What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-03 compared with 2021-03-09 · 279 added, 215 removed, 264 unchanged (65% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

As discussed in Part 1, some of the information in this Annual Report on Form 10-K 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.

As discussed in the forepart of this report, some of the information in this Annual Report on Form 10-K 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-K, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and statements related to the impact of the current COVID-19 Pandemic on our business and results, may constitute forward-looking statements.

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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.

As the largest cinema advertising network in the U.S., we unite brands with young, diverse audiences through 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.

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

On September 4, 2020 the Company resumed in-theater advertising and as of December 31, 2020, 40.5% of the theaters within our network were open.

As of March 5, 2021, 49.0% of theaters within our network are open.

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

We also sell advertising on our LEN, a series of strategically-placed screens located in movie theater lobbies, and other forms of advertising and promotions in theater lobbies.

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

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

In Regal and Cinemark and a portion of our network affiliates’ theaters, the Noovie pre-show now includes Post-Showtime 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.

As of December 30, 2021, theaters presenting the new Noovie pre-show format with Post-Showtime Inventory made up approximately 57% of our network.

All other NCM network theater circuits, which make up the remaining 43% 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 our Noovie pre-show.

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 digital online and mobile advertising through our Noovie Audience Accelerator , across our suite of Noovie digital properties, including Noovie Shuffle , Name That Movie and Noovie ARcade, on third party’s internet sites, as well as a variety of complementary out of home venues, including restaurants, convenience stores and college campuses, in order to reach entertainment audiences beyond the theater.

As of December 30, 2021, approximately 6.5 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 approximately 171.0 million as of December 31, 2020.

We have long-term ESAs (approximately 18.7 weighted average years based on pre-COVID-19 attendance levels) with the founding members and multi-year agreements with network affiliates, which expire at various dates between March 31, 2021 and July 22, 2031.

The weighted average remaining term (based on pre-COVID-19 attendance levels) of the ESAs and the network affiliate agreements is 16.3 years as of December 31, 2020.

These downloads and the acquisition of second- and third-party data have resulted in data sets of approximately 274 million as of December 30, 2021.

We have long-term ESAs (approximately 17.7 weighted average years) with the founding members and multi-year agreements with network affiliates, which expire at various dates between March 14, 2022 and December 31, 2037.

The weighted average remaining term of the ESAs and the network affiliate agreements is 15.5 years as of December 30, 2021.

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

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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 many operating metrics including changes in revenue, Adjusted OIBDA and Adjusted OIBDA margin, as defined and discussed in “Notes to the Selected Historical Financial and Operating Data” above, 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 theater per week, national and local and regional and total advertising revenue per attendee.

We focus on many operating metrics including changes in revenue, Adjusted OIBDA and Adjusted OIBDA margin, as defined and discussed in “Summary Historical and Operating Data” 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 theater per week, national, local, regional and total advertising revenue per attendee.

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

Recent Developments

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

Beginning in mid-March 2020, each of our founding

members and all of our network affiliates announced that their theaters would be temporarily closed and almost all of the theaters within our network remained closed until late August 2020.

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

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

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

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

In October 2020, Regal announced the re-closure of its theaters in the United States.

As of December 31, 2020, 40.5% of the theaters within our network had reopened.

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

The results of operations for the year ended December 31, 2020 were significantly impacted by the COVID-19 Pandemic.

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

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

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

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

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

In response to the reopening of a portion of our network, we brought back most of our staff from furlough and reduced schedules by August 31, 2020.

Most of the salary reductions remained in place.

Given the limited attendance levels and expected delay in new movie releases since September 2020, we have continued to re-implement a combination of temporary furloughs, permanent layoffs and further salary reductions.

As of the filing date, almost 20% of our current headcount is on furlough, over 20% of our current headcount is on reduced pay and schedules of 50%-60% and almost all remaining employees are at salary reductions of up to 20%.

Further, since the start of the COVID-19 Pandemic we have permanently reduced our total headcount by over 20% from pre-COVID-19 Pandemic headcount levels.

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

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

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

• Implemented a hiring freeze on non-essential positions;

• Temporarily suspended the 401K employee match program;

• Terminated or deferred certain non-essential capital expenditures;

• Strategically worked with our 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 from $0.19 per share in the fourth quarter of 2019.

When compared to the fourth quarter of 2019 this results in a cash savings of $10.9 million in the fourth quarter of 2020 and year to date cash savings of $39.1 million for NCM, Inc.;

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

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

As of the filing date, multiple COVID-19 vaccines have been developed and immunizations have commenced throughout the United States and cases of the COVID-19 virus are decreasing from the peak numbers experienced in late 2020.

However, there can be no assurance of

when theaters within our network will return to normal operations, that the theaters which have reopened will remain open or that patrons will return to the theaters at historical levels.

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

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

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

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.

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

As of December 31, 2020, our cash and marketable securities balance was $181.8 million ($123.9 million at NCM LLC) and our trade accounts receivable outstanding, net of the allowance for doubtful accounts, was $16.2 million.

The $123.9 million of cash at NCM LLC will be used to fund operations during the period of expected reduced cash flows.

Cash at NCM, Inc.

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

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

On April 30, 2020, NCM LLC amended its Credit Agreement, dated as of June 20, 2018 (“Credit Agreement Amendment”) to allow for the automatic waiver of any non-compliance with its consolidated net senior secured leverage ratio and consolidated total leverage ratio financial covenants occurring from the quarter ending June 25, 2020 until and including the quarter ending July 1, 2021 (the “Covenant Holiday Period”).

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

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

NCM LLC can make available cash distributions to its members outside of the Covenant Holiday Period so long as NCM LLC’s consolidated net senior secured leverage ratio is equal to or less than 5.00 to 1.00 and no default or event of default under the Credit Agreement has occurred and is continuing.

NCM LLC may continue to reimburse NCM, Inc.

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

On March 8, 2021, NCM LLC entered into an additional amendment to its Credit Agreement, dated as of June 20, 2018 (“Credit Agreement Second Amendment”).

Among other things, the Credit Agreement Second Amendment provides for:

(i) certain modifications to the negative covenants;

(ii) a waiver of non-compliance with the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the quarter ended June 30, 2022;

(iii) the consolidated net total leverage ratio and consolidated net senior secured leverage ratio financial covenants to be set to 6.75 to 1.00 and 5.50 to 1.00, respectively, for the quarter ending on or about September 29, 2022, and (iv) 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.

The Credit Agreement Second Amendment also:

(i) grants security interests in certain assets of NCM LLC and other potential loan parties that are not currently pledged to the lenders (the “Additional Collateral”) and (ii) increases the applicable margin of the existing term loans and revolving loans issued under the Credit Agreement in an amount equal to 1.00%.

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

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

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

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

In addition, pursuant to the Credit Agreement Second Amendment, NCM LLC will incur new incremental term loans (the “New Incremental Loans”) in an aggregate principal amount of $50.0 million, the proceeds of which will be used for general corporate purposes.

The New Incremental Loans will have substantially similar terms to the existing term loans (after giving effect the Credit Agreement Second Amendment), except that the New Incremental Loans will:

(i) have a cash interest

rate of LIBOR plus 8.00%, (ii) have a maturity of December 20, 2024, and (iii) be subject to prepayment premiums if NCM LLC prepays the New Incremental Loans before maturity.

In connection with the grant of the Additional Collateral to the lenders under the Credit Agreement, NCM LLC concurrently entered into an amendment to the Security Agreement, dated as of October 8, 2019 made by NCM LLC, as issuer, in favor of JPMorgan Chase Bank, N.A., as collateral agent, relating to that certain Indenture, dated as of October 8, 2019, between NCM LLC, as issuer and Wells Fargo Bank, National Association, as trustee, relating to NCM LLC’s Senior Secured Notes due 2028.

