What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-03 compared with 2021-03-09 · 216 added, 326 removed, 971 unchanged (36% of the section changed)

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and Subsidiary

Report of Independent Registered Public Accounting Firm

Report of Deloitte & Touche LLP , Independent Registered Public Accounting Fir m ( PCAOB ID:

Consolidated Balance Sheets as of December 3 0 , 202 1 and December 31, 202 0

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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 13—Commitments and Contingencies to the Consolidated Financial Statements, the Company changed its method of accounting for leases effective December 28, 2018 due to the adoption of Accounting Standards Codification Topic 842 – Leases.

Basis for Opinion

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The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which each relates.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which each relates.

Income Taxes – Tax Receivable Agreements — Refer to Notes 7 and 9 to the Consolidated Financial Statements

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The TRA applies to the Company’s taxable years up to and including the 30th anniversary of the IPO.

During the fiscal year ended December 31, 2020, the Company paid the founding members $12.8M for the 2019 tax year.

In addition, changes in the deferred tax rate and

in the Company’s realization assessment of its deferred tax assets, and therefore changes to future amounts probable to be paid under the TRA led to a re-measurement of the payable, resulting in a decrease of $152.7M during the fiscal year.

During the fiscal year ended December 30, 2021, the Company paid the founding members $0.0 million for the 2020 tax year and $0.9 million for the 2019 tax year.

In addition, changes in the deferred tax rate and in the Company’s realization assessment of its deferred tax assets, and therefore changes to future amounts probable to be paid under the TRA led to a re-measurement of the payable, resulting in a decrease of $16.1 million during the fiscal year.

At December 30, 2021, the Company’s payable to founding members under the TRA liability (“PFML”) was $16.4 million;

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• We reconciled realization of tax payments and deductions to the PFML.

Income Taxes – Deferred Tax Asset Realizability — Refer to Notes 7 and 9 to the consolidated financial statements

Critical Audit Matter Description

The Company accounts for income taxes under the asset and liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which differences are expected to be recovered or settled pursuant to the provisions of ASC 740 – Income Taxes .

The Company records a valuation allowance if it is deemed more likely than not that all or a portion of its deferred tax assets will not be realized.

As of December 31, 2020, the Company reported a gross deferred tax asset of $212.0 million.

The Company considered both positive and negative evidence in determining whether it is more likely than not that all or some portion of its deferred tax assets will be realized under ASC 740 as of December 31, 2020.

Based on all available evidence, including the Company’s expectation that it will generate a three-year cumulative pre-tax book loss during 2021, the Company concluded that 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 by $139.0 million as of December 31, 2020.

We identified the assessment of the realizability of the remaining net deferred tax assets as a critical audit matter because of the significant judgments and complex estimates required in evaluating the need for a valuation allowance.

This involved complexity in applying the tax law, considering all available evidence, and evaluating the Company’s three-year cumulative pre-tax book income (loss), including forecasted quarterly pre-tax book income (loss) through 2021.

The realizability of the net deferred tax asset, as well as the need for a valuation allowance, is dependent upon a number of complex items including:

(i) the weight assigned to the evidence based on the degree to which it is objectively verifiable and (ii) forecasting pre-tax book income (loss) through 2021 in a highly uncertain environment.

How the Critical Audit Matter Was Addressed in the Audit

With the assistance of our income tax specialists, our audit procedures related to the realizability of the deferred tax assets included the following procedures, among others:

• We tested the effectiveness of internal controls over the calculation of the valuation of deferred tax assets including the controls over the Company’s consideration of positive and negative evidence.

• We evaluated whether the sources of management’s positive and negative evidence were of the appropriate character and sufficient to utilize the deferred tax assets under the relevant tax law to confirm completeness.

• We tested management’s weighted forecast considerations by comparing and evaluating objectively verifiable evidence and subjective evidence.

• We evaluated management’s computation of the cumulative pre-tax book income position including actual and forecasted pre-tax book income amounts.

• We evaluated the Company’s “more likely than not” conclusion with regard to the realizability of deferred tax assets and recomputed the valuation allowance for those that were not considered realizable.

• We consulted with our accounting experts as to the appropriateness of the analysis performed and the conclusions reached.

/s/ Deloitte & Touche LLP

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Receivables, net of allowance of $ 1.7 and $ 2.3 , respectively

Amounts due from founding members, net — 6.6

Prepaid expenses and other current assets 3.9 3.1

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Total 183.2 151.4

OPERATING (LOSS) INCOME ( 61.0 ) 161.3

OPERATING LOSS ( 68.6 ) ( 61.0 )

NON-OPERATING EXPENSES:

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Loss on early retirement of debt, net 1.2 0.4

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

members under the TRA ( 152.7 ) 1.1

Other non-operating expense (income) 0.2 ( 0.4 )

Gain on re-measurement of the payable to founding members under the TRA ( 16.1 ) ( 152.7 )

Other non-operating expense — 0.2

Total 49.8 ( 96.9 )

INCOME BEFORE INCOME TAXES 35.9 99.1

(LOSS) INCOME BEFORE INCOME TAXES ( 118.4 ) 35.9

Income tax expense — 162.2

CONSOLIDATED NET (LOSS) INCOME ( 126.3 ) 86.7

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

NET (LOSS) INCOME ATTRIBUTABLE TO NCM, INC.

CONSOLIDATED NET LOSS ( 118.4 ) ( 126.3 )

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

NET LOSS ATTRIBUTABLE TO NCM, INC.

( 48.7 ) ( 65.4 )

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO NCM, INC.

COMPREHENSIVE LOSS ATTRIBUTABLE TO NCM, INC.

$ ( 48.7 ) $ ( 65.4 )

NET (LOSS) INCOME PER NCM, INC.

NET LOSS PER NCM, INC.

COMMON SHARE:

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

Cumulative-effect adjustment for adoption of 2016-13 2.9 — — — 1.2 1.7

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

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ownership changes ( 0.5 ) — — ( 3.9 ) — 3.4

Issuance of shares to founding members 1.7 197,118 — 1.7 — —

investment in NCM LLC ( 1.7 ) — — ( 1.7 ) — —

Comprehensive income, net of tax ( 126.3 ) — — — ( 65.4 ) ( 60.9 )

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

Cumulative-effect adjustment for adoption of ASU

2016-13, net of tax 2.9 — — — 1.2 1.7

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

NCM LLC equity issued for purchase of

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ownership changes ( 0.3 ) — — 1.7 — ( 2.0 )

Issuance of shares to founding members 6.6 1,390,567 — 6.6 — —

investment in NCM LLC ( 6.6 ) — — ( 6.6 ) — —

Comprehensive loss, net of tax ( 118.4 ) — — — ( 48.7 ) ( 69.7 )

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CASH FLOWS FROM OPERATING ACTIVITIES:

