National CineMedia, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Page National CineMedia, Inc. and Subsidiaries Report of Deloitte & Touche LLP , Independent Registered Public Accounting Firm (PCAOB ID: 34 ) 53 Consolidated Balance Sheets as of December 28, 2023 and December 29, 2022 56 Consolidated Statements of Operations for the years ended December 28, 2023 and December 29, 2022 57 Consolidated Statements of Equity/(Deficit) for the years ended December 28, 2023 and December 29, 2022 58 Consolidated Statements of Cash Flows for the years ended December 28, 2023 and December 29, 2022 59 Notes to Consolidated Financial Statements 61 52 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of National CineMedia, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of National CineMedia, Inc. and subsidiaries (the "Company") as of December 28, 2023 and December 29, 2022, the related consolidated statements of operations, equity/(deficit), and cash flows, for each of the two years in the period ended December 28, 2023, 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 28, 2023 and December 29, 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 28, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. 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 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. We conducted our audits in accordance with the standards of the PCAOB. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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 or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Income Taxes – Tax Receivable Agreement — Refer to Notes 1, 7 and 9 to the Consolidated Financial Statements Critical Audit Matter Description The Company and the ESA Parties entered into the Tax Receivable Agreement (“TRA”) at the time of the Company’s initial public offering (“IPO”). Under the terms of this agreement, the Company will make cash payments to the ESA Parties in amounts equal to 90% of the Company’s actual tax benefit realized primarily from the tax amortization of the intangible assets described below, which is recorded as a deferred tax asset. For purposes of the TRA, cash savings in income and franchise tax will be computed by comparing the Company’s actual income and franchise tax liability to the amount of such taxes that the Company would have been required to pay had there been no increase in the Company’s proportionate share of tax basis in National CineMedia, LLC’s (“NCM LLC”) tangible and intangible assets had the Company not entered into the TRA. 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 28, 2023, the Company paid the ESA Parties $0.0 million for the 2022 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 an increase of $24.2 million during the fiscal year. At December 28, 2023, the Company’s payable under the TRA was $59.8 million; of which $0.0 million is presented as a component of current liabilities and $59.8 million is presented as a component of non-current liabilities. 53 We identified the computation of adjustments to the payable under the TRA as a critical audit matter because of the complex calculations required to arrive at the correct tax basis upon which to calculate the corresponding payable under the TRA and deferred tax asset adjustments. This involved complexity in applying the tax law, and calculations of (a) incremental amortizable step-up in tax basis, (b) the iterative impact of the computation of adjustments to the payable under the TRA to owners and (c) the overall payable under the TRA. The amount of the payable under the TRA, as well as the timing of such payments, is dependent upon a number of complex items including: (i) the tax basis in the units of NCM LLC being issued as part of a common unit adjustment or exchanged for common stock of the Company, (ii) the allocation of the tax basis step up to the applicable assets, (iii) the amount and timing of taxable income the Company generates in future periods until the payable under the TRA is settled, (iv) the portion of the Company’s payments under the TRA that constitute imputed interest or give rise to depreciable or amortizable tax basis and (v) the amount and timing of tax attribute utilization on a with and without basis in accordance with the TRA. How the Critical Audit Matter Was Addressed in the Audit With the assistance of our income tax specialists, our audit procedures related to the computation of adjustments to the payable under the TRA included the following procedures, among others: • We read the individual TRA and Exhibitor Services Agreements to compare the terms in each agreement for consistency with the mathematical model used by management to calculate the adjustments to the payable under the TRA and deferred tax asset. • We evaluated management’s computation of adjustments to the year-end balance of the payable under the TRA amount by recalculating the payable under the TRA at the end of the year, taking into account the various unit exchanges occurring during the year as well as the additions in the payable under the TRA for each Common Unit Adjustment, termination of the Regal Exhibitor Service Agreement, and bankruptcy emergence, among others. • We analyzed the impact of any taxable income limitations on the payable under the TRA. • We prepared our own model to independently recompute the payable under the TRA and compare to the recorded balance. • We reconciled realization of tax payments and deductions to the payable under the TRA. Reconsolidation of National CineMedia, LLC — Refer to Notes 1 and 5 to the Consolidated Financial Statements Critical Audit Matter Description 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 Bankruptcy Code in the Bankruptcy Court. During the Chapter 11 Case, the Company was deemed to no longer control NCM LLC for accounting purposes and NCM LLC was deconsolidated from the Company’s financial statements prospectively as of April 11, 2023. Upon emergence from bankruptcy, the Company regained control and retained 100.0% ownership of NCM LLC, after taking into account elections by the holders of secured debt claims to receive NCM, Inc. common stock in lieu of NCM LLC common units. Therefore, NCM LLC was reconsolidated into the Company’s financial statements prospectively as of August 7, 2023. The Company accounted for the reconsolidation of NCM LLC as a business combination using the acquisition method of accounting. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of reconsolidation, including exhibitor service agreements of $250.0 million and network affiliate agreements of $75.0 million. Management estimated the fair values of the exhibitor service agreements and network affiliate agreements using the multi-period excess earnings method. The fair value determination of the exhibitor service agreements and network affiliate agreements requires management to make significant estimates and assumptions to determine forecasted cash flows, including those related to future revenue growth rates and the weighted average cost of capital. As such, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our auditing procedures related to the future revenue growth rates and the weighted average cost of capital included the following, among others: • We obtained an understanding of management’s key assumptions in developing the forecasted revenue. 54 • We evaluated management’s ability to accurately forecast revenue growth rates by comparing actual results to management’s historical forecasts. • We assessed the reasonableness of management’s forecast of future revenue growth rates by comparing projections to historical results, macroeconomic data, industry data, analyst reports, and certain of its peer companies. • We evaluated whether the forecast of future revenue growth rates was consistent with projections used by the Company in other areas of the audit. • With the assistance of our fair value specialists, we evaluated the reasonableness of management’s long-term revenue growth rate by analyzing inflation, economic, and industry growth statistics. • With the assistance of our fair value specialists, we evaluated the reasonableness of management’s weighted average cost of capital by: ◦ Testing the source information underlying the determination of the weighted average cost of capital and testing the mathematical accuracy of the calculation. ◦ Developing a range of independent estimates and comparing those to the weighted average cost of capital selected by management. /s/ Deloitte & Touche LLP Denver, Colorado March 18, 2024 We have served as the Company's auditor since 2006. 55 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except share and per share data) December 28, 2023 December 29, 2022 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 34.6 $ 61.7 Restricted cash 3.0 2.1 Short-term marketable securities — 0.7 Receivables, net of allowance of $ 1.4 and $ 1.7 , respectively 96.6 92.0 Prepaid expenses and other current assets 9.6 7.9 Total current assets 143.8 164.4 NON-CURRENT ASSETS: Property and equipment, net of accumulated depreciation of $ 1.6 and $ 54.8 , respectively 15.8 13.0 Intangible assets, net of accumulated amortization of $ 15.0 and $ 270.2 , respectively 394.3 586.7 Other investments 0.7 0.9 Long-term marketable securities — 0.3 Debt issuance costs, net 2.2 3.3 Other assets 10.9 23.8 Total non-current assets 423.9 628.0 TOTAL ASSETS $ 567.7 $ 792.4 LIABILITIES AND EQUITY/(DEFICIT) CURRENT LIABILITIES: Amounts due to ESA Parties, net (related party payables of $ 0.0 and $ 15.2 , respectively) $ 6.6 $ 18.2 Payable under the TRA (related party payables of $ 0.0 and $ 0.2 , respectively) — 0.3 Accrued expenses 1.6 17.8 Accrued payroll and related expenses 17.7 8.3 Accounts payable 21.7 25.0 Deferred revenue 9.8 10.2 Short-term debt, net of debt issuance costs of $ 0.0 and $ 7.9 , respectively — 1,121.1 Other current liabilities 1.0 2.2 Total current liabilities 58.4 1,203.1 NON-CURRENT LIABILITIES: Long-term debt 10.0 — Payable under the TRA (related party payables of $ 0.0 and $ 25.5 , respectively) 59.8 35.3 Other liabilities 5.0 18.0 Total non-current liabilities 74.8 53.3 Total liabilities 133.2 1,256.4 COMMITMENTS AND CONTINGENCIES (NOTE 13) EQUITY/(DEFICIT): NCM, Inc. Stockholders’ Equity/(Deficit): Preferred stock, $ 0.01 par value; 10,000,000 shares authorized, 50 and 0 issued and outstanding, respectively — — Common stock, $ 0.01 par value; 260,000,000 shares authorized, 96,837,039 and 12,840,264 issued and outstanding, respectively 2.6 1.3 Additional paid in capital (deficit) 115.3 ( 146.2 ) Retained earnings (distributions in excess of earnings) 316.6 ( 370.4 ) Total NCM, Inc. stockholders’ equity/(deficit) 434.5 ( 515.3 ) Noncontrolling interests — 51.3 Total equity/(deficit) 434.5 ( 464.0 ) TOTAL LIABILITIES AND EQUITY/(DEFICIT) $ 567.7 $ 792.4 Refer to accompanying notes to Consolidated Financial Statements. 56 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except share and per share data) Years Ended December 28, 2023 December 29, 2022 Revenue (including revenue from related parties of $ 14.2 and $ 14.4 , respectively) $ 165.2 $ 249.2 OPERATING EXPENSES: Advertising operating costs 30.7 27.2 Network costs 6.3 8.4 ESA theater access fees and revenue share (including fees to related parties of $ 16.5 and $ 59.4 , respectively) 43.1 82.3 Selling and marketing costs 29.6 42.8 Administrative and other costs 57.3 44.3 Impairment of long-lived assets — 5.8 Depreciation expense 3.1 6.5 Amortization expense 22.4 25.0 Total 192.5 242.3 OPERATING (LOSS) INCOME ( 27.3 ) 6.9 NON-OPERATING (INCOME) EXPENSES: Interest on borrowings 27.9 79.7 Loss (gain) on modification and retirement of debt, net 0.4 ( 5.9 ) Loss on re-measurement of the payable under the tax receivable agreement 9.3 2.2 Gain on sale of asset ( 0.3 ) ( 2.2 ) Gain on deconsolidation of affiliate ( 557.7 ) — Gain on re-measurement of investment in NCM LLC ( 35.5 ) — Gain on reconsolidation of NCM LLC ( 167.8 ) — Other non-operating income, net ( 0.3 ) ( 0.7 ) Total ( 724.0 ) 73.1 INCOME (LOSS) BEFORE INCOME TAXES 696.7 ( 66.2 ) Income tax expense — — CONSOLIDATED NET INCOME (LOSS) 696.7 ( 66.2 ) Less: Net loss attributable to noncontrolling interests ( 8.5 ) ( 37.5 ) NET INCOME (LOSS) ATTRIBUTABLE TO NCM, INC. 705.2 ( 28.7 ) COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NCM, INC. $ 705.2 $ ( 28.7 ) NET INCOME (LOSS) PER NCM, INC. COMMON SHARE: Basic $ 14.73 $ ( 3.50 ) Diluted $ 14.34 $ ( 3.50 ) WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 47,882,944 8,196,801 Diluted 48,574,583 8,196,801 Refer to accompanying notes to Consolidated Financial Statements. 