This amendment grants a security interest in the Additional Collateral for the benefit of the holders of the Secured Notes.

Taxes — On March 27, 2020, the U.S.

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

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

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

The Company deferred $1.3 million in qualifying payments in the year ended December 31, 2020, respectively;

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

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

Due to the impact of the COVID-19 Pandemic on the Company’s operations in 2020 and expected continued impact in 2021, the Company expects that it will generate a three-year cumulative pre-tax book loss during 2021.

Given the associated weight assigned to this item as negative evidence within the Company’s analysis of the realizability of its deferred tax assets, the Company determined it is more-likely-than-not that the Company will not be able to realize certain of the Company’s deferred tax assets before they expire.

The Company increased the valuation allowance against certain deferred tax assets, generating $139.0 million of additional income tax expense in the year ended December 31, 2020.

The Company recorded a corresponding $151.9 million reduction to the ‘Payable to founding members under the tax receivable agreement’ equal to the portion of the payable related to 90% of the amortization of the expected benefits from the realization of the deferred tax assets deemed not more-likely-than-not to be realized as of December 31, 2020.

The reduction to the payable to founding members under the tax receivable agreement was recorded as a gain of $151.9 million within non-operating income within the Consolidated Statements of Income.

Once the Company returns to a more normal operating level and emerges from a three-year cumulative pre-tax book loss position, part or all the valuation allowance is expected to reverse, resulting in an inverse impact to the payable to founding members under the tax receivable agreement which would increase to reflect future payments to the founding members at that time.

COVID-19 Impact and Outlook — The COVID-19 Pandemic has had a significant impact on the world and our business as federal, state and local governments issued restrictions on travel, public gatherings and other events and issued social distancing guidelines.

Most of our network theaters were closed for approximately six months from March 2020 and 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 prior comparative periods due primarily to the shift in motion picture release schedules and local/state COVID-19 patron capacity limitations.

By the third quarter of 2021, all of the theaters within the Company’s network were open and multiple, successful major motion pictures were released during the third and fourth quarters of 2021 resulting in the highest attendance numbers within our network since the start of the COVID-19 Pandemic following the approval and administration of FDA-approved vaccines in 2021;

however, variants of the COVID-19 virus, including Delta and Omicron, continue to circulate through the United States, and may lead to increased health and safety regulations and restrictions or impact consumer behavior.

Despite the increase in network attendance, 2021 in-theater advertising revenue remained below historical levels as we were not able to participate in the 2021 advertising upfront marketplace during the summer of 2020 while theaters were closed.

The movie slate for 2022 remains packed due to the addition of the major motion pictures originally scheduled for 2020 and 2021 and major motion pictures studios committing to theatrical-only releases.

To ensure sufficient liquidity to endure the impacts of the COVID-19 Pandemic, 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, and these changes have resulted in a headcount reduction of 35% as of December 30, 2021, 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.

We believe that the exhibition industry has historically fared well during periods of economic stress, and we remain optimistic 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 and a return to normalcy.

There can be no assurance that the cases of the COVID-19 virus will continue to decline;

new variants will not emerge and spread;

studios will not reschedule movie releases;

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;

or if any of the changes in consumer behavior or changes to the theatrical window in response to the COVID-19 Pandemic will become permanent.

Financing — Subsequent to year-end, on January 5, 2022, NCM LLC entered into the third amendment (the “Credit Agreement Third Amendment”) to its Credit Agreement, dated as of June 20, 2018, among NCM LLC, the several banks and other financial institutions or entities from time to time parties thereto, and JPMorgan Chase Bank, N.A., as administrative agent, as previously amended (the “Credit Agreement”).

Among other things, the Credit Agreement Third Amendment provides for:

(i) certain modifications to and extensions to modifications of the affirmative and negative covenants therein, including maintaining a total balance of $55.0 million of a combination of unrestricted cash on hand and availability under NCM LLC’s revolving credit facility through the fourth quarter of 2023;

(ii) the suspension of the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the fiscal quarter ending December 29, 2022 (the “Extended Covenant Waiver Holiday”);

(iii) the consolidated net total leverage ratio and consolidated net senior secured leverage ratio financial covenants to be set to 9.25 to 1.00 and 7.25 to 1.00, respectively, for the fiscal quarter ending on or about March 30, 2023, 8.50 to 1.00 and 6.50 to 1.00, respectively, for the fiscal quarter ending on or about June 29, 2023, 8.00 to 1.00 and 6.00 to 1.00, respectively, for the fiscal quarter ending on or about September 28, 2023, and 6.25 to 1.00 and 4.50 to 1.00, respectively, for the fiscal quarter ending on or about December 28, 2023 and each fiscal quarter thereafter, and (iv) with respect to NCM LLC’s audited financial statements for the fiscal year ended December 30, 2021, a waiver of the requirement to deliver an auditor’s opinion for such financial statements without a “going concern” or like qualification or exception.

Also on January 5, 2022, NCM LLC entered into a Revolving Credit Agreement (the “New Revolving Credit Agreement”) among NCM LLC, the lenders party thereto and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent.

The New Revolving Credit Agreement provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022.

The New Revolving Credit Agreement provides for (i) a cash interest rate of term Secured Overnight Financing Rate (“SOFR”) plus 8.0%, with a 1.0% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the New

Revolving Credit Agreement at any time before maturity.

The New Revolving Credit Agreement also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement.

Selected Historical and Operating Data

The following table sets forth our historical selected financial and operating data for the periods indicated.

The selected financial and operating data should be read in conjunction with the other information contained in this document, including “Item 1.

Business,” the audited historical Consolidated Financial Statements and the notes thereto included elsewhere in this document, and historical audited Consolidated Financial Statements, which have not been included in this document.

The results of operations data for the years ended December 30, 2021 and December 31, 2020 and the balance sheet data as of December 30, 2021 and December 31, 2020 are derived from the audited Consolidated Financial Statements of NCM, Inc.

included elsewhere in this document.

The results of operations data for the years ended December 26, 2019, December 27, 2018 and December 28, 2017 and the balance sheet data as of December 26, 2019, December 27, 2018 and December 28, 2017 are derived from the audited Consolidated Financial Statements of NCM, Inc.

that are not included in this document.

Results of Operations Data Years Ended

($ in millions, except per share data) Dec.

Revenue $ 114.6 $ 90.4 $ 444.8 $ 441.4 $ 426.1

OPERATING EXPENSES:

Advertising operating costs 18.4 10.3 38.3 37.4 32.4

Network costs 7.4 8.6 13.5 13.3 15.8

Theater access fees and revenue share—founding

members 51.1 24.6 82.7 81.7 76.5

Selling and marketing costs 34.7 37.6 64.9 66.5 72.0

Administrative and other costs 36.0 30.9 43.8 48.3 37.9

Impairment of long-lived assets — 1.7 — — —

Depreciation expense 10.9 13.1 13.6 12.6 11.0

Amortization expense — — — 27.3 26.6

Amortization of intangibles recorded for network theater

screen leases 24.7 24.6 26.7 — —

Total 183.2 151.4 283.5 287.1 272.2

OPERATING (LOSS) INCOME (68.6) (61.0) 161.3 154.3 153.9

NON-OPERATING EXPENSE (INCOME) 49.8 (96.9) 62.2 50.6 (140.9)

(LOSS) INCOME BEFORE INCOME TAXES (118.4) 35.9 99.1 103.7 294.8

Provision for income taxes

— 162.2 12.4 23.5 180.3

CONSOLIDATED NET (LOSS) INCOME (118.4) (126.3) 86.7 80.2 114.5

Net (loss) income attributable to noncontrolling

interests (69.7) (60.9) 50.6 50.4 56.2

NET (LOSS) INCOME ATTRIBUTABLE TO NCM, Inc.