Consolidated net (loss) income $ ( 126.3 ) $ 86.7

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

Consolidated net loss $ ( 118.4 ) $ ( 126.3 )

Adjustments to reconcile consolidated net loss to net cash provided by operating activities:

Deferred income tax expense — 162.4

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Impairment of long-lived assets — 1.7

Impairment on investment — 2.0

Amortization of debt issuance costs 4.1 2.5

Loss on early retirement of debt, net 1.2 0.4

Non-cash (gain) loss on re-measurement of the payable to founding members under the TRA ( 152.7 ) 1.1

Non-cash gain on re-measurement of the payable to founding members under the TRA ( 16.1 ) ( 152.7 )

Other 0.2 0.1

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Payment to founding members under the TRA ( 0.9 ) ( 12.8 )

Common membership unit adjustment received 9.3 —

Other cash flows from operating activities, net — ( 0.1 )

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Other, net ( 2.7 ) ( 2.5 )

Net cash provided by operating activities 55.3 143.6

Net cash (used in) provided by operating activities ( 95.2 ) 55.3

CASH FLOWS FROM INVESTING ACTIVITIES:

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Proceeds from sale and maturities of marketable securities 0.3 31.8

Proceeds from notes receivable - founding members (including payments from related

parties of $ 0.0 and $ 4.2 , respectively)

Net cash provided by investing activities 15.6 1.6

Net cash (used in) provided by investing activities ( 5.4 ) 15.6

CASH FLOWS FROM FINANCING ACTIVITIES:

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Repayments of revolving credit facility — ( 82.0 )

Issuance of term loans 50.0 —

Repayments of term loan facility ( 2.3 ) ( 3.4 )

Repayment of Senior Notes due 2022 and 2026 — ( 408.6 )

Proceeds from issuance of Senior Notes due 2028 — 400.0

Payment of debt issuance costs ( 7.3 ) ( 1.3 )

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Repurchase of stock for restricted stock tax withholding ( 2.0 ) ( 1.0 )

Net cash provided by (used in) financing activities 53.5 ( 130.7 )

Net cash provided by financing activities 21.5 53.5

CHANGE IN CASH AND CASH EQUIVALENTS ( 79.1 ) 124.4

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

Accrued distributions to founding members (including accrued payments due from

related parties of $ 0.0 and $ 32.4 , respectively)

Accrued integration and other encumbered theater payments from founding members

(including accrued payments due from related parties of $ 0.0 and $ 0.1 , respectively)

Purchase of subsidiary equity with NCM, Inc.

equity $ — $ 1.7

Accrued purchases of property and equipment $ — $ 1.2

(Decrease) increase in dividend equivalent accrual not requiring cash

Increase (decrease) in dividend equivalent accrual not requiring cash

in the period $ 0.9 $ ( 0.1 )

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Cash paid for interest $ 58.6 $ 54.6

Cash paid for income taxes, net of refunds $ 0.5 $ 0.1

Cash (refunds) payments for income taxes $ ( 0.1 ) $ 0.5

Refer to accompanying notes to Consolidated Financial Statements.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

was incorporated in Delaware as a holding company with the sole purpose of becoming a member and sole manager of NCM LLC, a limited liability company owned by NCM, Inc., Cinemark, Regal and AMC.

was incorporated in Delaware as a holding company with the sole purpose of becoming a member and sole manager of NCM LLC, a limited liability company owned by NCM, Inc., Cinemark and Regal.

The terms “NCM”, “the Company” or “we” shall, unless the context otherwise requires, be deemed to include the consolidated entity.

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

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

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

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 the Company’s network were open.

Following the reopening of the theaters within the Company’s network in the third quarter of 2020, in-theater advertising revenue continued to be adversely impacted as attendance remained limited until major motion picture releases resumed during the second quarter of 2021 and by the third quarter of 2021 all of the theaters within the Company’s network were open.

On September 17, 2019, NCM LLC entered into the 2019 ESA Amendments.

The 2019 ESA Amendments extended the contract life of the ESAs with Cinemark and Regal by four years resulting in a weighted average remaining term of the ESAs with the founding members (based on pre-COVID-19 attendance levels) of approximately 18.7 as of December 31, 2020.

The network affiliate agreements expire at various dates between March 31, 2021 and July 22, 2031.

The network affiliate agreements expire at various dates between March 14, 2022 and December 31, 2037.

The weighted average remaining term (based on pre-COVID-19 attendance levels) of the ESAs and the network affiliate agreements together is 15.5 years as of December 30, 2021.

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December 31, 2020 2020

Revenue Recognition —The Company derives 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., as well as 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, the Company sells online and mobile advertising, including through Noovie

NATIONAL CINEMEDIA, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

as 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.

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.

Audience Accelerator, through NCM's digital gaming products including Noovie Trivia, Noovie ARcade, Name That Movie and Noovie Shuffle, which can be played on the mobile apps and through partnerships with certain internet platforms.

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

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

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The Company has elected the fair value option for valuing its cash equivalents.

The cash equivalents are valued at fair value at each balance sheet date and the change in value from the prior period is recognized within “Other non-operating income (loss)” on the audited Consolidated Statements of Income.

The cash equivalents are valued at fair value at each balance sheet date and the change in value from the prior period is recognized within “Other non-operating loss” on the audited Consolidated Statements of Income.

Marketable Securities —The Company’s marketable securities are classified as available-for-sale and are reported at fair value.

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

The Company increased the expected rate of default related to local and regional customers within the calculation of the allowance for doubtful accounts as of December 31, 2020, as compared to December 26, 2019, given the expected adverse impact of the COVID-19 Pandemic on certain businesses, in particular, categories of small businesses (e.g.

The Company increased the expected rate of default related to local and regional customers within the calculation of the allowance for doubtful accounts as of December 30, 2021 and December 31, 2020, given the expected adverse impact of the COVID-19 Pandemic on certain businesses, in particular, categories of small businesses (e.g.

restaurants, travel, etc.) which the Company expects could lead to an increased rate of default.

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Receivables are written off when management determines amounts are uncollectible.

As of December 31, 2020 there was one advertising agency group through which the Company sources national advertising revenue that accounted for 10.1 % of the Company’s outstanding gross receivable balance.

As of December 26, 2019 there was no advertising agency group through which the Company sources national advertising revenue that accounted for more than 10% of the Company’s outstanding gross receivable balance.

During the year ended December 31, 2020, the Company had one customer that accounted for 14.6 % of the Company's revenue.

During the year ended December 26, 2019, there were no customers that accounted for more than 10% of revenue.

As of December 30, 2021 and December 31, 2020 there was one advertising agency group through which the Company sources national advertising revenue that accounted for 15.7 % and 10.1 %, respectively, of the Company’s outstanding gross receivable balance.

During the years ended December 30, 2021 and December 31, 2020, the Company had one customer that accounted for 11.8 % and 14.6 %, respectively, of the Company's revenue.

