and no impairment charges were recorded in the year ended December 31, 2020.

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

Given the uncertainty inherent in any projection, heightened by the possibility of unforeseen additional effects of the COVID-19 Pandemic, including potential adverse impacts to NCM LLC's founding members' and affiliates' financial liquidity, actual results may differ from the estimates and assumptions used, or conditions may change, which could result in impairment charges in the future.

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

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

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

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

Such analysis required

NATIONAL CINEMEDIA, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

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

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

During the three months ended July 1, 2021 and June 25, 2020 and six months ended July 1, 2021 and June 25, 2020, the Company recorded a reduction to net intangible assets of $ 0.2 million, $ 0.0 million, $ 0.2 million and $ 1.4 million, respectively, related to integration and other encumbered theater payments.

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

During the three months ended July 1, 2021 and June 25, 2020 and six months ended July 1, 2021 and June 25, 2020, AMC and Cinemark paid a total of $ 0.1 million, $ 1.2 million, $ 0.1 million and $ 9.7 million, respectively, in integration and other encumbered theater payments (as payments are made one quarter and one month in arrears, respectively).

The payments received during the three months ended June 25, 2020 primarily relate to AMC's acquisition of theaters from Carmike.

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

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

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

AMC has owned less than 5% of NCM LLC since July 2018 and is no longer a related party.

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

AMC will continue to participate in the annual Common Unit Adjustment and receive available cash distributions or allocation of earnings and losses in NCM LLC (as long as its ownership is greater than zero), TRA payments and theater access fees.

AMC will continue to participate in the annual

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Common Unit Adjustment and receive available cash distributions or allocation of earnings and losses in NCM LLC (as long as its ownership is greater than zero), TRA payments and theater access fees.

Further, AMC will continue to pay beverage revenue, among other things.

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

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

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

The material agreements with the founding members are as follows:

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The advertising services include the use of the digital content network (“DCN”) equipment required to deliver the on-screen advertising and other content included in the Noovie® pre-show, use of the LEN and rights to sell and display certain lobby promotions.

Further, 30 seconds to 60 seconds of advertising included in the Noovie pre-show is sold to NCM LLC’s founding members to satisfy the founding members’ on-screen advertising commitments under their beverage concessionaire agreements.

Further, NCM LLC’s founding members have elected to purchase 30 seconds to 60 seconds of advertising, out of the 90 seconds allowed for under the ESA, in the Noovie pre-show to satisfy the founding members’ on-screen advertising commitments under their beverage concessionaire agreements.

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

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

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

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

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

Three Months Ended

Three Months Ended Six Months Ended

Included in the unaudited Condensed Consolidated Statements of Income:

April 1, 2021 March 26, 2020

July 1, 2021 June 25, 2020 July 1, 2021 June 25, 2020

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

$ 1.6 $ — $ 2.0 $ 4.3

Operating expenses:

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

$ 7.1 $ — $ 8.4 $ 12.5

Selling and marketing costs (3)

$ — $ — $ — $ 0.1

Advertising operating costs (3)

$ — $ — $ 0.1 $ —

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

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

________________________________________

(1) For the three and six months ended July 1, 2021 and June 25, 2020, Cinemark and Regal purchased 60 seconds of on-screen advertising time from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 seconds equivalent CPM rate specified by the ESA.

No beverage revenue was generated for the period of time that the

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

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

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

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Included in the unaudited Condensed Consolidated Balance Sheets:

April 1, 2021 December 31, 2020

July 1, 2021 December 31, 2020

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

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

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

Three Months Ended

April 1, 2021 March 26, 2020

Mandatory distributions of available cash for the three and six months ended July 1, 2021 and June 25, 2020 were as follows (in millions):

Three Months Ended Six Months Ended

July 1, 2021 June 25, 2020 July 1, 2021 June 25, 2020

Cinemark $ — $ — $ — $ 2.1

Regal — — — 2.2

Total distributions to related parties — — — 4.3

Total $ — $ — $ — $ 8.4

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

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

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

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

for the three months ended July 1, 2021 were calculated as negative $ 39.2 million (including negative $ 10.2 million for Cinemark, negative $ 10.1 million for Regal and negative $ 18.9 million for NCM, Inc.).

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

The mandatory distributions of available cash by NCM LLC for the six months ended July 1, 2021 were calculated as negative $ 70.1 million (including negative $ 18.2 million for Cinemark, negative $ 18.1 million for Regal and negative $ 33.8 million for NCM, Inc.).

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

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

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

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Cinemark Regal Total

Theater access fees and revenue share, net of beverage revenues and other encumbered theater payments $ 1.3 $ 1.7 $ 3.0

Cost and other reimbursement — ( 0.1 ) ( 0.1 )

Total amounts due to founding members, net $ 1.3 $ 1.7 $ 3.0

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

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

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

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

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

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

The Company’s investment in AC JV, LLC was $ 0.6 million and $ 0.7 million as of July 1, 2021 and December 31, 2020, respectively.

Equity in (losses) earnings from AC JV, LLC of $ 0.0 million, $( 0.1 ) million, $( 0.1 ) million and $ 0.0 million for the three months ended July 1, 2021 and June 25, 2020 and six months ended July 1, 2021 and June 25, 2020, respectively, is included in “Other non-operating income” in the unaudited Condensed Consolidated Statements of Income.

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

Outstanding Balance as of

Borrowings April 1, 2021 December 31, 2020 Maturity

Borrowings July 1, 2021 December 31, 2020 Maturity

Date Interest

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

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

As of July 1, 2021, NCM LLC’s senior secured credit facility consisted of a $ 175.0 million revolving credit facility, a $ 261.9 million term loan (first tranche) and a $ 49.9 million term loan (second tranche).

