What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-08 compared with 2021-08-09 · 216 added, 204 removed, 556 unchanged (43% of the section changed)

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(In millions, except share and per share data)

July 1, 2021 December 31, 2020

September 30, 2021 December 31, 2020

CURRENT ASSETS:

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(In millions, except share and per share data)

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)

Three Months Ended Nine Months Ended

September 30, 2021 September 24, 2020 September 30, 2021 September 24, 2020

REVENUE (including revenue from related parties of $ 2.7 , $ 0.2 , $ 4.7 and $ 4.5 ,

respectively)

$ 31.7 $ 6.0 $ 51.1 $ 74.7

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Network costs 2.0 1.8 5.7 6.3

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)

Theater access fees and revenue share to founding members (including fees to

related parties of $ 11.4 , $ 1.0 , $ 19.8 and $ 13.6 , respectively)

16.7 1.8 31.0 19.5

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

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

Gain on re-measurement of the payable to founding members under the tax

receivable agreement ( 1.8 ) ( 1.0 ) ( 3.2 ) ( 0.7 )

Other non-operating expense — 0.1 0.1 0.1

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(In millions) (UNAUDITED)

Six Months Ended

July 1, 2021 June 25, 2020

Nine Months Ended

September 30, 2021 September 24, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Consolidated net loss $ ( 122.4 ) $ ( 72.5 )

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

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

operating activities:

Deferred income tax benefit — ( 7.7 )

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Loss on modification and retirement of debt, net 0.8 0.3

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

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

the tax receivable agreement ( 3.2 ) ( 0.7 )

Other ( 0.1 )

Founding member integration and other encumbered theater payments (including

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payments to related parties of $ 0.6 and $ 9.0 , respectively)

( 0.9 ) ( 12.8 )

Other cash flows from operating activities ( 0.1 ) —

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Receivables, net ( 12.3 ) 163.3

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

Accounts payable and accrued expenses (including payments to related parties of $ 0.6

and $ 0.0 , respectively)

Amounts due to/from founding members, net 2.0 ( 4.7 )

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(In millions)

Six Months Ended

July 1, 2021 June 25, 2020

Nine Months Ended

September 30, 2021 September 24, 2020

Supplemental disclosure of non-cash financing and investing activity:

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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 )

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

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

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( 5.5 ) — — — ( 5.5 ) —

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 )

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

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

Income tax and other impacts of NCM LLC ownership

changes 0.1 — — 0.3 — ( 0.2 )

Comprehensive loss, net of tax ( 33.5 ) — — — ( 15.2 ) ( 18.3 )

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( 4.1 ) — — — ( 4.1 ) —

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

Balance—September 30, 2021 $ ( 385.2 ) 80,417,510 $ 0.8 $ ( 196.6 ) $ ( 336.7 ) $ 147.3

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

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

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

Cumulative-effect adjustment for adoption of ASU 2016-13,

net of tax 2.9 — — — 1.2 1.7

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

NCM LLC equity issued for purchase of intangible asset 10.5 — — 5.0 — 5.5

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

Income tax and other impacts of NCM LLC ownership

changes ( 0.5 ) — — ( 3.9 ) — 3.4

Comprehensive loss, net of tax ( 72.5 ) — — — ( 30.2 ) ( 42.3 )

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( 25.5 ) — — — ( 25.5 ) —

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

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

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

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

Income tax and other impacts of NCM LLC ownership changes ( 0.3 ) — — 0.9 — ( 1.2 )

Income tax and other impacts of NCM LLC ownership

changes ( 0.2 ) — — 1.2 — ( 1.4 )

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

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( 13.0 ) — — — ( 13.0 ) —

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

Balance—September 30, 2021 $ ( 385.2 ) 80,417,510 $ 0.8 $ ( 196.6 ) $ ( 336.7 ) $ 147.3

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

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Description of Business

National CineMedia, Inc.

(“NCM, Inc.”) was incorporated in Delaware as a holding company with the sole purpose of becoming a member and sole manager of National CineMedia, LLC (“NCM LLC”), a limited liability company.

National CineMedia, Inc., a Delaware corporation (“NCM, Inc.”), is a holding company with the sole purpose of becoming a member and sole manager of National CineMedia, LLC (“NCM LLC”), a Delaware limited liability company.