NATIONAL CINEMEDIA, INC.

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The subtopics require the capitalization of certain costs incurred in developing or obtaining software for internal use.

Software costs related primarily to the Company’s inventory management systems, digital products, digital network distribution system (DCS), enterprise resource planning system and website development costs, which are included in equipment, and are depreciated over three to five years .

Software costs related primarily to the Company’s cinema advertising management system, digital products, digital network distribution system (DCS), enterprise resource planning system and website development costs, which are included in equipment, and are depreciated over three to ten years .

As of December 30, 2021 and December 31, 2020, the Company had a net book value of $ 13.7 million and $ 10.4 million, respectively, of capitalized software and website development costs.

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As of December 30, 2021 and December 31, 2020 the Company had a net book value of $ 4.0 million and $ 3.0 million of capitalized implementation costs for CCAs, respectively.

These costs primarily relate to the Company's new hosted end-to-end order management and scheduling system which was implemented in January 2021.

Since December 31, 2020 and December 26, 2019 were prior to the implementation of the system, the gross value of the capitalized implementation costs were equal to the net book value.

These costs will be amortized to “Administrative and other costs” within the audited Consolidated Statements of Income over the life of the hosting arrangement beginning at implementation.

These costs primarily relate to the Company's new hosted cinema advertising management system which was implemented in January 2021.

Depreciation expense related to capitalized implementation costs for CCAs was approximately $ 0.4 million and $ 0.0 million for the years ended December 30, 2021 and December 31, 2020, respectively.

These costs are amortized to “Administrative and other costs” within the audited Consolidated Statements of Income over the life of the hosting arrangement beginning at implementation.

For the years ended December 30, 2021 and December 31, 2020, the Company recorded $ 1.7 million and $ 1.9 million in research and development expense, respectively.

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The Company has elected to capitalize extension costs on its intangible assets and thus capitalized the legal and professional costs incurred in conjunction with the 2019 ESA Amendments.

During the years ended December 31, 2020 and December 26, 2019, the Company capitalized $ 0.0 million and $ 1.3 million, respectively within the intangible asset balance related to extension costs.

Amounts Due to/from Founding Members —Amounts due to/from founding members include amounts due for the theater access fees and revenue share, offset by a receivable for advertising time purchased by the founding members on behalf of their beverage concessionaire, plus any amounts outstanding under other contractually obligated payments.

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Amortization of debt issuance costs ( 4.1 ) ( 2.5 )

Write-off of debt issuance costs — ( 1.9 )

Ending balance $ 15.0 $ 11.3

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Compensation —During 2021 and 2020, the Company issued stock options, restricted stock and restricted stock units.

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The Company recognizes share-based compensation net of an estimated forfeiture rate.

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

Compensation expense of restricted stock and restricted stock units that vest upon the

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

achievement of Company performance measures is based on management’s financial projections and the probability of achieving the projections, which require considerable judgment.

A cumulative adjustment is recorded to share-based compensation expense in periods that management changes its estimate of the number of shares expected to vest.

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December 30, 2021 December 31, 2020

Net (loss) income attributable to NCM, Inc.

Net loss attributable to NCM, Inc.

$ ( 48.7 ) $ ( 65.4 )

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Issuance of shares to founding members 6.6 —

Change from net (loss) income attributable to NCM, Inc.

Change from net loss attributable to NCM, Inc.

and transfers from

noncontrolling interests $ ( 40.2 ) $ ( 64.3 )

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently Adopted Accounting Pronouncements

During the first quarter of 2020, the Company adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements (“ASU 2016-13”), which requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

Upon the adoption of ASU 2016-13 on December 27, 2019, the Company recorded a $ 3.2 million cumulative-effect adjustment to retained earnings related to the change in methodology surrounding the historical losses utilized in the calculation of the allowance for credit losses related to trade and unbilled accounts receivable reducing the allowance to $ 3.0 million as of the adoption date.

The Company also recorded a corresponding $ 0.4 million reduction to the corresponding deferred tax asset with the offset also recorded to retained earnings.

The other impacts upon adoption were immaterial to the audited Consolidated Financial Statements.

The Company has incorporated additional disclosures in Note 1— The Company , Note 2— Revenue from Contracts with Customers and Accounts Receivable and Note14— Fair Value Measurements to its audited Consolidated Financial Statements to comply with ASU 2016-13.

The Company has also designed and implemented changes to certain processes and internal controls related to its adoption of ASU 2016-13.

During the first quarter of 2020, the Company adopted Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements.

The Company adoption of ASU 2018-13 did not have a material impact on the audited Consolidated Financial Statements or notes thereto.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update 2019-12, Income Taxes (Topic 740):

During the first quarter of 2021, the Company adopted Accounting Standards Update 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes the following exceptions for the Company to analyze in a given period:

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the exception to accounting for basis differences when there are ownership changes in foreign investments;

and the exception in interim periods income tax accounting for year-to-date losses that exceed anticipated losses.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted.

The Company is currently evaluating the impact that adopting this guidance will have on the audited Consolidated Financial Statements or notes thereto.

and the exception in interim periods

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

income tax accounting for year-to-date losses that exceed anticipated losses.

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

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update No.

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

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

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

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The Company recognizes local on-screen advertising revenue over the period in which the advertising airs as dictated by the underlying sales contracts.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

separately, LEN advertising and lobby promotions are sold based on length and breadth of the promotion.

When sold separately, LEN advertising and lobby promotions are sold based on length and breadth of the promotion.

The Company recognizes revenue derived from lobby network and promotions over time when the advertising is displayed in theater lobbies.

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

In rare cases, the Company will make a cash refund of the portion of the contract related to the undelivered impressions.

Periodically, the Company will make a cash refund of the portion of the contract related to the undelivered impressions.

Given the limited history of cash settlements of the make-good provision, the Company recognizes revenue on the guaranteed contracts as the impressions are delivered and no reserve for variable consideration is recorded.

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

specified in the advertising contract.

The make-good provision is recorded within “Accrued expenses” on the audited Consolidated Balance Sheets.

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Total revenue $ 114.6 $ 90.4

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Revenue and Unbilled Accounts Receivable

The changes in deferred revenue for the year ended December 30, 2021 were as follows (in millions):

December 31, 2020

December 30, 2021 December 31, 2020

Balance at beginning of year $ ( 5.1 ) $ ( 7.6 )

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The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

(LOSS) EARNINGS PER SHARE

Allowance for Doubtful Accounts

The allowance for doubtful accounts balance is determined separately for each pool of the Company's receivables with similar risk characteristics.