57 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY/ (DEFICIT) (In millions, except share and per share data) NCM, Inc. Common Stock Preferred Stock Additional Paid in Capital (Deficit) Retained Earnings (Distributions in Excess of Earnings) Noncontrolling Interest Consolidated Shares Amount Shares Amount Balance—December 30, 2021 $ ( 383.5 ) 8,062,689 $ 0.8 — $ — $ ( 195.5 ) $ ( 332.0 ) $ 143.2 Distributions to ESA Parties ( 4.9 ) — — — — — — ( 4.9 ) NCM LLC equity issued for purchase of intangible asset 10.4 — — — — 4.9 — 5.5 Income tax and other impacts of NCM LLC ownership changes ( 17.3 ) — — — — 39.8 — ( 57.1 ) Issuance of shares 12.4 4,663,845 0.4 — — 12.0 — — NCM, Inc. investment in NCM LLC ( 12.4 ) — — — — ( 12.4 ) — — Comprehensive loss, net of tax ( 66.2 ) — — — — — ( 28.7 ) ( 37.5 ) Share-based compensation issued, net of tax ( 0.1 ) 113,730 0.1 — — ( 0.2 ) — — Share-based compensation expense/ capitalized 7.3 — — — — 5.2 — 2.1 Cash dividends declared $ 0.11 per share ( 9.7 ) — — — — — ( 9.7 ) — Balance—December 29, 2022 $ ( 464.0 ) 12,840,264 $ 1.3 — $ — $ ( 146.2 ) $ ( 370.4 ) $ 51.3 Deconsolidation of affiliate ( 33.4 ) — — — — ( 15.3 ) ( 18.1 ) — Income tax and other impacts of NCM LLC ownership changes ( 9.5 ) — — — — 33.6 ( 0.1 ) ( 43.0 ) Issuance of shares 242.5 83,722,159 1.2 50.0 — 241.3 — — NCM LLC common membership unit redemption ( 2.6 ) — — — — ( 2.6 ) — — Comprehensive income, net of tax 696.7 — — — — — 705.2 ( 8.5 ) Share-based compensation issued, net of tax 0.1 274,616 0.1 — — — — — Share-based compensation expense/ capitalized 4.7 — — — — 4.5 — 0.2 Balance—December 28, 2023 $ 434.5 96,837,039 $ 2.6 50.0 $ — $ 115.3 $ 316.6 $ — Refer to accompanying notes to Consolidated Financial Statements. 58 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years Ended December 28, 2023 December 29, 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated net income (loss) $ 696.7 $ ( 66.2 ) Adjustments to reconcile consolidated net income (loss) to net cash used in operating activities: Depreciation expense 3.1 6.5 Amortization expense 22.4 25.0 Non-cash share-based compensation 4.5 7.1 Impairment of long-lived assets — 5.8 Bad-debt expense — 1.0 Amortization of debt issuance costs 3.4 8.9 Loss (gain) on modification and retirement of debt, net 0.4 ( 5.9 ) Non-cash loss on re-measurement of the payable under the TRA 9.3 2.2 Gain on sale of asset ( 0.3 ) ( 2.2 ) Gain on deconsolidation of affiliate ( 557.7 ) — Gain on re-measurement of NCM LLC ( 35.5 ) — Gain on reconsolidation of NCM LLC ( 167.8 ) — Other ( 0.4 ) ( 0.4 ) ESA Party integration and encumbered theater payments (including payments from related parties of $ 0.0 and $ 0.0 , respectively) 5.0 2.8 Other cash flows from operating activities, net ( 0.8 ) 0.1 Changes in operating assets and liabilities: Receivables, net 36.3 ( 40.0 ) Accounts payable and accrued expenses ( 2.7 ) 14.2 Amounts due to ESA Parties, net ( 4.2 ) 1.0 Deferred revenue ( 5.4 ) ( 4.8 ) Prepaid expenses ( 11.0 ) — Other, net ( 2.0 ) ( 2.4 ) Net cash used in operating activities ( 6.7 ) ( 47.3 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ( 3.3 ) ( 2.9 ) Cash contributed in reconsolidation ( 15.5 ) — Cash, cash equivalents and restricted cash reconsolidated 49.5 — Proceeds from sale and maturities of marketable securities 1.0 0.3 Proceeds from sale of asset 0.3 2.2 Proceeds received from equity method investment 0.6 — Net cash provided by investing activities 32.6 ( 0.4 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of dividends ( 0.5 ) ( 9.5 ) Issuance of revolving credit facility — 50.0 Repayments of term loan facility ( 0.8 ) ( 3.2 ) Removal of cash, cash equivalents and restricted cash of unconsolidated affiliate ( 49.6 ) — Repayment Notes due 2028 — ( 19.8 ) Payment of debt issuance costs ( 1.2 ) ( 7.0 ) Repurchase of stock for restricted stock tax withholding — ( 0.2 ) Net cash used in financing activities ( 52.1 ) 10.3 CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 26.2 ) ( 37.4 ) Cash, cash equivalents and restricted cash at beginning of period 63.8 101.2 Cash, cash equivalents and restricted cash at end of period $ 37.6 $ 63.8 Refer to accompanying notes to Consolidated Financial Statements. 59 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (In millions) Years Ended December 28, 2023 December 29, 2022 Supplemental disclosure of non-cash financing and investing activity: Purchase of an intangible asset with NCM LLC equity $ — $ 10.4 Accrued distributions to ESA Parties (including accrued payments due to related parties of $ 0.0 and $ 4.9 , respectively) $ — $ 4.9 Issuance of shares upon the reconsolidation of NCM LLC $ 245.3 $ — Fair value of NCM LLC net assets reconsolidated, net of cash $ 433.8 $ — Purchase of subsidiary equity with NCM, Inc. equity $ 2.6 $ 12.4 Accrued purchases of property and equipment $ 0.8 $ 0.8 Dividends declared not requiring cash in the period $ — $ 0.7 Supplemental disclosure of cash flow information: Cash paid for interest $ 12.5 $ 66.5 Cash payments for income taxes $ — $ 0.1 Refer to accompanying notes to Consolidated Financial Statements. 60 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NCM, Inc. 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. The terms “NCM”, “the Company” or “we” shall, unless the context otherwise requires, be deemed to include the consolidated entity. NCM, Inc. has no business operations or material assets other than its cash and ownership interest of 100.0 % of the common membership units in NCM LLC as of December 28, 2023. 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 ESA Parties and certain third-party network affiliates, under long-term network affiliate agreements. As of December 28, 2023, the weighted average remaining term of the ESAs is approximately 12.2 years. The network affiliate agreements expire at various dates between March 24, 2024 and July 13, 2033. The weighted average remaining term of the ESAs and the network affiliate agreements together is 11.9 yea rs as of December 28, 2023. In December 2022, AMC and Regal each redeemed all of their outstanding membership units in exchange for shares of NCM, Inc. common stock, reducing AMC’s and Regal’s ownership to 0.0 % as of December 29, 2022. On February 23, 2023 and March 23, 2023, Cinemark redeemed all of their outstanding membership units in exchange for shares of NCM, Inc. common stock reducing Cinemark’s ownership interest in NCM LLC to 0.0 % as of December 28, 2023. NCM, Inc.’s primary source of cash flow from operations is distributions from NCM LLC pursuant to the NCM LLC Operating Agreement. NCM, Inc. also receives management fees pursuant to a management services agreement with NCM LLC in exchange for providing specified management services to NCM LLC. Basis of Presentation The Company has prepared its Consolidated Financial Statements and related notes of NCM, Inc. 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 and all intercompany accounts have been eliminated in consolidation. 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 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, income taxes, intangible assets and the valuation of NCM LLC upon deconsolidation and reconsolidation. Actual results could differ from those estimates. Bankruptcy Filing, Deconsolidation and Reconsolidation of NCM LLC —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 Bankruptcy Code in the Bankruptcy Court (the “Chapter 11 Case”). During the Chapter 11 Case, the Company was deemed to no longer control NCM LLC for accounting purposes and NCM LLC was deconsolidated from the Company’s financial statements prospectively as of April 11, 2023. NCM LLC does not have a readily determinable fair value. Upon the deconsolidation of NCM LLC, the original cost of the investment was valued based upon NCM, Inc.'s ownership of the secured debt of NCM LLC and the estimation of the enterprise value of NCM LLC utilizing a combination of a market approach and income approach. The market approach relied upon a comparison with guideline public companies and entails selecting relevant financial information of the subject company and capitalizing those amounts using valuation multiples that are based on empirical market observation. The income approach relied upon an analysis of NCM LLC’s projected economic earnings discounted to present value. Significant assumptions utilized within these analyses include the weighted average cost of capital and NCM LLC’s forecasted cash flows. 61 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Upon emergence from bankruptcy, NCM, Inc., regained control and retained 100.0 % ownership of NCM LLC, after taking into account elections by the holders of Secured Debt Claims to receive NCM, Inc. common stock in lieu of NCM LLC common units and was therefore reconsolidated into the Company’s financial statements prospectively as of August 7, 2023 akin to an acquisition under ASC 805 – Business Combinations . The acquisition method requires the Company to make significant estimates and assumptions, especially at the acquisition date as the Company allocates the estimated fair values of acquired tangible and intangible assets and the liabilities assumed. The Company also uses our best estimates to determine the useful lives of the tangible and definite-lived intangible assets, which impact the periods over which depreciation and amortization of those assets are recognized. All balances within the Company’s financial statements reflect NCM LLC activity only for the periods while consolidated, December 30, 2022 through April 11, 2023 and August 7, 2023 through December 28, 2023. Significant Accounting Policies Accounting Period —The Company has a 52-week or 53-week fiscal year ending on the first Thursday after December 25. Fiscal year 2022 contained 52 weeks and 2023 contained 52 weeks. Throughout this document, the fiscal years are referred to as set forth below: Fiscal Year Ended Reference in this Document December 28, 2023 2023 December 29, 2022 2022 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, which can be played on the mobile apps and through partnerships with certain internet platforms. Further the Company sells advertising in a variety of complementary out of home venues, including restaurants, convenience stores and college campuses. The Company also has a long-term agreement to exhibit the advertising of the ESA Parties’ beverage suppliers. 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 —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. ESA theater access fees and revenue share —This balance consists of payments to the ESA Parties 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. 