$ (48.7) $ (65.4) $ 36.1 $ 29.8 $ 58.3

(LOSS) EARNINGS PER NCM, INC.

Basic $ (0.61) $ (0.84) $ 0.47 $ 0.39 $ 0.89

Diluted $ (0.61) $ (0.84) $ 0.46 $ 0.37 $ 0.48

Other Financial and Operating Data Years Ended

(in millions, except cash dividend declared per common share and

screen data) Dec.

Adjusted OIBDA (1)

$ (24.7) $ (19.4) $ 207.5 $ 205.4 $ 205.1

Adjusted OIBDA margin (1)

(21.6) % (21.5) % 46.7 % 46.5 % 48.1 %

Capital expenditures $ 6.5 $ 11.2 $ 15.3 $ 15.4 $ 12.3

Cash dividend declared per common share $ 0.20 $ 0.40 $ 0.68 $ 0.68 $ 0.88

Founding member screens at period end (2) (5)

16,436 16,515 16,880 16,768 16,808

Total screens at period end (3) (5)

20,740 20,450 21,208 21,172 20,850

Total attendance for period (4) (5)

250.7 138.2 651.4 705.1 655.8

Notes to the Selected Historical Financial and Operating Data

(1) 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 and amortization expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation costs, early lease termination expense, executive officer transition costs, legal fees related to an abandoned financing transaction and impairments 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 its operating performance and 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 and amortization policies, amounts of amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation programs, executive officer turnover, legal fees related to an abandoned financing transaction, early lease termination expense, impairments of long-lived assets, interest rates, debt levels or income tax rates.

A limitation of these measures, however, is that they exclude depreciation and amortization, 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 amortization of intangibles recorded for network theater screen leases, share-based payment costs, costs associated with the resignation and hiring of the Company’s executive officers, legal fees related to an abandoned financing transaction, early lease termination expense, or impairments of long-lived assets.

Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as indicators of operating performance, nor should it be considered in isolation of, or as substitutes 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.

Adjusted OIBDA does not reflect integration and other encumbered theater payments as they are recorded as a reduction to intangible assets.

Integration payments and other encumbered theater payments received are added to Adjusted OIBDA to determine our compliance with financial covenants under our senior secured credit facility and included in available cash distributions to NCM LLC’s founding members.

During the years ended December 30, 2021, December 31, 2020, December 26, 2019, December 27, 2018 and December 28, 2017, the Company recorded integration and other encumbered theater payments of $1.6 million, $1.4 million, $22.3 million, $21.4 million and $20.9 million, respectively, from NCM LLC’s founding members.

(2) Represents the total number of screens within NCM LLC’s advertising network operated by NCM LLC’s founding members.

(3) Represents the total screens within NCM LLC’s advertising network.

(4) Represents the total attendance within NCM LLC’s advertising network as provided by our founding members and affiliate partners.

(5) Excludes screens and attendance associated with certain AMC Carmike Cinemas, Inc.

(“Carmike”) theaters for certain periods presented.

Refer to Note 5 to the audited Consolidated Financial Statements included elsewhere in this document.

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

Operating (loss) income $ (68.6) $ (61.0) $ 161.3 $ 154.3 $ 153.9

Depreciation expense 10.9 13.1 13.6 12.6 11.0

Amortization expense (1)

— — — 27.3 26.6

Amortization of intangibles recorded for network theater screen leases (1)

24.7 24.6 26.7 — —

Share-based compensation costs (2)

8.1 2.2 5.5 7.8 11.2

Legal fees related to abandoned financing transaction (3)

Executive transition costs (4)

0.1 — 0.4 3.4 0.6

Early lease termination expense (5)

Impairment of long-lived assets (6)

Adjusted OIBDA $ (24.7) $ (19.4) $ 207.5 $ 205.4 $ 205.1

Total revenue $ 114.6 $ 90.4 $ 444.8 $ 441.4 $ 426.1

Adjusted OIBDA margin (21.6) % (21.5) % 46.7 % 46.5 % 48.1 %

(1) Following the adoption of ASC 842, as discussed within Note 13 to the audited Consolidated Financial Statements included elsewhere in this document, amortization of the ESA and affiliate intangible balances is considered a form of lease expense and has been reclassified to this account as of the adoption date, December 28, 2018.

The Company adopted ASC 842 prospectively and thus, prior period balances remain within amortization expense.

(2) Share-based payments costs are included in network operations, selling and marketing and administrative expense in the accompanying audited Consolidated Financial Statements.

(3) These fees relate to legal costs incurred for advice pertaining to an alternative debt transaction that was abandoned in the fourth quarter of 2021.

(4) Executive transition costs represent expenses associated with the search for new company executives.

(5) Early lease termination expense represents an expense recorded upon the early termination of the lease of our corporate headquarters because the early termination payment made by the Company was reimbursed by the landlord of the new building.

(6) The impairment of long-lived assets primarily relates to the write-off of certain internally developed software.

Summary Historical and Operating Data

You should read this information in conjunction with the other information contained in this document, and our audited 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).

Refer to “Item 6.

Selected Financial Data—Notes to the Selected Historical Financial and Operating Data” for a discussion of the calculation of Adjusted OIBDA and reconciliation to operating income.

Years Ended % Change

6 unchanged sentences

Total operating expenses 183.2 151.4 21.0 %

Operating (loss) income (61.0) 161.3 (137.8) %

Non-operating (income) expense (96.9) 62.2 (255.8) %

Operating loss (68.6) (61.0) 12.5 %

Non-operating expense (income) 49.8 (96.9) (151.4) %

Income tax expense — 162.2 (100.0) %

Net (loss) income attributable to noncontrolling interests (60.9) 50.6 (220.4) %

Net (loss) income attributable to NCM, Inc.

Net loss attributable to noncontrolling interests (69.7) (60.9) 14.4 %

Net loss attributable to NCM, Inc.

$ (48.7) $ (65.4) (25.5) %

Net (loss) income per NCM, Inc.

Net loss per NCM, Inc.

basic share $ (0.61) $ (0.84) (27.4) %

Net (loss) income per NCM, Inc.

Net loss per NCM, Inc.

diluted share $ (0.61) $ (0.84) (27.4) %

3 unchanged sentences

250.7 138.2 81.4 %

(1) Represents the total attendance within NCM LLC’s advertising network, excluding screens and attendance associated with certain AMC Rave, AMC Carmike and Cinemark Rave theaters that are currently part of another cinema advertising network for certain periods presented.

(1) Represents the total attendance within NCM LLC’s advertising network, excluding screens and attendance associated with AMC Carmike theaters that are currently part of another cinema advertising network for each of the periods presented.

Refer to Note 5 to the audited Consolidated Financial Statements included elsewhere in this document.

3 unchanged sentences

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

Lost affiliates, net of new affiliates (1)

— (193) (193)

New affiliates, net of lost affiliates (1)

Closures, net of openings (2)

(365) (200) (565)

Balance as of December 30, 2021 16,436 4,304 20,740

(1) Represents the loss of five of our affiliates that did not renew their contracts resulting in a reduction of 203 affiliate screens to our network, offset by the addition of two new affiliates which added 10 new screens to our network during the year ended December 31, 2020.

