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Item 8. Financial Statements and Supplementary Data

2023-04-13 compared with 2022-03-03 · 370 added, 312 removed, 875 unchanged (44% of the section changed)

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and Subsidiary

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

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

Consolidated Balance Sheets as of December 29, 2022 and December 30, 2021

Consolidated Statements of Income for the years ended December 30, 2021 and December 31, 2020

Consolidated Statements of Operations for the years ended December 29, 2022 and December 30, 2021

Consolidated Statements of Equity/(Deficit) for the years ended December 29, 2022 and December 30, 2021

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We have audited the accompanying consolidated balance sheets of National CineMedia, Inc.

and subsidiary (the "Company") as of December 30, 2021 and December 31, 2020, the related consolidated statements of income, equity/(deficit), and cash flows for each of the two years in the period ended December 30, 2021, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 30, 2021 and December 31, 2020, the results of its operations and its cash flows for each of the two years in the period ended December 30, 2021 in conformity with accounting principles generally accepted in the United States of America.

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.

and subsidiary (the "Company") as of December 29, 2022 and December 30, 2021, the related consolidated statements of operations, equity/(deficit), and cash flows, for each of the two years in the period ended December 29, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 29, 2022 and December 30, 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 29, 2022, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, National CineMedia LLC, the consolidated subsidiary of the Company, filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code on April 11th, 2023 which made its outstanding debt balances immediately due and payable.

The Company does not have sufficient available liquidity to repay its outstanding debt balances which raises substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1— Basis of Presentation .

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Bankruptcy Proceedings

As discussed in Note 1— Basis of Presentation to the financial statements, National CineMedia LLC, the consolidated subsidiary of the Company, has filed for reorganization under Chapter 11 of the U.S.

Bankruptcy Code.

The accompanying financial statements do not purport to reflect or provide for the consequences of the bankruptcy proceedings.

In particular, such financial statements do not purport to show (1) as to assets, their realizable value on a liquidation basis or their availability to satisfy liabilities;

(2) as to prepetition liabilities, the settlement amounts for allowed claims, or the status and priority thereof;

(3) as to shareholder accounts, the effect of any changes that may be made in the capitalization of the Company;

or (4) as to operations, the effect of any changes that may be made in its business.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which each relates.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

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 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.

During the fiscal year ended December 29, 2022, the Company paid the founding members $0.0 million for the 2021 tax year.

At December 29, 2022, the Company’s payable to founding members under the TRA liability (“PFML”) was $35.6 million;

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Denver, Colorado

March 3, 2022

April 13, 2023

We have served as the Company's auditor since 2006.

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Cash and cash equivalents $ 61.7 $ 101.2

Restricted cash 2.1 —

Short-term marketable securities 0.7 0.3

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Intangible assets, net of accumulated amortization of $ 270.2 and $ 245.6 , respectively

Deferred tax assets, net of valuation allowance of $ 223.8 and $ 212.0 , respectively

Other investments 0.9 0.8

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CURRENT LIABILITIES:

Amounts due to founding members, net $ 11.8 $ 2.0

Amounts due to founding members, net (related party payables of $ 15.2 and $ 11.4 , respectively)

$ 18.2 $ 11.8

Payable to founding members under the TRA (related party payables of $ 0.2 and $ 0.0 , respectively)

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Deferred revenue 10.2 15.0

Short-term debt 3.2 2.7

Short-term debt, net of debt issuance costs of $ 7.9 and $ 0.0 , respectively

Other current liabilities 2.2 2.2

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Long-term debt, net of debt issuance costs of $ 0.0 and $ 10.5 , respectively

1,094.3 1,049.6

Payable to founding members under the TRA (related party payables of $ 25.5 and $ 11.9 , respectively)

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Common stock, $ 0.01 par value;

175,000,000 shares authorized, 80,626,889 and 78,040,818 issued and

outstanding, respectively

260,000,000 and 175,000,000 shares authorized, 128,402,636 and

80,626,889 issued and outstanding, respectively

Additional paid in capital (deficit) ( 146.2 ) ( 195.5 )

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AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share data)

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Total 242.3 183.2

OPERATING LOSS ( 68.6 ) ( 61.0 )

OPERATING INCOME (LOSS) 6.9 ( 68.6 )

NON-OPERATING EXPENSES:

Interest on borrowings 79.7 64.8

Interest income ( 0.1 ) ( 0.6 )

Loss on early retirement of debt, net 1.2 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

(Gain) loss on early retirement of debt, net ( 5.9 ) 1.2

Loss (gain) on re-measurement of the payable to founding members under the TRA 2.2 ( 16.1 )

Gain on sale of asset ( 2.2 ) —

Other non-operating income, net ( 0.7 ) ( 0.1 )

Total 73.1 49.8

(LOSS) INCOME BEFORE INCOME TAXES ( 118.4 ) 35.9

LOSS BEFORE INCOME TAXES ( 66.2 ) ( 118.4 )

Income tax expense — —

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(Deficit) Retained

(Distribution

(Distributions

Earnings) Noncontrolling

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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 2016-13 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 )

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

Share-based compensation issued ( 1.0 ) 471,832 — ( 1.0 ) — —

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 )

Share-based compensation issued, net of tax ( 1.9 ) 1,195,504 — ( 1.9 ) — —

Share-based compensation expense/capitalized 8.4 — — 5.4 — 3.0

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

Accrued Distributions to founding members ( 4.9 ) — — — — ( 4.9 )

NCM LLC equity issued for purchase of

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Comprehensive loss, net of tax ( 66.2 ) — — — ( 28.7 ) ( 37.5 )

Share-based compensation issued ( 1.9 ) 1,195,504 — ( 1.9 ) — —

Share-based compensation issued, net of tax ( 0.1 ) 1,137,304 0.1 ( 0.2 ) — —

Share-based compensation expense/capitalized 7.3 — — 5.2 — 2.1

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Consolidated net loss $ ( 66.2 ) $ ( 118.4 )

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

Deferred income tax expense — 162.4

Adjustments to reconcile consolidated net loss to net cash used in operating activities:

Depreciation expense 6.5 10.9

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Impairment of long-lived assets 5.8 —

Bad-debt expense 1.0 —

Amortization of debt issuance costs 8.9 4.1

Loss on early retirement of debt, net 1.2 0.4

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

(Gain) loss on early retirement of debt, net ( 5.9 ) 1.2

Non-cash loss (gain) on re-measurement of the payable to founding members under the TRA 2.2 ( 16.1 )

Gain on sale of asset ( 2.2 ) —

Other ( 0.4 ) 0.2

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Other, net ( 2.4 ) ( 2.7 )

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

Net cash used in operating activities ( 47.3 ) ( 95.2 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment ( 2.9 ) ( 5.7 )

Purchases of marketable securities — ( 8.2 )

Proceeds from sale and maturities of marketable securities 0.3 0.3

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

Proceeds from sale of asset 2.2 —

Net cash used in investing activities ( 0.4 ) ( 5.4 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of dividends ( 9.5 ) ( 16.9 )

Proceeds from revolving credit facility — 210.0

Repayments of revolving credit facility — ( 82.0 )

Issuance of revolving credit facility 50.0 —

Issuance of term loans — 50.0

Repayments of term loan facility ( 3.2 ) ( 2.3 )

Repayment Notes due 2028 ( 19.8 ) —

Payment of debt issuance costs ( 7.0 ) ( 7.3 )

Distributions to founding members — ( 36.8 )

Repurchase of stock for restricted stock tax withholding ( 0.2 ) ( 2.0 )

Net cash provided by financing activities 10.3 21.5

CHANGE IN CASH AND CASH EQUIVALENTS ( 79.1 ) 124.4

CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 37.4 ) ( 79.1 )

Cash and cash equivalents at beginning of period 101.2 180.3

Cash and cash equivalents at end of period $ 101.2 $ 180.3

Cash, cash equivalents and restricted cash at end of period $ 63.8 $ 101.2

Refer to accompanying notes to Consolidated Financial Statements.

