National CineMedia, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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 of operations, 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 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. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. The following discussion and analysis should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herein and the audited financial statements and other disclosure included in our annual report on Form 10-K for the Company’s fiscal year ended December 31, 2020. In the following discussion and analysis, the term net income refers to net income attributable to NCM, Inc. Overview We are America's Movie Network. As the largest cinema advertising network in the U.S., we unite brands with the power of movies and engage movie fans anytime and anywhere. 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. We present two different formats of our Noovie pre-show depending on the theater circuit in which it runs. In Regal and Cinemark and 18 of our network affiliates' theaters, the Noovie pre-show 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 July 1, 2021, theaters presenting the new Noovie format with Post-Showtime Inventory made up approximately 56% of our network. All other NCM network theater circuits, which make up the remaining 44% of our network, present the Classic Noovie pre-show, which ends approximately at the advertised movie showtime when the movie trailers begin. The movie trailers that run before the feature film are not part of Noovie . 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 Noovie Audience Accelerator, across our suite of Noovie digital properties, including Noovie.com , Noovie Shuffle , Name That Movie and Noovie Arcade, on third party partner’s internet sites, as well as a variety of complementary out of home venues, including restaurants, retail locations, convenience stores, college campuses and office and residential buildings, in order to reach entertainment audiences beyond the theater. As of July 1, 2021, over 5.6 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 202.6 million as of July 1, 2021. We have long-term ESAs (approximately 18.2 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 August 2021 and December 2037. The weighted average remaining term of the ESAs and the network affiliate agreements is 15.9 years as of July 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 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. 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 21 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 March 8, 2021 for our fiscal year ended December 31, 2020. Recent Developments COVID-19 Impact and Outlook —As previously disclosed, the COVID-19 Pandemic has had a significant impact on the world and our 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 our network theaters for approximately six months and thus the Company generated no in-theater advertising revenue during that time. When theaters began to reopen in 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. 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. Multiple, successful major motion pictures were released during the second quarter of 2021 resulting in the highest attendance numbers within our network since the start of the COVID-19 Pandemic. The movie slate for the remainder of 2021 and into 2022 remains packed due to the addition of the major motion pictures originally scheduled for 2020. Despite the increase in network attendance, second quarter of 2021 in-theater advertising revenue remained significantly below historical levels as we believe many advertisers continued to delay making commitments until they confirmed that industry attendance had achieved necessary critical mass. We were also not able to participate in the 2021 advertising upfront marketplace during the summer of 2020 while theaters were closed. There can be no assurance that the cases of the COVID-19 virus will continue to decline; new variants will not continue to spread; recently reinstated mask mandates will not negatively impact network attendance, advertiser sentiment, and our business in general; social distancing, capacity restrictions, and other public safety measures will not be reintroduced; when or if theaters within our network will return to historic attendance levels and that the theaters which have reopened will remain open. To ensure sufficient liquidity to endure the impacts of the COVID-19 Pandemic, even if prolonged, we continued to manage our liquidity position through various cost control methods discussed further within the “ Financial Condition and Liquidity ” section below. Since the beginning of the COVID-19 Pandemic, the Company has significantly reduced payroll related costs through a combination of temporary furloughs, permanent layoffs and salary reductions (“Payroll Related Cost Reductions”). In total, the Company’s headcount has been reduced by over 30% as compared to headcount levels prior 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. We were still required to pay these screen-based fees when theaters are open, which were reduced for months where screens are in use for only part of the month. As a result of these actions and lower attendance, total operating expenses were over 20% lower in the six months ended July 1, 2021, as compared to the six months ended June 25, 2020. Further, due to these future market uncertainties 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. and NCM LLC. 