(1) Represents the addition of one new affiliate which added 501 new screens to our network, offset by the loss of four of our affiliates during 2021 resulting in a reduction of 139 affiliate screens to our network as of December 30, 2021.

(2) Represents the closure of 72 screens, net of new screens added, across our founding members and network affiliates.

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

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Fiscal Years 2021 and 2020

Total revenue decreased $354.4 million, or 79.7%, from $444.8 million for 2019 to $90.4 million for 2020.

Total revenue increased $24.2 million, or 26.8%, from $90.4 million for 2020 to $114.6 million for 2021.

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

16 unchanged sentences

250.7 138.2 81.4 %

(1) Represents the total attendance within NCM LLC’s advertising network, excluding screens and attendance associated with AMC Carmike theaters for each period presented.

Refer to Note 5 to the audited Consolidated Financial Statements included elsewhere in this document.

National and regional advertising revenue.

The $282.2 million, or 80.9%, decrease in national and regional advertising revenue (excluding beverage revenue from founding members) was primarily due to an 80.8% decrease in impressions sold due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic preventing the Company from displaying in-theater advertising beginning in mid-March 2020 until the beginning of September 2020.

Nearly 60% of our network remained closed and attendance was significantly below historical levels at the open theaters through the rest of 2020.

National advertising CPMs for the impressions delivered for the portion of the year ended December 31, 2020 the theaters were open decreased 17.2% driven by a change in the mix of clients with a higher proportion of upfront clients and fewer higher CPM scatter market and content partner clients in the year ended December 31, 2020, as compared to the year ended December 31, 2019.

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

The $19.0 million, or 28.5%, increase in national and regional advertising revenue was primarily due to the increase in network attendance of 81.4% in 2021, as compared to 2020 and a 48.0% increase in impressions sold, partially offset by a decrease in national advertising utilization from 102.5% for the year ended 2020 to 66.3% for the year ended 2021.

Local advertising revenue.

The $49.4 million, or 73.8%, decrease in local advertising revenue was primarily due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic preventing the Company from displaying in-theater advertising beginning in mid-March 2020 until the beginning of September 2020.

Nearly 60% of our network remained closed and attendance was significantly below historical levels at the open theaters through the rest of 2020.

The $0.3 million, or 1.7%, increase was in part due to the increase in network attendance of 81.4% in 2021, as compared to 2020, yet remained adversely impacted by the continued effects of the COVID-19 Pandemic on certain categories of advertisers that have historically advertised in our theaters such as arts and entertainment, restaurants, automotive and travel and tourism, which were suffering from various impacts including decreased inventory due to supply chain delays and the inability to serve existing patrons due to staffing shortages during 2021 .

Founding member beverage revenue.

The $22.8 million, or 78.6%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to a 79.0% decrease in founding member attendance for the year ended December 31, 2020, as compared to the year ended December 26, 2019, due to the temporary theater closures described above related to the COVID-19 Pandemic and fewer theaters open in our network through the end of 2020.

The $4.9 million, or 79.0%, increase in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to a 76.8% increase in founding member attendance for the year ended 2021, as compared to the year ended 2020.

Operating expenses.

Total operating expenses decreased $132.1 million, or 46.6%, from $283.5 million for 2019 to $151.4 million for 2020.

Total operating expenses increased $31.8 million, or 21.0%, from $151.4 million for 2020 to $183.2 million for 2021.

The following table shows the changes in operating expense for 2020 and 2021 (in millions):

8 unchanged sentences

Depreciation expense 10.9 13.1 (2.2) (16.8) %

Amortization of intangibles recorded for network theater screen leases 24.6 26.7 (2.1) (7.9) %

Amortization of intangibles recorded for network theater screen

leases 24.7 24.6 0.1 0.4 %

Total operating expenses $ 183.2 $ 151.4 $ 31.8 21.0 %

Advertising operating costs .

Advertising operating costs decreased $28.0 million, or 73.1%, from $38.3 million for the year ended December 26, 2019 to $10.3 million for the year ended December 31, 2020.

The decrease was due to a $26.5 million decrease in advertising affiliate expense due to lower revenue in 2020 due to the COVID-19 Pandemic, a $1.0 million decrease in personnel related expenses primarily due to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic and a $0.4 million decrease in onscreen production expense related to the corresponding lower revenue in 2020, compared to 2019.

Advertising operating costs increased $8.1 million, or 78.6%, from $10.3 million for the year ended 2020 to $18.4 million for the year ended 2021.

The increase was due primarily to a $6.9 million increase in advertising affiliate expense due to the addition of a new affiliate representing 501 screens that joined our network in 2021 and an increase in revenue share payments driven by the increase in revenue for the year ended 2021 as compared to the year ended 2020.

Advertising operating costs also increased $1.7 million in revenue share expense due to higher revenue in 2021 as compared to 2020 related to certain digital, DOOH and exhibitor partners.

These increases were partially offset by a $0.3 million decrease in personnel related expenses due to a reduction in headcount in 2021, as compared to 2020.

Network costs.

Network costs decreased $4.9 million, or 36.3%, from $13.5 million for the year ended December 26, 2019 to $8.6 million for the year ended December 31, 2020.

The decrease was primarily related to a $3.7 million decrease in personnel related expenses related to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic, a $0.6 million decrease in maintenance expense primarily related to our DCN due to the temporary closures of theaters within our network in response to the COVID-19 Pandemic and a $0.3 million decrease related to non-essential operating expenditures, including employee travel that was suspended as part of the measures taken to reduce expenses and preserve cash during the COVID-19 Pandemic.

Network costs decreased $1.2 million, or 14.0%, from $8.6 million for the year ended 2020 to $7.4 million for the year ended 2021.

The decrease was primarily related to a $1.0 million decrease in personnel related costs due to a reduction in headcount in 2021, as compared to the year ended 2020.

Theater access fees and revenue share—founding members.

Theater access fees and revenue share decreased $58.1 million, or 70.3%, from $82.7 million for the year ended December 26, 2019 to $24.6 million for the year ended December 31, 2020.

The decrease was primarily due to a 79.0% decrease in founding member attendance for the year ended December 31, 2020, as compared to year ended December 26, 2019, and fewer active founding member screens due to the temporary closure of founding member theaters in response to the COVID-19 Pandemic.

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

This decrease was partially offset by $1.8 million of higher expense in the year ended December 31, 2020 related to fees owed to Cinemark and Regal as compensation for post-showtime advertising in accordance with the 2019 ESA Amendments.

Theater access fees and revenue share increased $26.5 million, or 107.7%, from $24.6 million in the year ended 2020 to $51.1 million in the year ended 2021.

Theater access fees and revenue share increased $15.6 million due to a substantial increase in average active screens for the year ended 2021, as compared to the year ended 2020, and $9.8 million due to a 76.8% increase in founding member attendance.

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

Selling and marketing costs.

Selling and marketing costs decreased $27.3 million, or 42.1%, from $64.9 million for the year ended December 26, 2019 to $37.6 million for the year ended December 31, 2020.

This decrease was primarily related to a $16.4 million decrease in personnel related expenses primarily due to a decrease in commission and bonus expense from the revenue declines during 2020, as compared to 2019, as well as other lower personnel related expenses related to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic.

Selling and marketing costs also decreased 1) $5.8 million related to non-essential operating expenditures, including marketing, research, consulting and employee travel that were suspended as part of the measures taken to reduce expenses and preserve cash during the COVID-19 Pandemic, 2) $2.0 million due to a decrease in barter expense in 2020, compared to 2019, 3) $2.0 million due to non-cash impairment expense realized in the third quarter of 2019 related to investments obtained in prior years in exchange for advertising services and 4) $1.8 million due to a decrease in bad debt expense

and production and royalty related costs resulting from lower revenue in 2020, compared to 2019.