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Purchase of an intangible asset with NCM LLC equity $ 10.4 $ 14.1

Accrued distributions to founding members (including accrued payments due to

related parties of $ 4.9 and $ 0.0 , respectively)

Purchase of subsidiary equity with NCM, Inc.

equity $ 12.4 $ —

Accrued purchases of property and equipment $ 0.8 $ —

Increase (decrease) in dividend equivalent accrual not requiring cash

in the period $ 0.9 $ ( 0.1 )

Dividends declared not requiring cash in the period $ 0.7 $ 0.9

Supplemental disclosure of cash flow information:

Cash paid for interest $ 66.5 $ 58.6

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

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

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 and Regal.

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

and Cinemark.

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

The Company operates the largest cinema advertising network reaching movie audiences in the U.S., allowing NCM LLC to sell advertising under long-term ESAs with the founding members and certain third-party network affiliates, under long-term network affiliate agreements.

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.

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.

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

All of the theaters within the Company’s network are open and the release of major motion pictures resumed in the third quarter of 2021.

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

Attendance levels increased from the prior year, but have not met historical levels and were not 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 year ended December 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 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 17.7 years as of December 30, 2021.

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

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 of approximately 16.8 years as of December 29, 2022.

The network affiliate agreements expire at various dates between May 29, 2023 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 14.0 years as of December 29, 2022.

As of December 30, 2021, NCM LLC had 166,815,233 common membership units outstanding, of which 80,626,889 ( 48.3 %) were owned by NCM, Inc., 43,026,794 ( 25.8 %) were owned by Regal, 43,161,550 ( 25.9 %) were owned by Cinemark and 0 ( 0.0 %) were owned by AMC.

In December 2022, AMC and Regal each redeemed all of their outstanding membership units, 5,954,646 and 40,683,797 , respectively, in exchange for shares of NCM, Inc.

common stock, reducing AMC’s and Regal’s ownership to 0.0 % as of December 29, 2022.

NCM, Inc.’s primary source of cash flow from operations is distributions from NCM LLC pursuant to the NCM LLC Operating Agreement.

also receives management fees pursuant to a management services agreement with NCM LLC in exchange for providing specified management services to NCM LLC.

As of December 29, 2022, NCM LLC had 172,093,433 common membership units outstanding, of which 128,402,636 ( 74.6 %) were owned by NCM, Inc., 43,690,797 ( 25.4 %) were owned by Cinemark, 0 ( 0.0 %) were owned by Regal and 0 ( 0.0 %) 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.

Going Concern —The accompanying audited 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.

NCM LLC filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas on April 11, 2023.

expects to continue to manage NCM LLC, the “debtor in possession”, under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

In general, as debtor in possession under the Bankruptcy Code, NCM LLC is authorized to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court.

As a result of the bankruptcy petition, the realization of NCM LLC’s assets and the satisfaction of liabilities are subject to significant uncertainty.

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

Given the Chapter 11 Case, NCM LLC’s outstanding debt became immediately due and payable and was reclassified as current within the Company’s audited Consolidated Balance Sheet as of December 29, 2022.

Further, a Chapter 11 plan of reorganization for NCM LLC is likely to materially change the amounts and classifications of assets and other liabilities reported in the Company’s audited Consolidated Balance Sheet as of December 29, 2022.

As the progress of these plans and transactions is subject to approval of the Bankruptcy Court and therefore not within our control, NCM LLC’s successful reorganization and emergence from bankruptcy cannot be considered probable.

As a result, the proceedings do not alleviate the substantial doubt about the Company’s ability to continue as a going concern.

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

Basis of Presentation

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in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).

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.

NATIONAL CINEMEDIA, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s business is seasonal and for this and other reasons operating results for interim periods may not be indicative of the Company’s full year results or future performance.

As a result of the various related-party agreements discussed in Note 9— 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.

Advertising is the principal business activity of the Company and is the Company’s only reportable segment under the requirements of ASC 280 – Segment Reporting.

Advertising is the principal business activity of the Company and is the Company’s only operating and reportable segment under the requirements of ASC 280— Segment Reporting.

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.

Significant estimates include those related to the reserve for uncollectible accounts receivable, share-based compensation and income taxes.

Significant estimates include those related to the reserve for uncollectible accounts receivable, share-based compensation, income taxes, intangible assets and forecasts utilized to evaluate the Company’s ability to continue as a going concern.

Actual results could differ from those estimates.

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December 30, 2021 2021

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

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.

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 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, 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.

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The Company considers the terms of each arrangement to determine the appropriate accounting treatment as more fully discussed in Note 2— Revenue from Contracts with Customers .

Operating Costs —Advertising fulfillment-related operating costs primarily include personnel and other costs related to advertising fulfillment, payments due to unaffiliated theater circuits under the network affiliate agreements, and to a lesser extent, production costs of non-digital advertising.

Payments to the founding members of a theater access fee is comprised of a payment per theater attendee, a payment for post-showtime advertising, a payment per digital screen and a payment per digital cinema projector equipped in the theaters, all of which escalate over time, and payment for revenue share of the Platinum Spot.

Refer to Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this document.

Network costs include personnel, satellite bandwidth, repairs, and other costs of maintaining and operating the digital network and preparing advertising and other content for transmission across the digital network.

Advertising Costs —Advertising-related costs incurred promoting the Company's digital products are included within “Selling and marketing costs” on the audited Consolidated Statements of Income.

Operating Costs —The Company classifies its core operating expenses within the following categories on the audited Consolidated Statements of Operations:

Advertising operating costs —This balance relates to advertising fulfillment-related operating costs primarily consisting of personnel and other costs, revenue share and per patron based fees due to network affiliates and other sales partners, and to a lesser extent, production costs of non-digital advertising.

Network costs —This balance consists of personnel, satellite bandwidth, repairs and other costs of maintaining and operating the digital network as well as preparing advertising and other content for transmission across the digital network.

Theater access fees and revenue share to founding members —This balance consists of payments to the founding members in return for the rights to advertise in their theaters comprised of a payment per theater attendee, a payment for post-showtime advertising, a payment per digital screen and a payment per digital cinema projector equipped in the theaters, all of which escalate over time, and revenue share for the Platinum Spot, when sold.

Selling and marketing costs —This balance consists primarily of sales personnel costs including sales commissions and selling related expenses such as travel, barter and bad debt expense, marketing expenses including research subscriptions and studies and production costs for internal segments shown within the Noovie® show, lease expense for the Company’s sales offices and costs associated with digital inventory, including revenue shares paid to DOOH and other partners.

This balance also includes advertising-related costs incurred promoting the Company's digital products.

The Company recognized advertising costs of $ 0.0 million and $ 0.1 million for the years ended December 29, 2022 and December 30, 2021, respectively.

These costs are expensed when incurred.

Administrative and other costs —This balance consists of personnel costs for the Company’s executives as well as administrative functions including legal, information technology and accounting, lease expense for the Company’s

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

headquarters, legal and professional fees, cloud computing costs for the Company’s cinema advertising management system and repairs and maintenance costs.

Cash and Cash Equivalents —All highly liquid debt instruments and investments purchased with an original maturity of three months or less are classified as cash equivalents and are considered available-for-sale securities.

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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 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 income, net” on the audited Consolidated Statements of Operations.

Restricted Cash — The Company’s restricted cash balance was $ 2.1 million and $ 0.0 million for the years ended December 29, 2022 and December 30, 2021, respectively.

The balance as of December 29, 2022 related to fees due to Regal in accordance with the ESA which were held in escrow in conjunction with the Cineworld Proceeding.