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 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. There are cash balances in a bank in excess of the federally insured limits or in the form of a money market demand account with a major financial institution. The Company has elected the fair value option for valuing its cash equivalents. The cash equivalents are valued at fair value at each balance sheet date and the change in value from the prior period is recognized within “Other non-operating income, net” on the audited Consolidated Statements of Operations. 62 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Restricted Cash — The Company’s restricted cash balance was $ 3.0 million and $ 2.1 million for the years ended December 28, 2023 and December 29, 2022, respectively. The balance as of December 28, 2023 is related to unsettled, agreed upon payments to NCM LLC’s unsecured creditors within the escrow accounts and “Accounts payable” on the audited Consolidated Balance Sheet. 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. The fair value of substantially all securities is determined by quoted market information and pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. 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. The allowance for doubtful accounts balance is determined by pooling the Company's receivables with similar risk characteristics, specifically by type of customer (national or local/ regional) and then age of receivable, and applying historical write off percentages to these pools in order to determine the amount of expected credit losses as of the balance sheet date. National receivables are with large advertising agencies with strong reputations in the advertising industry and clients with stable financial positions and good credit ratings, represent larger receivables balances per customer and have significantly lower historical and expected credit loss patterns. Local and regional receivables are with smaller companies sometimes with less credit history and represent smaller receivable balances per customer and higher historical and expected credit loss patterns. The Company has smaller contracts with many local clients that are not individually significant. The Company also considers current economic conditions and trends to determine whether adjustments to historical loss rates are necessary. 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. Receivables are written off when management determines amounts are uncollectible. The Company had no agencies through which it sourced advertising revenue that accounted for more than 10% of the Company’s gross outstanding receivable balance as of December 28, 2023. As of December 29, 2022 there was one advertising agency group through which the Company sources national advertising revenue that accounted for 13.0 % of the Company’s outstanding gross receivable balance. During the years ended December 28, 2023 and December 29, 2022, the Company had one customer that accounted for 11.2 % and 12.9 %, respectively, of the Company's revenue. Receivables consisted of the following (in millions): As of December 28, 2023 December 29, 2022 Trade accounts $ 98.0 $ 93.1 Other — 0.6 Less: Allowance for doubtful accounts ( 1.4 ) ( 1.7 ) Total $ 96.6 $ 92.0 Long-lived Assets —Property and equipment is stated at cost, net of accumulated depreciation or amortization. Generally, the equipment associated with the digital network of the ESA Party theaters is owned by the ESA Parties, while the equipment associated with network affiliate theaters is owned by the Company. Major renewals and improvements are capitalized, while replacements, maintenance, and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. The Company records depreciation using the straight-line method over the following estimated useful lives: Equipment 4-10 years Computer hardware and software 3-5 years Leasehold improvements Lesser of lease term or asset life 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 . The subtopics require the capitalization of certain costs incurred in developing or obtaining software for internal use. Software costs related primarily to the Company’s cinema advertising management system, digital products, digital network distribution system (DCS), enterprise resource planning system and website development costs, which are included in equipment, and are depreciated over three to ten years . As of December 28, 2023 and December 29, 2022, the Company had a net book value of $ 11.1 million and $ 7.4 million, respectively, of capitalized software and website development costs. Depreciation expense related to software and website development was approximately $ 1.8 million and $ 3.8 million for the years ended December 28, 2023 and December 29, 2022, respectively. The subtopics also require the capitalization of certain implementation costs related to qualifying Cloud 63 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Computing Arrangements (“CCAs”) upon adoption of ASU 2018-15— Intangibles - Goodwill and Other - Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract as of September 28, 2018. As of December 28, 2023 and December 29, 2022 the Company had a net book value of $ 4.5 million and $ 3.7 million of capitalized implementation costs for CCAs, respectively, recorded within “Other assets” in the Consolidated Balance Sheets. 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 $ 0.5 million and $ 0.4 million for the years ended December 28, 2023 and December 29, 2022, respectively. 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 28, 2023 and December 29, 2022, the Company recorde d $ 3.0 milli on and $ 4.6 million in research and development expense, respectively. The Company assesses impairment of long-lived assets pursuant with ASC 360 – Property, Plant and Equipment. This includes determining if certain triggering events have occurred that could affect the value of an asset. The Company recorded losses of $ 0.0 million and $ 5.8 million related to the write-off of certain internally developed software during the years ended December 28, 2023 and December 29, 2022, respectively, which has been included within “Impairment of long-lived assets” within the respective audited Consolidated Statements of Operations. Intangible Assets —The Company’s intangible assets consist of contractual rights to provide its services within the theaters under the ESAs and the network affiliate agreements, customer relationships developed and maintained by the Company’s sales force and trademarks held and used by the Company. The intangible assets are stated at their estimated fair values upon the reconsolidation of NCM LLC on August 7, 2023 as further described within Note 5— Reconsolidation of NCM LLC, net of accumulated amortization. The Company records amortization using the straight-line method over the estimated useful life of the intangibles, corresponding to the expected term of the ESAs, the average renewable term of the contracts with the network affiliates and industry standard lives for customer relationships and trademarks. 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 the intangible asset by determining the estimated future cash flows associated with the ESAs, network affiliate agreements and trademarks or the estimated replacement cost of the customer relationships. If after determining that gross cash flows are insufficient to recover the asset, the estimated fair value is less than the carrying value, the intangible asset is written down to its estimated fair value. Significant judgment is involved in estimating long-term cash flow forecasts and replacement costs. Amounts Due to/from ESA Parties —Amounts due to/from ESA Parties include amounts due for the theater access fees and revenue share, offset by a receivable for advertising time purchased by the ESA Parties on behalf of their beverage concessionaire, plus any amounts outstanding under other contractually obligated payments. Payments to or received from the ESA Parties against outstanding balances are made monthly. Available cash distributions are made quarterly contingent upon the ESA Parties’ ownership of NCM LLC membership units, the Company's compliance with the covenants outlined within the 2023 Revolving Credit Facility 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. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which differences are expected to be recovered or settled pursuant to the provisions of ASC 740 – Income Taxes . The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. 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 ESA Parties 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 years ended December 28, 2023 and December 29, 2022. 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. The Company follows ASC 740-10-25, which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. Only tax positions that meet the more likely than not recognition threshold are recognized. 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. The Company follows ASC 740-10-25, which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. Only tax positions that meet the more likely than not recognition threshold are recognized. 64 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company recognizes the tax benefits from uncertain tax positions only when it is more likely than not, based on the technical merits of the position, the tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits recognized in the Consolidated Financial Statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. Debt Issuance Costs —In relation to the issuance of outstanding debt discussed in Note 10— Borrowings , there is a balance of $ 2.2 million and $ 11.2 million in deferred financing costs as of December 28, 2023 and December 29, 2022, respectively. The debt issuance costs are being amortized on a straight-line basis over the terms of the underlying obligations and are included in interest on borrowings, which approximates the effective interest method. Debt issuance costs are written-off in the event that the underlying debt is extinguished through partial or full repayment of the obligation. The changes in debt issuance costs are as follows (in millions): Years Ended December 28, 2023 December 29, 2022 Beginning balance $ 11.2 $ 15.0 Debt issuance costs 0.9 5.1 Deconsolidation of NCM LLC ( 8.9 ) — Reconsolidation for NCM LLC 2.4 — Amortization of debt issuance costs ( 3.4 ) ( 8.9 ) Ending balance $ 2.2 $ 11.2 Share-Based Compensation —During 2023 and 2022, 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 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 requires 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 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. Under the fair value recognition provisions of ASC 718, Compensation—Stock Compensation , the Company recognizes share-based compensation net of an estimated forfeiture rate, and therefore only recognizes compensation cost for those shares expected to vest over the requisite service period of the award. Refer to Note 11— Share-Based Compensation for more information. Fair Value Measurements —Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 – Quoted prices in active markets for identical assets or liabilities. 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. 