What changed in this filing

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Item 1. Financial Statements

2022-11-07 compared with 2022-08-08 · 173 added, 165 removed, 597 unchanged (36% of the section changed)

4 unchanged sentences

(In millions, except share and per share data)

June 30, 2022 December 30, 2021

September 29, 2022 December 30, 2021

CURRENT ASSETS:

54 unchanged sentences

(In millions, except share and per share data)

Three Months Ended Six Months Ended

June 30, 2022 July 1, 2021 June 30, 2022 July 1, 2021

Three Months Ended Nine Months Ended

September 29, 2022 September 30, 2021 September 29, 2022 September 30, 2021

REVENUE (including revenue from related parties of $ 3.9 , $ 2.7 , $ 11.3 and $ 4.7 ,

13 unchanged sentences

Total 58.7 50.4 178.7 127.7

OPERATING INCOME (LOSS) 5.6 ( 29.6 ) ( 16.9 ) ( 57.9 )

OPERATING LOSS ( 4.2 ) ( 18.7 ) ( 21.2 ) ( 76.6 )

NON-OPERATING EXPENSES (INCOME):

26 unchanged sentences

(In millions) (UNAUDITED)

Six Months Ended

June 30, 2022 July 1, 2021

Nine Months Ended

September 29, 2022 September 30, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

24 unchanged sentences

Purchases of property and equipment ( 2.0 ) ( 3.9 )

Proceeds from sale and maturities of marketable securities — 0.3

Net cash used in investing activities ( 2.0 ) ( 3.6 )

17 unchanged sentences

(In millions)

Six Months Ended

June 30, 2022 July 1, 2021

Nine Months Ended

September 29, 2022 September 30, 2021

Supplemental disclosure of non-cash financing and investing activity:

2 unchanged sentences

equity $ — $ 6.6

Increase in dividend equivalent accrual not requiring cash in the period $ 0.5 $ 0.9

Dividends declared not requiring cash in the period $ 0.7 $ 1.0

Supplemental disclosure of cash flow information:

Cash paid for interest $ 48.9 $ 42.3

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

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

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

6 unchanged sentences

Consolidated Shares Amount

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

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

Income tax and other impacts of NCM LLC ownership

1 unchanged sentence

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

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

Share-based compensation issued, net of tax ( 0.4 ) 178,759 — ( 0.4 ) — —

Share-based compensation expensed/capitalized 1.7 — — 1.1 — 0.6

1 unchanged sentence

( 4.1 ) — — — ( 4.1 ) —

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

Balance—March 31, 2022 $ ( 421.4 ) 81,403,872 $ 0.8 $ ( 191.5 ) $ ( 361.4 ) $ 130.7

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

Balance—June 30, 2022 $ ( 431.3 ) 81,492,426 $ 0.8 $ ( 190.4 ) $ ( 364.9 ) $ 123.3

Income tax and other impacts of NCM LLC ownership

changes ( 0.2 ) — — 0.1 — ( 0.3 )

Comprehensive loss, net of tax ( 21.7 ) — — — ( 8.9 ) ( 12.8 )

Share-based compensation issued ( 0.1 ) 88,554 — ( 0.1 ) — —

Share-based compensation issued, net of tax ( 0.1 ) 209,235 — ( 0.1 ) — —

Share-based compensation expensed/capitalized 2.2 — — 1.4 — 0.8

1 unchanged sentence

( 2.7 ) — — — ( 2.7 ) —

Balance—June 30, 2022 $ ( 431.3 ) 81,492,426 $ 0.8 $ ( 190.5 ) $ ( 364.9 ) $ 123.3

Balance—September 29, 2022 $ ( 453.8 ) 81,701,661 $ 0.8 $ ( 189.1 ) $ ( 376.5 ) $ 111.0

Paid in Capital (Deficit) Retained

8 unchanged sentences

Comprehensive loss, net of tax ( 122.4 ) — — — ( 57.3 ) ( 65.1 )

Share-based compensation issued ( 1.4 ) 807,366 — ( 1.4 ) — —

Share-based compensation issued, net of tax ( 1.8 ) 986,125 — ( 1.8 ) — —

Share-based compensation expensed/capitalized 6.7 — — 4.7 — 2.0

1 unchanged sentence

( 13.0 ) — — — ( 13.0 ) —

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

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

Balance—December 30, 2021 $ ( 383.5 ) 80,626,889 $ 0.8 $ ( 195.5 ) $ ( 332.0 ) $ 143.2

3 unchanged sentences

Comprehensive loss, net of tax ( 76.3 ) — — — ( 34.8 ) ( 41.5 )

Share-based compensation issued ( 0.2 ) 865,537 — ( 0.2 ) — —

Share-based compensation issued, net of tax ( 0.3 ) 1,074,772 — ( 0.3 ) — —

Share-based compensation expensed/capitalized 5.2 — — 3.4 — 1.8

1 unchanged sentence

( 9.7 ) — — — ( 9.7 ) —

Balance—June 30, 2022 $ ( 431.3 ) 81,492,426 $ 0.8 $ ( 190.5 ) $ ( 364.9 ) $ 123.3

Balance—September 29, 2022 $ ( 453.8 ) 81,701,661 $ 0.8 $ ( 189.1 ) $ ( 376.5 ) $ 111.0

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

12 unchanged sentences

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

As previously disclosed, the COVID-19 pandemic has had a significant impact on the world and the Company’s business as the United States’ government and other state and local governments issued restrictions on travel, public gatherings and other events and issued social distancing guidelines.