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

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The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market.

The change in value from the prior period is recognized within “Other non-operating income, net” on the audited Consolidated Statements of Operations.

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.

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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 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.

The Company decreased the expected rate of default related to local and regional customers within the calculation of the allowance for doubtful accounts as of December 29, 2022, as compared to December 30, 2021, given the recovery of the previously identified at-risk small businesses (e.g.

restaurants, travel, etc.) from the adverse impact of the COVID-19 Pandemic.

The Company also reserves for specific receivable balances that it expects to write off based on known concerns regarding the financial health of the customer.

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During the years ended December 29, 2022 and December 30, 2021, the Company had one customer that accounted for 12.9 % and 11.8 %, respectively, of the Company's revenue.

NATIONAL CINEMEDIA, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Receivables consisted of the following (in millions):

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Leasehold improvements Lesser of lease term or asset life

NATIONAL CINEMEDIA, INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Software and website development costs developed or obtained for internal use are accounted for in accordance with ASC 350— Internal Use Software and ASC 350– Website Development Costs .

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As of December 29, 2022 and December 30, 2021 the Company had a net book value of $ 3.7 million and $ 4.0 million of capitalized implementation costs for CCAs, respectively.

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

These costs primarily relate to the Company's 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 $ 0.4 million for the years ended December 29, 2022 and December 30, 2021, 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.

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

For the years ended December 29, 2022 and December 30, 2021, the Company recorded $ 4.6 million and $ 1.7 million in research and development expense, respectively.

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

The Company recorded losses of $ 0.2 million and $ 0.2 million related to the write-off of equipment during the years ended December 30, 2021 and December 31, 2020, respectively, which has been included within “Depreciation expense” within the respective audited Consolidated Statements of Income given the immaterial nature of the balances.

The Company recorded losses of $ 0.0 million and $ 1.7 million related to the write-off of certain internally developed software during the years ended December 30, 2021 and December 31, 2020, respectively, which has been included within “Impairment of long-lived assets” within the respective audited Consolidated Statements of Income.

The Company recorded losses of $ 5.8 million and $ 0.0 million related to the write-off of certain internally developed software during the years ended December 29, 2022 and December 30, 2021, respectively, which has been included within “Impairment of long-lived assets” within the respective audited Consolidated Statements of Operations.

The Company also recorded losses of $ 0.0 million and $ 0.2 million related to the write-off of equipment during the years ended December 29, 2022 and December 30, 2021, respectively, which has been included within “Depreciation expense” within the respective audited Consolidated Statements of Operations given the immaterial nature of the balances.

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

The Company records amortization using the straight-line method over the contractual life of the intangibles, corresponding to the term of the ESAs or the term of the contract with the network affiliate.

Intangible assets are tested for impairment at least annually during the fourth quarter or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable.

Intangible assets are tested for impairment whenever events or changes in circumstances indicate the carrying value may not be fully recoverable.

In its impairment testing, the Company estimates the fair value of its ESAs or network affiliate agreements by determining the estimated future cash flows associated with the ESAs or network affiliate agreements.

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Significant judgment is involved in estimating long-term cash flow forecasts.

Refer to Note 5— Intangible Assets to the audited Consolidated Financial Statements for discussion of the Company's consideration of the impact of the COVID-19 Pandemic within the impairment testing performed over the Company's intangible assets during the year

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ended December 30, 2021.

Refer to Note 5— Intangible Assets to the audited Consolidated Financial Statements for discussion of the Company's consideration of the impact of the Cineworld Proceeding within the impairment testing performed over the Company's intangible assets during the year ended December 29, 2022.

The Company recorded $ 0.0 million and $ 0.0 million, respectively, in impairment charges related to intangible assets during the years ended December 29, 2022 and December 30, 2021.

These losses have been included within “Depreciation expense” within the respective audited Consolidated Statements of Income given the immaterial nature of the activity.

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.

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Payments to or received from the founding members against outstanding balances are made monthly.

Available cash distributions are made quarterly.

Available cash distributions are made quarterly contingent upon the Company's compliance with the covenants outlined within the Credit Agreement Second and Third Amendments and in accordance with the NCM LLC Operating Agreement.

Income Taxes —Income taxes are accounted for 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.

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The Company records a valuation allowance if it is deemed more likely than not that all or a portion of its deferred income tax assets will not be realized, which will be assessed on an on-going basis.

Only the portion of deferred income tax assets deemed more likely than not to be realized are considered within the calculation of the payable to the founding members under the TRA which is equal to 90% of the Company’s actual tax benefit realized from the tax amortization of the basis difference for qualifying deferred income tax assets.

Refer to Note 7— Income Taxes to the audited Consolidated Financial Statements for discussion of changes within the Company's valuation allowance on its deferred tax assets during the year ended December 30, 2021.

Only the portion of deferred income tax assets deemed more likely than not to be realized are considered within the calculation of the payable to the founding members

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under the TRA which is equal to 90 % of the Company’s actual tax benefit realized from the tax amortization of the basis difference for qualifying deferred income tax assets.

In addition, income tax rules and regulations are subject to interpretation and the application of those rules and regulations require judgment by the Company and may be challenged by the taxation authorities.

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Ending balance $ 11.2 $ 15.0

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

Restricted stock and restricted stock units vest upon the achievement of Company three -year cumulative performance measures and service conditions or only service conditions.

Share-Based Compensation —During 2022 and 2021, the Company issued stock options and restricted stock units.

Restricted stock units vest upon the achievement of Company two or three -year cumulative performance measures and service conditions or only service conditions.

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

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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 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.

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.

Ultimately, the Company adjusts the expense recognized to reflect the actual vested shares following the resolution of the performance conditions.

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

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

Compensation cost of stock options is based on the estimated grant date fair value using the Black-Scholes option pricing model, which requires that the Company make estimates of various factors.

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Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

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Recently Adopted Accounting Pronouncements

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:

the exception to the incremental approach for intraperiod tax allocation;

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

and the exception in interim periods

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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.

The Company did not adopt any new accounting pronouncements during the year ended December 29, 2022.

Recently Issued Accounting Pronouncements

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This guidance is effective upon issuance and expires on December 31, 2024.

The Company is currently assessing the impact of the LIBOR transition and ASU 2020-04 on the Company’s audited Consolidated Financial Statements.

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its audited Consolidated Financial Statements or notes thereto .

The Company concluded the LIBOR transition did not have a material impact on the Company’s Consolidated Financial Statements.

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its Consolidated Financial Statements or notes thereto.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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 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.

The Company derives revenue principally from the sale of advertising to national, regional and local businesses in Noovie® , our cinema advertising and entertainment 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, Name That Movie and Noovie Shuffle, which can be played on the mobile app 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.

National and regional advertising, including advertising under the beverage concessionaire and PSA agreements, are sold on a CPM basis.

National and regional advertising, including advertising under the beverage concessionaire and courtesy PSA agreements, are sold on a CPM basis.

The Company recognizes national and regional advertising over time as impressions (or theater attendees) are delivered.

National advertising is also sold to content partners.

The content partners provide the Company with original entertainment content segments, typically 90 seconds in length, that are entertaining, informative, or educational in nature in the Noovie pre-show and they make commitments to buy a portion of the Company’s advertising inventory at a specified CPM.

The content partners provide the Company

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with original entertainment content segments, typically 90 seconds in length, that are entertaining, informative, or educational in nature in the Noovie show and they make commitments to buy a portion of the Company’s advertising inventory at a specified CPM.

The Company recognizes revenue for the content segments ratably over time as the content segments air.

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Expense recorded from barter transactions for the years ended December 29, 2022 and December 30, 2021 was $ 0.0 million and $ 0.7 million, respectively.

This expense is included within “Selling and marketing costs” on the audited Consolidated Statements of Income.