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

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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 July 1, 2021.

common stock, reducing AMC’s ownership to 0.0 % as of September 30, 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.

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.

The Company operates the largest cinema advertising network reaching movie audiences in the U.S.

and sells advertising under long-term exhibitor service agreements (“ESAs”) with the founding members and with certain third-party network affiliates, under long-term network affiliate agreements.

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 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.

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 prior comparative periods due primarily to the shift in motion picture release schedules and the local/state COVID-19 patron capacity limitations.

These and subsequent developments are referred to as the “COVID-19 Pandemic.” Beginning in 2021, the FDA approved multiple COVID-19 vaccines, which 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 and by the third quarter of 2021 all of the theaters within the Company’s network were open.

Multiple successful major motion pictures were released during the second and third quarters of 2021 resulting in the highest theater attendance since the start of the COVID-19 Pandemic.

Despite the increase in network attendance, the second and third quarter of 2021 in-theater advertising revenue remained significantly below historical levels.

During the third quarter of 2021 variants of the COVID-19 virus spread throughout the United States resulting in the reinstatement of mask mandates in certain areas with increased infection rates and concerning some advertisers about the impact on theater attendance.

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 18.2 years as of July 1, 2021.

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

The weighted average remaining term of the ESAs and the network affiliate agreements together is 15.7 years as of September 30, 2021 (based upon pre-COVID-19 attendance levels).

As of September 30, 2021, NCM LLC had 166,605,854 common membership units outstanding, of which 80,417,510 ( 48.3 %) were owned by NCM, Inc., 43,026,794 ( 25.8 %) 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.

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.

Historically, the Company’s business has been

NATIONAL CINEMEDIA, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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Actual results could differ from estimates.

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

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

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

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

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

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

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

In light of this, the Company is actively pursuing a number of options including amending its Senior Secured Credit Facility to extend a waiver of these financial covenants and obtaining additional financing either through a loan from third party lenders or NCM, Inc.

Management expects to conclude one of these alternatives in the very near term;

however, there can be no assurance that the Company will be successful in completing any of these options.

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

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

Significant Accounting Policies

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

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

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

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

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

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

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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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Receivables are written off when management determines amounts are uncollectible.

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.

The Company had one agency through which the Company sourced advertising revenue that accounted for 22.0 % and 10.1 % of the Company's gross outstanding receivable balance as of September 30, 2021 and December 31, 2020, respectively.

During the three months ended September 30, 2021 and September 24, 2020, the Company had one customer that accounted for 11.8 % and 28.8 % of the Company's revenue, respectively.

During the nine months ended September 30, 2021 and September 24, 2020, the Company had one customer that accounted for 11.6 % and 10.6 % 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.

The Company recorded losses of $ 0.0 million, $ 0.0 million, $ 0.0 million and $ 1.7 million related to the write-off of certain internally developed software during the three months ended September 30, 2021 and September 24, 2020 and the nine months ended September 30, 2021 and September 24, 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

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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 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 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.

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 $ 1.7 million for the three months and nine months ended September 30, 2021, respectively.

During the three months ended September 30, 2021 and September 24, 2020 and the nine months ended September 30, 2021 and September 24, 2020, 268,782 , 50,052 , 1,394,321 and 607,733 shares of restricted stock and restricted stock units vested, respectively.

Consolidation —NCM, Inc.

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2021 September 24, 2020 September 30, 2021 September 24, 2020

Net loss attributable to NCM, Inc.

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Change from net loss income attributable to NCM, Inc.

and transfers from noncontrolling interests $ ( 22.5 ) $ ( 13.7 ) $ ( 34.4 ) $ ( 16.4 )

transfers from noncontrolling interests $ ( 14.9 ) $ ( 12.7 ) $ ( 49.3 ) $ ( 29.1 )

Recently Adopted Accounting Pronouncements

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

NATIONAL CINEMEDIA, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements

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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

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promotions in theater lobbies.

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, 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 .

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

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.

As of September 30, 2021 and December 31, 2020, the Company had a make-good provision of $ 2.9 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 September 30, 2021.