These and subsequent developments are referred to as the “COVID-19 Pandemic.” All of the theaters within the Company’s network are open and the release of major motion pictures has resumed since the third quarter of 2021 resulting in the highest theater attendance since the start of the COVID-19 Pandemic.

Despite the increase in network attendance, in-theater advertising revenue for the year ended December 30, 2021 and the six months ended June 30, 2022 remained below historical levels due to the lag between the recovery of attendees and advertisers.

The impacts from the COVID-19 Pandemic have had and continue to have an effect on the world and our business.

The movie slate for 2022 has improved from prior years but continues to be limited by post-production delays and major motion picture release schedule changes.

The attendance level has increased from the prior year, but it has not met historical levels and has not been consistent throughout the year due to timing of major motion picture releases.

In-theater advertising revenue for the year ended December 30, 2021 and the nine months ended September 29, 2022 also remained below historical levels due in part to a lag between the recovery of attendees and advertisers, as well as current macroeconomic factors.

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

The 2019 ESA Amendments extended the contract life of the ESAs with Cinemark and Regal by four years resulting in a weighted average remaining term of the ESAs with the founding members (weighted based upon pre-COVID-19 attendance levels) of approximately 17.2 years as of June 30, 2022.

The network affiliate agreements expire at various dates between August 2022 and December 2037.

The weighted average remaining term of the ESAs and the network affiliate agreements together is 15.0 years as of June 30, 2022 (weighted based upon pre-COVID-19 attendance levels).

As of June 30, 2022, NCM LLC had 171,821,666 common membership units outstanding, of which 81,492,426 ( 47.4 %) were owned by NCM, Inc., 40,683,797 ( 23.7 %) were owned by Regal, 43,690,797 ( 25.4 %) were owned by Cinemark and 5,954,646 ( 3.5 %) were owned by AMC.

The network affiliate agreements expire at various dates between November 2022 and December 2037.

The weighted average remaining term of the ESAs and the network affiliate agreements together is 15.1 years as of September 29, 2022 (weighted based upon pre-COVID-19 attendance levels).

As of September 29, 2022, NCM LLC had 172,030,901 common membership units outstanding, of which 81,701,661 ( 47.5 %) were owned by NCM, Inc., 40,683,797 ( 23.6 %) were owned by Regal, 43,690,797 ( 25.4 %) were owned by Cinemark and 5,954,646 ( 3.5 %) were owned by AMC.

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

common stock on a one -for-one basis.

common stock on a one -for-one basis, at the discretion of the holder.

Basis of Presentation

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Therefore, the unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s annual report on Form 10-K filed for the fiscal year ended December 30, 2021.

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

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

As a result of the various related party agreements discussed in Note 5— Related Party Transactions , the operating results as presented are not necessarily indicative of the results that might have occurred if all agreements were with non-related third parties.

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

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

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

5 unchanged sentences

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

The Company has borrowings under two Revolving Credit Facilities with $217.0 million outstanding as of June 30, 2022, that mature on June 20, 2023 (see Note 6).

The Company, through NCM LLC, has borrowings under two Revolving Credit Facilities with $ 217.0 million outstanding as of September 29, 2022, that mature on June 20, 2023 (refer to Note 6— Borrowings ).

The Company does not have available liquidity to repay the full outstanding balance on the date of maturity.

Under the Credit Agreement, failure to repay borrowings under the Revolving Credit Facilities at maturity would result in an event of default for the term loans, which would allow a majority of the lenders under the Credit Agreement to accelerate the maturity of the principal amounts of outstanding term loans to become due and payable.

Additionally, based on current projections, the Company does not expect to meet certain financial covenants for the period ending March 30, 2023.

Further, if the Company’s independent registered public accounting firm includes a “going concern” or like qualification or exception, other than for debt maturing within one year, in its report on the Company’s financial statements for the year ending December 29, 2022, this would be an event of default under the Company’s Credit Agreement at the time the Company’s financial statements for the year ending December 29, 2022 are filed.

Under the Credit Agreement, failure to remain in compliance with these covenants or inability to repay borrowings under the Revolving Credit Facilities at maturity would result in an event of default for the term loans, which would allow a majority of the lenders under the Credit Agreement to accelerate the maturity of the principal amounts of outstanding term loans to become due and payable.

It would also result in an event of default for the senior notes, which would allow the indenture trustee or senior note holders of each tranche of senior notes to accelerate the maturity to become due and payable.

The Company does not have available liquidity to repay any accelerated principal of term loans or tranches of the outstanding senior notes upon an event of default within one year after the date that the financial statements are issued.

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

If these financial covenants are not met a majority of the lenders of the Senior Secured Credit Facility are permitted under the Credit Agreement to accelerate the debt which would also result in an event of default for the senior notes.

In this event, the Company would not be able to repay the Company’s total outstanding debt balance.

Should the Company’s borrowings become due and payable, the Company would not be able to repay the Company’s total outstanding debt balance.

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

10 unchanged sentences

The Company considers the terms of each arrangement to determine the appropriate accounting treatment.

The Company has changed the classification of the make good provision, retrospectively, to now be included within “Deferred Revenue” on the unaudited Consolidated Balance Sheet rather than “Accrued Expenses” as of June 30, 2022.

Concentration of Credit Risk and Significant Customers —The risk of credit loss related to the Company's trade receivables and unbilled receivables balances is accounted for through the allowance for doubtful accounts, a contra asset account which reduces the net receivables balance.