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

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

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AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 30, 2021 December 31, 2020

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

Balance at beginning of period (1)

$ 0.2 $ 2.1 $ 1.1 $ 1.9

Provision for bad debt 0.1 — ( 0.9 ) 1.2

Write-offs, net — ( 0.7 ) — ( 1.0 )

Balance at end of period $ 0.3 $ 1.4 $ 0.2 $ 2.1

(1) Upon the adoption of ASU 2016-13 on December 27, 2019, the Company recorded a $ 3.2 million cumulative-effect adjustment to the allowance for doubtful accounts and retained earnings related to the change in methodology surrounding the historical losses utilized in the calculation of the allowance for credit losses related to trade and unbilled accounts receivable reducing the allowance to $ 3.0 million as of the adoption date from $ 6.2 million.

LOSS PER SHARE

Basic loss per share is computed on the basis of the weighted average number of common shares outstanding.

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December 30, 2021 December 31, 2020

Net income attributable to NCM, Inc.

Net loss attributable to NCM, Inc.

(in millions) $ ( 48.7 ) $ ( 65.4 )

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Diluted 79,867,332 77,955,675

Earnings per NCM, Inc.

Loss per NCM, Inc.

Basic $ ( 0.61 ) $ ( 0.84 )

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The effect of the 85,748,080 and 83,903,921 exchangeable NCM LLC common membership units held by the founding members for the years ended December 30, 2021 and December 31, 2020, respectively, was excluded from the calculation of diluted weighted average shares and earnings per NCM, Inc.

share as it was antidilutive in that period.

share as it was antidilutive in these periods.

In addition, there were 4,646,960 and 5,193,200 , stock options and non-vested (restricted) shares for the years ended December 30, 2021 and December 31, 2020, respectively, excluded from the calculation as they were antidilutive.

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

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PROPERTY AND EQUIPMENT

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Total property and equipment $ 21.3 $ 27.5

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INTANGIBLE ASSETS

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There was no impact to the Payable to founding members under tax receivable agreement as the useful life of the intangible assets were not deemed to be extended for tax purposes and there were no changes made to the tax receivable agreements.

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

360, Impairment and Disposal of Long-Lived Assets during 2020.

In its impairment analysis, management considered possible scenarios in a probability-weighted estimated future undiscounted cash flow analysis, including the potential of further delays in major motion picture releases, a recurrence of the temporary theater closures and other potential adverse impacts to NCM LLC’s founding members’ and affiliates’ financial liquidity related to the COVID-19 Pandemic.

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

The Company determined that recent adverse changes in macroeconomic trends constituted a triggering event for certain of its intangible assets under Accounting Standards Certification No.

360, Impairment and Disposal of Long-Lived Assets during the fourth quarter of 2021.

In its impairment analysis, management considered possible scenarios in a probability-weighted estimated future undiscounted cash flow analysis, including potential adverse impacts to certain NCM LLC’s founding members’ financial liquidity.

The estimated future cash flows from the ESAs calculated within the probability-weighted analyses were in excess of the net book value of these intangible assets and no impairment charges were recorded in 2021.

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

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

In 2019, AMC and Cinemark also made integration payments to NCM LLC related to their respective acquisitions of theaters from Rave Cinemas.

The advertising agreements with

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an alternative provider for these theaters ended during 2019 and the theaters were transferred to our network.

Integration payments are no longer due related to these theaters.

Integration payments are calculated based upon the advertising cash flow that the Company would have generated if it had exclusive access to sell advertising in the theaters with pre-existing advertising agreements.

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Total intangible assets, net $ 627.8 $ 4.8 $ — $ ( 24.7 ) $ ( 1.6 ) $ 606.3

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2019 Additions (3)

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(1) During the first quarter of 2021, NCM LLC issued 3,047,582 common membership units to its founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions by the founding members to NCM LLC’s network during the 2020 fiscal year and NCM LLC recorded a net intangible asset of $ 4.8 million during the first quarter of 2021 as a result of the Common Unit Adjustment.

(2) Carmike and Rave Cinemas had pre-existing advertising agreements for some of the theaters it owned prior to their acquisitions by AMC and Cinemark.

As a result, AMC and Cinemark will make integration and other encumbered theater payments over the remaining term of those agreements.

During the years ended December 31, 2020 and December 26, 2019, NCM LLC recorded a reduction to net intangible assets of $ 1.4 million and $ 22.3 million, respectively, related to integration and other encumbered theater payments due from AMC and Cinemark.

During the year ended December 31, 2020 and December 26, 2019, AMC and Cinemark paid a total of $ 9.8 million and $ 21.7 million, respectively, related to integration and other encumbered theater payments.

(2) Carmike theaters had pre-existing advertising agreements for some of the theaters it owned prior to their acquisitions by AMC.

As a result, AMC will make integration and other encumbered theater payments over the remaining term of those agreements.

During the years ended December 30, 2021 and December 31, 2020, NCM LLC recorded a reduction to net intangible assets of $ 1.6 million and $ 1.4 million, respectively, related to integration and other encumbered theater payments due from AMC.

During the year ended December 30, 2021 and December 31, 2020, AMC paid a total of $ 0.5 million and $ 9.8 million, respectively, related to integration and other encumbered theater payments.

(3) During the first quarter of 2020, NCM LLC issued 3,022,959 common membership units to its founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions by the founding members to NCM LLC’s network during the 2019 fiscal year and NCM LLC recorded a net intangible asset of $ 10.5 million during the first quarter of 2020 as a result of the Common Unit Adjustment.

During the third quarter of 2019, the Company capitalized $ 1.3 million of legal and professional costs incurred in conjunction with the 2019 ESA Amendments which extended the useful life of the intangible asset for Cinemark and Regal.

As of December 30, 2021 and December 31, 2020, the Company’s intangible assets related to the founding members, net of accumulated amortization, was $ 589.6 million and $ 608.1 million, respectively, with weighted average remaining lives of 17.4 years and 18.3 years, respectively.

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The estimated aggregate amortization expense for each of the five succeeding years is as follows (in millions ):

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Year Amortization

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Total accrued expenses $ 15.8 $ 19.0

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The Company is subject to taxation in the U.S.

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For the 2020 tax year, the Company paid the founding members $ 0.0 million in the year ended December 30, 2021 and expects to pay an additional $ 0.0 million in the first quarter of 2022.

The Company paid the founding members $ 14.8 million in the year ended December 26, 2019 for the 2018 tax year.

The Company paid the founding members $ 0.9 million in the year ended December 30, 2021 and $ 12.8 million in the year ended December 31, 2020 for the 2019 tax year.

recorded a long-term payable to the founding members related to the TRA.

The Company recorded a $ 152.7 million reduction to the ‘Payable to founding members under the tax receivable agreement’ during the year ended December 31, 2020.

The reduction was primarily related 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 of $ 151.9 million, as further discussed below.

The reduction was also due to the decrease in the deferred tax rate during the year ended December 31, 2020.

The reduction to the payable to founding members under the tax receivable agreement was recorded as a gain within “Non-operating income” within the Consolidated Statements of Income.