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. Consolidation —NCM, Inc. consolidates the accounts of NCM LLC under the provisions of ASC 810— Consolidation (“ASC 810”). Under Accounting Standards Update 2015-2, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-2”), a limited partnership is a variable interest entity unless a simple majority or lower threshold of all limited partners unrelated to the general partner have kick-out or participating rights. The non-managing members of NCM LLC do not have dissolution rights or removal rights. NCM, Inc. has evaluated the provisions of the NCM LLC membership agreement and has concluded that the various rights of the non-managing members are not substantive participating rights under ASC 810, as they do not limit NCM, Inc.’s ability to make decisions in the ordinary course of business. The Company concluded that NCM LLC is a variable interest entity and determined that NCM, Inc. should consolidate the accounts of NCM LLC pursuant to ASU 2015-2 because 1) it has the power to direct the activities of NCM LLC in its role as managing member 65 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and 2) NCM, Inc. has the obligation to absorb losses of, or the right to receive benefits from NCM LLC, that could potentially be significant provided its 100.0 % ownership in NCM LLC. Upon NCM LLC’s emergence from bankruptcy, it was determined that NCM, Inc. continues to hold the current rights that give it power to direct activities of NCM LLC that most significantly impact NCM LLC’s economic performance and that NCM, Inc. continues to have the rights to receive the significant benefits or the obligations to absorb potentially significant losses, resulting in NCM, Inc. having a controlling financial interest in NCM LLC. As a result, NCM, Inc. was deemed to be the primary beneficiary of NCM LLC and the Company has consolidated NCM LLC under the variable interest entity provisions of ASC 810— Consolidation. The following table presents the changes in NCM, Inc.’s equity resulting from net income attributable to NCM, Inc. and transfers to or from noncontrolling interests (in millions): Years Ended December 28, 2023 December 29, 2022 Net income (loss) attributable to NCM, Inc. $ 705.2 $ ( 28.7 ) NCM LLC equity issued for purchase of intangible asset — 4.9 Income tax and other impacts of NCM LLC ownership changes 33.6 39.8 NCM, Inc. investment in NCM LLC ( 2.6 ) ( 12.4 ) Issuance of shares 241.3 12.0 Change from net income (loss) attributable to NCM, Inc. and transfers from noncontrolling interests $ 977.5 $ 15.6 Recently Adopted Accounting Pronouncements In March 2020, the FASB issued Accounting Standards Update No. 2020-04, Reference Rate Reform (“ASU 2020-04”), which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This guidance is effective upon issuance and expires on December 31, 2024. The Company concluded the LIBOR transition did not have a material impact on the Company’s Consolidated Financial Statements. The Company did not adopt any other accounting pronouncements during the year ended December 28, 2023. Recently Issued Accounting Pronouncements In January 2024, the FASB issued Accounting Standards Update No. 2023-09, Income Tax Disclosures (“ASU 2023-09”), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation. They must also further disaggregate income taxes paid. This guidance is effective upon issuance on December 15, 2024. The Company does not believe this will 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. 2. REVENUE FROM CONTRACTS WITH CUSTOMERS Revenue Recognition NCM, Inc. derives revenue principally from its role as sole manager of NCM LLC. NCM LLC 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 Audience Accelerator, through NCM's digital gaming products 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 ESA Parties’ beverage suppliers. 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 66 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Local advertising is sold on a per-screen, per-week basis and to a lesser extent on a CPM basis. The Company recognizes local on-screen advertising revenue over the period in which the advertising airs as dictated by the underlying sales contracts. When sold separately, LEN advertising and lobby promotions are sold based on length and breadth of the promotion. The Company recognizes revenue derived from lobby network and promotions over time when the advertising is displayed in theater lobbies. The Company sells online and mobile advertising on a CPM basis. The Company recognizes revenue from branded entertainment websites and mobile applications over time as the online or mobile impressions are served. Customer contracts often include multiple advertising services to reach the moviegoer at multiple points during a theater experience. The Company considers each of these advertising services to represent distinct performance obligations of the contract and allocates a portion of the transaction price to each service based upon the standalone selling price of the service, when available. When standalone selling prices are not available or not applicable given the nature of the customer, the Company allocates the transaction price based upon all information that is reasonably available and maximizes the use of observable inputs. Methods utilized include the adjusted market and expected cost-plus margin approaches. The Company enters into barter transactions that exchange advertising program time for products and services used principally for selling and marketing activities. The Company records barter transactions at the estimated fair value of the products and services received. Revenue for advertising barter transactions is recognized when advertising is provided, and products and services received are charged to expense when used. Revenue from barter transactions for the years ended December 28, 2023 and December 29, 2022 was $ 0.1 million and $ 0.0 million , respectively. Expense recorded from barter transactions for the years ended December 28, 2023 and December 29, 2022 was $ 0.1 million and $ 0.0 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. Invoices are generated following the processing of each revenue contract and payment is due from the customer within 30 days of the invoice date. Customers select to pay the invoice in full at the start of a contract or through equal monthly installments over the course of the contract. The Company records deferred revenue when cash payments are received, or invoices are issued, in advance of revenue being earned. 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 noncancellable as of December 28, 2023. 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, the Company’s contracts longer than one year that are cancellable are not included within this disclosure. Disaggregation of Revenue The Company disaggregates revenue based upon the type of customer: national; local and regional; beverage concessionaire; and management fee reimbursement revenue related to NCM LLC. 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 28, 2023 and December 29, 2022 (in millions): Years ended December 28, 2023 December 29, 2022 National advertising revenue $ 114.8 $ 187.1 Local and regional advertising revenue 30.4 43.5 ESA advertising revenue from beverage concessionaire agreements 9.9 18.6 Management fee reimbursement 10.1 — Total revenue $ 165.2 $ 249.2 Deferred Revenue and Unbilled Accounts Receivable Revenue recognized in the year ended December 28, 2023 that was included within the Deferred Revenue balance as of December 29, 2022 was $ 8.6 million. Unbilled accounts receivable is classified as a current asset as it is expected to be billed within the next twelve months. As of December 28, 2023 and December 29, 2022, the Company had $ 0.8 million and $ 5.0 million, respectively, in unbilled accounts receivable, included within the accounts receivable balance. Practical Expedients and Exemptions 67 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 Statements of Operations. Allowance for Doubtful Accounts The allowance for doubtful accounts balance is determined separately for each pool of the Company's receivables with similar risk characteristics. The Company has determined that two pools, national customers and local/ regional customers, is appropriate. The changes within the allowance for doubtful accounts balances for the years ended December 28, 2023 and December 29, 2022 were as follows (in millions): Years Ended December 28, 2023 December 29, 2022 Allowance for National Customer Receivables Allowance for Local/ Regional Customer Receivables Allowance for National Customer Receivables Allowance for Local/ Regional Customer Receivables Balance at beginning of period $ 0.3 $ 1.4 $ 0.3 $ 1.4 Provision for bad debt ( 0.2 ) 0.2 0.2 0.8 Write-offs, net of recoveries — ( 0.3 ) ( 0.2 ) ( 0.8 ) Balance at end of period $ 0.1 $ 1.3 $ 0.3 $ 1.4 3. INCOME PER SHARE Basic income (loss) per share is computed on the basis of the weighted average number of common shares outstanding. Diluted income (loss) per share is computed on the basis of the weighted average number of common shares outstanding plus the effect of potentially dilutive common stock options, restricted stock and exchangeable NCM LLC common units using the treasury stock method. The components of basic and diluted income (loss) per NCM, Inc. share are as follows: Years Ended December 28, 2023 December 29, 2022 Net income (loss) attributable to NCM, Inc. (in millions) $ 705.2 $ ( 28.7 ) Weighted average shares outstanding: Basic 47,882,944 8,196,801 Add: Dilutive effect of stock options, restricted stock, and exchangeable NCM LLC common membership units 691,639 — Diluted 48,574,583 8,196,801 Income (loss) per NCM, Inc. share: Basic $ 14.73 $ ( 3.50 ) Diluted $ 14.34 $ ( 3.50 ) The effect of the 8,880,101 weighted average exchangeable NCM LLC common membership units held by the ESA Parties for the year ended December 29, 2022 was excluded from the calculation of diluted weighted average shares and earnings per NCM, Inc. share as it was antidilutive. The weighted average exchangeable NCM LLC common membership units held by the ESA Parties for the year ended December 28, 2023 was 685,404 and are included in diluted weighted average shares. In addition, there were 979,176 and 727,338 , stock options and non-vested (restricted) shares for the years ended December 28, 2023 and December 29, 2022, respectively, excluded from the calculation as they were antidilutive. The Company’s non-vested (restricted) shares do not meet the definition of a participating security as the dividends will not be paid if the shares do not vest. On August 3, 2023, the Company effected a one-for-ten ( 1:10 ) reverse stock split of its common stock, par value $ 0.01 per share. The reverse stock split, which was authorized by its Board of Directors, was approved by the Company’s stockholders on August 2, 2023. The reverse stock split reduced the number of outstanding shares of the Company’s common stock from 174,112,385 shares as of August 3, 2023, to 17,411,323 shares outstanding post-split. In accordance with ASC 260— Earnings Per Share, income (loss) per share for the year ended December 29, 2022 was retrospectively adjusted for the reverse stock split. Additionally, unaudited (loss) income per share for the quarterly periods through the years ended December 28, 2023 and December 29, 2022, are stated as follows: 68 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended March 30, 2023 March 31, 2022 Net loss attributable to NCM, Inc. (in millions) $ ( 45.5 ) $ ( 25.2 ) Weighted average shares outstanding: Basic 14,550,799 8,104,066 Add: Dilutive effect of stock options, restricted stock, and exchangeable NCM LLC common membership units — — Diluted 14,550,799 8,104,066 Loss per NCM, Inc. share: Basic $ ( 3.13 ) $ ( 3.11 ) Diluted $ ( 3.13 ) $ ( 3.11 ) The effect of th e 2,741,617 and 8,623,385 weighted average exchangeable NCM LLC common membership units held by the ESA Parties for the three months ended March 30, 2023 and March 31, 2022, respectively, were excluded from the calculation of diluted weighted average shares and earnings per NCM, Inc. share as it was antidilutive. In addition, there were 494,695 and 346,330 , stock options and non-vested (restricted) shares for the quarters ended March 30, 2023 and March 31, 2022, respectively, excluded from the calculation as they were antidilutive. The Company’s non-vested (restricted) shares do not meet the definition of a participating security as