These decreases were partially offset by a $1.8 million increase in expense associated with our Noovie® Audience Accelerator service offering in 2020, compared to 2019.

Selling and marketing costs decreased $2.9 million, or 7.7%, from $37.6 million for the year ended 2020 to $34.7 million for the year ended 2021.

This decrease was primarily related to a $2.4 million decrease related to non-essential operating expenditures, including marketing, training, research and consulting, a $0.4 million decrease in software costs and a $0.3 million decrease in bad debt expense, partially offset by a $0.6 million increase in non-cash barter expense for the year ended 2021, as compared to the year ended 2020.

Administrative and other costs.

Administrative and other costs decreased $12.9 million, or 29.5%, from $43.8 million for the year ended December 26, 2019 to $30.9 million for the year ended December 31, 2020.

Administrative and other costs decreased primarily due to a $9.6 million decrease in personnel related expenses due to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic and a decrease in performance-based compensation expense related to lower projected performance against internal bonus and performance-based restricted stock targets as of December 31, 2020, as compared to December 26, 2019.

Administrative and other costs also decreased 1) $1.5 million due to a decrease in consulting services, 2) $0.8 million due to a decrease 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 and 3) $0.4 million due to a decrease in CEO transition fees related to costs incurred in the year ended December 26, 2019.

Administrative and other costs increased $5.1 million, or 16.5%, from $30.9 million for the year ended 2020 to $36.0 million for the year ended 2021.

This increase was primarily due to a $6.8 million increase in performance-based compensation expense primarily due to the modification of certain of the Company’s performance-based equity grants and issuance of new equity grants during 2021, $2.9 million in personnel expenses due to less capitalized personnel costs from our technology department during 2021, as compared to 2020, and a $1.9 million increase related to cloud computing expense incurred following the implementation of our new cinema advertising management system in January 2021.

These increases were partially offset by a $4.2 million decrease in salary and other personnel related expenses due to a reduction in headcount in 2021, as compared to 2020 and a $2.0 million decrease in legal and professional fees due in part to non-recurring legal services obtained in 2020 related to the various implications of the COVID-19 Pandemic and the negotiation of the services agreement for our cinema advertising management system.

Impairment of long-lived assets.

Impairment of long-lived assets increased $1.7 million, or 100.0%, from $0.0 million in the year ended December 26, 2019 to $1.7 million in the year ended December 31, 2020.

This increase in impairment expense was primarily related to the write-off of certain long-lived assets during the year ended December 31, 2020.

Impairment of long-lived assets decreased $1.7 million, or 100.0%, from $1.7 million in the year ended December 31, 2020 to $0.0 million in the year ended December 30, 2021.

This decrease in impairment expense was primarily related to the write-off of certain long-lived assets during the year ended December 31, 2020.

Depreciation expense.

Depreciation expense decreased $0.5 million, or 3.7%, from $13.6 million for the year ended December 26, 2019 to $13.1 million for the year ended December 31, 2020, as assets became fully depreciated.

Depreciation expense decreased $2.2 million, or 16.8%, from $13.1 million for the year ended 2020 to $10.9 million in the year ended 2021, as certain assets were retired following the implementation of our new cinema advertising management system in January 2021.

Amortization of intangibles recorded for network theater screen leases.

Amortization of intangibles recorded for network theater screen leases decreased $2.1 million, or 7.9%, from $26.7 million for the year ended December 26, 2019, to $24.6 million for the year ended December 31, 2020, primarily due to the four-year extension of the contractual life of the intangible assets for Cinemark and Regal following the 2019 ESA Amendments at the end of the third quarter of 2019.

Non-operating (income) expense.

Total non-operating income increased $159.1 million, or 255.8%, from non-operating expense of $62.2 million in 2019 to non-operating income of $96.9 million in 2020.

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

Amortization of intangibles recorded for network theater screen leases increased $0.1 million, or 0.4%, from $24.6 million for the year ended 2020, to $24.7 million for the year ended 2021.

Non-operating expense (income).

Total non-operating expense increased $146.7 million, or 151.4%, from non-operating income of $96.9 million in 2020 to non-operating expense of $49.8 million in 2021.

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

Fiscal Year $ Change % Change

2 unchanged sentences

Interest income (0.1) (0.6) 0.5 (83.3) %

Loss on modification and retirement of debt, net 0.4 5.6 (5.2) NM

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

Loss on modification and retirement of debt, net 1.2 0.4 0.8 200.0 %

Gain on re-measurement of the payable to

founding members under the tax receivable

agreement (152.7) 1.1 (153.8) NM

Other non-operating expense (income) 0.2 (0.4) 0.6 150.0 %

Total non-operating (income) expense $ (96.9) $ 62.2 $ (159.1) (255.8) %

agreement (16.1) (152.7) 136.6 (89.5) %

Other non-operating expense — 0.2 (0.2) NM

Total non-operating expense (income) $ 49.8 $ (96.9) $ 146.7 (151.4) %

NM = Not meaningful.

The increase in non-operating income from non-operating expense was due primarily to 1) the $153.8 million increase in the gain on the re-measurement of the payable to the founding members which was due primarily to the decrease in our payable to the founding members under the tax receivable agreement resulting from an increase in the valuation allowance against certain of our deferred tax assets, 2) a $5.2 million decrease in the loss on modification and retirement of debt, net related to a loss incurred in the fourth quarter of 2019 upon the early retirement of our Notes due 2022 and 3) a $2.2 million decrease in interest on borrowings due to a 0.65% decrease in the weighted average interest rate, partially offset by an increase in the weighted average balance of debt outstanding for the year ended December 31, 2020, compared to the year ended December 26, 2019.

These decreases in non-operating expense were partially offset by a $1.5 million decrease in interest income on the Company's marketable securities due to a decrease in the outstanding balance of the underlying securities and a decrease in the rate of return.

The increase in non-operating expense was primarily due to a $136.6 million decrease in the gain on the re-measurement of the payable to the founding members which was due primarily to the decrease in our payable to the founding members under the tax receivable agreement resulting from an increase in the valuation allowance against certain of our deferred tax assets as of December 31, 2020, a $9.0 million increase in interest on borrowings related to the issuance of additional debt and the increase in the interest rate on our credit facilities and a $0.8 million increase in the loss on modifications and retirements of debt, net resulting from the second amendment to the Credit Agreement ( the “Credit Agreement Second Amendment”) and the Credit Agreement Third Amendment entered into on March 8, 2021 and January 5, 2022, respectively, and a $0.5 million decrease in interest income in 2021, as compared to 2020.

These increases were partially offset by a $0.2 million decrease in other non-operating expense in 2021, as compared to 2020.

Income tax expense.

Income tax expense increased $149.8 million primarily related to an increase in the valuation allowance against certain of our deferred income tax assets recognized as of December 31, 2020 as discussed within the ' Recent Developments ' section.

Net loss increased $101.5 million from net income of $36.1 million for the year ended December 26, 2019 to net loss of $65.4 million for the year ended December 31, 2020.

The increase in net loss was due to a $222.3 million increase in

operating loss and a $149.8 million increase in income tax expense, partially offset by a $159.1 million decrease in non-operating expenses and a $111.5 million increase in net loss attributable to noncontrolling interests.

Income tax expense decreased $162.2 million primarily related to an increase in the valuation allowance against certain of our deferred income tax assets recognized in 2020, as compared to 2021.

Net loss decreased $16.7 million from $65.4 million for the year ended December 31, 2020 to $48.7 million for the year ended December 30, 2021.