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The Company recorded reductions of $ 16.1 million and $ 152.7 million to the ‘Payable to founding members under the tax receivable agreement’ during the years ended December 30, 2021 and December 31, 2020, respectively.

These reductions were primarily related 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 30, 2021 and December 31, 2020, as further discussed below.

The reductions to the payable to founding members under the tax receivable agreement were recorded as a gain within “Non-operating income” within the Consolidated Statements of Income.

Provision for Income Taxes —The Company has provided total income taxes, as follows (in millions)

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Federal — 131.8

State 30.6 2.1

Total deferred income tax expense — 162.4

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federal statutory rate of 21.0 % as of December 30, 2021 and December 31, 2020 was (in millions):

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December 30, 2021 December 31, 2020

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Income attributable to NCM, Inc.

( 10.3 ) 20.3

Current year change to enacted federal and state rate — ( 1.4 )

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Accrued bonus 0.2 —

Business interest expense limitation 8.3 —

Other 1.5 1.7

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Total deferred tax assets, net of valuation allowance $ — $ —

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(1) The Company recognized a deferred tax asset in the amount of $ 138.5 million and $ 156.0 million as of 2021 and 2020, respectively, associated with the basis difference in our investment in NCM LLC.

The Company evaluated its deferred tax assets as of December 31, 2020 and considered both positive and negative evidence in determining whether it is more likely than not that all or some portion of its deferred tax assets will 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 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 increase in the valuation allowance was partially offset by an $ 8.6 million reduction in the valuation allowance related to the investment in consolidated subsidiary NCM LLC deferred tax asset.

The Company evaluated its deferred tax assets as of December 30, 2021 and December 31, 20201 and considered both positive and negative evidence in determining whether it is more likely than not that all or some portion of its deferred tax assets will be realized.

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 2021 and 2020, the effect of which is expected to continue into 2022.

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 and the Company increased the valuation allowance against certain deferred tax assets, generating $ 10.3 million and $ 139.0 million of additional income tax expense in the years ended December 31, 2021 and December 31, 2020, respectively.

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.

Once the valuation allowance is reversed, the payable to founding members under the tax receivable agreement would be increased to reflect expected future payments to the founding members at that time.

Carryforwards —As of December 31, 2020, the Company had gross federal net operating loss carryforwards of approximately $ 207.5 million, of which $ 47.0 million will expire between 2034 through 2037 and $ 160.5 million will be carried forward indefinitely.

Carryforwards —As of December 30, 2021, the Company had gross federal net operating loss carryforwards of approximately $ 297.3 million, of which $ 47.0 million will expire between 2034 through 2037 and $ 250.3 million will be

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carried forward indefinitely.

As of December 30, 2021, the Company had gross state net operating loss carryforwards of approximately $ 229.6 million, of which $ 153.1 million will expire between 2022 and 2041 and $ 76.5 million will be carried forward indefinitely.

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AMC remains a party to the ESA, Common Unit Adjustment Agreement, TRA and certain other original agreements, and AMC will continue to participate in the annual Common Unit Adjustment, receive TRA payments, receive theater access fee payments, and make payments under the beverage concessionaire agreements, among other things.

Further, AMC's ownership percentage does not

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impact future integration payments and other encumbered theater payments owed to NCM LLC by AMC.

AMC is considered a related party through the date it fell below the 5% ownership threshold.

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

The material agreements with the founding members are as follows:

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• Common Unit Adjustment Agreement.

The common unit adjustment agreement provides a mechanism for increasing or decreasing the membership units held by the founding members based on the acquisition or construction of new theaters or sale of theaters that are operated by each founding member and included in NCM LLC’s network.

The common unit adjustment agreement provides a mechanism for increasing or decreasing the membership units held by the founding members based on the acquisition or

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construction of new theaters or sale of theaters that are operated by each founding member and included in NCM LLC’s network.

• Tax Receivable Agreement.

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

$ 34.3 $ 16.0

Selling and marketing costs (3)

Advertising operating costs (3)

Non-operating expenses:

Interest income from notes receivable (included in

interest income) (4)

(1) For the full years ended December 30, 2021 and December 31, 2020, Regal and Cinemark purchased 60 seconds of on-screen advertising time (all three founding members having a right to purchase up to 90 seconds ) from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 second equivalent CPM rate specified by the ESA.

(2) Comprised of payments per theater attendee, payments per digital screen with respect to the founding member theaters included in the Company’s network, payments for access to higher quality digital cinema equipment and payments to Cinemark and Regal for their portion of the Platinum Spot revenue for the utilization of the theaters post-showtime in accordance with the 2019 ESA Amendments.

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

(4) On December 26, 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability company (AC JV, LLC) owned 32 % by each of the founding members and 4 % by NCM LLC.

In consideration for the sale, NCM LLC received a total of $ 25.0 million in promissory notes from its founding members (one-third or approximately $ 8.3 million from each founding member).

The notes bore interest at a fixed rate of 5.0 % per annum, compounded annually.

Interest and principal payments were due annually in six equal installments commencing on the first anniversary of the closing and ended on December 26, 2019.

Included in the Consolidated Balance Sheets:

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Long-term payable to founding members under the TRA (2)

$ 11.9 $ 23.7

Accounts payable (3)

(1) Refer to Note 5— Intangible Assets for further information on common unit adjustments and integration payments.

(2) The Company paid Cinemark and Regal $ 3.2 million and $ 5.8 million, respectively, in payments pursuant to the TRA during 2020 which was for the 2019 tax year.

(2) The Company paid Cinemark and Regal an additional $ 0.2 million and $ 0.4 million, respectively, in payments pursuant to the TRA during 2021 which was for the 2019 tax year.

The Company paid Cinemark and Regal $ 3.2 million and $ 5.8 million, respectively, in payments pursuant to the TRA during 2020 which was for the 2019 tax year.

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

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

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Cinemark $ — $ 2.1

Regal 2.2 39.1

Total founding members — 4.3

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Due to the adverse impacts of the COVID-19 Pandemic on the Company’s operations, the mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc.

for the second quarter of 2020, third quarter of 2020 and fourth quarter of 2020 were calculated as negative $ 85.2 million (including negative $ 21.6 million for Cinemark, negative $ 22.4 million for Regal and negative $ 41.2 million for NCM, Inc.).

Under the terms of the NCM LLC Operating Agreement, these negative amounts will be netted against future positive available cash distributions after the Extended Covenant Holiday Period, contingent upon the Company's compliance with the covenants outlined within the Credit Agreement Second Amendment defined within Note 17— Subsequent Events and in accordance with the NCM LLC Operating Agreement.