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. 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 continue to benefit from pent-up social demand as 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, responsive governmental regulations, including mandated business closures which could recur causing subsequent closure periods, social distancing guidelines, theater capacity restrictions, government restrictions, shifting movie slates, voluntary theater closures and decreasing levels of theater attendance. Our business also could be significantly affected 22 should the disruptions caused by the COVID-19 Pandemic lead to permanent changes in consumer behavior (such as the movie audience’s willingness to return to the movie theaters, which may be influenced by the adoption or continued use of streaming services), or further reductions or impacts to the customary theatrical release window. The COVID-19 Pandemic also makes it more challenging for management to estimate the future performance of our business, particularly over the near to medium term. We are monitoring the rapidly evolving situation and its potential impacts on our financial position, results of operations, liquidity and cash flows. Summary Historical and Operating Data You should read this information with the other information contained in this document, and our unaudited historical financial statements and the notes thereto included elsewhere in this document. Our Operating Data —The following table presents operating data and Adjusted OIBDA (dollars in millions, except share and margin data): % Change Q2 2021 Q2 2020 YTD 2021 YTD 2020 Q2 2021 to Q2 2020 YTD 2021 to YTD 2020 Revenue $ 14.0 $ 4.0 $ 19.4 $ 68.7 250.0 % (71.8) % Operating expenses: Advertising 20.7 5.6 31.2 42.4 269.6 % (26.4) % Network, administrative and unallocated costs 22.9 22.2 46.1 45.2 3.2 % 2.0 % Total operating expenses 43.6 27.8 77.3 87.6 56.8 % (11.8) % Operating loss (29.6) (23.8) (57.9) (18.9) 24.4 % 206.3 % Non-operating expenses 17.3 13.8 31.0 27.3 25.4 % 13.6 % Income tax benefit — (4.2) — (4.6) (100.0) % (100.0) % Net loss attributable to noncontrolling interests (24.2) (19.6) (46.8) (24.1) 23.5 % 94.2 % Net loss attributable to NCM, Inc. $ (22.7) $ (13.8) $ (42.1) $ (17.5) 64.5 % 140.6 % Net loss per NCM, Inc. basic share $ (0.28) $ (0.18) $ (0.53) $ (0.22) 55.6 % 140.9 % Net loss per NCM, Inc. diluted share $ (0.28) $ (0.18) $ (0.53) $ (0.22) 55.6 % 140.9 % Adjusted OIBDA $ (18.7) $ (12.7) $ (34.9) $ 1.7 47.2 % (2152.9) % Adjusted OIBDA margin (133.6) % (317.5) % (179.9) % 2.5 % 183.9 % (182.4) % Total theater attendance (in millions) (1) 49.1 0.2 62.9 120.6 NM (47.8) % _________________________ (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. Non-GAAP Financial Measures 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 and impairment of long-lived assets. Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. Our management uses these non-GAAP financial measures to evaluate operating performance, to forecast future results and as a basis for compensation. 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 23 theater screen leases, non-cash share based compensation programs, 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. 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. The Company believes that operating income is the most directly comparable GAAP financial measure to Adjusted OIBDA. Because not all companies use identical calculations, these non-GAAP presentations may not be comparable to other similarly titled measures of other companies, or calculations in the Company’s debt agreement. The following table reconciles operating income to Adjusted OIBDA for the periods presented (dollars in millions): Q2 2021 Q2 2020 YTD 2021 YTD 2020 Operating loss $ (29.6) $ (23.8) $ (57.9) $ (18.9) Depreciation expense 2.6 3.2 5.9 6.4 Amortization of intangibles recorded for network theater screen leases 6.2 6.1 12.3 12.2 Share-based compensation costs (1) 2.1 0.1 4.8 0.3 Impairment of long-lived assets (2) — 1.7 — 1.7 Adjusted OIBDA $ (18.7) $ (12.7) $ (34.9) $ 1.7 Total revenue $ 14.0 $ 4.0 $ 19.4 $ 68.7 Adjusted OIBDA margin (133.6) % (317.5) % (179.9) % 2.5 % ____________________________________________ (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 impairment of long-lived assets primarily relate to the write off of certain internally developed software. Our Network —The change in the number of screens in our network by the founding members and network affiliates during the six months ended July 1, 2021 was as follows. Number of screens Founding Members Network Affiliates Total Balance as of December 31, 2020 16,515 3,935 20,450 New affiliates, net of lost affiliates (1) — 464 464 Closures, net of openings (2) (23) (8) (31) Balance as of July 1, 2021 16,492 4,391 20,883 ______________________________________ (1) Represents the addition of one new affiliate which added 501 new screens to our network, offset by the loss of three of our affiliates that closed during the first six months of 2021 resulting in a reduction of 37 affiliate screens to our network as of July 1, 2021. (2) Excludes the temporary theater closures in response to the COVID-19 Pandemic. Our founding member and network affiliate agreements allow us to sell cinema advertising across the largest network of digitally equipped theaters in the U.S. We believe that our market coverage strengthens our selling proposition and competitive positioning against other national, regional and local video advertising platforms, including television, online and mobile video platforms and other out-of-home video advertising platforms by allowing advertisers the broad reach and national scale that they need to effectively reach their target audiences. Basis of Presentation The results of operations data for the three months ended July 1, 2021 (second quarter of 2021) and June 25, 2020 (second quarter of 2020) and the six months ended July 1, 2021 and June 25, 2020 and 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. 