The Company makes contractual guarantees to deliver a specified number of impressions to view the customers’ advertising.

If the contracted number of impressions are not delivered, the Company will run additional advertising to deliver the contracted impressions at a later date.

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

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

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specified in the advertising contract.

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

As of December 30, 2021 and December 31, 2020, the Company had a make-good provision of $ 2.4 million and $ 7.1 million, respectively.

This expense is included within “Selling and marketing costs” on the audited Consolidated Statements of Operations.

The Company recognizes revenue as the performance obligation for the advertising services is satisfied.

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Deferred revenue is classified as a current liability as it is expected to be earned within the next twelve months.

The Company does not have any contracts with terms in excess of one year that are noncancelable as of December 30, 2021.

The Company does not have any contracts with terms in excess of one year that are noncancellable as of December 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.

In addition, other of the Company’s contracts longer than one year that are cancelable are not included within this disclosure.

In addition, the Company’s contracts longer than one year that are cancellable are not included within this disclosure.

Disaggregation of Revenue

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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 years ended December 30, 2021 and December 31, 2020:

The Company has changed the presentation of revenues in the table below, retrospectively, to have Regional advertising revenue now be included with Local advertising revenue rather than with National advertising revenue as of December 29, 2022.

This presentation change did not affect total consolidated revenue.

The following table summarizes revenue from contracts with customers for the years ended December 29, 2022 and December 30, 2021 (in millions):

December 29, 2022 December 30, 2021

National and regional advertising revenue $ 85.7 $ 66.7

Local advertising revenue 17.8 17.5

National advertising revenue $ 187.1 $ 84.2

Local and Regional advertising revenue 43.5 19.3

Founding member advertising revenue from beverage concessionaire agreements 18.6 11.1

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Deferred Revenue and Unbilled Accounts Receivable

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

December 30, 2021 December 31, 2020

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

Performance obligations satisfied 2.0 7.6

New contract liabilities ( 9.5 ) ( 5.1 )

Balance at end of year $ ( 12.6 ) $ ( 5.1 )

The Company has changed the classification of the make good provision, retrospectively, to now be included within “Deferred Revenue” on the audited Consolidated Balance Sheet rather than “Accrued Expenses” as of December 29, 2022.

Revenue recognized in the year ended December 29, 2022 that was included within the Deferred Revenue balance as of December 30, 2021 was $ 12.3 million.

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Unbilled accounts receivable is classified as a current asset as it is expected to be billed within the next twelve months.

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The Company expenses sales commissions when incurred as the amortization period would have been one year or less.

These costs are recorded within “Selling and marketing costs” in the audited Consolidated Statement of Income.

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

These costs are recorded within “Selling and marketing costs” in the audited Consolidated Statements of Operations.

Allowance for Doubtful Accounts

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

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

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

December 29, 2022 December 30, 2021

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

$ 0.2 $ 2.1 $ 1.1 $ 1.9

Provision for bad debt 0.2 0.8 0.1 —

Write-offs, net — ( 0.7 ) — ( 1.0 )

Write-offs, net of recoveries ( 0.2 ) ( 0.8 ) — ( 0.7 )

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

(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

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Diluted $ ( 0.35 ) $ ( 0.61 )

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.

The effect of the 88,801,009 and 85,748,080 weighted average exchangeable NCM LLC common membership units held by the founding members for the years ended December 29, 2022 and December 30, 2021, respectively, was excluded from the calculation of diluted weighted average shares and earnings per NCM, Inc.

share as it was antidilutive in these periods.

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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 $ 13.0 $ 21.3

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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 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.

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.

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

On February 1, 2023, Cineworld filed a motion for summary judgment on NCM LLC’s adversary proceeding with a hearing scheduled during the second quarter of 2023.

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

360, Impairment and Disposal of Long-Lived Assets during the third and fourth quarter of 2022.

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 group resulting from the Cineworld Proceeding.

The estimated future cash flows calculated within the probability-weighted analysis were in excess of the net book value of the Company’s intangible assets and no impairment charge was recorded in the year ended December 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 or dispositions during the previous year.

In addition, NCM LLC’s Common Unit Adjustment Agreement requires that a Common Unit Adjustment occur for a specific founding member if its acquisition or disposition of theaters, in a single transaction or cumulatively since the most recent Common Unit Adjustment, results in an attendance increase or decrease in excess of two percent of the annual total attendance at the prior adjustment date.

Integration Payments and Other Encumbered Theater Payments— If an existing on-screen advertising agreement with an alternative provider is in place with respect to any acquired theaters, the founding members may elect to receive common membership units related to those encumbered theaters in connection with the Common Unit Adjustment.

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membership units related to those encumbered theaters in connection with the Common Unit Adjustment.

If the founding members make this election, then they are required to make payments on a quarterly basis in arrears in accordance with certain run-out provisions pursuant to the ESAs (“integration payments”).

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Total intangible assets, net $ 606.3 $ 10.8 $ — $ ( 25.0 ) $ ( 5.4 ) $ 586.7

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2020 Additions (3)

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

(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.

(1) During the first quarter of 2022, NCM LLC issued 4,140,896 common membership units, net of 2,342,997 returned 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 2021 fiscal year and NCM LLC recorded a net intangible asset of $ 10.4 million during the first quarter of 2022 as a result of the Common Unit Adjustment.

Additionally, there were $ 0.4 million of additions related to upfront affiliate payments in 2022.

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

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During the year ended December 29, 2022 and December 30, 2021, AMC paid a total of $ 2.8 million and $ 0.5 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.

(3) During the first quarter of 2021, the Company 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 the Company’s network during the 2020 fiscal year and the Company recorded a net intangible asset of $ 4.8 million during the first quarter of 2021 as a result of the Common Unit Adjustment.

As of December 29, 2022 and December 30, 2021, the Company’s intangible assets related to the founding members, net of accumulated amortization, was $ 572.4 million and $ 589.6 million, respectively, with weighted average remaining lives of 16.3 years and 17.4 years, respectively.

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As of December 29, 2022 and December 30, 2021, the Company’s intangible assets related to the network affiliates, net of accumulated amortization, was $ 14.3 million and $ 16.7 million, respectively, with weighted average remaining lives of 6.1 years and 8.5 years, respectively.

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December 29, 2022 December 30, 2021

Make-good reserve $ 2.4 $ 7.1

Accrued interest $ 16.3 $ 12.2

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Total accrued expenses $ 17.8 $ 13.4

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

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The TRA applies to NCM, Inc.’s taxable years up to and including the 30t h anniversary date of the offering.

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 $ 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.

For the 2021 tax year, the Company paid the founding members $ 0.0 million in the year ended December 29, 2022.

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

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

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)

December 30, 2021 December 31, 2020

Federal $ — $ ( 0.1 )

State — ( 0.1 )

Total current income tax (benefit)/expense — ( 0.2 )

Federal — 131.8

Total deferred income tax expense — 162.4

Total income tax provision on Consolidated Statements of Income $ — $ 162.2

A reconciliation of the provision for income taxes as reported and the amount computed by multiplying income before taxes, less noncontrolling interest, by the U.S.

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

The Company recorded an increase of $ 19.2 million and reduction of $ 16.1 million to the “Payable to founding members under the tax receivable agreement” during the years ended December 29, 2022 and December 30, 2021, respectively.

The increase in the year ended December 29, 2022 was primarily due to the increase in NCM, Inc.’s ownership percentage of NCM LLC during the year.

The reduction in the year ended December 30, 2021 was primarily related to the Company’s utilization of the Non-TRA net operating losses as of December 30, 2021.

The ownership related changes to the “Payable to founding members under the tax receivable agreement” were recorded within “Additional paid in capital, deficit” on the Consolidated Balance Sheet and the non-ownership related changes were recorded within “Non-operating income” within the Consolidated Statements of Operations.