Amounts due to (from) founding members, net as of December 31, 2020 were comprised of the following (in millions):

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for the year ended December 30, 2021 were calculated as negative $ 93.7 million (including negative $ 24.3 million for Cinemark, negative $ 24.2 million for Regal and negative $ 45.2 million for NCM, Inc.) and calculated as negative $ 85.2 million (including negative $ 21.6 million for Cinemark, negative $ 22.4 million for Regal and negative $ 41.2 million for NCM, Inc.) for the year ended December 31, 2020.

Under the terms of the NCM LLC Operating Agreement, these negative amounts will be netted against future positive available cash distributions after the Extended Covenant Waiver Holiday, contingent upon the Company's compliance with the covenants outlined within the Credit Agreement Second Amendment defined within Note 10—Borrowings and the Credit Agreement Third Amendment defined within Note 16— Subsequent Events and in accordance with the NCM LLC Operating Agreement.

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

Cinemark Regal Total

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and other encumbered theater payments $ 0.6 $ 0.9 $ 1.5

Distributions payable to founding members 15.8 16.6 32.4

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

Cost and other reimbursement ( 0.1 ) ( 0.1 ) ( 0.2 )

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

Common Unit Membership Redemption — The NCM LLC Operating Agreement provides a redemption right of the founding members to exchange common membership units of NCM LLC for shares of the Company’s common stock on a one -for-one basis, or at the Company’s option, a cash payment based on the three -day variable weighted average closing price of NCM, Inc.’s common stock prior to the redemption date.

Network Affiliate Transactions —NCM LLC paid a network affiliate owned by a family member of a director on the Company's Board of Directors $ 0.4 million and $ 0.6 million in circuit share payments during the years ended December 31, 2020 and December 26, 2019, respectively.

Network Affiliate Transactions —NCM LLC paid a network affiliate owned by a family member of a former director on the Company's Board of Directors $ 0.4 million in circuit share payments during the year ended December 31, 2020.

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

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NCM LLC’s investment in AC JV, LLC was $ 0.7 million and $ 0.7 million as of December 30, 2021 and December 31, 2020, respectively.

During the years ended December 31, 2020 and December 26, 2019, NCM LLC received cash distributions from AC JV, LLC of $ 0.0 million and $ 0.4 million, respectively.

NCM LLC recorded equity in (losses) earnings for AC JV, LLC of $( 0.2 ) million and $ 0.4 million during the years ended December 31, 2020 and December 26, 2019, respectively, which are included in “Other non-operating income” in the audited Consolidated Statements of Income.

NCM LLC recorded equity in (losses) earnings for AC JV, LLC of $ 0.0 million and $( 0.2 ) million during the

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years ended December 30, 2021 and December 31, 2020, respectively, which are included in “Other non-operating income” in the audited Consolidated Statements of Income.

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

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Revolving credit facility $ 167.0 $ 167.0 June 20, 2023 (1)

Term loans 263.3 266.6 June 20, 2025 (1)

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

Term loans - first tranche 261.2 263.3 June 20, 2025 (1)

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

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

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

Total borrowings 1,108.0 1,060.3

Debt issuance costs related to term loans and senior notes ( 8.0 ) ( 9.0 )

Debt issuance costs and discounts related to term

loans and senior notes ( 10.5 ) ( 8.0 )

Total borrowings, net 1,097.5 1,052.3

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Carrying value of long-term debt $ 1,094.3 $ 1,049.6

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

Senior Secured Credit Facility —On June 20, 2018, NCM LLC entered into a credit agreement to replace NCM LLC's previous senior secured credit facility, dated as of February 13, 2007, as amended (the “previous facility”).

Consistent with the structure of the previous facility, the new agreement consists of a term loan facility and a revolving credit facility.

As of December 31, 2020, NCM LLC’s new senior secured credit facility consisted of a $ 175.0 million revolving credit facility and a $ 263.3 million term loan.

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

As of 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 $ 49.8 million term loan (second tranche).

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

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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.

Further, NCM LLC can make available cash distributions to its members (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 entered into an additional amendment to its Credit Agreement on March 8, 2021 which further extends the restrictions on available cash distributions established within the Credit Agreement Amendment.

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

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

In addition, pursuant to the Credit Agreement Second Amendment, NCM LLC incurred a second tranche of the term loans in an aggregate principal amount of $ 50.0 million, the net proceeds of $ 43.0 million to be used for general corporate purposes.

Upon execution of the Credit Agreement Second Amendment, the Company recorded $ 2.3 million as a discount, $ 3.9 million as debt issuance costs and $ 0.8 million within “Loss on modification and retirement of debt, net” .

NCM LLC entered into an additional amendment to its Credit Agreement on January 5, 2022 which further extends the restrictions on available cash distributions established within the Credit Agreement Amendment.

Refer to Note 16— Subsequent Events for more details.

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As of December 30, 2021, NCM LLC’s total availability under the $ 175.0 million revolving credit facility was $ 6.8 million, net of $ 167.0 million outstanding and $ 1.2 million letters of credit.

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

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

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Borrowings under the revolving credit facility bear interest at NCM LLC’s option of either the LIBOR index plus an applicable margin ranging from 1.75 % to 2.25 % or the base rate plus an applicable margin ranging from 0.75 % to 1.25 %.

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The weighted-average interest rate on the outstanding balance on the revolving credit facility as of December 30, 2021 was 4.50 %.

On January 5, 2022, NCM LLC entered into the New Revolving Credit Agreement which provided for $50.0 million in new secured revolving loans.

Refer to Note 16— Subsequent Events for more details.

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

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

Refer to Note 17— Subsequent Events for details of the extension of the restrictions on available cash distributions established within the Credit Agreement Second Amendment.

Senior Secured Notes due 2022 —On April 27, 2012, NCM LLC completed a private placement of $ 400.0 million in aggregate principal amount of 6.00 % Senior Secured Notes (the “Notes due 2022”).

The Notes due 2022 pay interest semi-annually in arrears on April 15 and October 15 of each year, which commenced October 15, 2012.

The Notes due 2022 were issued at 100 % of the face amount thereof and are senior secured obligations of NCM LLC, rank the same as NCM LLC’s senior secured credit facility, subject to certain exceptions, and share in the same collateral that secures NCM LLC’s obligations under the senior secured credit facility.

On November 7, 2019, NCM LLC redeemed the entire $ 400.0 million aggregate principal amount of NCM LLC’s existing Notes due 2022.

The redemption price for the Notes due 2022 was 101.000 % of the

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principal amount thereof plus accrued and unpaid interest.

As a result of the redemption, NCM LLC wrote-off approximately $ 1.9 million in unamortized debt issuance costs and paid a redemption premium of approximately $ 4.0 million, which are reflected in the loss on early retirement of debt, net on the Consolidated Statements of Income during the year ended December 26, 2019.

Refer to Note 16— Subsequent Events for details of the extension of the restrictions on available cash distributions and amended leverage ratios established within the Credit Agreement Third Amendment.