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

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

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

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

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

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

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

Among other things, the Credit Agreement Second Amendment provides for certain modifications to the

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

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 $ 43.0 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, $ 3.9 million as debt issuance costs and $ 0.8 million within “Loss on modification and retirement of debt, net”.

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

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

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

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

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

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

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

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

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

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

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

As of July 1, 2021, NCM LLC has paid principal of $ 8.1 million, reducing the outstanding balance to $ 261.9 million.

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

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

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

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

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

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

Under the Credit Agreement, 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 minimum liquidity balance of $ 55.0 million consisting of a combination of unrestricted cash on hand and availability under NCM LLC's revolving credit facility.

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

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

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

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

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

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Due to the future market uncertainties discussed within Note 1 - The Company and in order to provide additional liquidity while revenue levels build and accounts receivable balances are collected, the Board of Directors of NCM, Inc.

and required NCM LLC founding members approved the material terms of a $ 20.0 million unsecured revolving loan agreement between NCM Inc.

Borrowings by NCM LLC will be available from October 1, 2021 through March 31, 2022.

The final definitive loan agreement will be approved by the Audit Committee of NCM, Inc.

and is expected to be completed in the third quarter of 2021.

Once entered into, this revolving loan facility will provide NCM LLC with short-term working capital loans as NCM LLC rebuilds its advertising revenue base and collects related accounts receivable and will provide additional cushion with respect to the NCM LLC debt covenants.

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

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

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

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

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

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

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

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

Changes in the Company’s Effective Tax Rate —The Company recorded income tax expense of $ 0.0 million for the six months ended July 1, 2021 compared to an income tax benefit of $ 4.6 million for the six months ended June 25, 2020 resulting in an effective tax rate of 0.0 % for the six months ended July 1, 2021 as compared to 20.8 % for the six months ended June 25, 2020.

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

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

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

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

COMMITMENTS AND CONTINGENCIES

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

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

The Company has right-of-use (“ROU”) assets of $ 19.7 million and short-term and long-term lease liabilities of $ 2.0 million and $ 21.6 million, respectively, on the balance sheet as of July 1, 2021 for all material leases with terms longer than twelve months.

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

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

As of July 1, 2021, the Company had a weighted average remaining lease term of 8.6 years on these leases.

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

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

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

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

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

During the three and six months ended July 1, 2021 and June 25, 2020, the Company recognized the following components of total lease cost (in millions).

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

Three Months Ended

April 1, 2021 March 26, 2020

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Three Months Ended Six Months Ended

July 1, 2021 June 25, 2020 July 1, 2021 June 25, 2020

Operating lease cost $ 0.9 $ 0.9 $ 1.8 $ 1.8

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Total lease cost $ 1.0 $ 1.1 $ 2.0 $ 2.1

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

The Company made total lease payments of $ 1.1 million, $ 0.9 million, $ 2.0 million and $ 1.8 million during the three months ended July 1, 2021 and June 25, 2020 and six months ended July 1, 2021 and June 25, 2020, respectively.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

No digital screen fees were or will be incurred for the period of time the founding member's theaters were temporarily closed due to the COVID-19 Pandemic and future fees will be reduced for months where screens are in use for only part of the month.

No digital screen fees were incurred for the period of time the founding member's theaters were temporarily closed due to the COVID-19 Pandemic and future fees may be reduced for months where screens are in use for only part of the month.

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The network affiliates compensation is considered variable lease expense and varies by circuit depending upon the agreed upon terms of the network affiliate agreement.

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

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

As of July 1, 2021, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $ 107.6 million over the remaining terms of the network affiliate agreements.

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

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

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

The Company accrued $ 0.1 million and $ 0.0 million related to affiliate agreements with guaranteed minimums in excess of the revenue share agreement as of July 1, 2021 and December 31, 2020, respectively.

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

FAIR VALUE MEASUREMENTS

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

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

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Other investments consisted of the following (in millions):

April 1, 2021 December 31, 2020

July 1, 2021 December 31, 2020

Investment in AC JV, LLC (1)

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This investment is accounted for utilizing the equity method.

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

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

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

The other investments were recorded based upon the fair value of the services provided in exchange for the investment.

The other investments were recorded based upon the fair

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value of the services provided in exchange for the investment.

As the inputs to the determination of fair value are based upon non-identical assets and use significant unobservable inputs, they have been classified as Level 3 in the fair value hierarchy.

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

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

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

Carrying Value Fair Value (1)

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Fair Value Measurements at Reporting Date Using

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

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

(Level 1) Significant Other

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Total assets $ 43.4 $ 41.8 $ 1.6 $ —

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Fair Value Measurements at Reporting Date Using

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The value of commercial paper and certificates of deposit is derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves.

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

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

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

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

As of April 1, 2021

The inputs to the valuation pricing models are observable in the market, and as such

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

are generally classified as Level 2 in the fair value hierarchy.

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

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

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

As of July 1, 2021

Amortized Cost

7 unchanged sentences

Total marketable securities $ 1.6 $ 1.6

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020

12 unchanged sentences

SUBSEQUENT EVENT

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

On August 9, 2021, the Company declared a cash dividend of $ 0.05 per share (approximately $ 4.1 million) on each share of the Company’s common stock (not including outstanding restricted stock which will accrue dividends until the shares vest) to stockholders of record on August 23, 2021 to be paid on September 6, 2021.

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

What changed 10-Q

Item 1. Financial Statements