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

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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 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

The following table summarizes revenue from contracts with customers for the three and nine months ended September 30, 2021 and September 24, 2020 (in millions):

Three Months Ended Nine Months Ended

September 30, 2021 September 24, 2020 September 30, 2021 September 24, 2020

National and regional advertising revenue $ 22.9 $ 3.5 $ 35.5 $ 55.0

Local advertising revenue 5.4 2.3 9.6 14.0

Founding member advertising revenue from beverage concessionaire agreements 2.1 — 2.6 5.5

Founding member advertising revenue from beverage

concessionaire agreements 3.4 0.2 6.0 5.7

Total revenue $ 31.7 $ 6.0 $ 51.1 $ 74.7

Deferred Revenue and Unbilled Accounts Receivable

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

Six Months Ended

The changes in deferred revenue for the nine months ended September 30, 2021 were as follows (in millions):

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Nine Months Ended

September 30, 2021

Balance at beginning of period $ ( 5.1 )

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Balance at end of period $ ( 11.1 )

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

As of September 30, 2021 and December 31, 2020, the Company had $ 3.3 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 six months ended July 1, 2021 were as follows (in millions):

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Six Months Ended

The changes within the allowance for doubtful accounts balances for the nine months ended September 30, 2021 were as follows (in millions):

Nine Months Ended

September 30,

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

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share are as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2021 September 24, 2020 September 30, 2021 September 24, 2020

Net loss attributable to NCM, Inc.

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Basic 80,359,723 78,016,737 79,652,152 77,925,552

Dilutive effect of stock options, restricted stock and exchangeable membership units — — — —

Dilutive effect of stock options, restricted stock and

exchangeable membership units — — — —

Diluted 80,359,723 78,016,737 79,652,152 77,925,552

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Diluted $ ( 0.19 ) $ ( 0.16 ) $ ( 0.72 ) $ ( 0.39 )

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.

The effect of 86,188,344 , 84,531,328 , 85,601,326 and 83,678,699 weighted average exchangeable NCM LLC common units held by the founding members for the three months ended September 30, 2021 and September 24, 2020 and nine months ended September 30, 2021 and September 24, 2020, respectively, have been excluded from the calculation of diluted weighted average shares and loss per NCM, Inc.

share as they were anti-dilutive.

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

In addition, there were 4,376,000 , 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.

In addition, there were 4,797,243 , 4,484,702 , 4,797,243 and 4,484,702 , stock options and non-vested (restricted) shares for the three months ended September 30, 2021 and September 24, 2020 and nine months ended September 30, 2021 and September 24, 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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INTANGIBLE ASSETS

Intangible assets consist of contractual rights to provide the Company’s services within the theaters of the founding members and network affiliates and are stated at cost, net of accumulated amortization.

The Company’s intangible assets with its founding members are recorded at fair market value of NCM, Inc.’s publicly traded stock as of the date on which the common membership units were issued.

The Company’s intangible assets with its founding members are recorded at the fair market value of NCM, Inc.’s publicly traded stock as of the date on which the common membership units were issued.

The NCM LLC common membership units are fully convertible into NCM, Inc.’s common stock.

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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, 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.

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 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

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

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.

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Because the Carmike Cinemas, Inc.

(“Carmike”) theaters acquired by AMC are subject to an existing on-screen advertising agreement with an alternative provider, AMC will make integration payments to NCM LLC.

(“Carmike”) theaters acquired by AMC are subject to an existing on-screen advertising agreement with an alternative provider, AMC makes integration payments to NCM LLC.

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

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

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.

During the three months ended September 30, 2021 and September 24, 2020 and nine months ended September 30, 2021 and September 24, 2020, the Company recorded a reduction to net intangible assets of $ 0.2 million, $ 0.0 million , $ 0.3 million and $ 1.4 million, respectively,

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related to integration and other encumbered theater payments.

No integrations payments were earned for the three months ended September 30, 2021 because the Company generated negative Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”) during this period.

During the three months ended September 30, 2021 and September 24, 2020 and nine months ended September 30, 2021 and September 24, 2020, AMC and Cinemark paid a total of $ 0.2 million, $ 0.0 million , $ 0.3 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 September 24, 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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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

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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.

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.

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

As of September 30, 2021, AMC’s ownership was 0.0 %.

The material agreements with the founding members are as follows:

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NCM LLC has made improvements to this software since the IPO date and NCM LLC owns those improvements, except for improvements that were developed jointly by NCM LLC and NCM LLC’s founding members, if any.