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Provision for Income Taxes —A reconciliation of the provision for income taxes as reported and the amount computed by multiplying income before taxes, less noncontrolling interest, by the U.S.

federal statutory rate of 21.0 % as of December 29, 2022 and December 30, 2021 was (in millions):

December 29, 2022 December 30, 2021

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State and local income taxes, net of federal benefit ( 1.1 ) ( 1.8 )

NCM LLC income taxes — ( 0.2 )

Share-based compensation 0.6 1.1

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Executive compensation 0.5 0.4

Other — ( 0.4 )

Change in effective ownership 1.2 —

Total income tax provision $ — $ —

(1) Refer to the discussion of changes to the valuation allowance during the year ended December 30, 2021 within the Deferred Tax Assets table below.

Deferred Tax Assets —Significant components of the Company’s deferred tax assets consisted of the following (in millions):

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

(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.

(1) The Company recognized a deferred tax asset in the amount o f $ 149.7 mi llion and $ 138.5 million as of December 29, 2022 and December 30, 2021, respectively, associated with the basis difference in our investment in NCM LLC.

The Company evaluated its deferred tax assets as of December 29, 2022 and December 30, 2021 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.

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As of December 29, 2022, the Company had gross state net operating loss carryforwards of approximately $ 244.7 million, of which $ 167.7 million will expire between 2023 and 2042 and $ 76.9 million will be carried forward indefinitely.

As of December 30, 2021, the Company had gross capital loss carryforwards of approximately $ 0.1 million, which will expire in 2024.

As of December 29, 2022, the Company had gross capital loss carryforwards of approximately $ 0 .0 million.

As of December 29, 2022, the Company had gross federal and state research and experimentation tax credit carryforwards of approximately $ 1.6 million, which expire at various dates between 2030 and 2038.

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Founding Member Transactions —In connection with NCM, Inc.’s 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.

As AMC owns less than 5% of NCM LLC as of December 30, 2021, AMC is no longer a related party.

As AMC owns less than 5% of NCM LLC, on an as converted basis, as of December 29, 2022, AMC is not a related party.

AMC was also not a related party as of December 30, 2021.

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.

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Under the ESAs, NCM LLC is the exclusive provider within the United States of advertising services in the founding members’ theaters (subject to pre-existing contractual obligations and other limited exceptions for the benefit of the founding members).

The advertising services include the use of the DCN equipment required to deliver the on-screen advertising and other content included in the Noovie ® pre-show, use of the LEN and rights to sell and display certain lobby promotions.

Further, 30 to 60 seconds of advertising included in the Noovie pre-show is sold to the founding members to satisfy the founding members’ on-screen advertising commitments under their beverage concessionaire agreements.

The advertising services include the use of the DCN equipment required to deliver the on-screen advertising and other content included in the Noovie ® show, use of the LEN and rights to sell and display certain lobby promotions.

Further, 30 to 60 seconds of advertising included in the Noovie show is sold to the founding members to satisfy the founding members’ on-screen advertising commitments under their beverage concessionaire agreements.

In consideration for access to the founding members’ theaters, theater patrons, the network equipment required to display on-screen and LEN video advertising and the use of theaters for lobby promotions, the founding members receive a monthly theater access fee.

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Following is a summary of the related party transactions between the Company and the founding members (in millions):

Included in the Consolidated Statements of Income:

Included in the Consolidated Statements of Operations:

December 29, 2022 December 30, 2021

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$ 25.5 $ 11.9

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 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.

This balance includes common unit adjustments issued to Cinemark and Regal.

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

(3) Includes other payables due to the founding members in the ordinary course of business.

At the date of the Company’s IPO, NCM LLC was granted a perpetual, royalty-free license from the founding members to use certain proprietary software that existed at the time for the delivery of digital advertising and other content through the DCN to screens in the U.S.

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.

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, contingent upon the Company's compliance with the covenants outlined

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Mandatory distributions for the years ended December 30, 2021 and December 31, 2020 are as shown within the table below (in millions).

within the Credit Agreement Amendment, as amended, defined within Note 10—Borrowings.

The portion of positive available cash due to founding members is accrued within the “Amounts due to founding members, net” on the audited Consolidated Balance Sheet.

The positive available cash from NCM LLC for the years ended December 29, 2022 and December 30, 2021 were as follows (in millions):

December 29, 2022 December 30, 2021

Cinemark $ 4.9 $ —

Total founding members — 4.3

Total $ 19.3 $ —

The mandatory distributions in the table above related to the first quarter of 2020 and were paid in the second quarter of 2020.

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 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.

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

for the nine months ended September 29, 2022 of $ 39.4 million (including negative $ 10.5 million for Cinemark, negative $ 9.3 million for Regal and negative $ 19.6 million for NCM, Inc.) and $ 93.7 million (including negative $ 24.3 million for Cinemark, negative $ 24.2 million for Regal and negative $ 45.2 million for NCM, Inc.) for the year ended December 30, 2021.

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

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

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and other encumbered theater payments $ 11.1 $ 4.1 $ 15.2

Cost and other reimbursement — — —

Total amounts due to founding members, net $ 11.1 $ 4.1 $ 15.2

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and other encumbered theater payments $ 5.1 $ 6.3 $ 11.4

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

Total amounts due to founding members, net $ 5.1 $ 6.3 $ 11.4

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 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 $ 0.8 million and $ 0.7 million as of December 29, 2022 and December 30, 2021, respectively.

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

NCM LLC received cash distributions from AC JV, LLC of $ 0.4 million and $ 0.0 million, during the years ended December 29, 2022 and December 30, 2021, respectively.

NCM LLC recorded equity in earnings for AC JV, LLC of $ 0.4 million and $ 0.0 million during the years ended December 29, 2022 and December 30, 2021, respectively, which are included in “Other non-operating income, net” in the audited Consolidated Statements of Operations.

The commencement of the Chapter 11 Case constituted an event of default and caused the automatic and immediate acceleration of all debt outstanding under or in respect of, NCM LLC’s Credit Agreements and senior notes.

However, any efforts to enforce payment obligations under the debt agreements are automatically stayed as a result of the filing of the Chapter 11 Case, and the creditors’ rights of enforcement in respect of the debt agreements are subject to the applicable provisions of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Bankruptcy Code.

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

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Revolving credit facility 2018 $ 167.0 $ 167.0 June 20, 2023 (1)

Revolving credit facility 2022 50.0 — June 20, 2023 (1)

Term loans - first tranche 258.5 261.2 June 20, 2025 (1)

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

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

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

Further, NCM LLC can make available cash distributions to its members (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.

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

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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.

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

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

Given the uncertainty of the resolution of the Chapter 11 Case, conditions may change, which could result in impairment of any discounts or debt issuance costs in future periods.

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 and (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.

The senior secured credit facility contains a number of covenants and financial ratio requirements, including (i) a consolidated net total leverage ratio covenant of 6.25 times for each 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,

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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;

(ii) the consolidated net senior secured 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.

As of December 29, 2022, NCM LLC was in compliance with the financial requirements of the Credit Agreement Third Amendment described above.

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 4.00 % or the base rate plus 3.00 %.

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 December 29, 2022 was 8.44 %.

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

As of December 29, 2022, NCM LLC has paid principal of $ 11.5 million, reducing the outstanding balance to $ 258.5 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 December 29, 2022 was 12.44 %.

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

As of December 29, 2022, NCM LLC has paid principal of $ 0.7 million, reducing the outstanding balance to $ 49.3 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.

As of December 29, 2022, NCM LLC’s total availability under the $ 175.0 million revolving credit facility was $ 7.2 million, net of $ 167.0 million outstanding and $ 0.8 million letters of credit.