24 Results of Operations Second Quarter of 2021 and Second Quarter of 2020 Revenue. Total revenue increased 250.0%, from $4.0 million for the second quarter of 2020 to $14.0 million for the second quarter of 2021. The following is a summary of revenue by category (in millions): $ Change % Change Q2 2021 Q2 2020 Q2 2021 to Q2 2020 Q2 2021 to Q2 2020 National and regional advertising revenue $ 8.9 $ 1.7 $ 7.2 423.5 % Local advertising revenue 3.0 2.3 0.7 30.4 % Founding member advertising revenue from beverage concessionaire agreements 2.1 — 2.1 100.0 % Total revenue $ 14.0 $ 4.0 $ 10.0 250.0 % The following table shows data on theater attendance and revenue per attendee for the three months ended July 1, 2021 and June 25, 2020: % Change Q2 2021 Q2 2020 Q2 2021 to Q2 2020 National and regional advertising revenue per attendee $ 0.181 NM NM Local advertising revenue per attendee $ 0.061 NM NM Total advertising revenue (excluding founding member beverage revenue) per attendee $ 0.242 NM NM Total advertising revenue per attendee $ 0.285 NM NM Total theater attendance (in millions) (1) 49.1 0.2 NM ________________________________________________________ (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. National and regional advertising revenue. The $7.2 million, or 423.5%, increase in national and regional advertising revenue (excluding beverage revenue from founding members) was due to a significant increase in impressions sold and attendance as 97.0% of the theaters within our network were open and multiple major motion pictures were released during the second quarter of 2021 compared to the temporary closure of almost all of the theaters in our network in response to the COVID-19 Pandemic in the second quarter of 2020. Local advertising revenue. The $0.7 million, or 30.4%, increase in local advertising revenue was due primarily to the ability to generate onscreen advertising revenue in the second quarter of 2021, compared to the second quarter of 2020 as 97.0% of the theaters within our network were open and multiple major motion pictures were released during the second quarter of 2021 compared to the temporary closure of almost all of the theaters in our network in response to the COVID-19 Pandemic in the second quarter of 2020. Founding member beverage revenue. The $2.1 million, or 100.0%, increase in national advertising revenue from the founding members’ beverage concessionaire agreements was due to the reopening of 98.8% of founding member theaters within our network and the release of multiple major motion pictures during the second quarter of 2021 compared to the temporary closure of all of the founding member theaters in our network in response to the COVID-19 Pandemic during the second quarter of 2020. Operating expenses. Total operating expenses increased $15.8 million, or 56.8%, from $27.8 million for the second quarter of 2020 to $43.6 million for the second quarter of 2021. The following table shows the changes in operating expense for the second quarter of 2021 (in millions): 25 $ Change % Change Q2 2021 Q2 2020 Q2 2021 to Q2 2020 Q2 2021 to Q2 2020 Advertising operating costs $ 3.2 $ 1.1 $ 2.1 190.9 % Network costs 1.9 1.6 0.3 18.8 % Theater access fees and revenue share—founding members 11.2 — 11.2 100.0 % Selling and marketing costs 8.9 6.7 2.2 32.8 % Administrative and other costs 9.6 7.4 2.2 29.7 % Impairment of long-lived assets — 1.7 (1.7) (100.0) % Depreciation expense 2.6 3.2 (0.6) (18.8) % Amortization of intangibles recorded for network theater screen leases 6.2 6.1 0.1 1.6 % Total operating expenses $ 43.6 $ 27.8 $ 15.8 56.8 % Advertising operating costs. Advertising operating costs increased $2.1 million, or 190.9%, from $1.1 million for the second quarter of 2020 to $3.2 million for the second quarter of 2021. The increase was due primarily to a $2.0 million increase in advertising affiliate expense due to higher revenue in the second quarter of 2021 as compared to the second quarter of 2020 and the addition of a new affiliate representing 501 screens during 2021. Network costs. Network costs increased $0.3 million, or 18.8%, from $1.6 million for the second quarter of 2020 to $1.9 million for the second quarter of 2021. The increase was primarily related to a $0.4 million increase in personnel expenses primarily related to the return of certain employees from furlough and restoration of hours and/or salaries of certain other employees from reductions that had been implemented at the beginning of the second quarter of 2020 in response to the COVID-19 Pandemic . Theater access fees and revenue share—founding