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

Included in the unaudited Condensed Consolidated Statements of Income:

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

September 30, 2021 September 24, 2020 September 30, 2021 September 24, 2020

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

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________________________________________

(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.

(1) For the three and nine months ended September 30, 2021 and September 24, 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 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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Included in the unaudited Condensed Consolidated Balance Sheets:

July 1, 2021 December 31, 2020

September 30, 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 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

Mandatory distributions of available cash for the three and nine months ended September 30, 2021 and September 24, 2020 were as follows (in millions):

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Three Months Ended Nine Months Ended

September 30, 2021 September 24, 2020 September 30, 2021 September 24, 2020

Cinemark $ — $ — $ — $ 2.1

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Total $ — $ — $ — $ 8.4

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.).

Due to the temporary closure of the theaters within NCM LLC's network during a portion of the nine months ended September 30, 2021 and decrease in 2021 in-theater advertising revenue, the mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc.

for the three months ended September 30, 2021 were calculated as negative $ 23.2 million (including negative $ 6.0 million for Cinemark, negative $ 6.0 million for Regal and negative $ 11.2 million for NCM, Inc.).

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

The mandatory distributions of available cash by NCM LLC for the nine months ended September 30, 2021 were calculated as negative $ 93.3 million (including negative $ 24.2 million for Cinemark, negative $ 24.1 million for Regal and negative $ 45.0 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 July 1, 2021 were comprised of the following (in millions):

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Amounts due to related party founding members, net, as of September 30, 2021 were comprised of the following (in millions):

Cinemark Regal Total

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

Theater access fees and revenue share, net of beverage revenues and other

encumbered theater payments $ 1.2 $ 1.6 $ 2.8

Total amounts due to founding members, net $ 1.2 $ 1.6 $ 2.8

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Cinemark Regal Total

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

Theater access fees and revenue share, net of beverage revenues and other

encumbered theater payments $ 0.6 $ 0.9 $ 1.5

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

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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 $ 0.6 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):

The Company’s investment in AC JV, LLC was $ 0.6 million and $ 0.7 million as of September 30, 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 $( 0.1 ) million for the three months ended September 30, 2021 and September 24, 2020 and nine months ended September 30, 2021 and September 24, 2020, respectively, is included in “Other non-operating income” in the unaudited Condensed Consolidated Statements of Income.

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The following table summarizes NCM LLC’s total outstanding debt as of September 30, 2021 and December 31, 2020 and the significant terms of its borrowing arrangements (in millions):

Outstanding Balance as of

Borrowings July 1, 2021 December 31, 2020 Maturity

Borrowings September 30, 2021 December 31, 2020 Maturity

Date Interest

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Term loans - second tranche 49.8 — December 20, 2024 (1)

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

Senior secured notes due 2028 400.0 400.0 April 15, 2028 5.875 %

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

Total borrowings 1,108.0 1,060.3

debt issuance costs and debt discounts related to term loans and senior notes ( 11.8 ) ( 8.0 )

debt issuance costs and debt discounts related to

term loans and senior notes ( 11.2 ) ( 8.0 )

Total borrowings, net 1,096.8 1,052.3

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

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

As of 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).

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

As of September 30, 2021, NCM LLC’s senior secured credit facility consisted of a $ 175.0 million revolving credit facility, a $ 261.2 million term loan (first tranche) and a $ 49.8 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

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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.

On March 8, 2021, NCM LLC entered into a second 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.

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”.

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

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

As of 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.

As of September 30, 2021, NCM LLC’s total availability under the $ 175.0 million revolving credit facility was $ 6.8 million, net of $ 167.0 million outstanding and $ 1.2 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 July 1, 2021 was 4.50 %.

The weighted-average interest rate on the revolving credit facility as of September 30, 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 July 1, 2021 was 5.00 %.

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rate on the term loans as of September 30, 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 July 1, 2021, NCM LLC has paid principal of $ 8.1 million, reducing the outstanding balance to $ 261.9 million.

As of September 30, 2021, NCM LLC has paid principal of $ 8.8 million, reducing the outstanding balance to $ 261.2 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 July 1, 2021 was 9.00 %.

The interest rate on the term loans as of September 30, 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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and (iii) the aggregate principal amount of all outstanding revolving loans under the Credit Agreement is $ 39.0 million or less.