the dividends will not be paid if the shares do not vest. Three Months Ended Six Months Ended June 29, 2023 June 30, 2022 June 29, 2023 June 30, 2022 Net loss attributable to NCM, Inc. (in millions) $ 545.3 $ ( 0.7 ) $ 499.8 $ ( 25.9 ) Weighted average shares outstanding: Basic 17,405,864 8,146,766 15,978,331 8,125,415 Add: Dilutive effect of stock options, restricted stock, and exchangeable NCM LLC common membership units — — 1,370,808 — Diluted 17,405,864 8,146,766 17,349,139 8,125,415 Loss per NCM, Inc. share: Basic $ 31.33 $ ( 0.09 ) $ 31.28 $ ( 3.19 ) Diluted $ 31.33 $ ( 0.09 ) $ 28.32 $ ( 3.19 ) The effect of t he 9,037,475 and 8,828,155 w eighted average exchangeable NCM LLC common membership units held by the ESA Parties for the three and six months ended June 30, 2022 was excluded from the calculation of diluted weighted average shares and earnings per NCM, Inc. share as it was antidilutive. The weighted average exchangeable NCM LLC common membership units held by the ESA Parties for the three and six months ended June 29, 2023 was 0 and 1,370,808 and are included in diluted weighted average shares. In addition, there were 491,517 , 644,216 , 491,517 and 644,216 stock options and non-vested (restricted) shares for the three months ended June 29, 2023 and June 30, 2022 and six months ended June 29, 2023 and June 30, 2022, respectively, excluded from the calculation as they were antidilutive. The Company’s non-vested (restricted) shares do not meet the definition of a participating security as the dividends will not be paid if the shares do not vest. 4. PROPERTY AND EQUIPMENT The following is a summary of property and equipment, at cost less accumulated depreciation (in millions): As of December 28, 2023 December 29, 2022 Equipment, computer hardware and software $ 15.4 $ 63.8 Leasehold improvements 0.7 2.9 Less: Accumulated depreciation ( 1.6 ) ( 54.8 ) Subtotal 14.5 11.9 Construction in progress 1.3 1.1 Total property and equipment $ 15.8 $ 13.0 69 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. RECONSOLIDATION OF NCM LLC Upon filing the Chapter 11 Case and in accordance with applicable GAAP, the Company concluded that NCM, Inc. no longer controlled NCM LLC for accounting purposes as of April 11, 2023 (the “Petition Date”), the date on which NCM LLC filed its Chapter 11 petition, as NCM LLC was under the control of the Bankruptcy Court, and therefore, NCM LLC was deconsolidated from the Company’s consolidated financial statements prospectively, resulting in a $ 557.7 million gain recorded in “Gain on deconsolidation of affiliate” in the Consolidated Statement of Operations. The recorded gain was measured as the excess of the estimated fair value of the investment in NCM LLC retained over the Net Liabilities of NCM LLC as of April 11, 2023. The investment of NCM LLC was measured at cost minus any impairment in accordance with the measurement alternative outlined in ASC 321— Investments—Equity Securities . While NCM LLC remained in bankruptcy, NCM, Inc. accounted for the retained equity interest in NCM LLC at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly market transactions. Upon the deconsolidation of NCM LLC, the original cost of the investment was valued based upon NCM, Inc.'s ownership of the secured debt of NCM LLC and an estimation of the enterprise value of NCM LLC developed utilizing discounted cash flows and comparable company analysis as of the Petition Date. Significant assumptions utilized within these analyses included the weighted average cost of capital and NCM LLC’s forecasted cash flows. On August 7, 2023, NCM LLC emerged from bankruptcy and NCM, Inc. contributed $ 15.0 million in cash to NCM LLC in exchange for 2.8 % of additional ownership of NCM LLC in accordance with the NCMI Capital Contribution and $ 0.5 million to assist with payments to unsecured creditors in accordance with the settlement with the unsecured creditors. NCM, Inc. also issued 83,421,135 shares to the secured creditors in accordance with the NCMI 9019 Settlement and terms of the Plan with a fair value of $ 245.3 million based on the closing stock price of $ 2.94 . Upon NCM LLC’s emergence from bankruptcy, NCM, Inc. retained 100.0 % of NCM LLC, regained control of and reconsolidated NCM LLC. The Company accounted for the NCM LLC reconsolidation as a business combination under ASC 805 — Business Combinations and accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of reconsolidation, the Effective Date. The determination of fair values required management to make significant estimates and assumptions. The estimated fair values of the assets acquired and liabilities assumed are considered provisional and are based on currently available information. The Company believes that the information available provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed; however, these provisional estimates may be adjusted upon the availability of new information regarding facts and circumstances which existed at the reconsolidation date. The Company expects to finalize the valuation of assets and liabilities as soon as practicable, but not later than one year from the reconsolidation date. The following table summarizes the fair value of NCM LLC and provisional fair values of the assets acquired and liabilities assumed as of the reconsolidation date: Fair value of assets acquired: Cash, cash equivalents and restricted cash $ 49.6 Receivables, net (1) 74.8 Prepaid expenses and other current assets 7.2 Property and equipment, net 14.8 Other investments 0.9 Debt issuance costs, net 2.4 Fair value of intangible assets 415.0 Other assets 10.0 Total assets acquired 574.7 Fair value of liabilities assumed: Amounts due to members, net ( 15.3 ) Accrued expenses ( 0.7 ) Accrued payroll and related expenses ( 9.9 ) Accounts payable ( 37.3 ) Deferred revenue ( 11.1 ) Other current liabilities ( 1.5 ) Long-term debt ( 10.0 ) Other liabilities ( 5.5 ) 70 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Total liabilities assumed ( 91.3 ) Fair value of NCM LLC $ 483.4 (1) Includes a valuation adjustment recorded during the three months ended December 28, 2023 that decreased accounts receivable, net by $ 0.2 million. The provisional identifiable intangible assets of $ 415.0 million are subject to amortization. The following table summarizes the major classes of intangible assets acquired and their respective weighted-average estimated useful lives. Estimated Fair Value Useful Life (years) Exhibitor service agreements $ 250.0 13.0 Network affiliates agreements 75.0 16.0 Customer relationships 75.0 6.0 Trademarks 15.0 8.0 Total intangible assets $ 415.0 The estimated fair values of the ESAs, network affiliate agreements and trademarks were estimated using the income approach. The multi-period excess earnings method starts with a forecast of all of the expected future net cash flows associated with the asset. The forecasts are then adjusted to present value by applying an appropriate discount rate that reflects the risks associated with the company specific cash flow streams. Significant assumptions utilized within the income approach include the weighted average cost of capital and forecasted cash flows. The estimated fair values of the customer relationships were estimated using the cost approach. The cost approach included estimating the investment required to replace the contracts with customers, with significant assumptions including the replacement cost. The Company elected the practical expedients allowed in ASC 805-20-30-29a in estimating the fair value of the contract liabilities assumed. Upon NCM LLC’s emergence from the Chapter 11 Case, NCM, Inc. remeasured the value of the investment in NCM LLC to the estimated fair value calculated as NCM, Inc.’s percentage ownership of NCM LLC, due to NCM, Inc.’s ownership of the secured debt of NCM LLC and the NCMI Capital Contribution, multiplied by the fair value of NCM LLC as of the Effective Date of $ 483.4 million. The value of the cost investment of NCM LLC immediately prior to the Effective Date was $ 11.9 million based upon NCM, Inc.’s ownership of the secured debt of NCM LLC and an estimation of the enterprise value of NCM LLC developed utilizing discounted cash flows and comparable company analysis as of the Petition Date. The increase in the fair value resulted in a gain on remeasurement of the investment in NCM LLC of $ 35.5 million. Upon reconsolidation, NCM, Inc. recorded the provisional fair values of the assets acquired and liabilities assumed as of the reconsolidation date and the investment in NCM LLC was further adjusted to the full purchase price value of $ 483.4 million. The difference between the purchase price of NCM LLC and the fair value of NCM, Inc.’s investment in NCM LLC as calculated above, the $ 15.5 million of cash contributed by NCM, Inc. (consisting of $ 0.5 million related to the General Unsecured Claim Pool and $ 15.0 million under the NCMI Capital Contribution) and the shares issued to NCM LLC’s secured lenders of $ 245.3 million resulted in a gain of $ 167.8 million upon the reconsolidation of NCM LLC. The Company recognized a gain due to the variance between the fair value of NCM LLC’s assets and liabilities and NCM, Inc.’s depressed stock price on the Effective Date and the NCM, Inc. shares retained by the existing shareholders as part of the NCMI 9019 Settlement. NCM, Inc.’s stock price has been negatively impacted beginning with the COVID-19 pandemic followed by Cineworld’s bankruptcy proceeding and NCM LLC’s Chapter 11 Case, as well as by other socioeconomic factors. The Company’s Consolidated Statements of Operations include total net revenues and net loss attributable to NCM LLC of $ 155.1 million and $ 42.0 million, respectively, for the total of the consolidated periods of December 30, 2022 through April 11, 2023 and August 7, 2023 through December 28, 2023. Pro Forma Financial Information (Unaudited) The following table presents unaudited pro forma financial information as if the NCM LLC reconsolidation had occurred on December 31, 2021. The unaudited pro forma results reflect adjustments for depreciation of acquired property and equipment, amortization of acquired intangible assets and amortization of acquired debt issuance costs. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of future operations or results had the NCM LLC reconsolidation been completed as of December 31, 2021. Year ended December 28, 2023 December 29, 2022 Revenue $ 259.8 $ 249.2 Net (Loss) Income $ ( 200.5 ) $ 755.9 71 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. INTANGIBLE ASSETS The Company’s intangible assets consist of contractual rights to provide its services within the theaters under the ESAs and network affiliates agreements, customer relationships developed and maintained by the Company’s sales force and trademarks held and used by the Company. The intangible assets are stated at their estimated fair values upon the reconsolidation of NCM LLC on August 7, 2023 as further described within Note 5— Reconsolidation of NCM LLC, 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, the average renewable term of the contract with the network affiliates and industry standard lives for customer relationships and trademarks. In accordance with ASC 360 — Property, Plant and Equipment, the Company continuously monitors the performance of the underlying assets for potential triggering events suggesting an impairment review should be performed. No such triggering events were identified in the period since the reconsolidation of NCM LLC on August 7, 2023. Common Unit Adjustments— In accordance with NCM LLC’s Common Unit Adjustment Agreement, on an annual basis NCM LLC determines the amount of common membership units to be issued to or returned by AMC and Cinemark based on theater additions, new builds or dispositions during the previous year. In the event AMC or Cinemark does not have sufficient common membership units to return, the adjustment is satisfied in cash in an amount calculated pursuant to NCM LLC’s Common Unit Adjustment Agreement. In addition, NCM LLC’s Common Unit Adjustment Agreement requires that a Common Unit Adjustment occur for either AMC or Cinemark 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. Upon the issuance of common membership units, the Company records an addition to the intangible asset related to AMC and Cinemark’s respective ESAs equal to the fair market value of NCM, Inc.’s publicly traded stock as of the date on which the common membership units were issued. The NCM LLC common membership units are fully convertible into NCM, Inc.’s common stock. During the first quarter of 2022, NCM LLC issued 4,140,896 ( 6,483,893 issued, net of 2,342,997 returned) common membership units to AMC, Cinemark, and Regal for the rights to exclusive access to the theater screens and attendees added, net of dispositions, to NCM LLC’s network during the 2021 fiscal year. The net impact as a result of the Common Unit Adjustment to the intangible asset was $ 10.4 million during the first quarter of 2022. Pursuant to the Plan and in connection with the Chapter 11 Case, during the year ended December 28, 2023, NCM LLC did not issue common membership units to Cinemark for the rights to exclusive access to the theater screens and attendees added, net of dispositions, to NCM LLC’s network for the 2022 fiscal year and the 16,581,829 units issued to AMC were issued and cancelled on the Effective 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 ESA Parties may elect to receive common membership units related to those encumbered theaters in connection with the Common Unit Adjustment. If the ESA Parties 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”). Because the Carmike Cinemas, Inc. (“Carmike”) theaters acquired by AMC are subject to an existing on-screen advertising agreement with an alternative provider, AMC will make integration payments to NCM LLC. The integration payments will continue until the earlier of (i) the date the theaters are transferred to NCM LLC’s network or (ii) the expiration of the ESA. Integration payments are calculated based upon the advertising cash flow that the Company would have generated if it had exclusive access to sell advertising in the theaters with pre-existing advertising agreements. The ESA additionally entitles NCM LLC to payments related to the ESA Parties’ on-screen advertising commitments under their beverage concessionaire agreements for encumbered theaters (“encumbered theater payments”). These payments are also accounted for as a reduction to the intangible asset. If common membership units are issued to an ESA Party for newly acquired theaters that are subject to an existing on-screen advertising agreement with an alternative provider, the amortization of the intangible asset commences after the existing agreement expires and NCM LLC can utilize the theaters for all of its services. The following is a summary of the Company’s intangible asset’s activity (in millions) during December 28, 2023 and December 29, 2022: 72 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 29, 2022 Additions (1) Disposals (2) Amortization Integration and other encumbered theater payments (3) As of December 28, 2023 Gross carrying amount $ 856.9 $ 415.8 $ ( 857.4 ) $ — $ ( 6.0 ) $ 409.3 Accumulated amortization ( 270.2 ) — 277.6 ( 22.4 ) — ( 15.0 ) Total intangible assets, net $ 586.7 $ 415.8 $ ( 579.8 ) $ ( 22.4 ) $ ( 6.0 ) $ 394.3 As of December 30, 2021 Additions (4) Disposals Amortization Integration and other encumbered theater payments (3) As of December 29, 2022 Gross carrying amount $ 851.9 $ 10.8 $ ( 0.4 ) $ — $ ( 5.4 ) $ 856.9 Accumulated amortization ( 245.6 ) — 0.4 ( 25.0 ) — ( 270.2 ) Total intangible assets, net $ 606.3 $ 10.8 $ — $ ( 25.0 ) $ ( 5.4 ) $ 586.7 (1) On August 7, 2023, NCM, Inc. reconsolidated NCM LLC’s intangible assets of $ 415.0 million. Refer to Note 5 - Reconsolidation of NCM LLC for further information. Additionally, there were $ 0.8 million in upfront payments made to network affiliates prior to the deconsolidation of NCM LLC on April 11, 2023. (2) On April 11, 2023, the intangible asset balance of NCM LLC was deconsolidated from NCM, Inc. Refer to Note 5 - Reconsolidation of NCM LLC for further information. (3) Carmike theaters had pre-existing advertising agreements for some of the theaters it owned prior to their acquisitions by AMC. As a result, AMC will make integration and other encumbered theater payments over the remaining term of those agreements. For the periods while consolidated, December 30, 2022 through April 11, 2023 and August 7, 2023 through December 28, 2023 and for the year ended December 29, 2022, NCM LLC recorded a reduction to net intangible assets of $ 6.0 million and $ 5.4 million, respectively, related to integration and other encumbered theater payments due from AMC. During the year ended December 28, 2023 and December 29, 2022, AMC paid a total of $ 4.2 million and $ 2.8 million, respectively, related to integration and other encumbered theater payments. (4) 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 ESA Parties for the rights to exclusive access to the theater screens and attendees added, net of dispositions by the ESA Parties 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. As of December 28, 2023 and December 29, 2022, the Company’s intangible assets related to the ESA Parties, net of accumulated amortization, was $ 236.7 million and $ 572.4 million, respectively, with weighted average remaining lives of 12.6 years and 16.3 years, respectively. As of December 28, 2023 and December 29, 2022, the Company’s intangible assets related to the network affiliates, net of accumulated amortization, was $ 73.2 million and $ 14.3 million, respectively, with weighted average remaining lives of 15.6 years and 6.1 years, respectively. As of December 28, 2023 and December 29, 2022, the Company’s intangible assets related to the customer relationships, was $ 70.1 million and $ 0.0 million, respectively, with weighted average remaining lives of 5.6 years and 0.0 years, respectively. As of December 28, 2023 and December 29, 2022, the Company’s intangible assets related to trademark, was $ 14.3 million and $ 0.0 million, respectively, with weighted average remaining lives of 7.6 years and 0.0 years, respectively. The estimated aggregate amortization expense for each of the five succeeding years is as follows (in millions): 73 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Amortization 2024 $ 39.5 2025 $ 39.5 2026 $ 39.5 2027 $ 39.5 2028 $ 39.5 7. INCOME TAXES The Company is subject to taxation in the U.S. and various states. The Company’s tax returns for the calendar years 2020 through 2022 remain open to examination by the IRS in their entirety. With respect to state taxing jurisdictions, the Company’s tax returns for calendar years ended 2019 through 2022 are eligible for examination by various state revenue services. Tax Receivable Agreement —On the IPO date, NCM, Inc. and the ESA Parties entered into a TRA. Under the terms of this agreement, NCM, Inc. will make cash payments to the ESA Parties in amounts equal to 90 % of NCM, Inc.’s actual tax benefit realized from the tax amortization of the intangible assets described below. For purposes of the TRA, cash savings in income and franchise tax will be computed by comparing NCM, Inc.’s actual income and franchise tax liability to the amount of such taxes that NCM, Inc. would have been required to pay had there been no increase in NCM, Inc.’s proportionate share of tax basis in NCM LLC’s tangible and intangible assets and had the TRA not been entered into. The TRA applies to NCM, Inc.’s taxable years up to and including the 30t h anniversary date of the offering. For the 2022 tax year, the Company paid the ESA Parties $ 0.0 million in the year ended December 28, 2023. The Company paid the ESA Parties $ 0.9 million in the year ended December 29, 2022 for the 2019 tax year. NCM, Inc. recorded a long-term payable to the ESA Parties related to the TRA. The Company recorded an increase of $ 24.2 million and $ 19.2 million to the “Payable to ESA Parties under the tax receivable agreement” during the years ended December 28, 2023 and December 29, 2022, respectively. The increases in the year ended December 28, 2023 and December 29, 2022 was primarily due to the increase in NCM, Inc.’s ownership percentage of NCM LLC. The ownership related changes to the “Payable to ESA Parties 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. Following the Regal Termination Agreement whereby Regal waived all rights and interests as to the TRA, the Company reduced the “Payable under the TRA” on the Consolidated Balance Sheets for the amounts expected to be owed to Regal. This decrease was ultimately offset by the increase in the ‘Payable under the TRA’ on the Consolidated Balance Sheets due to the additional basis created upon the revaluation and reconsolidation of NCM LLC on the Effective Date. 74 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 28, 2023 and December 29, 2022 was (in millions): Years Ended December 28, 2023 December 29, 2022 Provision calculated at federal statutory income tax rate: Income before income taxes $ 146.5 $ ( 13.9 ) Less: Noncontrolling interests 1.8 7.9 Income attributable to NCM, Inc. 148.3 ( 6.0 ) Current year change to enacted federal and state rate ( 0.2 ) 1.1 State and local income taxes, net of federal benefit 25.7 ( 1.1 ) Share-based compensation 1.4 0.6 Cancellation of debt income attributable to NCM LLC 16.5 — Deconsolidation effects of NCM LLC ( 37.2 ) — Effects of NCM LLC Bankruptcy ( 4.8 ) — Tax attribute reduction (1) 63.1 — Change in the valuation allowance (1) ( 208.4 ) 3.6 Executive compensation 0.9 0.5 Other ( 5.3 ) 1.3 Total income tax provision $ — $ — (1) Refer to the discussion of changes to the valuation allowance during the year ended December 28, 2023 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): Years Ended December 28, 2023 December 29, 2022 Deferred tax assets: Investment in consolidated subsidiary NCM LLC (1) $ 127.1 $ 149.7 Share-based compensation 0.8 1.0 Net operating losses (2) 13.3 76.4 Accrued bonus 0.7 0.1 Business interest expense limitation 3.7 18.2 Other 0.4 0.1 Total gross deferred tax assets 146.0 245.5 Valuation allowance (1) ( 146.0 ) ( 245.5 ) Total deferred tax assets, net of valuation allowance $ — $ — (1) The Company recognized a deferred tax asset in the amount o f $ 127.1 mi llion and $ 149.7 million as of December 28, 2023 and December 29, 2022, respectively, associated with the basis difference in our investment in NCM LLC. The Company evaluated its deferred tax assets as of December 28, 2023 and December 29, 2022 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 continued into 2022 and 2023. 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. 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 75 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS expected to reverse, resulting in an inverse impact to the payable to ESA Parties under the tax receivable agreement which would increase to reflect future payments to the ESA Parties at that time. Once the valuation allowance is reversed, the payable to ESA Parties under the tax receivable agreement would be increased to reflect expected future payments to the ESA Parties at that time. (2) The decrease within the Net operating losses deferred tax asset from December 29, 2022 to December 28, 2023 was due to the reduction of the Company’s tax attributes in recognition of cancellation of debt income in conjunction with NCM LLC’s emergence from the Chapter 11 Case on August 7, 2023. 