members. Theater access fees and revenue share increased from $0.0 million in the second quarter of 2020 to $11.2 million in the second quarter of 2021. The increase was due to there being theater attendance and active founding member screens in the second quarter of 2021, compared to closures of all the founding member theaters in our network in the second quarter of 2020. Selling and marketing costs. Selling and marketing costs increased $2.2 million, or 32.8%, from $6.7 million for the second quarter of 2020 to $8.9 million for the second quarter of 2021. This increase was primarily related to a $1.9 million increase in personnel expenses primarily related to the return of a portion of our sales and marketing departments from furlough and restoration of hours and/or salaries of certain other employees from reductions that had been implemented at the beginning of the second quarter of 2020 in response to the COVID-19 Pandemic, an increase in commission expense related to higher revenue during the second quarter of 2021, as compared to the second quarter of 2020, and the higher share-based compensation expense. Administrative and other costs. Administrative and other costs increased $2.2 million, or 29.7%, from $7.4 million in the second quarter of 2020 to $9.6 million in the second quarter of 2021. This increase was primarily due to a $2.5 million increase in personnel expenses due to higher share-based compensation expense primarily from the issuance of equity grants in late 2020 and early 2021, higher projected performance against internal bonus targets during the six months ended July 1, 2021 and due to a decrease in capitalized personnel costs resulting from the nature of the work being performed by our technology department during the second quarter of 2021, as compared to the second quarter of 2020. Administrative and other costs also increased $0.5 million related to cloud computing expense incurred in the second quarter of 2021 related to the implementation of our new end-to-end order management and scheduling system in January 2021. These increases were partially offset by a $0.9 million decrease in legal and professional fees primarily related to legal services obtained in the second quarter of 2020 related to the various implications of the COVID-19 Pandemic. Impairment of long-lived assets. Impairment of long-lived assets decreased $1.7 million, or 100.0%, from $1.7 million in the second quarter of 2020 to $0.0 million in the second quarter of 2021. This decrease in impairment expense was primarily related to the write-off of certain long-lived assets during the second quarter of 2020. Depreciation expense. Depreciation expense decreased $0.6 million, or 18.8%, from $3.2 million for the second quarter of 2020 to $2.6 million in the second quarter of 2021, as assets became fully depreciated. 26 Amortization of intangibles recorded for network theater screen leases. Amortization of intangibles recorded for network theater screen leases increased $0.1 million, or 1.6%, from $6.1 million for the second quarter of 2020 to $6.2 million for the second quarter of 2021. Non-operating expenses. Total non-operating expenses increased $3.5 million, or 25.4%, from $13.8 million for the second quarter of 2020 to $17.3 million for the second quarter of 2021. The following table shows the changes in non-operating expense for the second quarter of 2021 and the second quarter of 2020 (in millions): $ Change % Change Q2 2021 Q2 2020 Q2 2021 to Q2 2020 Q2 2021 to Q2 2020 Interest on borrowings $ 16.9 $ 13.6 $ 3.3 24.3 % Interest income (0.1) (0.3) 0.2 (66.7) % Loss on modification and retirement of debt, net 0.4 0.3 0.1 33.3 % Loss on the re-measurement of the payable to founding members under the tax receivable agreement 0.1 0.1 — — % Other non-operating expense (income) — 0.1 (0.1) (100.0) % Total non-operating expenses $ 17.3 $ 13.8 $ 3.5 25.4 % The increase in non-operating expense was primarily due to a $3.3 million increase in interest on borrowings related to the issuance of the second tranche of the terms loans and the increase in the contracted interest rate on the initial tranche of the term loans and the revolving credit facility following the Credit Agreement Second Amendment entered into on March 8, 2021. Income Tax Benefit. Income tax benefit decreased from income tax benefit of $4.2 million for the second quarter of 2020 to $0.0 million of income tax benefit for the second 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 July 1, 2021 which reduced deferred tax expense to $0.0 million for the three months ended July 1, 2021. Net Loss . Net loss increased $8.9 million from net loss of $13.8 million for the second quarter of 2020 to $22.7 million for the second quarter of 2021. The increase in net loss was due to a $5.8 million increase in operating loss, a $4.2 million decrease in income tax benefit and a $3.5 million increase in non-operating expense, partially offset by a $4.6 million increase in net loss attributable to noncontrolling interests. Six months ended July 1, 2021 and June 25, 2020 Revenue. Total revenue decreased 71.8%, from $68.7 million for the six months ended June 25, 2020 to $19.4 million for the six months ended July 1, 2021. The following is a summary of revenue by category (in millions): Six Months Ended $ Change % Change July 1, 2021 June 25, 2020 YTD 2021 to YTD 2020 YTD 