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company had no agencies through which it sourced advertising revenue that accounted for more than 10% of the Company’s gross outstanding receivable balance as of June 30, 2022.

The Company had no agencies through which it sourced advertising revenue that accounted for more than 10% of the Company’s gross outstanding receivable balance as of September 29, 2022.

The Company had one agency through which it sourced advertising revenue that accounted for 15.7 % of the Company's gross outstanding receivable balance as of December 30, 2021.

During the three and six months ended June 30, 2022, the Company had one customer that accounted for more than 14.8 % and 15.3 % of the Company’s revenue, respectively.

During the three and six months ended July 1, 2021, the Company had one customer that accounted for 14.1 % and 11.3 % of the Company's revenue, respectively.

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

During the three and nine months ended September 29, 2022, the Company had one customer that accounted for 14.6 % and 15.0 % of the Company’s revenue, respectively.

During the three and nine months ended September 30, 2021, the Company had one customer that accounted for 11.8 % and 11.6 % of the Company's revenue, respectively.

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

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

The Company recorded losses of $ 0.0 million, $ 0.0 million, $ 5.8 million and $ 0.0 million related to the write-off of certain internally developed software during the three months ended June 30, 2022 and July 1, 2021 and six months ended June 30, 2022 and July 1, 2021, respectively.

The Company recorded losses of $ 0.0 million, $ 0.0 million, $ 5.8 million and $ 0.0 million related to the write-off of certain internally developed software during the three months ended September 29, 2022 and September 30, 2021 and nine months ended September 29, 2022 and September 30, 2021, respectively.

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

4 unchanged sentences

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

On January 19, 2022, March 2, 2021 and February 28, 2021, the Company’s Board of Directors approved certain modifications to equity awards awarded under the Company’s 2016 Equity Incentive Plan and 2020 Omnibus Equity Incentive Plan to adjust performance metrics, vesting amount and future performance goals in light of the COVID-19 Pandemic resulting in incremental share-based compensation expense of $ 0.1 million, $ 0.2 million, $ 0.3 million and $ 1.5 million for the three months ended June 30, 2022 and July 1, 2021 and six months ended June 30, 2022 and July 1, 2021, respectively.

During the three months ended June 30, 2022 and July 1, 2021 and the six months ended June 30, 2022 and July 1, 2021, 89,375 , 281,810 , 925,128 and 1,125,539 shares of restricted stock and restricted stock units vested, respectively.

On February 28, 2021, March 2, 2021 and January 19, 2022, the Company’s Board of Directors approved certain modifications to equity awards awarded under the Company’s 2016 Equity Incentive Plan and 2020 Omnibus Equity Incentive Plan to adjust performance metrics, vesting amount and future performance goals in light of the COVID-19 Pandemic resulting in incremental share-based compensation expense of $ 0.1 million, $ 0.2 million, $ 0.5 million and $ 1.7 million for the three months ended September 29, 2022 and September 30, 2021 and nine months ended September 29, 2022 and September 30, 2021, respectively.

During the three months ended September 29, 2022 and September 30, 2021 and the nine months ended September 29, 2022 and September 30, 2021, 230,689 , 268,782 , 1,155,817 and 1,394,321 shares of restricted stock and restricted stock units vested, respectively.

Consolidation —NCM, Inc.

2 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, 2022 July 1, 2021 June 30, 2022 July 1, 2021

Three Months Ended Nine Months Ended

September 29, 2022 September 30, 2021 September 29, 2022 September 30, 2021

Net loss attributable to NCM, Inc.

4 unchanged sentences

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.

transfers from noncontrolling interests $ ( 8.8 ) $ ( 14.9 ) $ ( 31.5 ) $ ( 49.3 )

20 unchanged sentences

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

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

In addition, the Company sells online and mobile advertising, including through Noovie Audience Accelerator , through NCM's digital gaming products including Noovie Trivia, 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.

5 unchanged sentences

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

The Company does not have any contracts with customers with terms in excess of one year that are noncancellable as of June 30, 2022.

The Company does not have any contracts with customers with terms in excess of one year that are noncancellable as of September 29, 2022.

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

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

The following table summarizes revenue from contracts with customers for the three months and six months ended June 30, 2022 and July 1, 2021 (in millions):

Three Months Ended Six Months Ended

June 30, 2022 July 1, 2021 June 30, 2022 July 1, 2021

The following table summarizes revenue from contracts with customers for the three months and nine months ended September 29, 2022 and September 30, 2021 (in millions):

Three Months Ended Nine Months Ended

September 29, 2022 September 30, 2021 September 29, 2022 September 30, 2021

National advertising revenue $ 39.7 $ 22.6 $ 116.7 $ 34.3

4 unchanged sentences

Deferred Revenue and Unbilled Accounts Receivable

Revenue recognized in the six months ended June 30, 2022 that was included within the Deferred Revenue balance as of December 30, 2021 was $ 8.3 million.

As of June 30, 2022 and December 30, 2021, the Company had $ 8.0 million and $ 4.4 million in unbilled accounts receivable, respectively.

Revenue recognized in the nine months ended September 29, 2022 that was included within the Deferred Revenue balance as of December 30, 2021 was $ 12.0 million.

As of September 29, 2022 and December 30, 2021, the Company had $ 6.5 million and $ 4.4 million in unbilled accounts receivable, respectively.