The decrease in net loss was due to a $162.2 million decrease in income tax expense and an $8.8 million increase in net loss attributable to noncontrolling interests, partially offset by a $146.7 million increase in non-operating expenses and a $7.6 million increase in operating loss.

Known Trends and Uncertainties

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

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

COVID-19— As discussed within the ‘ Recent Developments’ section, due to the COVID-19 Pandemic certain theaters within the Company’s network were temporarily closed during a portion of the year ended December 30, 2021.

The Company's ability to advertise within theaters once opened was limited for part of the year 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.

3 unchanged sentences

For the years ended 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.

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.

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 2022 will not change compared to 2021.

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

Beginning in 2020 and in accordance with the 2019 ESA Amendments, the price for the time sold to Cinemark and Regal’s beverage suppliers now increases at a fixed rate of 2.0% each year.

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.

4 unchanged sentences

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

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

Platinum Spot —In consideration for the utilization of the theaters post-showtime for Platinum Spots, Cinemark and Regal are entitled to receive a percentage 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, NCM LLC will be required to satisfy a minimum average CPM for that period of time.

1 unchanged sentence

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 Cinemark and Regal, interest or principal payments on our term loan and the Notes due 2026 and Notes due 2028, income tax payments, TRA payments to the founding members and the amount of quarterly dividends to NCM, Inc.’s common stockholders.

As discussed within the ‘Recent Developments’ section, due to the COVID-19 Pandemic, the Company was unable to advertise in the theaters, and thus generate the majority of its revenue, for the approximate six months that the theaters were generally closed and many theaters in our network remain closed.

The Company’s ability to advertise within the reopened

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

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

As discussed within the ‘Recent Developments’ section, due to the COVID-19 Pandemic, certain theaters within the Company’s network remained temporarily closed during a portion of the year ended December 30, 2021 and the Company's ability to advertise within the reopened theaters has been 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 has reduced cash payments during the period theaters within the Company's network are closed or attendance levels are low as expenses related to theater attendance are either not incurred or incurred at lower levels (i.e.

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).

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

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

The $123.9 million of cash at NCM LLC will be used to fund operations during the period of expected reduced cash flows.

As all of the theaters within our network were open for the third and fourth quarters of 2021, the screen-based portion of these expenses returned to historical levels and the attendance-based portion of these expenses is expected to continue to increase as attendance increases following the continued release of many major motion pictures.

During the year ended December 30, 2021, 29% of our current employee base continued to be furloughed or had salary reductions of up to 50%.

Effective January 28, 2022, the Company ended all of the part-time and reduced salary arrangements implemented in response to the COVID-19 Pandemic.

We have experienced a 35% headcount reduction from pre-COVID-19 Pandemic headcount levels.

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:

• 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;

• 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, to $0.05 for the fourth quarter of 2020 and first, second and third quarters of 2021 and to $0.05 for the fourth quarter of 2021 from $0.19 per share in the fourth quarter of 2019.

When compared to the first quarter of 2020 this results in a cash savings of $10.8 million in the fourth quarter of 2021 and cash savings of $71.3 million for NCM, Inc.

since the beginning of the pandemic;

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

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 $58.6 million of cash at NCM LLC as of December 30, 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 and Credit Agreement Second Amendment, for the period beginning in the second quarter of 2020 through the date that NCM LLC delivers a compliance certificate for the third quarter of 2022, NCM LLC must maintain a total balance of $55.0 million of a combination of unrestricted cash on hand and availability under NCM LLC's revolving credit facility.

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

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

As of December 30, 2021, NCM LLC was in compliance with the requirements of the Credit Agreement, as amended.

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Revolver availability (2)

4.4 132.4 (128.0)

Total liquidity $ 109.3 $ 186.2 $ (76.9)

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As of December 30, 2021 and December 31, 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 and $167.0 million, respectively, and net letters of credit of $1.2 million and $3.6 million, respectively.

Subsequent to year-end, on January 5, 2022, NCM LLC entered into the Credit Agreement Third Amendment.

Among other things, the Credit Agreement Third Amendment provides for:

(ii) the suspension of the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the fiscal quarter ended December 29, 2022;

Also on January 5, 2022, NCM LLC entered into the New Revolving Credit Agreement.

The New Revolving Credit Agreement provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022.

The New Revolving Credit Agreement provides for (i) a cash interest rate of term SOFR plus 8.0%, with a 1.0% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the New Revolving Credit Agreement at any time before maturity.

The New Revolving Credit Agreement also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement.

As of December 30, 2021, NCM LLC was in compliance with the requirements of the Credit Agreement, as amended.

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

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Operating Activities.

The $88.3 million decrease in cash provided by operating activities for 2020, compared to 2019 was primarily due to 1) a $213.0 million decrease in consolidated net income due the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic during the period, 2) a $22.1 million larger decrease in accounts payable and accrued expenses during 2020 as compared to 2019, related to the decrease in operating expenses for the corresponding periods as described above, 3) a $11.9 million decrease in founding member integration and other encumbered theater payments, 4) a $6.2 million decrease in amounts due to founding members, 5) a $5.2 million decrease on the loss on modification and retirement of debt, and 6) a $3.5 million increase in the noncash gain on the remeasurement of the payable to

founding members under the TRA, net of the increase in income tax expense, as described above, for 2020, compared to 2019.

These decreases in cash provided by operating activities were partially offset by $178.9 million larger decrease in the accounts receivable balance during 2020, as compared to 2019, related to the collection of the accounts receivable balance and the decrease in revenue described above.

The $150.5 million increase in cash used in operating activities for the year ended 2021, compared to the year ended 2020 was primarily due to a $194.8 million decrease in accounts receivable collections during 2021, as compared to 2020, a $25.8 million decrease in deferred income tax expense, net of the decrease in the noncash gain on the remeasurement of the payable to founding members under the TRA and a $9.3 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 decreased revenue and negative Adjusted OIBDA, from which integration payments are calculated.

These decreased cash inflows were partially offset by i) a $20.8 million decrease in payments of accounts payable and accrued expenses due in part to the cash preservation actions taken by the Company to mitigate the impact of the COVID-19 Pandemic, ii) a $15.0 million increase in amounts due to founding members for 2021, as compared to 2020 due to the increase in theater access fees, net of beverage revenue discussed above, iii) an $11.9 million decrease to the amount paid to founding member under the TRA, iv) a $10.0 million increase in deferred revenue related to higher revenue for 2021, as compared to 2020 and v) a $9.3 million increase in receipts related to a common membership unit adjustment.

Investing Activities.

The $14.0 million increase in cash provided by investing activities for 2020, compared to 2019 was primarily due to a $13.6 million decrease in the purchase of marketable securities, net of proceeds and a $6.0 million decrease in purchases of property and equipment in 2020, compared to 2019 driven by the Company's measures to preserve cash in response to the COVID-19 Pandemic, partially offset by a $5.6 million decrease in proceeds from the founding member notes receivable.

The $21.0 million increase in cash used in investing activities for the year ended 2021, compared to the year ended 2020 was primarily due to a $23.3 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 $184.2 million increase in cash provided by financing activities for 2020, compared to 2019 was primarily due to a $116.0 million increase in proceeds from our revolving credit facility, net of repayments made early in 2020, in order to fund operations during the period of expected reduced cash flows due to the temporary closure of the theaters within NCM LLC's network to address the COVID-19 Pandemic.