8. EQUITY As of December 28, 2023, the Company has authorized capital stock of 260,000,000 shares of common stock, par value of $ 0.01 per share, and 10,000,000 shares of preferred stock, par value of $ 0.01 per share. There were 50 shares of preferred stock issued and outstanding and 96,837,039 shares of common stock issued and outstanding as of December 28, 2023. The holders of NCM, Inc. common stock are entitled to one vote per share on all matters submitted for action by the NCM, Inc. stockholders. Holders of common stock are entitled to share equally, share for share, in declared dividends. The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval. These additional shares may be used for a variety of corporate purposes, including share-based compensation, future public offerings to raise additional capital, corporate acquisitions and exchange on a one-for-one basis under the ESA Parties’ right to convert their NCM LLC membership units into Company common stock. Prior to the deconsolidation of NCM LLC on April 11, 2023, in conformity with accounting guidance of the SEC concerning monetary consideration paid to promoters, such as the ESA Parties, in exchange for property conveyed by the promoters, the excess over predecessor cost was treated as a special distribution. Because the ESA Parties had no cost basis in the ESAs, nearly all payments to the ESA Parties with the proceeds of the IPO and related debt, have been accounted for as distributions. The distributions by NCM LLC to the ESA Parties made at the date of the IPO resulted in a consolidated stockholders’ deficit. As a noncontrolling interest cannot be shown as an asset, the ESA Parties’ interest in NCM LLC’s members equity was included in distributions in excess of paid in capital in the Consolidated Balance Sheets. On April 11, 2023, the historical Equity balances of NCM LLC were deconsolidated from the Consolidated Financial Statements. On August 7, 2023, the Company accounted for the NCM LLC reconsolidation as a business combination under ASC 805 — Business Combinations and accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of reconsolidation, the Effective Date, with no allocation to any equity balances. The reconsolidation reduced NCM LLC’s equity balances to $ 0 and removed the impact of the IPO discussed above. For further information regarding the deconsolidation and reconsolidation of NCM LLC, refer to Note 5 - Reconsolidation of NCM LLC. 9. RELATED PARTY TRANSACTIONS ESA Party and Managing Member Transactions —In connection with NCM, Inc.’s IPO, the Company entered into several agreements to define and regulate the relationships among NCM LLC, NCM, Inc. and AMC, Cinemark and Regal which are outlined below. AMC has owned less than 5 % of NCM LLC, on an as converted basis, since July 2018 and is no longer a related party. AMC remains a party to the ESA, Common Unit Adjustment Agreement and certain other original agreements and is a member under the terms of the NCM LLC Operating Agreement, subject to fulfilling the requirements of Section 3.1 of the NCM LLC Operating Agreement. AMC will continue to participate in the annual Common Unit Adjustment and receive available cash distributions or allocation of earnings and losses in NCM LLC (as long as its ownership in NCM LLC is greater than zero) and theater access fees. Further, AMC will continue to pay beverage revenue, among other things, to NCM LLC. AMC’s ownership percentage does not impact future integration payments and other encumbered theater payments owed to NCM LLC by AMC. As of December 28, 2023, AMC’s ownership was 0.0 % of NCM LLC and NCM, Inc. Cinemark has owned less than 5 % of NCM LLC, on an as converted basis, since NCM LLC emerged from bankruptcy on August 7, 2023 and is no longer a related party. Cinemark remains a party to the ESA, Common Unit Adjustment Agreement and certain other original agreements and is a member under the terms of the NCM LLC Operating Agreement, subject to fulfilling the requirements of Section 3.1 of the NCM LLC Operating Agreement. Cinemark will continue to participate in the annual Common Unit Adjustment and receive available cash distributions or allocation of earnings and losses in NCM LLC (as long as its ownership in NCM LLC is greater than zero) and theater access fees. Further, Cinemark will continue to pay beverage revenue, among other things, to NCM LLC. Cinemark’s ownership percentage does not impact future integration payments and other encumbered theater payments owed to NCM LLC by Cinemark. As of December 28, 2023, Cinemark’s ownership was 4.5 % of NCM, Inc. and 0.0 % of NCM LLC. 76 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On June 3, 2023, NCM LLC entered into the Regal Advertising Agreement and Regal Termination Agreement which became effective on July 14, 2023. Pursuant to the Regal Termination Agreement, Regal rejected and terminated its ESA with NCM LLC. Additionally Regal and Regal’s affiliates’ waived all rights and interests as to the TRA, the Common Unit Adjustment Agreement, the Software License Agreement, the Director Designation Agreement, the Registration Rights Agreement and all the other joint venture agreements described in the NCM LLC Operating Agreement and the Company and NCM LLC, and Regal and Regal’s affiliates waived and released claims against the other party. Regal also agreed to support NCM LLC’s Plan and surrendered all 4,068,381 shares in the Company, totaling $ 13.0 million, upon the effective date of the Plan. In connection with the Regal Advertising Agreement, NCM LLC and Regal also agreed to dismiss with prejudice the ongoing litigation between the parties related to NCM LLC’s request to enforce certain provisions of the ESA, including the exclusivity provision. Subsequent to July 14, 2023, Regal is no longer an ESA Party or related party to NCM, Inc. or NCM LLC. The material agreements with the ESA Parties are as follows: • ESAs. Under the ESAs, NCM LLC is the exclusive provider within the United States of advertising services in the ESA Parties’ theaters (subject to pre-existing contractual obligations and other limited exceptions for the benefit of the ESA Parties). 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 ESA Parties to satisfy the ESA Parties’ on-screen advertising commitments under their beverage concessionaire agreements. In consideration for access to the ESA Parties’ theaters, theater patrons, the network equipment required to display on-screen and LEN video advertising and the use of theaters for lobby promotions, the ESA Parties receive a monthly theater access fee. In conjunction with the 2019 ESA Amendments, NCM LLC also pays Cinemark and Regal incremental monthly theater access fees and, subject to NCM LLC's use of specified inventory, a revenue share in consideration for NCM LLC's access to certain on-screen advertising inventory after the advertised showtime of a feature film beginning November 1, 2019 and the underlying term of the ESAs were extended until 2041. The ESAs and 2019 ESA Amendments are considered leases with related parties under ASC 842. As described above, the Regal ESA was rejected by Regal in connection with Regal’s Chapter 11 case and terminated by the Regal Termination Agreement. • Common Unit Adjustment Agreement. The Common Unit Adjustment Agreement provides a mechanism for increasing or decreasing the membership units held by the ESA Parties based on the acquisition or construction of new theaters or sale of theaters that are operated by each ESA Party and included in NCM LLC’s network. • Tax Receivable Agreement. The TRA provides for the effective payment by NCM, Inc. to the ESA Parties of 90 % of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that is actually realized as a result of certain increases in NCM, Inc.’s proportionate share of tax basis in NCM LLC’s tangible and intangible assets resulting from the IPO and related transactions. • Software License Agreement. At the date of the Company’s IPO, NCM LLC was granted a perpetual, royalty-free license from the ESA Parties 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 ESA Parties, if any. Following is a summary of the related party transactions between the Company and the ESA Parties (in millions): Years Ended Included in the Consolidated Statements of Operations: December 28, 2023 December 29, 2022 Revenue: (1) Beverage concessionaire revenue (included in advertising revenue) (2) $ 4.1 $ 14.4 Management fee reimbursement (3) $ 10.1 $ — Operating expenses: ESA theater access fee and revenue share (4) $ 16.5 $ 59.4 Selling and marketing costs (5) $ — $ 0.1 (1) For the year ended December 28, 2023 there was no related party activity subsequent to the deconsolidation of NCM LLC on April 11, 2023 for AMC, Cinemark and Regal as they were not considered related parties of NCM, Inc. nor was there any activity following the reconsolidation of NCM LLC on August 7, 2023, as AMC, Cinemark and Regal were no longer considered related parties. 77 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2) For the full years ended December 28, 2023 and December 29, 2022, Regal and Cinemark purchased 60 seconds of on-screen advertising time (all three ESA Parties having a right to purchase up to 90 seconds ) from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 second equivalent CPM rate specified by the ESA. (3) Comprised of payments from NCM LLC to NCM, Inc. for managing NCM LLC during the period where NCM LLC was deconsolidated of April 11, 2023 through August 7, 2023. (4) Comprised of payments per theater attendee, payments per digital screen with respect to the ESA Party theaters included in the Company’s network, payments for access to higher quality digital cinema equipment and payments to Cinemark and Regal for their portion of the Platinum Spot revenue for the utilization of the theaters post-showtime in accordance with the 2019 ESA Amendments. (5) Includes purchase of movie tickets, concession products, rental of theater space primarily for marketing to NCM LLC’s advertising clients and other payments made to the ESA Parties in the ordinary course of business. As of Included in the Consolidated Balance Sheets: December 28, 2023 December 29, 2022 Common unit adjustments, net of amortization and integration payments (included in intangible assets) (1) $ — $ 312.2 Current payable under the TRA (2) $ — $ 0.2 Long-term payable under the TRA (2) $ — $ 25.5 (1) Refer to Note 6— Intangible Assets for further information on common unit adjustments and integration payments. As Cinemark and Regal are no longer related parties, there are no related party balances to reflect as of December 28, 2023. (2) NCM, Inc. paid Cinemark and Regal $ 0.0 million and $ 0.0 million during the year ended December 28, 2023 and December 29, 2022, respectively, in payments pursuant to the TRA for the 2022 or 2021 tax years. As Cinemark and Regal are no longer related parties, there are no related party balances to reflect as of December 28, 2023. At the date of the Company’s IPO, NCM LLC was granted a perpetual, royalty-free license from the ESA Parties 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 ESA Parties, 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 within the Revolving Credit Facility 2023. The portion of positive available cash due to ESA Parties is accrued within the “Amounts due to ESA Parties, net” on the audited Consolidated Balance Sheet. As Cinemark and Regal are no longer related parties, there are no related party balances to reflect as of December 28, 2023. The positive available cash from NCM LLC for the three months ended December 28, 2023 and December 29, 2022 were as follows (in millions): Three Months Ended December 28, 2023 December 29, 2022 Cinemark $ — $ 4.9 NCM, Inc. 30.3 14.4 Total $ 30.3 $ 19.3 The Company generated negative available cash by NCM LLC to its related party ESA Parties and NCM, Inc. for the nine months ended September 28, 2023 of $ 50.6 million (including $ 0.0 million for Cinemark, $ 0.0 million for Regal and $ 50.6 million for NCM, Inc.) and $ 39.4 million (including negative $ 10.5 million for Cinemark, negative $ 9.3 million for Regal and negative $ 19.6 million for NCM, Inc.) for the year ended December 29, 2022. 