Allowance for Doubtful Accounts

4 unchanged sentences

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

The changes within the allowance for doubtful accounts balances for the six months ended June 30, 2022 and July 1, 2021, respectively, were as follows (in millions):

Six Months Ended

June 30, 2022 July 1, 2021

The changes within the allowance for doubtful accounts balances for the nine months ended September 29, 2022 and September 30, 2021, respectively, were as follows (in millions):

Nine Months Ended

September 29, 2022 September 30, 2021

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

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share are as follows:

Three Months Ended Six Months Ended

June 30, 2022 July 1, 2021 June 30, 2022 July 1, 2021

Three Months Ended Nine Months Ended

September 29, 2022 September 30, 2021 September 29, 2022 September 30, 2021

Net loss attributable to NCM, Inc.

8 unchanged sentences

Diluted $ ( 0.11 ) $ ( 0.19 ) $ ( 0.43 ) $ ( 0.72 )

The effect of 90,374,744 , 86,084,305 , 88,281,544 and 85,307,817 weighted average exchangeable NCM LLC common units held by the founding members for the three months ended June 30, 2022 and July 1, 2021 and six months ended June 30, 2022 and July 1, 2021, respectively, have been excluded from the calculation of diluted weighted average shares and loss per NCM, Inc.

The effect of 90,329,240 , 86,188,344 , 88,964,109 and 85,601,326 weighted average exchangeable NCM LLC common units held by the founding members for the three months ended September 29, 2022 and September 30, 2021 and nine months ended September 29, 2022 and September 30, 2021, respectively, have been excluded from the calculation of diluted weighted average shares and loss per NCM, Inc.

share as they were anti-dilutive.

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

In addition, there were 6,442,164 , 4,376,000 , 6,442,164 and 4,376,000 stock options and non-vested (restricted) shares for the three months ended June 30, 2022 and July 1, 2021 and six months ended June 30, 2022 and July 1, 2021, respectively, excluded from the calculation as they were anti-dilutive.

In addition, there were 7,275,326 , 4,797,243 , 7,275,326 and 4,797,243 stock options and non-vested (restricted) shares for the three months ended September 29, 2022 and September 30, 2021 and nine months ended September 29, 2022 and September 30, 2021, respectively, excluded from the calculation as they were anti-dilutive.

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

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

During the fourth quarter of 2021, the Company determined that recent adverse changes in macroeconomic trends, reduced cash flows as a consequence of the temporary, and sometimes permanent, closure of the theaters within the Company's network in response to the COVID-19 Pandemic, a decline in the fair value of NCM LLC’s debt and the further sustained decline in the market price of NCM, Inc.'s common stock constituted a triggering event for certain of its intangible assets under Accounting Standards Certification No.

360, Impairment and Disposal of Long-Lived Assets.

Management considered possible

During the third quarter of 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., a party to the ESA, and Regal CineMedia Holdings, LLC, a party to other agreements with NCM LLC and NCM, Inc., filed petitions of reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas (the “Cineworld Proceeding”).

On October 21, 2022, Regal filed a motion to reject the ESA without

NATIONAL CINEMEDIA, INC.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

scenarios in a probability-weighted estimated future undiscounted cash flow analysis, including the potential of further delays in major motion picture releases, a delay in audience return to the theaters and other potential adverse impacts to certain of NCM LLC's founding members' and affiliates' financial liquidity related to the COVID-19 Pandemic.

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 the year ended December 30, 2021.

specifying an effective date for the rejection and indicated that Regal currently plans on negotiating with the Company regarding the ESA.

NCM LLC has also filed a complaint against Regal seeking declaratory relief and an injunction prohibiting Regal from breaching certain exclusivity, non-compete, non-negotiate and confidentiality provisions in the ESA by entering into a new agreement with a third party or bringing any of the services performed by NCM LLC in-house.

The Company determined that this announced restructuring and subsequent developments constituted a triggering event for the intangible asset related to Regal under ASC No.

360, Impairment and Disposal of Long-Lived Assets.

Management considered possible scenarios in a probability-weighted estimated future undiscounted cash flow analysis, including the potential of further permanent closure of the theaters within the Company's network, renegotiation of the ESA terms and other potential adverse impacts to the Company’s intangible asset resulting from the Cineworld Proceeding.

The estimated future cash flows from the ESA calculated within the probability-weighted analysis were in excess of the net book value of the intangible asset and no impairment charge was recorded in the three and nine months ended September 29, 2022.

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

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

While the Company believes that the rights will survive any attempted rejection in the bankruptcy court by Regal, given the uncertainty inherent in any projection, heightened by the possibility of unforeseen additional effects of the Cineworld Proceeding, actual results may differ from the estimates and assumptions used, or conditions may change, which could result in impairment charges in the future.

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

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

During the three months ended June 30, 2022 and July 1, 2021 and six months ended June 30, 2022 and July 1, 2021, the Company recorded a reduction to net intangible assets of $ 1.1 million, $ 0.2 million, $ 1.3 million and $ 0.2 million, respectively, related to other encumbered theater payments.

During the three months ended June 30, 2022 and July 1, 2021 and six months ended June 30, 2022 and July 1, 2021, AMC and Cinemark paid a total of $ 0.3 million, $ 0.1 million, $ 1.5 million and $ 0.1 million, respectively, in integration and other encumbered theater payments (as payments are made one quarter and one month in arrears, respectively).

During the three months ended September 29, 2022 and September 30, 2021 and nine months ended September 29, 2022 and September 30, 2021, the Company recorded a reduction to net intangible assets of $ 0.3 million, $ 0.2 million, $ 1.6 million and $ 0.3 million, respectively, related to other encumbered theater payments.