The increase was also due to a $21.6 million decrease in dividends paid related to the decrease in the dividend amounts declared from $0.68 per share during 2019 to $0.40 per share during 2020, a $35.1 million decrease in distributions to founding members in 2020, compared to 2019 and an $8.6 million increase related to the repurchase and repayment of the Notes due 2022 and the retired Notes due 2026, net of the issuance of the Notes due 2028.

The $32.0 million decrease in cash provided by financing activities for the year ended 2021, compared to the year ended 2020 was primarily due to a $128.0 million decrease in proceeds from the revolving credit facility, net of repayments, and a $6.0 million increase in the payment of debt issuance costs related primarily to the 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 and a $15.1 million decrease in dividends paid related to the decrease in the dividend amounts declared from $0.40 per share during 2020 to $0.20 per share during 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 December 30, 2021 were $43.9 million (excluding $58.6 million of cash held by NCM LLC).

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

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

The $123.9 million of cash at NCM LLC will be used to fund operations during the period of expected reduced cash flows.

NCM LLC’s primary sources of liquidity and capital resources are its cash provided by operating activities, availability under its revolving credit facility, as of January 5, 2022, its New Revolving Credit Agreement and cash on hand.

On January 5, 2022, the company entered in the New Revolving Credit Agreement and drew down upon the new revolving credit facility of $50.0 million.

Including the net proceeds from the New Revolving Credit Agreement after fees, NCM LLC has a cash balance of $99.7 million, which will be used to fund operations during the period of expected reduced cash flows.

Cash at NCM, Inc.

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Refer to Note 10 to the audited Consolidated Financial Statements included elsewhere in this document and “Financings” below for a detailed discussion of the debt transactions in 2020 and 2021 and the debt outstanding as of December 30, 2021.

During the next fiscal year, the Company intends to have cash outflows of interest payments of $66.5 million and amortization payments of $3.2 million payable throughout the fiscal year as required by the Credit Agreement, New Revolving Credit Agreement, Senior Secured Notes due 2028 and Senior Notes due 2026, capital expenditures between $6.5 million and $7.5 million, prepayments to affiliates and DOOH partners of $8.1 million and lease payments of $3.8 million.

The Company expects to continue to make capital expenditures and other contractually obligated prepayments and upfront payments that may vary from our historical practice.

For other long-term anticipated cash outflows, refer to Note 10 - Borrowings and Note 13 - Commitments and Contingencies for discussion of future anticipated payments.

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 due to the limitations instituted by the Credit Agreement Amendment and Credit Agreement Second Amendment.

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

The available cash distribution to the members of NCM LLC for the combined three months ended June 25, 2020, three months ended September 24, 2020 and three months ended December 31, 2020 was calculated as approximately negative $85.9 million, of which NCM, Inc.'s share is approximately negative $41.2 million.

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

These negative available cash distributions for 2020 are expected to be netted in accordance with the NCM LLC Operating Agreement against future positive available cash distributions after the Extended Covenant Waiver Holiday.

expects to use its cash balances and cash received from future available cash distributions to fund payments associated with the TRA with the founding members and current and future dividends as declared by the Board of Directors, including a dividend declared on March 8, 2021 of $0.05 per share (approximately $3.9 million) on each share of the Company’s common stock (not including outstanding restricted stock) to stockholders of record on March 22, 2021 to be paid on April 5, 2021.

The Company will pay Cinemark, Regal and AMC $0.2 million, $0.4 million, and $0.3 million, respectively, in the first quarter of 2021 as the final payments pursuant to the TRA for the 2019 tax year.

and the founding members will be impacted by the temporary closure of our network theaters and may be deferred through the quarter ending December 28, 2023 or longer due to the limitations instituted by the Credit Agreement Amendment, Credit Agreement Second Amendment and Credit Agreement Third Amendment.

The available cash distribution to the members of NCM LLC for the combined three months ended April 1, 2021, three months ended July 1, 2021, three months ended September 30, 2021 and three months ended December 30, 2021 was calculated as approximately negative $93.7 million, of which NCM, Inc.'s share is approximately negative $45.2 million.

Pursuant to the NCM LLC Operating Agreement and the Credit Agreement Amendment, there were no available cash distributions made for the fourth quarter of 2021.

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

expects to use its cash balances and cash received from future available cash distributions to fund payments associated with the TRA with the founding members and current and future dividends as declared by the Board of Directors, including a dividend declared on March 3, 2022 of $0.05 per share (approximately $4.0 million) on each share of the Company’s common stock (not including outstanding restricted stock) to stockholders of record on March 17, 2022 to be paid on March 31, 2022.

The Company does not expect to make a TRA payment in 2022 for the 2021 tax year.

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Capital Expenditures

Capital expenditures of NCM LLC include digital applications being developed primarily by our programmers and outside consultants, capitalized software development or upgrades for our Digital Content Software and advertising proposal and inventory management, audience targeting and data management systems, equipment required for our Customer Experience Center and content production and post-production facilities, office leasehold improvements, desktop equipment for use by our employees, and in certain cases, the costs necessary to install equipment at or digitize all or a portion of a network affiliate’s theaters when they are added to our network.

Capital expenditures of NCM LLC include digital applications being developed primarily by our programmers and outside consultants, capitalized software development or upgrades for our Digital Content Software, audience targeting and data management systems, cinema advertising management system, equipment required for our Customer Experience Center and content production and post-production facilities, office leasehold improvements, desktop equipment for use by our employees, and in certain cases, the costs necessary to install equipment at or digitize all or a portion of a network affiliate’s theaters when they are added to our network.

Capital expenditures in 2021 were $6.5 million (including $1.7 million associated with digital product development;

$1.6 million associated with upgrades to our existing systems related to the planned upgrade of our cinema advertising management system;

$1.5 million associated with certain implementation and prepaid costs associated with Cloud Computing arrangements;

$2.0 million associated with upgrades to our existing systems related to the planned upgrade of our end-to-end order management and scheduling system;

and $0.6 million associated with network affiliate additions) compared to $11.2 million (including $4.6 million associated with digital product development;

$2.0 million associated with certain implementation and prepaid costs associated with Cloud Computing Arrangements related to the planned upgrade of our end-to-end order management and scheduling system;

$2.4 million associated with certain implementation and prepaid costs associated with Cloud Computing arrangements;

$2.0 million associated with upgrades to our existing systems related to the planned upgrade of our cinema advertising management system;

and $0.2 million associated with network affiliate additions) for the 2020 period.

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We expect these digital products to allow us to capture exclusive first party data on our movie audiences and build our own foundational capabilities for digital ad buying, selling and serving.

We also expect approximately $2.3 million of capital expenditures related to upgrades to our Digital Content Software distribution and content management software and our other internal management systems, including our proposal, inventory and data management systems, reporting systems, network equipment related to currently contracted network affiliate theaters, server and storage upgrades and software licensing.

We also expect approximately $1.1 million of capital expenditures related to upgrades to our Digital Content Software distribution and content management software and our other internal management systems, including our cinema advertising management system, reporting systems, network equipment related to currently contracted network affiliate theaters, server and

storage upgrades and software licensing.

Our capital expenditures may increase as we add additional network affiliates.

We expect that additional expenditures, if any, would be funded in part by additional cash flows associated with those new network affiliates.

Subsequent to year-end, on January 5, 2022, NCM LLC entered into the Credit Agreement Third Amendment.

Among other things, the Credit Agreement Third Amendment provides for:

(i) certain modifications to and extensions to modifications of the affirmative and negative covenants therein;

(ii) the suspension of the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the fiscal quarter ending December 29, 2022;

Also on January 5, 2022, NCM LLC entered into the New Revolving Credit Agreement.

The New Revolving Credit Agreement provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022.

The New Revolving Credit Agreement also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement.