2021 to YTD 2020 National and regional advertising revenue $ 12.6 $ 51.5 $ (38.9) (75.5) % Local advertising revenue 4.2 11.7 (7.5) (64.1) % Founding member advertising revenue from beverage concessionaire agreements 2.6 5.5 (2.9) (52.7) % Total revenue $ 19.4 $ 68.7 $ (49.3) (71.8) % The following table shows data on theater attendance and revenue per attendee for six months ended July 1, 2021 and June 25, 2020: 27 Six Months Ended % Change July 1, 2021 June 25, 2020 YTD 2021 to YTD 2020 National and regional advertising revenue per attendee $ 0.200 $ 0.427 (53.2) % Local advertising revenue per attendee $ 0.067 $ 0.097 (30.9) % Total advertising revenue (excluding founding member beverage revenue) per attendee $ 0.267 $ 0.524 (49.0) % Total advertising revenue per attendee $ 0.308 $ 0.570 (46.0) % Total theater attendance (in millions) (1) 62.9 120.6 (47.8) % ________________________________________________________ (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. National and regional advertising revenue. The $38.9 million, or 75.5%, decrease in national and regional advertising revenue (excluding beverage revenue from founding members) was due to an 81.8% decrease in impressions sold due to the significant decrease in attendance from historical levels as a result of fewer open theaters within our network, fewer motion picture releases and a longer period of government mandated capacity restrictions during the six months ended July 1, 2021, compared to the six months ended June 25, 2020. Local advertising revenue. The $7.5 million, or 64.1%, decrease in local advertising revenue was due to fewer open theaters within our network, fewer motion picture releases and a longer period of government mandated capacity restrictions during the six months ended July 1, 2021, compared to the six months ended June 25, 2020. Founding member beverage revenue. The $2.9 million, or 52.7%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to a 51.2% decrease in founding member attendance for the six months ended July 1, 2021, as compared to the six months ended June 25, 2020, due to the temporary theater closures and lower attendance described above related to the COVID-19 Pandemic. Operating expenses. Total operating expenses decreased $10.3 million, or 11.8%, from $87.6 million for the six months ended June 25, 2020 to $77.3 million for the six months ended July 1, 2021. The following table shows the changes in operating expense for the six months ended July 1, 2021 and June 25, 2020 (in millions): Six Months Ended $ Change % Change July 1, 2021 June 25, 2020 YTD 2021 to YTD 2020 YTD 2021 to YTD 2020 Advertising operating costs $ 4.7 $ 7.3 $ (2.6) (35.6) % Network costs 3.7 4.5 (0.8) (17.8) % Theater access fees—founding members 14.3 17.7 (3.4) (19.2) % Selling and marketing costs 16.6 20.6 (4.0) (19.4) % Administrative and other costs 19.8 17.2 2.6 15.1 % Impairment of long-lived assets — 1.7 (1.7) (100.0) % Depreciation expense 5.9 6.4 (0.5) (7.8) % Amortization of intangibles recorded for network theater screen leases 12.3 12.2 0.1 0.8 % Total operating expenses $ 77.3 $ 87.6 $ (10.3) (11.8) % Advertising operating costs. Advertising operating costs decreased $2.6 million, or 35.6%, from $7.3 million for the six months ended June 25, 2020 to $4.7 million for the six months ended July 1, 2021. The decrease was due primarily to a $2.0 million decrease in advertising affiliate expense due to lower revenue in the six months ended July 1, 2021 as compared to the six m onths ended June 25, 2020 due to the COVID-19 Pandemic and a $0.3 million decrease in personnel related expenses due to the Payroll Related Cost Reductions implemented in response to the COVID-19 Pandemic which were in place for the full six months ended July 1, 2021, as compared to three of the six months ended June 25, 2020. 28 Network costs. Network costs decreased $0.8 million, or 17.8%, from $4.5 million for the six months ended June 25, 2020 to $3.7 million for the six months ended July 1, 2021. The decrease was primarily related to a $0.5 million decrease in personnel related expenses related to the Payroll Related Cost Reductions implemented in response to the COVID-19 Pandemic which were in place for the full six months ended July 1, 2021, as compared to three of the six months ended June 25, 2020, 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 $3.4 million, or 19.2%, from $17.7 million in the six months ended June 25, 2020 to $14.3 million in the six months ended July 1, 2021. Theater access fees and revenue share decreased $5.6 million due to a 51.2% decrease in founding member attendance. The decrease due to attendance was partially offset by a $1.3 million increase due to the annual contractual rate increase related to the fee for post-showtime attendance and digital screens and a $0.9 million increase due to an increase in active screens for the six months ended July 1, 2021, as compared to the six months ended June 25, 2020. Selling and marketing costs. Selling and marketing costs decreased $4.0 million, or 19.4%, from $20.6 million for the six months ended June 25, 2020 to $16.6 million for the six months ended July 1, 2021. This decrease was primarily related to 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 $1.0 million decrease in bad debt expense related to lower revenue in the six months ended July 1, 2021, compared to the six