During the three months ended September 29, 2022 and September 30, 2021 and nine months ended September 29, 2022 and September 30, 2021, AMC and Cinemark paid a total of $ 1.2 million, $ 0.2 million, $ 2.6 million and $ 0.3 million, respectively, in integration and other encumbered theater payments (as payments are made one quarter and one month in arrears, respectively).

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

RELATED PARTY TRANSACTIONS

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

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

AMC remains a party to the ESA, Common Unit Adjustment Agreement, Tax Receivable Agreement (“TRA”) and

NATIONAL CINEMEDIA, INC.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

certain other original agreements and is a member under the terms of the NCM LLC operating agreement, subject to fulfilling the requirements of Section 3.1 of the NCM LLC operating agreement.

RELATED PARTY TRANSACTIONS

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

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

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

1 unchanged sentence

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

As of June 30, 2022, AMC’s ownership was 3.5 % on an as converted to NCM, Inc.’s common stock basis.

As of September 29, 2022, AMC’s ownership was 3.5 % on an as converted to NCM, Inc.’s common stock basis.

The material agreements with the founding members are as follows:

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

Three Months Ended Six Months Ended

NATIONAL CINEMEDIA, INC.

AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended Nine Months Ended

Included in the unaudited Condensed Consolidated Statements of Income:

June 30, 2022 July 1, 2021 June 30, 2022 July 1, 2021

September 29, 2022 September 30, 2021 September 29, 2022 September 30, 2021

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

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$ 15.4 $ 11.4 $ 45.2 $ 19.8

Selling and marketing costs (3)

$ 0.1 $ — $ 0.1 $ —

Advertising operating costs (3)

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________________________________________

(1) For the three and six months ended June 30, 2022 and July 1, 2021, Cinemark and Regal purchased 60 seconds of on-screen advertising time from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30

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seconds equivalent CPM rate specified by the ESA.

(1) For the three and nine months ended September 29, 2022 and September 30, 2021, Cinemark and Regal purchased 60 seconds of on-screen advertising time from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 seconds equivalent cost per thousand impressions (“CPM”) rate specified by the ESA.

Beverage revenue was limited for periods of reduced attendance due to the COVID-19 Pandemic.

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Included in the unaudited Condensed Consolidated Balance Sheets:

June 30, 2022 December 30, 2021

September 29, 2022 December 30, 2021

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

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(1) Refer to Note 4— Intangible Assets for further information on common unit adjustments and integration payments.

This balance includes common unit adjustments issued to all of the founding members (including AMC) as the Company's intangible balance is considered one asset inclusive of all common unit adjustment activity.

This balance includes common unit adjustments issued to all founding members (including AMC).

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

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

Due to the continued recovery from the COVID-19 Pandemic during the six months ended June 30, 2022 and decrease in 2021 in-theater advertising revenue, the mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc.

for the three months ended June 30, 2022 were calculated as negative $ 6.0 million (including negative $ 1.6 million for Cinemark, negative $ 1.5 million for Regal and negative $ 2.9 million for NCM, Inc.).

Due to the continued recovery from the COVID-19 Pandemic during the nine months ended September 29, 2022, the mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc.

for the three months ended September 29, 2022 were calculated as negative $ 7.7 million (including negative $ 2.0 million for Cinemark, negative $ 1.9 million for Regal and negative $ 3.8 million for NCM, Inc.).

The mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc.

for the six months ended June 30, 2022 were calculated as negative $ 32.2 million (including negative $ 8.5 million for Cinemark, negative $ 7.9 million for Regal and negative $ 15.8 million for NCM, Inc.).

Therefore, there will be no payment made for the second quarter of 2022.

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 Third Amendment defined within Note 6— Borrowings and in accordance with the NCM LLC operating agreement.

Amounts due to related party founding members, net, as of June 30, 2022 were comprised of the following (in millions):

for the nine months ended September 29, 2022 were calculated as negative $ 39.9 million (including negative $ 10.5 million for Cinemark, negative $ 9.8 million for Regal and negative $ 19.6 million for NCM, Inc.).

Therefore, there will be no payment made for the third quarter of 2022.

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

Amounts due to related party founding members, net, as of September 29, 2022 were comprised of the following (in millions):

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Cinemark Regal Total

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encumbered theater payments $ 7.4 $ 3.9 $ 11.3

Cost and other reimbursement 4.9 — 4.9

Total amounts due to founding members, net $ 7.4 $ 3.9 $ 11.3

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

The Company accounts

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for its investment in AC JV, LLC under the equity method of accounting in accordance with ASC 323-30, Investments—Equity Method and Joint Ventures (“ASC 323-30”) because AC JV, LLC is a limited liability company with the characteristics of a limited partnership and ASC 323-30 requires the use of equity method accounting unless the Company’s interest is so minor that it would have virtually no influence over partnership operating and financial policies.

The Company accounts for its investment in AC JV, LLC under the equity method of accounting in accordance with ASC 323-30, Investments—Equity Method and Joint Ventures (“ASC 323-30”) because AC JV, LLC is a limited liability company with the characteristics of a limited partnership and ASC 323-30 requires the use of equity method accounting unless the Company’s interest is so minor that it would have virtually no influence over partnership operating and financial policies.

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

The Company’s investment in AC JV, LLC was $ 0.7 million and $ 0.7 million as of June 30, 2022 and December 30, 2021, respectively.

During the three months ended June 30, 2022 and July 1, 2021 and six months ended June 30, 2022 and July 1, 2021, NCM LLC received cash distributions from AC JV, LLC of $ 0.1 million, $ 0.0 million , $ 0.2 million and $ 0.0 million , respectively.