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

Borrowings under the revolving credit facility bear interest at NCM LLC’s option of either the LIBOR index plus an applicable margin ranging from 3.00 % to 3.50 % or the base rate plus an applicable margin ranging from 2.00 % to 2.50 %.

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The weighted-average interest rate on the outstanding balance on the revolving credit facility as of December 29, 2022 was 8.03 %.

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 %.

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

The weighted-average interest rate on the term loans as of December 30, 2021 was 5.64 %.

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

As of December 30, 2021, NCM LLC has paid a principal of $ 8.8 million, reducing the outstanding balance to $ 261.2 million.

The term loan will mature on June 20, 2025.

In addition, NCM LLC is permitted to make quarterly dividend payments and other restricted payments with its available cash as long as NCM LLC's consolidated net senior secured leverage ratio (after giving effect to any such payment) is below 5.50 times and no default or event of has occurred and continues to occur under the senior secured credit facility.

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 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.

Revolving Credit Facility 2022 —On January 5, 2022, NCM LLC also entered into the Revolving Credit Agreement 2022 among NCM LLC, the lenders party thereto and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent.

The Revolving Credit Agreement 2022 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 Revolving Credit Agreement 2022 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 Revolving Credit Agreement 2022 at any time before maturity.

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 December 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 December 29, 2022 was 12.43 % As of December 29, 2022, NCM LLC was in compliance with the financial requirements of the Credit Agreement Third Amendment described above.

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 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.

In addition, at any time prior to August 15, 2019, NCM LLC may on any one or more occasions redeem up to 35% of the original aggregate principal amount of Notes due 2026 from the net proceeds of certain equity offerings at a redemption price equal to 105.750% of the principal amount of the Notes due 2026 redeemed, plus accrued and unpaid interest, if any to the redemption date.

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amount of the Notes due 2026 redeemed, plus accrued and unpaid interest, if any to the redemption date.

Upon the occurrence of a Change of Control (as defined in the indenture), NCM LLC will be required to make an offer to each holder of the Notes due 2026 to repurchase all of such holder’s Notes due 2026 for a cash payment equal to 101.000 % of the aggregate principal amount of the Notes due 2026 repurchased, plus accrued and unpaid interest, if any, to the date of repurchase.

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In particular, NCM LLC has the ability to distribute all of its quarterly available cash as a restricted payment or as an investment, if it meets a minimum net senior secured leverage ratio.

NCM LLC was in compliance with these non-maintenance covenants as of December 30, 2021.

NCM LLC was in compliance with the financial requirements of the Notes due 2026 as of December 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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due 2028 will mature on April 15, 2028.

The Notes 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.

In the year ended December 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 December 29, 2022 and resulting in a $ 6.0 million gain on extinguishment of debt in the year ended December 29, 2022.

NCM LLC may redeem all or any portion of the Notes due 2028 prior to April 15, 2023, at a redemption price equal to 100 % of the principal amount plus the applicable premium, plus accrued and unpaid interest, if any, to the redemption date.

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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.

As of December 29, 2022, NCM LLC was in compliance with the financial requirements of the Notes due 2028, as described above.

Future Maturities of Borrowings – The scheduled annual maturities on the Senior Secured Credit Facility, Notes due 2026 and Notes due 2028 as of December 29, 2022 are as follows (in millions):

Thereafter 400.0

2023 $ 1,129.0

Total $ 1,129.0

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The NCM, Inc.

2020 Omnibus Equity Incentive Plan (the “2020 Plan”) was approved by NCM, Inc.'s stockholders on April 28, 2020 and approved 7,500,000 additional shares of common stock available for issuance or delivery under the 2020 Plan.

2020 Omnibus Equity Incentive Plan (the “2020 Plan”) was approved by NCM, Inc.'s stockholders on April 28, 2020 and approved 7,500,000 shares of common stock available for issuance or delivery under the 2020 Plan and an additional 7,500,000 shares of common stock available for issuance or delivery approved on May 4, 2022.

The Company began issuing shares under the 2020 Plan in the second quarter of 2020.

The 2020 Plan replaced NCM, Inc.’s 2016 Equity Incentive Plan (the “2016 Plan”), which replaced the 2007 Equity Incentive Plan (the “2007 Plan”).

The 2020 Plan also includes 2,388,302 shares related to the number of shares reserved for issuance under the 2016 Plan that remained available for grant as of the effective date of the 2020 Plan and the number of shares subject to awards granted under the 2007 Plan as of the effective date of the 2020 Plan, which can become available for grant again upon expiration, termination, cancellation or forfeiture of the original award.

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original award.

As of December 29, 2022, 8,868,249 shares remain available for future grants (assuming 100 % achievement of targets on performance-based restricted stock).

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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 $ 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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Compensation Cost — The Company recognized $ 7.1 million and $ 8.1 million for the years ended December 29, 2022 and December 30, 2021, respectively, of share-based compensation expense within “Network costs”, “Selling and marketing costs” and “Administrative and other costs” in the Consolidated Statements of Operations as shown in the table below (in millions):

December 29, 2022 December 30, 2021

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During the years ended December 29, 2022 and December 30, 2021, $ 0.2 million and $ 0.3 million was capitalized, respectively, in a corresponding manner to the capitalization of employee’s salaries for capitalized labor.

The income tax benefit recognized in the income statement for share-based compensation was approximately $ 0.0 million and $ 0.3 million for the years ended December 30, 2021 and December 31, 2020, respectively.

The income tax benefit recognized in the statements of operations for share-based compensation was approximately $ 0.0 million and $ 0.0 million for the years ended December 29, 2022 and December 30, 2021, respectively.

As of December 29, 2022, there was $ 0.8 million unrecognized compensation cost related to unvested options, which will be recognized over a remaining period of 2.2 years.

As of December 29, 2022, unrecognized compensation cost related to restricted stock and restricted stock units was approximately $ 5.7 million, which will be recognized over a weighted average remaining period of 1.2 years.

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

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

Stock Options —The Company granted stock options during 2021 and 2022.

Stock options granted in 2021 and a portion of the stock options awarded in 2022 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.

The stock options awarded in 2019 contained a market condition as the options were granted with an exercise price in excess of the closing market price of NCM, Inc.

The remaining portion of stock options awarded in 2022 contained a market condition as the options were granted with an exercise price in excess of 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 expected term of options granted was developed based on historical and peer company data and represents the period of time that options granted are expected to be outstanding.

The expected term of the options granted during 2019 was adjusted to include the Company's cost of equity in order to incorporate the impact of the option's market condition and simulate a lattice model.

The expected term of the options granted during 2022 were adjusted to include the Company's cost of equity in order to incorporate the impact of the option's market condition and simulate a lattice model.

The risk-free rate for periods within the contractual life of the option is based on the U.S.

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Dividend yield 4.8 % 5.1 %

A summary of option award activity under the 2007, 2016 and 2020 Plans as of December 30, 2021, and changes during the year then ended are presented below:

A summary of option award activity as of December 29, 2022, and changes during the year then ended are presented below:

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Options Weighted

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Vested and expected to vest as of December 29, 2022 2,072,433 $ 4.36 8.0 $ —

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

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performance targets.

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

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As of December 29, 2022 and December 30, 2021, accrued dividend equivalents totaled $ 0.8 million and $ 0.7 million, respectively and during the years ended December 29, 2022 and December 30, 2021, the Company paid $ 0.5 million and $ 1.0 million, respectively, for dividend equivalents upon vesting of the restricted stock and restricted stock units.

The Company has issued time-based restricted stock and restricted stock units to its employees which generally vest over a three -year period with one-third vesting on each anniversary of the date of grant and performance-based restricted stock and restricted stock units which vest following a three -year measurement period to the extent that the Company achieves specified non-GAAP targets at the end of the measurement period.

