Item 1. Legal Proceedings
Item 1. Legal Proceedings .
On September 7, 2022, Cineworld Group plc 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 for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas. On October 21, 2022, Regal Cinemas, Inc. filed a motion to reject the ESA without specifying an effective date for the rejection and indicated that Regal Cinemas, Inc. planned on negotiating with NCM LLC. NCM LLC has also filed an adversary proceeding against Regal Cinemas, Inc. seeking declaratory relief and an injunction prohibiting Regal Cinemas, Inc. 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. On May 5, 2023, NCM LLC and Regal agreed to stay the ongoing litigation while the parties work towards the terms of a new arrangement for NCM LLC to provide advertising services to Regal. NCM LLC has been in continued negotiations with Regal following Cineworld’s petition for reorganization under Chapter 11 in 2022. Refer to Note 11— Subsequent Events for discussion of the resolution of NCM LLC’s negotiations with Regal in the third quarter of 2023 and the dismissal of the adversary proceeding.
On April 11, 2023, NCM LLC filed a voluntary petition for reorganization with a prearranged Chapter 11 plan under Chapter 11 of title 11 of the United States 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. 23-90291. 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. 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 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. On April 26, 2023, NCM LLC filed the Plan and the Disclosure Statement with the Bankruptcy Court, along with a motion requesting the approval of the Plan and the Disclosure Statement and various Plan solicitation materials, which incorporates the terms of the Restructuring Support Agreement.
On June 27, 2023, the Bankruptcy Court entered the Confirmation Order approving the Disclosure Statement on a final basis and confirming the Company’s Plan. There can be no guarantee that NCM LLC will successfully implement the Plan or that the Plan will be implemented in a time frame that is acceptable to the Bankruptcy Court. On June 29, 2023, AMC and Cinemark filed a notice of appeal of the Confirmation Order. After June 29, 2023, AMC and Cinemark sought a stay of the Confirmation Order in the Bankruptcy Court, which the Bankruptcy Court denied, and then sought a stay of the Confirmation Order in the United States District Court for the Southern District of Texas which is currently pending.
We are sometimes involved in legal proceedings arising in the ordinary course of business. We are not aware of any other litigation currently pending that would have a material adverse effect on our operating results or financial condition.
Item 1A. Risk Factors
There have been no material changes from risk factors as previously disclosed in our annual report on Form 10-K filed with the SEC on April 13, 2023 for the fiscal year ended December 29, 2022.
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