months ended June 25, 2020. Personnel expense also decreased $1.0 million primarily related to the Payroll Related Cost Reductions implemented in response to the COVID-19 Pandemic and a decrease in commission expense driven by the revenue declines during the six months ended July 1, 2021, as compared to the six months ended June 25, 2020. These decreases were partially offset by a $0.8 million increase in expense associated with our digital offerings due to an increase in digital revenue for the six months ended July 1, 2021, as compared to the six months ended June 25, 2020. Administrative and other costs. Administrative and other costs increased $2.6 million, or 15.1%, from $17.2 million for the six months ended June 25, 2020 to $19.8 million for the six months ended July 1, 2021. This increase was primarily due to a $5.4 million increase in performance-based compensation expense following the modification of certain of the Company’s performance-based equity grants, issuance of new equity grants and higher projected performance against internal bonus targets during the six months ended July 1, 2021 . This increase was partially offset by a $1.6 million decrease in salary and other personnel related expenses related to the Payroll Related Cost Reductions in place during the six months ended July 1, 2021 in response to the COVID-19 Pandemic, a $1.5 million decrease in legal and professional fees for the six months ended July 1, 2021, as compared to the six months ended June 25, 2020 due in part to legal services obtained in the second quarter of 2020 related to the various implications of the COVID-19 Pandemic and a $0.3 million decrease related to reductions in 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. Impairment of long-lived assets. Impairment of long-lived assets decreased $1.7 million, or 100.0%, from $1.7 million in the six months ended June 25, 2020 to $0.0 million in the six months ended July 1, 2021. This decrease in impairment expense was primarily related to the write-off of certain long-lived assets during the second quarter of 2020. Depreciation expense. Depreciation expense decreased $0.5 million, or 7.8%, from $6.4 million for the six months ended June 25, 2020 to $5.9 million in the six months ended July 1, 2021, as assets became fully depreciated. Amortization of intangibles recorded for network theater screen leases. Amortization of intangibles recorded for network theater screen leases increased $0.1 million, or 0.8%, from $12.2 million for the six months ended June 25, 2020, to $12.3 million for the six months ended July 1, 2021. Non-operating expenses. Total non-operating expenses increased $3.7 million, or 13.6%, from $27.3 million for the six months ended June 25, 2020 to $31.0 million for the six months ended July 1, 2021. The following table shows the changes in non-operating expense for the six months ended July 1, 2021 and June 25, 2020 (in millions): 29 Six Months Ended $ Change % Change July 1, 2021 June 25, 2020 YTD 2021 to YTD 2020 YTD 2021 to YTD 2020 Interest on borrowings $ 31.6 $ 27.2 $ 4.4 16.2 % Interest income (0.1) (0.5) 0.4 (80.0) % Loss on modification and retirement of debt, net 0.8 0.3 0.5 166.7 % (Gain) loss on re-measurement of the payable to founding members under the tax receivable agreement (1.4) 0.3 (1.7) (566.7) % Other non-operating expense 0.1 — 0.1 100.0 % Total non-operating expenses $ 31.0 $ 27.3 $ 3.7 13.6 % The increase in non-operating expense was primarily due to a $4.4 million increase in interest on borrowings related to the issuance of the second tranche of the terms loans and the increase in the contracted interest rate on the initial tranche of the term loans and the revolving credit facility and a $0.5 million increase in the loss on modifications and retirements of debt, net resulting from the Credit Agreement Second Amendment entered into on March 8, 2021. These increases were partially offset by a $1.7 million increase in the gain on 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 decreased from income tax benefit of $4.6 million for the six months ended June 25, 2020 to $0.0 million of income tax benefit for the six months ended July 1, 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 July 1, 2021 which reduced deferred tax expense to $0.0 million for the six months ended July 1, 2021. Net Loss . Net loss increased $24.6 million from net loss of $17.5 million for the six months ended June 25, 2020 to $42.1 million for the six months ended July 1, 2021. The increase in net loss was due to a $39.0 million increase in operating loss, a $4.6 million decrease in income tax benefit and a $3.7 million increase in non-operating expense, partially offset by a $22.7 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 certain theaters within the Company’s network remained temporarily closed during the six months ended July 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. 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 six 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. 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 30 instead increased at a fixed rate of 2.0%. 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. The theater access fee is composed of a fixed payment per patron and a fixed payment per digital screen (connected to the DCN). The payment per theater patron increases by 8% every five years, with the next increase occurring in fiscal year 2022. 