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

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NCM LLC does not currently have any subsidiaries, and the Notes due 2026 will not be guaranteed by any subsidiaries that NCM LLC may form or acquire in the future except in very limited circumstances.

During the years ended December 31, 2020 and December 26, 2019, NCM LLC repurchased and canceled a total of $ 0.0 million and $ 5.0 million of the Notes due 2026, respectively, reducing the principal amount to $ 230.0 million as of December 31, 2020.

This repurchase was treated as a partial debt extinguishment 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.

NCM LLC may redeem all or any portion of the Notes due 2026 prior to August 15, 2021, at once or over time, at 100% of the principal amount plus the applicable make-whole premium, plus accrued and unpaid interest, if any, to the redemption date.

NCM LLC may redeem all or any portion of the Notes due 2026, at once or over time, on or after August 15, 2021 at specified redemption prices, plus accrued and unpaid interest, if any, to the redemption date.

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

The Notes due 2028 will mature on April 15, 2028.

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due 2028 will mature on April 15, 2028.

Interest on the Notes due 2028 accrues at a rate of 5.875 % per annum and is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2020.

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All of these restrictive covenants are subject to a number of important exceptions and qualifications.

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particular, NCM LLC may distribute all of its quarterly available cash as a restricted payment or as an investment, provided that NCM LLC satisfies a minimum net senior secured leverage ratio.

In particular, NCM LLC may distribute all of its quarterly available cash as a restricted payment or as an investment, provided that NCM LLC satisfies a minimum net senior secured leverage ratio.

Future Maturities of Borrowings – The scheduled annual maturities on the Senior Secured Credit Facility, Notes due 2026 and Notes due 2028 as of December 30, 2021 are as follows (in millions):

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Upon vesting of the restricted stock awards or exercise of options, NCM LLC will issue common membership units to the Company equal to the number of shares of the Company’s common stock represented by such awards.

Compensation Cost — The Company recognized $ 2.2 million and $ 5.5 million for the years ended December 31, 2020 and December 26, 2019, respectively, of share-based compensation expense within “Network costs”, “Selling and marketing costs” and “Administrative and other costs” in the Consolidated Statements of Income as shown in the table below (in millions):

Compensation Cost — The Company recognized $ 8.1 million and $ 2.2 million for the years ended December 30, 2021 and December 31, 2020, respectively, of share-based compensation expense within “Network costs”, “Selling and marketing costs” and “Administrative and other costs” in the Consolidated Statements of Income as shown in the table below (in

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December 30, 2021 December 31, 2020

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Stock Options —The Company granted stock options during 2019, 2020 and 2021, after not granting options since 2012.

Stock options awarded in 2020 were granted with an exercise price equal to the closing market price of NCM, Inc.

Stock options awarded in 2021 and 2020 were granted with an exercise price equal to the closing market price of NCM, Inc.

common stock on the date the Company’s Board of Directors approved the grant.

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The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing valuation model that uses the assumptions noted in the table below.

Expected volatilities are based on implied volatilities from traded

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options on the Company’s stock, historical volatility of the Company’s stock, and other factors.

Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock, and other factors.

The Company uses historical data to estimate option exercise and employee termination within the valuation model.

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Vested and expected to vest as of December 30, 2021 1,625,062 $ 5.99 7.5 $ —

Restricted Stock and Restricted Stock Units —Under the non-vested stock program, common stock of the Company may be granted at no cost to officers, independent directors and employees, subject to requisite service and/or financial performance targets.

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performance targets.

As such restrictions lapse, the award vests in that proportion.

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The above table reflects performance-based restricted stock granted at 100 % achievement of performance conditions and as such does not reflect the maximum or minimum number of shares of performance-based restricted stock contingently issuable.

An additional 438,255 shares of restricted stock could be issued if the performance criteria maximums are met.

As of December 30, 2021, the total number of restricted stock and restricted stock units that are ultimately expected to vest, after consideration of expected forfeitures and current projections of estimated vesting of performance-based restricted stock is 2,994,233 shares.

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

The Company has options on certain of these facilities to extend the lease or to terminate part or all of the leased space prior to the lease end date.

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Company has options on certain of these facilities to extend the lease or to terminate part or all of the leased space prior to the lease end date.

Certain termination fees would be due upon exercise of the early termination options as outlined within the underlying agreements.

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

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December 30, 2021 December 31, 2020

Operating lease cost $ 3.6 $ 3.5

Short-term lease cost — 0.2

Variable lease cost 0.5 0.5

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

The minimum lease payments under noncancelable operating leases as of December 31, 2020 were as follows (in millions):

The minimum lease payments under noncancellable operating leases as of December 30, 2021 were as follows (in millions):

Year Minimum Lease Payments

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However, the amortization of these intangible assets is considered lease expense and was therefore, reclassified in the current period from “Depreciation and amortization expense” to “Amortization of intangibles recorded for network theater screen leases” within the audited Consolidated Statement of Income.

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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.

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As of December 30, 2021 and December 31, 2020, the Company had no liabilities recorded for the minimum payment, as the theater access fee was in excess of the minimum.

Following the 2019 ESA Amendments, Cinemark and Regal receive an additional monthly theater access fee beginning November 1, 2019 in consideration for NCM LLC’s access to certain on-screen advertising inventory after the advertised

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showtime of a feature film.

These fees are also based upon a fixed payment per patron beginning at (i) $ 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) increase 8 % every five years beginning November 1, 2027.

Additionally, following the 2019 ESA Amendments, beginning on November 1, 2019, NCM LLC is entitled to display an additional single unit that is either 30 or 60 seconds of the Noovie® pre-show in the trailer position directly prior to the one or two trailers preceding the feature film (the “Platinum Spot”).

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

Additionally, following the 2019 ESA Amendments, beginning on November 1, 2019, NCM LLC is entitled to display the Platinum Spot, an additional single unit that is either 30 or 60 seconds of the Noovie® pre-show in the trailer position directly prior to the one or two trailers preceding the feature film.

In consideration for the utilization of the theaters for the 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.

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

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When the estimated fair value is determined to be lower than the carrying value of the asset, an impairment charge is recorded to write the asset down to its estimated fair value.

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Other investments consisted of the following (in millions):

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(1) Refer to Note 9— Related Party Transactions .

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(2) The Company received equity securities in privately held companies as consideration for a portion of advertising contracts.

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The Company does not exert significant influence on these companies’ operating or financial activities.

During the years ended December 31, 2020 and December 26, 2019, the Company recorded impairment charges of $ 0.0 million and $ 2.0 million, respectively, on certain of its investments due to a significant deterioration in the business prospects of the investee or new information regarding the fair value of the investee, which brought the total remaining value of the respective impaired investments to $ 0.0 million as of December 31, 2020.

As of December 31, 2020, no other observable price changes or impairments have been recorded as a result of the Company’s qualitative assessment of identified events or changes in the circumstances of the remaining investments.