The Company has issued time-based restricted stock and restricted stock units to its employees which generally vest over a two or three -year period with one-half or one-third, respectively, vesting on each anniversary of the date of grant and performance-based restricted stock and restricted stock units which vest following a two or three -year measurement period to the extent that the Company achieves specified non-GAAP targets at the end of the measurement period.

Certain other vesting periods have also been used.

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The weighted average grant date fair value of non-vested stock was $ 2.12 and $ 3.82 for the years ended December 29, 2022 and December 30, 2021, respectively.

The total fair value of awards vested was $ 7.1 million and $ 5.8 million during the years ended December 30, 2021 and December 31, 2020, respectively.

The total fair value of awards that vested during the years ended December 29, 2022 and December 30, 2021 was $ 5.9 million and $ 7.1 million, respectively.

A summary of restricted stock award and restricted stock unit activity as of December 29, 2022, and changes during the year then ended are presented below:

Stock Units Weighted

Stock Units (1)

Non-vested balance as of December 30, 2021 3,001,105 $ 4.64

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Non-vested balance as of December 29, 2022 5,175,560 $ 2.80

(1) Includes 729,817 shares of performance-based restricted stock and restricted stock units as of December 29, 2022, including 427,231 shares granted during the year and 11,750 shares forfeited during the year.

(2) Includes 96,241 vested shares that were withheld to cover tax obligations and were subsequently canceled.

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EMPLOYEE BENEFIT PLANS

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The Company sponsors the NCM 401(k) Profit Sharing Plan (the “Plan”) under Section 401(k) of the Internal Revenue Code of 1986, as amended, for the benefit of substantially all full-time employees.

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Employee contributions are invested in various investment funds based upon election made by the employee.

The Company made discretionary contributions of $ 0.0 million and $ 0.5 million during the years ended December 30, 2021 and December 31, 2020, respectively.

In response to the COVID-19 Pandemic, the Company temporarily suspended its match of a portion of employees 401(k) contributions effective April 2020 through December 29, 2022.

COMMITMENTS AND CONTINGENCIES

Legal Actions —The Company is subject to claims and legal actions in the ordinary course of business.

Legal Actions —As discussed more fully in Note 16—Subsequent Events, on April 11, 2023, NCM, LLC filed a voluntary petition for reorganization with a prearranged Chapter 11 plan under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

The Chapter 11 Case is being administered under the caption In re:

National CineMedia, LLC , Case No.

The Company will continue to act as the manager of NCM LLC, the “debtor in possession” under the jurisdiction of the Bankruptcy Court, and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Pursuant to “first day” motions filed with the Bankruptcy Court, the Bankruptcy Court authorized NCM LLC to conduct NCM LLC’s business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing NCM LLC to consensually use cash collateral, pay employee wages and benefits, and pay vendors and suppliers in the ordinary course for all go forward goods and services.

NCM LLC will continue to pursue approval of a proposed plan of reorganization, which will incorporate the terms of the Restructuring Support Agreement.

NCM LLC’s normal operating cash flows are providing liquidity for the Company to operate as usual and fulfill ongoing commitments to stakeholders.

The Company is unable to predict when NCM LLC will emerge from this Chapter 11 process.

The Company is subject to claims and legal actions in the ordinary course of business.

The Company believes such claims will not have a material effect, individually and in aggregate, on its financial position, results of operations or cash flows.

Operating Commitments-Facilities —The Company adopted Accounting Standards Update 2016-2 and subsequent amendments, Leases (Topic 842) (together “ASC 842”) effective December 28, 2018.

The Company has entered into operating lease agreements for its corporate headquarters and other regional offices.

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 $ 16.9 million and short-term and long-term lease liabilities of $ 2.2 million and $ 18.0 million, respectively, on the balance sheet as of December 29, 2022 for all material leases with terms longer than twelve months.

As of December 30, 2021 the Company had ROU assets of $ 18.8 million and short-term and long-term lease liabilities of $ 2.1 million and $ 20.4 million, respectively, 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 audited Consolidated Balance Sheets.

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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.

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.

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

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As of December 29, 2022, the Company had a weighted average remaining lease term of 6.7 years on these leases.

Given the uncertainty of the resolution of the Chapter 11 Case, conditions may change, which could result in impairment of the Company’s ROU assets in future periods.

The Company has also entered into certain short-term leases with a term of less than one year.

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During the twelve months ended December 29, 2022 and December 30, 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 audited Consolidated Statements of Income depending upon the nature of the use of the facility.

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

December 29, 2022 December 30, 2021

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Total lease cost $ 3.9 $ 4.1

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The Company made lease payments for the year ended December 29, 2022 and December 30, 2021 of $ 3.8 million and $ 3.7 million, respectively.

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No ROU assets or lease liabilities were recognized for these agreements and no change to the balance sheet presentation of the intangible assets was necessary.

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.

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

The payment per theater patron increases by 8 % every five years , with the next increase taking effect in fiscal year 2022.

The payment per theater patron increased by 4 % on November 1, 2022 and will increase by 8 % every five years with the next occurrence in 2027.

The payment per digital screen and for digital cinema equipment increases annually by 5 %.

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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 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 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.

These fees are also based upon a fixed payment per patron of (i) $ 0.0375 per patron beginning on November 1, 2020, (ii) $ 0.05 per patron beginning on November 1, 2021, (iii) $ 0.052 per patron beginning on November 1, 2022 and (iv) 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 the Platinum Spot, an additional single unit that is either 30 or 60 seconds of the Noovie® 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.

The Company does not owe the founding members any theater access fees or any Platinum Spot revenue share when the theaters are not displaying the Company's pre-show or when the Company does not have access to the theaters.

As such, the Company did not and will not owe these fees for the period of time the founding members' theaters were temporarily closed due to the COVID-19 Pandemic and future fees will be reduced if attendance remains lower than historical levels.

The Company does not owe the founding members any theater access fees or any Platinum Spot revenue share when the theaters are not displaying the

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Company's show or when the Company does not have access to the theaters.

As such, the Company did not incur fees for the period of time the founding members' theaters were temporarily closed due to the COVID-19 Pandemic and future fees will be reduced if attendance remains lower than historical levels.

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

No digital screen fees were or will be incurred for the period of time the founding member's theaters were temporarily closed due to the COVID-19 Pandemic and future fees will be reduced for months where screens are in use for only part of the month.

No digital screen fees were incurred for the period of time the founding member's theaters were temporarily closed due to the COVID-19 Pandemic and were reduced for months where screens were in use for only part of the month.

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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As of December 29, 2022, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $ 141.7 million over the remaining terms of the network affiliate agreements.

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

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

During the year ended December 29, 2022 and December 30, 2021 the Company paid $ 0.0 million and $ 0.2 million, respectively, related to these minimum guarantees.

As of December 30, 2021 and December 31, 2020, the Company had $ 0.4 million and $ 0.0 million in liabilities recorded for these obligations, as such guarantees are less than the expected share of revenue paid to the affiliate.

As of December 29, 2022 and December 30, 2021, the Company had $ 0.4 million and $ 0.4 million in liabilities recorded within “Accounts payable” in the Consolidated Balance Sheet for these obligations, as such guarantees are less than the expected share of revenue paid to the affiliate.

As the guaranteed minimums are based upon agreed upon minimum attendance or affiliate revenue levels, the Company did not incur minimum revenue share fees during the period of time the respective affiliate's theaters were temporarily closed due to the COVID-19 Pandemic and will not for the remaining duration an affiliate's theater attendance or revenue levels are low as the minimum levels must first be met by the affiliate.

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These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances.

These assets include long-lived assets, intangible assets, cost and equity method investments, notes receivable and borrowings.