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: (i) beginning at $0.025 per patron on November 1, 2019, (ii) $0.0375 per patron beginning on November 1, 2020, (iii) $0.05 per patron beginning on November 1, 2021, (iv) $0.052 per patron beginning on November 1, 2022 and (v) increasing 8% every five years beginning November 1, 2027. The Company does not owe the founding members any theater access fees when the theaters are closed. The digital screen fee is calculated based upon screens in use during each month. 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. 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. Financial Condition and Liquidity 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 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, certain theaters within the Company’s network remained temporarily closed during the six months ended July 1, 2021 and the Company's ability to advertise within the reopened theaters has been and may continue to be limited due to lower than historical levels of attendance due in part 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 attendance levels normalize and advertising revenue increases. Further, once the above conditions are met there will be a lag between when revenue is generated and when the Company ultimately collects the associated accounts receivable balance. The Company also had reduced cash payments during the period when theaters within the Company's network were closed or attendance levels were low as expenses related to theater attendance were either not incurred or incurred at lower levels (i.e. theater access fees, Platinum Spot revenue share and network affiliate revenue share payments). As 97.0% of the theaters within our network were open as of July 1, 2021, the screen-based portion of these expenses is expected to return to historical levels during the third quarter of 2021 and the attendance-based portion of these e xpenses is expected to increase as attendance increases following the upcoming releases of many major motion pictures. The Company also implemented the following cost-saving measures in order to preserve cash at the start of the COVID-19 Pandemic, and those measures remain in place as of the filing date: • During the six months ended July 1, 2021, 45%-75% of our current employee base continued to be furloughed or had salary reductions of up to 50%. Further, since the start of the COVID-19 Pandemic our total headcount has been reduced by over 30% from pre-COVID-19 Pandemic headcount levels. • 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, second and third quarter in equivalent value of the Company’s common stock in lieu of cash; • Suspended or curtailed certain non-essential operating expenditures, including marketing, research, employee travel and consulting services; 31 • Temporarily suspended the 401K employee match program; • Terminated or deferred certain non-essential capital expenditures; • 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 and second quarters 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 $10.8 million in the second quarter of 2021 and cash savings of $52.4 million for NCM, Inc. since the beginning of the pandemic; and • Introduced an active cash management process, which, among other things, requires CEO approval of all outgoing payments. Due to the future market uncertainties 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 million unsecured revolving loan agreement between NCM Inc. and NCM LLC. 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. In March 2020, we drew down an additional $110.0 million on our revolving credit facility and in March 2021 we received $43.0 million in proceeds under incremental term loans that mature on December 20, 2024. The $98.2 million of cash at NCM LLC as of July 1, 2021 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. 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 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. As of July 1, 2021, NCM LLC was in compliance with the requirements of the Credit Agreement, as amended. A summary of our financial liquidity is as follows (in millions): As of $ Change $ Change July 1, 2021 December 31, 2020 June 25, 2020 Q2 2021 to YE 2020 Q2 2021 to Q2 2020 Cash, cash equivalents and marketable securities (1) $ 149.0 $ 181.8 $ 249.9 $ (32.8) $ (100.9) NCM LLC revolver availability (2) 5.6 4.4 4.4 1.2 1.2 Total liquidity $ 154.6 $ 186.2 $ 254.3 $ (31.6) $ (99.7) _________________________ (1) Included in cash, cash equivalents and marketable securities as of July 1, 2021, December 31, 2020 and June 25, 2020, was $98.2 million, $123.9 million and $168.1 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 July 1, 2021, December 31, 2020 and June 25, 2020. As of July 1, 2021, December 31, 2020 and June 25, 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 July 1, 2021, the weighted average remaining maturity of our debt was 4.9 years. As of July 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 used and generated cash as follows (in millions): 32 Six Months Ended July 1, 2021 June 25, 2020 Operating cash flow $ (61.6) $ 107.4 Investing cash flow $ (2.9) $ 15.5 Financing cash flow $ 31.6 $ 66.6 • Operating Activities. The $169.0 million increase in cash used in operating activities for the six months ended July 1, 2021, compared