Equity in earnings (losses) from AC JV, LLC of $ 0.1 million, $ 0.0 million , $ 0.2 million and $( 0.1 ) million for the three months and six months ended June 30, 2022 and July 1, 2021, respectively, is included in “Other non-operating income” in the unaudited Condensed Consolidated Statements of Income.

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The following table summarizes NCM LLC’s total outstanding debt as of June 30, 2022 and December 30, 2021 and the significant terms of its borrowing arrangements (in millions):

The Company’s investment in AC JV, LLC was $ 0.7 million and $ 0.7 million as of September 29, 2022 and December 30, 2021, respectively.

During the three months ended September 29, 2022 and September 30, 2021 and nine months ended September 29, 2022 and September 30, 2021, NCM LLC received cash distributions from AC JV, LLC of $ 0.0 million , $ 0.0 million , $ 0.2 million and $ 0.0 million , respectively.

Equity in earnings (losses) from AC JV, LLC of $ 0.0 million , $ 0.0 million , $ 0.2 million and $( 0.1 ) million for the three months and nine months ended September 29, 2022 and September 30, 2021, respectively, are included in “Other non-operating income” in the unaudited Condensed Consolidated Statements of Income.

The following table summarizes NCM LLC’s total outstanding debt as of September 29, 2022 and December 30, 2021 and the significant terms of its borrowing arrangements (in millions):

Outstanding Balance as of

Borrowings June 30, 2022 December 30, 2021 Maturity

Borrowings September 29, 2022 December 30, 2021 Maturity

Date Interest

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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 June 30, 2022, NCM LLC’s senior secured credit facility consisted of a $ 175.0 million revolving credit facility, a $ 259.2 million term loan (first tranche) and a $ 49.4 million term loan (second tranche).

As of September 29, 2022, NCM LLC’s senior secured credit facility consisted of a $ 175.0 million revolving credit facility, a $ 259.2 million term loan (first tranche) and a $ 49.4 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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On March 8, 2021, NCM LLC entered into a second amendment to its Credit Agreement (“Credit Agreement Second Amendment”).

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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”.

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 “(Gain) loss on modification and retirement of debt, net” within the nine months ended September 30, 2021.

On January 5, 2022, NCM LLC entered into a third amendment to its Credit Agreement (“Credit Agreement Third Amendment”).

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(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.

Upon execution of the Credit Agreement Third Amendment, $ 6.4 million was recorded as debt issuance costs and $ 0.4 million was recorded as a loss on the modification of debt during the year ended December 30, 2021.

Upon execution of the Credit Agreement Third Amendment, $ 6.4 million was recorded as debt issuance costs and $ 0.4 million was recorded within “(Gain) loss on modification and retirement of debt, net” during the year ended December 30, 2021.

The senior secured credit facility contains a number of covenants and various financial ratio requirements including, (i) a consolidated net total leverage ratio covenant of 6.25 times for each quarterly period and (ii) with respect to the revolving credit facility, maintaining a consolidated net senior secured leverage ratio of equal to or less than 4.50 times on a quarterly basis for each quarterly period in which a balance is outstanding on the revolving credit facility, each of which has been modified by the Credit Agreement Third Amendment.

Pursuant to the terms of the Credit Agreement Third Amendment, NCM LLC is restricted from making available cash distributions until after NCM LLC delivers a compliance certificate for the

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quarter ending on or about December 28, 2023, and, thereafter, NCM LLC may only make available cash distributions if:

Pursuant to the terms of the Credit Agreement Third 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 December 28, 2023, 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;

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

As of June 30, 2022, NCM LLC was in compliance with the requirements of the Credit Agreement Third Amendment described above and the noncompliance with the financial covenants was automatically waived.

As of September 29, 2022, NCM LLC was in compliance with the requirements of the Credit Agreement Third Amendment described above and the noncompliance with the financial covenants was automatically waived.

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

The rate increased from LIBOR index plus 2.75 % or the base rate plus 1.75 %.

The interest rate on the term loans as of June 30, 2022 was 5.69 %.

The interest rate on the term loans as of September 29, 2022 was 6.56 %.

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

As of June 30, 2022, NCM LLC has paid principal of $ 10.8 million, reducing the outstanding balance to $ 259.2 million.

As of September 29, 2022, NCM LLC has paid principal of $ 10.8 million, reducing the outstanding balance to $ 259.2 million.

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

The interest rate on the term loans as of June 30, 2022 was 9.69 %.

The interest rate on the term loans as of September 29, 2022 was 10.56 %.

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

As of June 30, 2022, NCM LLC has paid principal of $ 0.6 million, reducing the outstanding balance to $ 49.4 million.

As of September 29, 2022, NCM LLC has paid principal of $ 0.6 million, reducing the outstanding balance to $ 49.4 million.

Revolving Credit Facility 2018 —The revolving credit facility portion of NCM LLC’s total borrowings is available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the senior secured credit facility, and a portion is available for letters of credit.

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

As of June 30, 2022, NCM LLC’s total availability under the $ 175.0 million revolving credit facility was $ 6.8 million, net of $ 167.0 million outstanding and $ 1.2 million in letters of credit.

As of September 29, 2022, NCM LLC’s total availability under the $ 175.0 million revolving credit facility was $ 6.8 million, net of $ 167.0 million outstanding and $ 1.2 million in letters of credit.