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.

As of September 30, 2021, NCM LLC was in compliance with the requirements of the Credit Agreement Second Amendment described above and the noncompliance with the financial covenants was automatically waived.

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

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

NCM LLC repurchased and canceled a total of $ 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.

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 September 30, 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 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 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 %.

Due to the future market uncertainties discussed within Note 1 - The Company , the Board of Directors of NCM, Inc.

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

Borrowings by NCM LLC will be available through December 31, 2022.

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

If 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 flexibility with respect to the NCM LLC minimum liquidity covenant.

Changes in the Company’s Effective Tax Rate —The Company recorded income tax expense of $ 0.0 million for the nine months ended September 30, 2021 compared to an income tax benefit of $ 7.7 million for the nine months ended September 24, 2020 resulting in an effective tax rate of 0.0 % for the nine months ended September 30, 2021 as compared to 20.4 % for the nine months ended September 24, 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

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realize the benefit of those assets.

The Company maintained a full valuation allowance as of September 30, 2021, reducing deferred tax expense to $ 0.0 million for the nine months ended September 30, 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 $ 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.

The Company has right-of-use (“ROU”) assets of $ 19.2 million and short-term and long-term lease liabilities of $ 2.0 million and $ 21.0 million, respectively, on the balance sheet as of September 30, 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 July 1, 2021, the Company had a weighted average remaining lease term of 8.6 years on these leases.

As of September 30, 2021, the Company had a weighted average remaining lease term of 8.4 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 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).

As of September 30, 2021, the Company’s weighted average annual discount rate used to establish the ROU assets and lease liabilities was 7.36 %.

During the three and nine months ended September 30, 2021 and September 24, 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.

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Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2021 September 24, 2020 September 30, 2021 September 24, 2020

Operating lease cost $ 0.8 $ 0.9 $ 2.6 $ 2.7

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Total lease cost $ 1.0 $ 1.0 $ 3.0 $ 3.1

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.

The Company made total lease payments of $ 0.9 million, $ 0.9 million, $ 2.9 million and $ 2.7 million during the three months ended September 30, 2021 and September 24, 2020 and nine months ended September 30, 2021 and September 24, 2020, respectively.

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

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

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

The payment per theater patron increases by 8 % every five years , with this next increase occurring in fiscal year 2022, and the

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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 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.

As of September 30, 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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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 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.

As of September 30, 2021, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $ 105.4 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 $ 0.1 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.

The Company accrued $ 0.2 million and $ 0.0 million related to affiliate agreements with guaranteed minimums in excess of the revenue share agreement as of September 30, 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.

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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.

4 unchanged sentences

Other investments consisted of the following (in millions):

July 1, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Investment in AC JV, LLC (1)

4 unchanged sentences

This investment is accounted for utilizing the equity method.

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.

As of September 30, 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

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

value of the services provided in exchange for the investment.

The other investments were recorded based upon the fair 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.

1 unchanged sentence

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 July 1, 2021 As of December 31, 2020

As of September 30, 2021 As of December 31, 2020

Carrying Value Fair Value (1)

8 unchanged sentences

Fair Value Measurements at Reporting Date Using

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

Fair Value as of September 30, 2021 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other

2 unchanged sentences

$ 37.1 $ 37.1 $ — $ —

Short-term marketable securities (2)

Long-term marketable securities (2)

Total assets $ 38.3 $ 37.1 $ 1.2 $ —

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements at Reporting Date Using

16 unchanged sentences

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

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

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

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

As of September 30, 2021 and December 31, 2020, there were $ 1.0 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 September 30, 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 September 30, 2021 and December 31, 2020 were as follows:

As of September 30, 2021

Amortized Cost

2 unchanged sentences

MARKETABLE SECURITIES:

Short-term certificates of deposit $ 0.3 $ 0.3 0.1

Total short-term marketable securities 0.3 0.3

Long-term certificates of deposit $ 1.3 $ 1.2 2.1

Total long-term marketable securities 1.3 1.3

Total marketable securities $ 1.3 $ 1.2

13 unchanged sentences

SUBSEQUENT EVENT

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.

On November 8, 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 November 22, 2021 to be paid on December 7, 2021.

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

What changed 10-Q

Item 1. Financial Statements