to the six months ended June 25, 2020 was primarily due to a $142.9 million decrease in accounts receivable collections during the six months ended July 1, 2021, as compared to the six months ended June 25, 2020, a $47.3 million increase in consolidated net loss and a $9.6 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 $18.9 million decrease in accounts payable and accrued expenses payments due in part to the cash preservation actions taken by the Company to mitigate the impact of the COVID-19 Pandemic and an $8.5 million increase in amounts due to founding members for the six months ended July 1, 2021, as compared to the six months ended June 25, 2020 due to the increase in theater access fees, net of beverage discussed above. • Investing Activities. The $18.4 million increase in cash used in investing activities for the six months ended July 1, 2021, compared to the six months ended June 25, 2020 was primarily due to a $20.7 million decrease in proceeds from the sale of marketable securities, net of purchases. This decrease was partially offset by a $2.3 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 $35.0 million decrease in cash provided by financing activities for the six months ended July 1, 2021, compared to the six months ended June 25, 2020 was primarily due to a $128.0 million decrease in proceeds from the revolving credit facility, net of repayments, and a $5.5 million increase in the payment of debt issuance costs related to Credit Agreement Second Amendment executed in the first quarter of 2021. These decreases were partially offset by a $50.0 million increase in the issuance of term loans, a $36.8 million decrease in distributions to founding members in the six months ended July 1, 2021, compared to the six months ended June 25, 2020, and a $12.2 million decrease in dividends paid related to the decrease in the dividend amounts declared from $0.26 per share during the six months ended June 25, 2020 to $0.10 per share during the six months ended July 1, 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 July 1, 2021 were $50.8 million (excluding $98.2 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 and received net proceeds of $43.0 million from incremental terms loans in March 2021 in order to supplement the decrease in cash provided by operating activities during the period during which a portion or all of our network theaters are closed. The $98.2 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 used to fund income taxes, payments associated with the TRA with the founding members and for future payment of dividends to NCM, Inc. shareholders. 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 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 July 1, 2021 was calculated as approximately negative $39.2 million, of which NCM, Inc.'s share is approximately negative $18.9 million. The available cash distribution to the members of NCM LLC for the six months ended July 1, 2021 was calculated as approximately negative $70.1 million, of which NCM, Inc.'s share is approximately negative $33.8 million. Further there was $85.9 million of negative available cash generated during 2020. Pursuant to the NCM LLC Operating Agreement and the Credit Agreement amendments, there will be no available cash distributions made for the third quarter of 2021. Negative available cash 33 distributions for the first and second 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, 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. NCM, Inc. 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, pay associated with the TRA with the founding members, fund the unsecured revolving loan to NCM LLC, and pay current and future dividends as declared by the Board of Directors, including a dividend declared on August 9, 2021 of $0.05 per share (approximately $4.1 million) on each share of the Company’s common stock (not including outstanding restricted stock) to stockholders of record on August 23, 2021 to be paid on September 6, 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. 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, restrictions under the NCM LLC Credit Agreement and the current availability and funding of the unsecured revolving loan agreement between NCM Inc. and NCM LLC. Critical Accounting Policies 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 31, 2020 and incorporated by reference herein. As of July 1, 2021, there were no significant changes in those critical accounting policies. Recent Accounting Pronouncements For a discussion of recent accounting pronouncements, see the information provided under Note 1— The Company to the unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q. The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its unaudited Condensed Consolidated Financial Statements. Related Party Transactions For a discussion of related party transactions, see the information provided under Note 5— Related Party Transactions to the unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q. Off-Balance Sheet Arrangements We do not believe the Company has any off-balance sheet arrangements that are material to our current or future financial condition, results of operations, liquidity, capital resources or capital expenditures. Contractual and Other Obligations See Item 7. “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 six months ended July 1, 2021.