As of December 30, 2021, no observable price changes or impairments have been recorded as a result of the Company’s qualitative assessment of identified events or changes in the circumstances of the remaining investments.

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

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Carrying Value Fair Value (1)

Term Loans $ 263.3 $ 217.2 $ 266.6 $ 266.9

Term Loans - first tranche $ 261.2 $ 236.4 $ 263.3 $ 217.2

Term Loans - second tranche $ 49.8 $ 48.1 $ — $ —

Senior Notes due 2028 $ 400.0 $ 357.0 $ 400.0 $ 337.5

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Total assets $ 38.4 $ 37.1 $ 1.3 $ —

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Fair Value Measurements at

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Short-term marketable securities (2)

17.5 — 17.5 —

Long-term marketable securities (2)

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(1) Cash Equivalents —The Company’s cash equivalents are carried at estimated fair value.

Cash equivalents consist of money market accounts which the Company has classified as Level 1 given the active market for these accounts and

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commercial paper with original maturities of three months or less, which are classified as Level 2 and are valued as described below.

Cash equivalents consist of money market accounts which the Company has classified as Level 1 given the active market for these accounts and commercial paper with original maturities of three months or less, which are classified as Level 2 and are valued as described below.

(2) Short-Term and Long-Term Marketable Securities —The carrying amount and fair value of the marketable securities are equivalent since the Company accounts for these instruments at fair value.

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MARKETABLE SECURITIES:

Short-term U.S.

government agency bonds $ 3.5 $ 3.5 0.4

Short-term certificates of deposit $ 0.3 $ 0.3 0.6

Short-term municipal bonds 1.2 1.2 0.5

Short-term commercial paper:

Financial 8.0 7.9 0.3

Industrial 4.0 4.0 0.2

Total short-term marketable securities 0.3 0.3

Long-term U.S.

government agency bonds 4.5 4.5 2.2

Long-term certificates of deposit 1.3 1.2 2.8

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Total marketable securities $ 1.6 $ 1.5

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(1) Maturities — Securities available for sale include obligations with various contractual maturity dates some of which are greater than one year.

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The Company’s allowance for doubtful accounts and the valuation allowance on deferred tax assets for the years ended December 30, 2021 and December 31, 2020 were as follows (in millions):

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December 30, 2021 December 31, 2020

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Valuation allowance added (2)

Valuation allowance reversed — —

Balance at end of period $ 223.8 $ 212.0

(2) The increase within the valuation allowance during the year ended December 31, 2020 relates to its deferred tax assets which the Company determined it is more-likely-than-not it will not be able to realize before they expire.

The increase for the year ended December 26, 2019 relates to the establishment of a valuation allowance for state NOLs and investment losses that the Company no longer expects to realize prior to expiration and timing differences between the recognition of available cash distributions for book and tax purposes.

QUARTERLY FINANCIAL DATA (UNAUDITED)

The following represents selected information from the Company’s unaudited quarterly Consolidated Statements of Income for the years ended December 31, 2020 and December 26, 2019 (in millions, except per share data):

Quarter Second

Quarter Third

Quarter Fourth

Revenue $ 64.7 $ 4.0 $ 6.0 $ 15.7

Operating expenses 59.8 27.8 27.3 36.5

Operating income (loss) 4.9 ( 23.8 ) ( 21.3 ) ( 20.8 )

Consolidated net loss ( 8.2 ) ( 33.4 ) ( 30.9 ) ( 53.8 )

Net loss attributable to NCM, Inc.

( 3.7 ) ( 13.8 ) ( 12.7 ) ( 35.2 )

Loss per NCM, Inc.

share, basic (1)

( 0.05 ) ( 0.18 ) ( 0.16 ) ( 0.45 )

Loss per NCM, Inc.

share, diluted (1)

( 0.05 ) ( 0.18 ) ( 0.16 ) ( 0.45 )

Quarter Second

Quarter Third

Quarter Fourth

Revenue $ 76.9 $ 110.2 $ 110.5 $ 147.2

Operating expenses 66.0 72.5 70.5 74.5

Operating income 10.9 37.7 40.0 72.7

Consolidated net (loss) income ( 2.6 ) 21.0 22.8 45.5

Net (loss) income attributable to NCM, Inc.

( 1.1 ) 8.9 9.2 19.1

(Loss) Earnings per NCM, Inc.

share, basic (1)

( 0.01 ) 0.11 0.12 0.25

(Loss) Earnings per NCM, Inc.

share, diluted (1)

( 0.01 ) 0.11 0.12 0.24

(2) The increase within the valuation allowance during the years ended December 30, 2021 and December 31, 2020 relate to its deferred tax assets which the Company determined it is more-likely-than-not it will not be able to realize before they expire.

SUBSEQUENT EVENTS

On January 5, 2022, NCM LLC entered into 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.

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;

(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 also entered into 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 SOFR plus 8.00 %, with a 1.00 % 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Earnings per share in each quarter is computed using the weighted-average number of common shares outstanding during that quarter while earnings per share for the full year is computed using the weighted average number of common shares outstanding during the year.

SUBSEQUENT EVENTS

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

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 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 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 the Borrower 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 Notes due 2028.

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

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

In the third quarter of 2020, the Company’s ability to continue as a going concern was subject to uncertainty as the Company did not expect to meet certain of its financial covenants within one year following the date of issuance.

As a result of the additional funding received and the extension of the automatic waiver of any non-compliance with its consolidated net senior secured leverage ratio and consolidated total leverage ratio financial covenants occurring through and including the quarter ending July 1, 2022 discussed above, substantial doubt about the Company's ability to continue as a going concern no longer exists.

On March 8, 2021 , the Company declared a cash dividend of $ 0.05 per share (approximately $ 3.9 million) on each share of the Company’s common stock (not including outstanding restricted stock and restricted stock units which will accrue dividends until the shares vest) to stockholders of record on March 22, 2021 to be paid on April 5, 2021 .

In the third quarter of 2021, conditions existed that raised substantial doubt about the Company’s ability to continue as a going concern as the Company did not expect to meet certain of its financial covenants within one year following the date of issuance.

As a result of the additional funding received and the extension of the automatic waiver of any non-compliance with its consolidated net senior secured leverage ratio and consolidated total leverage ratio financial covenants occurring through and including the quarter ending December 29, 2022, and the amendment of the related ratios for compliance occurring through and including the quarter ending June 29, 2023 discussed above, substantial doubt about the Company's ability to continue as a going concern no longer exists.

On March 3, 2022 , the Company declared a cash dividend of $ 0.05 per share (approximately $ 4.0 million) on each share of the Company’s common stock (not including outstanding restricted stock and restricted stock units which will accrue dividends until the shares vest) to stockholders of record on March 17, 2022 to be paid on March 31, 2022 .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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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 8. Financial Statements and Supplementary Data