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

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The margin changed to the aforementioned range from a fixed margin of LIBOR index plus 2.00 % or the base rate plus 1.00 %.

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

The weighted-average interest rate on the revolving credit facility as of June 30, 2022 was 5.10 %.

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income before depreciation and amortization expense adjusted to also exclude non-cash share based compensation costs for NCM LLC plus integration payments received).

The weighted-average interest rate on the revolving credit facility as of September 29, 2022 was 6.18 %.

Revolving Credit Facility 2022 —On January 5, 2022, NCM LLC also entered into a new revolving credit agreement (the “Revolving Credit Agreement 2022”).

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The Revolving Credit Agreement 2022 also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement.

As of June 30, 2022, NCM LLC’s total availability under the $ 50.0 million revolving credit facility was $ 0.0 million.

The weighted-average interest rate on the revolving credit facility as of June 30, 2022 was 9.11 %.

As of September 29, 2022, NCM LLC’s total availability under the $ 50.0 million revolving credit facility was $ 0.0 million.

The weighted-average interest rate on the revolving credit facility as of September 29, 2022 was 10.86 %.

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

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

NCM LLC repurchased and canceled a total of $ 20.0 million of the Notes due 2026 during 2019 and 2018, reducing the principal amount to $ 230.0 million as of June 30, 2022.

NCM LLC repurchased and canceled a total of $ 20.0 million of the Notes due 2026 during 2019 and 2018, reducing the principal amount to $ 230.0 million as of September 29, 2022.

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

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

In the quarter ended June 30, 2022, NCM Inc.

purchased $ 25.8 million of the Notes due 2028 on

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the open market, reducing the principal amount owed by NCM LLC to third parties to $ 374.2 million as of June 30, 2022 and resulting in a $ 6.0 million gain on extinguishment of debt in the second quarter.

Changes in the Company’s Effective Tax Rate —The Company recorded income tax expense of $ 0.0 million for the six months ended June 30, 2022 and for the six months ended July 1, 2021 resulting in an effective tax rate of 0.0 % for both periods.

In the nine months ended September 29, 2022, NCM Inc.

purchased $ 25.8 million of the Notes due 2028 on the open market, reducing the principal amount owed by NCM LLC to third parties to $ 374.2 million as of September 29, 2022 and resulting in a $ 6.0 million gain on extinguishment of debt in the nine months ended September 29, 2022.

Changes in the Company’s Effective Tax Rate —The Company recorded income tax expense of $ 0.0 million for the nine months ended September 29, 2022 and for the nine months ended September 30, 2021 resulting in an effective tax rate of 0.0 % for both periods.

The Company recorded a full valuation allowance on its net deferred tax assets as of December 30, 2021 following the determination it was more-likely-than-not that the Company will not be able to realize the benefit of those assets.

The Company maintained a full valuation allowance as of June 30, 2022, resulting in deferred tax expense of $ 0.0 million for the six months ended June 30, 2022 and the Company’s effective tax rate of 0.0 %.

The Company maintained a full valuation allowance as of September 29, 2022, resulting in deferred tax expense of $ 0.0 million for the nine months ended September 29, 2022 and the Company’s effective tax rate of 0.0 %.

COMMITMENTS AND CONTINGENCIES

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

The Company has right-of-use (“ROU”) assets of $ 17.8 million and short-term and long-term lease liabilities of $ 2.2 million and $ 19.3 million, respectively, on the balance sheet as of June 30, 2022 for all material leases with terms longer than twelve months.

The Company has right-of-use (“ROU”) assets of $ 17.4 million and short-term and long-term lease liabilities of $ 2.2 million and $ 18.6 million, respectively, on the balance sheet as of September 29, 2022 for all material leases with terms longer than twelve months.

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

As of June 30, 2022, the Company had a weighted average remaining lease term of 7.1 years on these leases.

As of September 29, 2022, the Company had a weighted average remaining lease term of 6.9 years on these leases.

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

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

As of June 30, 2022, the Company’s weighted average annual discount rate used to establish the ROU assets and lease liabilities was 7.4 %.

During the three months ended June 30, 2022 and July 1, 2021, the Company recognized the following components of total lease cost (in millions).

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

Three Months Ended Six Months Ended

June 30, 2022 July 1, 2021 June 30, 2022 July 1, 2021

As of September 29, 2022, the Company’s weighted average annual discount rate used to establish the ROU assets and lease liabilities was 7.4 %.

During the three months ended September 29, 2022 and September 30, 2021, the Company recognized the following components of total lease cost (in millions).

These costs are presented within “Selling and marketing costs” and

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

Three Months Ended Nine Months Ended

September 29, 2022 September 30, 2021 September 29, 2022 September 30, 2021

Operating lease cost $ 0.9 $ 0.8 $ 2.6 $ 2.6

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Total lease cost $ 1.0 $ 1.0 $ 3.0 $ 3.0

The Company made total lease payments of $ 1.0 million, $ 1.1 million, $ 1.9 million and $ 2.0 million during the three months ended June 30, 2022 and July 1, 2021 and six months ended June 30, 2022 and July 1, 2021, respectively.

The Company made total lease payments of $ 0.9 million, $ 0.9 million, $ 2.9 million and $ 2.9 million during the three months ended September 29, 2022 and September 30, 2021 and nine months ended September 29, 2022 and September 30, 2021, respectively.

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

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However, the amortization of these intangible assets is considered lease expense and is presented within “Amortization of intangibles recorded for network theater screen leases” within the unaudited Condensed 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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The theater access fee paid in the aggregate to all founding members cannot be less than 12 % of NCM LLC’s aggregate advertising revenue (as defined in the ESA), or it will be adjusted upward to reach this minimum payment.