On March 8, 2021, NCM LLC entered into an additional amendment to its Credit Agreement, dated as of June 20, 2018.

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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.

In addition, pursuant to the Credit Agreement Second Amendment, NCM LLC will incur new incremental term loans in an aggregate principal amount of $50.0 million, the proceeds of which will be used for general corporate purposes.

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

The New Incremental Loans will have substantially similar terms to the existing term loans (after giving effect the Credit Agreement Amendment), except that the New Incremental Loans will:

(i) have a cash interest rate of LIBOR plus 8.00%, (ii) have a maturity of December 20, 2024, and (iii) be subject to prepayment premiums if the Borrower prepays the New Incremental Loans before maturity.

(i) have a cash interest rate of LIBOR plus 8.00%, (ii) have a maturity of December 20, 2024, and (iii) be subject to prepayment premiums if NCM LLC prepays the New Incremental Loans before maturity.

This amendment grants a security interest in the Additional Collateral for the benefit of the holders of the Secured Notes.

On April 30, 2020, NCM LLC entered into the Credit Agreement Amendment to allow for the automatic waiver of any non-compliance with its consolidated net senior secured leverage ratio and consolidated total leverage ratio financial covenants occurring from the quarter ending June 25, 2020 until and including the quarter ending July 1, 2021.

The Credit Agreement Amendment requires that, until the fiscal quarter ending July 1, 2021, NCM LLC must not permit the sum of unrestricted cash

on hand at NCM LLC and availability under its revolving credit facility to be less than $55.0 million.

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

On April 30, 2020, NCM LLC entered into the first amendment to the Credit Agreement (the “Credit Agreement Amendment”) to allow for the automatic waiver of any non-compliance with its consolidated net senior secured leverage ratio and consolidated total leverage ratio financial covenants occurring from the quarter ending June 25, 2020 until and including the quarter ending July 1, 2021 (the “Covenant Holiday Period”).

Further, NCM LLC can make available cash

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

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

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The redemption price for the Notes due 2022 was 101.0% of the principal amount thereof plus accrued and unpaid interest thereon, to but not including the redemption date.

In June 2018, we entered into a credit agreement to replace NCM LLC's previous senior secured credit facility.

Consistent with the structure of the previous facility, the new credit agreement consists of a term loan facility and a revolving credit facility for $270.0 million and $175.0 million, respectively.

The new agreement extended the maturity dates by 5.5 years to June 20, 2025 for the term loan facility and 3.5 years to June 20, 2023 for the revolving credit facility.

In June 2018, we entered into the Credit Agreement to replace NCM LLC's previous senior secured credit facility.

Consistent with the structure of the previous facility, the Credit Agreement consists of a term loan facility and a revolving credit facility for $270.0 million and $175.0 million, respectively.

The Credit Agreement extended the maturity dates by 5.5 years to June 20, 2025 for the term loan facility and 3.5 years to June 20, 2023 for the revolving credit facility.

The interest rate under the term loan facility is either the LIBOR index plus 3.00% or the base rate plus 2.00% and the rate under the revolving credit facility is either the LIBOR index plus an applicable margin ranging from 1.75%-2.25% or the base rate plus an applicable margin ranging from 0.75%-1.25%.

The applicable margin for the revolving credit facility is determined quarterly and is subject to adjustment based upon a consolidated net senior secured leverage ratio for NCM LLC.

As of December 31, 2020, NCM LLC’s senior secured credit facility consisted of a $175.0 million revolving credit facility and a $266.6 million term loan, following NCM LLC's required principal amortization payments of $6.7 million which reduced the outstanding balance to $263.3 million from $270.0 million.

NCM LLC repurchased and canceled a total of $0.0 million and $5.0 million of the Notes due 2026 during 2020 and 2019, respectively, reducing the principal amount to $230.0 million as of December 31, 2020.

These repurchases were treated as partial debt extinguishments and resulted in the realization of a non-operating gain, net of written off debt issuance costs, of $0.0 million and $0.3 million during the years ended December 31, 2020 and December 26, 2019, respectively.

As of December 31, 2020 re-purchases to date are expected to result in interest savings to maturity of approximately $8.9 million.

As of December 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 $48.0 million term loan (second tranche).

As of December 30, 2021, the weighted average remaining maturity was 4.4 years.

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The remaining 43% of our borrowings bear interest at variable rates and as such, 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.

Critical Accounting Policies

Critical Accounting Estimates

The significant accounting policies of the Company are described in Note 1 to the audited Consolidated Financial Statements included elsewhere in this document.

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As of December 30, 2021, our allowance for doubtful accounts was $1.7 million, or 3.1% of the gross accounts receivable balance.

A 10% difference in the allowance for doubtful accounts as of December 31, 2020 would have affected net income attributable to NCM, Inc.

A 10% difference in the allowance for doubtful accounts as of December 30, 2021 would have affected net loss attributable to NCM, Inc.

by approximately $0.2 million.

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The fair value of restricted stock and restricted stock units are based on the closing market price of our common stock on the date of grant.

Restricted stock vest upon the achievement of Company three-year cumulative performance measures and service conditions or only service conditions whereby they vest ratably over three years.

Restricted stock units vest after the completion of a service period of thirteen months.

Compensation expense equal to the fair value of each restricted stock award or restricted stock unit is recognized ratably over this requisite service period.

Restricted stock and restricted stock units granted to employees vest upon the achievement of Company three-year cumulative performance measures and service conditions or only service conditions whereby they vest ratably over three years.

Restricted stock units granted to non-employee directors vest after the completion of a service period of thirteen months.

Compensation expense equal to the fair value of each restricted stock award or restricted stock unit is recognized ratably over this requisite service period once the performance-based metric has been determined, if applicable.

For the restricted stock awards including performance vesting conditions, compensation expense is based on management’s projections and the probability of achievement of those targets, which requires considerable judgment.

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Accordingly, deferred tax assets and liabilities arise from the differences between the tax basis of an asset or liability and its reported amount in the audited Consolidated Financial Statements.

Deferred tax amounts are determined using the tax rates expected to be in effect when the

taxes will actually be paid or refunds received, as provided under currently enacted tax law.

Deferred tax amounts are determined using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided under currently enacted tax law.

Valuation allowances are to be established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company expects that it will generate a three-year cumulative pre-tax book loss during 2021 driven by the impact of the COVID-19 Pandemic on the Company’s operations in 2020, the effect of which is expected to continue into 2021.

The Company generated a three-year cumulative pre-tax book loss during 2021 driven by the impact of the COVID-19 Pandemic on the Company’s operations in 2020 and 2021.

Given the associated weight assigned to this item as negative evidence within the Company’s analysis, the Company determined it is more-likely-than-not that the Company will not be able to realize certain of the Company’s deferred tax assets before they expire.

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The requirements of the TRA, as amended, are highly technical and complex and involve management’s judgment, including judgments to determine hypothetical tax outcomes exclusive of the IPO date transaction and agreements.

Management performs thorough analysis of the estimate each quarter and upon new information or conditions will refine its estimate.

If we were to fail to meet certain of the requirements of the TRA, we could be subject to additional payments to taxing authorities or to the founding members.

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For a discussion of the related-party transactions, refer to the information provided under Note 9 to the audited Consolidated Financial Statements included elsewhere in this document.

Off-Balance Sheet Arrangements

Our operating lease obligations, which primarily include office leases, are not reflected on our balance sheet.

Refer to “—Contractual and Other Obligations” for further detail.

We do not believe these arrangements are material to our current or future financial condition, results of operations, liquidity, capital resources or capital expenditures.

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-K

Item 7. Management’s Discussion and Analysis