Long-Lived Assets, Intangible Assets, Other Investments and Notes Receivable —As described in Note 1— Basis of Presentation and Summary of Significant Accounting Policies , the Company regularly reviews long-lived assets (primarily property, plant and equipment), intangible assets, investments accounted for under the cost or equity method and notes receivable for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable.

These assets include long-lived assets, intangible assets, cost and equity method investments and borrowings.

Long-Lived Assets, Intangible Assets and Other Investments —As described in Note 1— Basis of Presentation and Summary of Significant Accounting Policies , the Company regularly reviews long-lived assets (primarily property, plant and equipment), intangible assets, investments accounted for under the cost or equity method and notes receivable for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable.

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

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.

During the years ended December 29, 2022 and December 30, 2021, the Company recorded impairment charges of $ 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 December 29, 2022.

As of December 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 was initially valued using comparative market multiples.

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As the inputs to the determination of fair value are based upon non-identical assets and use significant unobservable inputs, they have been classified as Level 3 in the fair value hierarchy.

Borrowings —The carrying amount of the revolving credit facility is considered a reasonable estimate of fair value due to its floating-rate terms.

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

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

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

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Carrying Value Fair Value (1)

Revolving credit facilities $ 217.0 $ 58.0 $ 167.0 $ 167.0

Term Loans - first tranche $ 258.5 $ 65.8 $ 261.2 $ 236.4

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If the Company were to measure the borrowings in the above table at fair value on the balance sheet they would be classified as Level 2.

Recurring Measurements —The fair values of the Company’s assets and liabilities measured on a recurring basis pursuant to ASC 820-10 Fair Value Measurements and Disclosures are as follows (in millions):

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

The fair values of the Company’s assets and liabilities measured on a recurring basis pursuant to ASC 820-10 Fair Value Measurements and Disclosures are as follows (in millions):

Fair Value Measurements at

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Total assets $ 1.8 $ 0.8 $ 1.0 $ —

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Fair Value Measurements at

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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 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.

(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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Original cost of short term marketable securities is based on the specific identification method.

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As of December 29, 2022, there was $ 0.2 million of available-for-sale debt securities in unrealized loss positions without an allowance for credit losses.

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Total marketable securities $ 1.3 $ 1.3

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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.

The Company considers the securities to be liquid and convertible to cash within 30 days.

VALUATION AND QUALIFYING ACCOUNTS

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):

December 30, 2021 December 31, 2020

ALLOWANCE FOR DOUBTFUL ACCOUNTS:

Balance at beginning of period $ 2.3 $ 6.2

Adjustment upon adoption of ASU 2016-13 (1)

Provision for bad debt 0.1 0.3

Write-offs, net ( 0.7 ) ( 1.0 )

Balance at end of period $ 1.7 $ 2.3

VALUATION ACCOUNT

The Company’s valuation allowance on deferred tax assets for the years ended December 29, 2022 and December 30, 2021 was as follows (in millions):

December 29, 2022 December 30, 2021

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Valuation allowance added (1)

Valuation allowance reversed — —

Balance at end of period $ 245.5 $ 223.8

(1) The increase within the valuation allowance during the years ended December 29, 2022 and December 30, 2021 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

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.

Credit Agreement Amendment — Subsequent to year-end, on January 17, 2023, NCM LLC entered into (i) Credit Agreement Amendment Fourth 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 and (ii) Revolving Credit Agreement Amendment.

The Credit Agreement

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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 .

Amendment Fourth Amendment and Revolving Credit Agreement Amendment provide for the addback of specified professional fees paid by NCM LLC during the period of January 6, 2023 through the date NCM LLC delivers a compliance certificate for the quarter ending on or about December 28, 2023, when calculating the sum of unrestricted cash on hand at NCM LLC and revolving credit facility availability under the Credit Agreement and Revolving Credit Agreement required to be maintained under each respective agreement.

On March 31, 2023, NCM LLC as the Borrower, entered into Amendment No.

5 (the “Fifth Credit Agreement Amendment”) to its Credit Agreement, dated as of June 20, 2018, among the Borrower, the several banks and other financial institutions or entities from time to time parties thereto, and JPMorgan Chase Bank, N.A., as administrative agent, as previously amended (the “Credit Agreement”).

The Fifth Credit Agreement Amendment extends the grace period available for certain payments under the Credit Agreement for nine business days.

Indenture Amendment — On February 15, 2023, NCM LLC elected to enter into a 30-day grace period for the interest payment in the amount of $ 6.6 million under the Senior Notes due 2026 under the indenture governing the Senior Notes due 2026.

The Company and NCM LLC are actively engaged in negotiations with certain of NCM LLC’s secured lenders regarding NCM LLC’s indebtedness.

On March 15, 2023, NCM LLC entered into a First Supplemental Indenture to the Indenture, dated as of August 19, 2016 (the “Indenture”) relating to NCM LLC’s 5.75% Senior Notes due 2026 with Computershare Trust Company, N.A., as Trustee.

The First Supplemental Indenture was approved by holders of the Senior Notes due 2026 holding at least a majority of the aggregate principal amount of the Senior Notes due 2026.

The First Supplemental Indenture amends Section 6.01(a) of the Indenture by extending the grace period for payment of interest due on the Senior Notes due 2026 from 30 days to 47 days.

On March 31, 2023, NCM LLC entered into a Second Supplemental Indenture to the Indenture, relating to NCM LLC’s 5.75% Senior Notes due 2026 with Computershare Trust Company, N.A., as Trustee.

The Second Supplemental Indenture was approved by holders of the Senior Notes due 2026 holding at least a majority of the aggregate principal amount of the Senior Notes due 2026.

The Second Supplemental Indenture amends Section 6.01(a) of the Indenture by extending the grace period for payment of interest due on the Senior Notes due 2026 from 47 days to 57 days.

Redemptions — On February 23, 2023 and March 23, 2023, Cinemark redeemed 41,969,862 and 1,720,935 , respectively, of their outstanding common membership units, in exchange for shares of NCM, Inc.

common stock.

These redemptions reduced Cinemark’s ownership interest to 0.0 % as of March 23, 2023.

This redemption will cause the “Payable to founding members under the TRA” to increase by approximately $15.0 million.

This is driven primarily by the increase in NCM, Inc.’s ownership in NCM LLC increasing and the corresponding increase in NCM, Inc.’s percentage of NCM LLC’s deferred tax liabilities.

Bankruptcy Petition — On April 11, 2023, NCM LLC filed a voluntary petition for reorganization with a prearranged Chapter 11 plan under Chapter 11 of the Bankruptcy Code in the U.S.

Bankruptcy Court for the Southern District of Texas.

The Chapter 11 Case is being administered under the caption In re:

National CineMedia, LLC , Case No.

Operation and Implications of the Bankruptcy Filing

expects to continue to manage NCM LLC, the debtor in possession, under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

The debtor in possession intends to continue to operate businesses in the ordinary course during the pendency of the Chapter 11 Case.

In general, as debtor in possession, under the Bankruptcy Code, NCM LLC is authorized to continue to operate as an ongoing business, but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court.

Pursuant to “first day” motions filed with the Bankruptcy Court, the Bankruptcy Court authorized NCM LLC to conduct business activities in the ordinary course and, among other things and subject to the terms and conditions of such orders, authorized certain employees at NCM, Inc.

to continue providing day-to-day management services to NCM LLC and NCM LLC to pay employee wages and benefits and vendors and suppliers in the ordinary course for all goods and services going forward.

Ongoing Negotiations on Proposed Plan of Reorganization

NCM LLC will continue to pursue approval of a plan of reorganization, which will incorporate the terms of the Restructuring Support Agreement.

Confirmation of a plan of reorganization could materially alter the classifications and amounts reported in our consolidated financial statements.

The financial statements as of and for the year ended December 29, 2022, do not give effect to any adjustments to the carrying values of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization or other arrangement or the effect of any operational changes that may be implemented.

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