As of June 30, 2022 and December 30, 2021, the Company had no liabilities recorded for the minimum payment, as the theater access fee was in excess of the minimum.

As of September 29, 2022 and December 30, 2021, the Company had no liabilities recorded for the minimum payment, as the theater access fee was in excess of the minimum.

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

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

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

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

As of June 30, 2022, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $ 113.2 million over the remaining terms of the network affiliate agreements.

As of September 29, 2022, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $ 122.8 million over the remaining terms of the network affiliate agreements.

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

The Company accrued $ 0.5 million and $ 0.4 million related to affiliate agreements with guaranteed minimums in excess of the revenue share agreement as of June 30, 2022 and December 30, 2021, respectively.

The Company accrued $ 0.6 million and $ 0.4 million related to affiliate agreements with guaranteed minimums in excess of the revenue share agreement as of September 29, 2022 and December 30, 2021, respectively within “Accounts payable” in the Unaudited Condensed Consolidated Balance Sheet.

As the guaranteed minimums are based upon agreed upon minimum attendance or affiliate revenue levels, the Company will not incur minimum revenue share fees during a period of time the minimum theater attendance or revenue levels are not met by the affiliate.

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FAIR VALUE MEASUREMENTS

All current assets and liabilities are estimated to approximate their fair value due to the short-term nature of these balances.

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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Other investments consisted of the following (in millions):

June 30, 2022 December 30, 2021

September 29, 2022 December 30, 2021

Investment in AC JV, LLC (1)

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This investment is accounted for utilizing the equity method.

During the three months ended June 30, 2022 and July 1, 2021 and six months ended June 30, 2022 and July 1, 2021, the Company recorded impairment charges of $ 0.0 million, $ 0.0 million, $ 0.1 million and $ 0.0 million, respectively, on certain of its investments due to new information regarding the fair value of the investee, which brought the total remaining value of the respective impaired investments to $ 0.1 million as of June 30, 2022.

As of June 30, 2022, 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.

During the three months ended September 29, 2022 and September 30, 2021 and nine months ended September 29, 2022 and September 30, 2021, the Company recorded impairment charges of $ 0.0 million, $ 0.0 million, $ 0.1 million and $ 0.0 million, respectively, on certain of its investments due to new information regarding the fair value of the investee, which

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brought the total remaining value of the respective impaired investments to $ 0.1 million as of September 29, 2022.

As of September 29, 2022, 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.

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

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

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As of June 30, 2022 As of December 30, 2021

As of September 29, 2022 As of December 30, 2021

Carrying Value Fair Value (1)

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Fair Value Measurements at Reporting Date Using

Fair Value as of June 30, 2022 Quoted Prices in Active Markets for Identical Assets

Fair Value as of September 29, 2022 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other

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The value of the Company’s government agency bonds is derived from quoted market information.

The inputs in the valuation are classified as Level 1 if there is an active market for these securities;

however, if an active market does not exist, the inputs are recorded at a lower level in the fair value hierarchy.

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

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

As of June 30, 2022 and December 30, 2021, there were $ 1.0 million and $ 1.0 million, respectively, of available-for-sale debt securities in unrealized loss positions without an allowance for credit losses.

The Company has not recorded an allowance for credit losses for the marketable securities balance as of June 30, 2022 or December 30, 2021 given the immaterial difference between the amortized cost basis and the aggregate fair value of the Company's securities.

The inputs in the valuation are

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The amortized cost basis, aggregate fair value and maturities of the marketable securities the Company held as of June 30, 2022 and December 30, 2021 were as follows:

As of June 30, 2022

classified as Level 1 if there is an active market for these securities;

however, if an active market does not exist, the inputs are recorded at a lower level in the fair value hierarchy.

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

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

As of September 29, 2022 and December 30, 2021, there were $ 1.0 million and $ 1.0 million, respectively, of available-for-sale debt securities in unrealized loss positions without an allowance for credit losses.

The Company has not recorded an allowance for credit losses for the marketable securities balance as of September 29, 2022 or December 30, 2021 given the immaterial difference between the amortized cost basis and the aggregate fair value of the Company's securities.

The amortized cost basis, aggregate fair value and maturities of the marketable securities the Company held as of September 29, 2022 and December 30, 2021 were as follows:

As of September 29, 2022

Amortized Cost

21 unchanged sentences

SUBSEQUENT EVENT

On August 8, 2022, the Company declared a cash dividend of $ 0.03 per share (approximately $ 2.4 million) on each share of the Company’s common stock (not including outstanding restricted stock which will accrue dividends until the shares vest) to stockholders of record on August 22, 2022 to be paid on September 6, 2022.

On October 17, 2022, NCM LLC elected not to make an interest payment in the amount of $ 11.8 million, $ 0.8 million of which relates to notes held by NCM, Inc., due October 17, 2022 under the Senior Secured Notes due 2028, and entered a 30-day grace period under the indenture governing the Senior Secured Notes due 2028.

The Company made the payment on November 4, 2022, prior to the end of the applicable grace period.

On November 3, 2022, NCM LLC and NCM, Inc.

entered into a Receivable Sales Agreement pursuant to which, NCM, Inc.

acquired the right to approximately $ 4.9 million of NCM LLC’s accounts receivable at a purchase price equal to the book value of the accounts receivable in exchange for a cash payment.

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

What changed 10-Q

Item 1. Financial Statements