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. For the year ended December 28, 2023 there was no related party activity subsequent to the deconsolidation of NCM LLC on April 11, 2023 for AMC, Cinemark and Regal as they were not considered related parties of NCM, Inc. nor was there any activity following the reconsolidation of NCM LLC on August 7, 2023, as AMC, Cinemark and Regal were no longer 78 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS considered related parties. Amounts due to ESA Parties, net as of December 29, 2022 were comprised of the following (in millions): Cinemark Regal Total Theater access fees, net of beverage revenues and other encumbered theater payments $ 11.1 $ 4.1 $ 15.2 Total amounts due to ESA Parties, net $ 11.1 $ 4.1 $ 15.2 Common Unit Membership Redemption — The NCM LLC Operating Agreement provides a redemption right of the ESA Parties 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. AC JV, LLC Transactions —The Company accounts for its investment in AC JV, LLC under the equity method of accounting in accordance with ASC 323-30, Investments—Equity Method and Joint Ventures (“ASC 323-30”) because AC JV, LLC is a limited liability company with the characteristics of a limited partnership and ASC 323-30 requires the use of equity method accounting unless the Company’s interest is so minor that it would have virtually no influence over partnership operating and financial policies. Although NCM LLC does not have a representative on AC JV, LLC’s Board of Directors or any voting, consent or blocking rights with respect to the governance or operations of AC JV, LLC, the Company concluded that its interest was more than minor under the accounting guidance. NCM LLC’s investment in AC JV, LLC was $ 0.7 million and $ 0.8 million as of December 28, 2023 and December 29, 2022, respectively. NCM LLC received cash distributions from AC JV, LLC of $ 0.6 million and $ 0.4 million, during the years ended December 28, 2023 and December 29, 2022, respectively. NCM LLC recorded equity in earnings for AC JV, LLC of $ 0.6 million and $ 0.4 million during the years ended December 28, 2023 and December 29, 2022, respectively, which are included in “Other non-operating income, net” in the audited Consolidated Statements of Operations. 10. BORROWINGS 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. As of August 7, 2023, upon emergence from bankruptcy, all historical debt of NCM LLC was discharged and the historical credit agreements were terminated. The following table summarizes NCM LLC’s total outstanding debt as of December 28, 2023 and December 29, 2022 and the significant terms of its borrowing arrangements: Outstanding Balance as of Borrowings ($ in millions) December 28, 2023 December 29, 2022 Maturity Date Interest Rate Revolving credit facility 2023 $ 10.0 $ — August 7, 2026 (1) Revolving credit facility 2018 — 167.0 June 20, 2023 (1) Revolving credit facility 2022 — 50.0 June 20, 2023 (1) Term loans - first tranche — 258.5 June 20, 2025 (1) Term loans - second tranche — 49.3 December 20, 2024 (1) Senior secured notes due 2028 — 374.2 April 15, 2028 5.875 % Senior unsecured notes due 2026 — 230.0 August 15, 2026 5.750 % Total borrowings 10.0 1,129.0 Less: Debt issuance costs and discounts related to term loans and senior notes — ( 7.9 ) Total borrowings, net 10.0 1,121.1 Less: current portion of debt — ( 1,121.1 ) Carrying value of long-term debt $ 10.0 $ — (1) The interest rates on the revolving credit facility and term loan are described below. Loan, Security and Guarantee Agreement – On August 7, 2023, NCM LLC entered into the Revolving Credit Facility 2023 with CIT Northbridge Credit LLC as agent. The Revolving Credit Facility 2023 is an asset backed line facility where the capacity depends upon NCM LLC’s trade accounts receivable balance, as adjusted for aged balances and other considerations, 79 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and is secured by a lien on substantially all of assets of NCM LLC. The maximum availability NCM LLC has access to under the Revolving Credit Facility 2023 is $ 55.0 million. The proceeds of the Revolving Credit Facility 2023 may be used for, inter alia, working capital and capital expenditures. The Revolving Credit Facility 2023 will mature on August 7, 2026. The interest rate under the Revolving Credit Facility 2023 is a base rate or SOFR benchmark plus (i) 3.75 % if less than 50 % of revolving commitments are utilized or (ii) 4.50 % if 50 % or more of revolving commitments are utilized (utilizing the average revolver usage for the prior calendar month as a benchmark for this determination). The Revolving Credit Facility 2023 also contains a financial maintenance covenant requiring that the fixed charge coverage ratio ending on the last day of each fiscal month is at least 1.1 to 1.0 during a “Trigger Period.” A Trigger Period begins upon (i) an event of default or (ii) if availability is less than the greater of (a) $ 5.0 million and (b) 10 % of aggregate revolving commitments. A Trigger Period ends only if (i) no event of default existed for the preceding thirty (30) consecutive days and (ii) availability is greater than both (a) $ 5.0 million and (b) 10 % of aggregate revolving commitments. Upon the effectiveness of the Revolving Credit Facility 2023, NCM LLC immediately drew $ 10.0 million from the facility, which represents the only amount currently outstanding under the Revolving Credit Facility 2023, as of December 28, 2023. The Revolving Credit Facility 2023 also contains customary representations, warranties, covenants, events of default, terms and conditions, including limitations on liens, incurrence of debt, mergers and significant asset dispositions. As of December 28, 2023, NCM LLC’s maximum availability under the $ 55.0 million Revolving Credit Facility 2023 was $ 44.4 million, net of $ 10.0 million outstanding and net letters of credit of $ 0.6 million. The weighted-average interest rate on the Revolving Credit Facility 2023 as of December 28, 2023 was 9.2 %. Upon execution of the Revolving Credit Facility 2023, NCM LLC recorded $ 2.4 million as debt issuance costs and received $ 9.1 million in proceeds. The Revolving Credit Facility 2023 contains a number of covenants and financial ratio requirements, with which NCM LLC was in compliance at December 28, 2023, including maintaining a fixed charge coverage ratio in excess of 1.1 to 1.0 on a monthly basis while maintaining availability in excess of either (i) $ 8.25 million or (ii) 15.0 % of the aggregate revolver commitments (the “availability thresholds”). NCM LLC is permitted to make quarterly dividend payments and other payments based on the fixed charge coverage ratio and availability thresholds so long as no default or event of default has occurred and continues to occur. Dividend payments and other distributions are made if the fixed charge coverage ratio is in excess of 1.1 to 1.0 and availability, after the distribution, is in compliance with the availability thresholds. There are no borrower distribution restrictions as long as NCM LLC’s fixed coverage ratio is 1.1 to 1.0 , NCM LLC maintains availability under the availability thresholds and NCM LLC is in compliance with its debt covenants. If there are borrower distribution restrictions on the payments, NCM LLC may not declare or pay any dividends, or make any payments on account of NCM LLC or make any other distribution for obligations of NCM LLC. When these restrictions are effective, NCM LLC may still pay the services fee and reimbursable costs pursuant to terms of a management services agreement, between NCM, Inc. and NCM LLC, in exchange for NCM, Inc. providing specified management services to NCM LLC. NCM LLC can also make payments pursuant to the Common Unit Adjustment Agreement and Tax Receivable Agreement in the amount, and at the time necessary to satisfy the contractual obligations with respect to the actual cash tax benefits payable to NCM LLC’s founding members. As of December 28, 2023, the NCM LLC’s fixed charge coverage ratio was 54.2 to 1.0 (versus the required ratio of 1.1 to 1.0 ) and had availability under the Revolving Credit Facility 2023 of $ 44.4 million (versus the applicable availability threshold of $ 8.25 million). As of December 28, 2023, NCM LLC was in compliance with the financial covenants of the Revolving Credit Facility 2023 described above. Senior Secured Credit Facility —NCM LLC’s credit agreement, as amended, (the “Credit Agreement”) consisted of a term loan facility and a revolving credit facility. As of August 7, 2023, upon emergence from bankruptcy, all outstanding debt under the Credit Agreement was discharged and the Credit Agreement was terminated. On March 8, 2021, NCM LLC entered into a second amendment to its Credit Agreement (“Credit Agreement Second Amendment”). Among other things, the Credit Agreement Second Amendment provided for certain modifications to the negative covenants, additional waivers and term changes outlined below and granted security interests in certain assets of NCM LLC and other potential loan parties that were not then pledged to the lenders. In addition, pursuant to the Credit Agreement Second Amendment, NCM LLC incurred a second tranche of the term loans in an aggregate principal amount of $ 50.0 million, the net proceeds of $ 43.0 million to be used for general corporate purposes. On January 5, 2022, NCM LLC entered into a third amendment to its Credit Agreement (“Credit Agreement Third Amendment”). Among other things, the Credit Agreement Third Amendment provided 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) changes to the consolidated net total leverage ratio and consolidated net senior secured leverage ratio financial covenants. Upon execution of the Credit Agreement Third Amendment, $ 6.4 million was recorded as debt issuance costs and $ 0.4 million was recorded within “Loss on modification and retirement of debt, net” during the year ended December 29, 2022. 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 80 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2.75 % or the base rate plus 1.75 %. The term loans amortized at a rate equal to 1.00 % annually, paid in equal quarterly installments. As of August 7, 2023, upon emergence from bankruptcy, all outstanding debt under the Credit Agreement, including the terms loans, was discharged and the Credit Agreement was terminated. Term Loans — Second Tranche —The interest rate on the second tranche of term loans was the LIBOR index plus 8.00 %. The term loans amortized at a rate equal to 1.00 % annually, paid in equal quarterly installments. As of August 7, 2023, upon emergence from bankruptcy, all outstanding debt under the Credit Agreement, including the term loans, was discharged and the Credit Agreement was terminated. Revolving Credit Facility 2018 —The revolving credit facility portion of NCM LLC’s senior secured credit facility was 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 Credit Agreement, and a portion was available for letters of credit. During March 2020, NCM LLC drew down an additional $ 110.0 million on the revolving credit facility to fund operations during the period of expected disrupted cash flows due to the temporary closure of the theaters within NCM LLC’s network due to the COVID-19 Pandemic. As of August 7, 2023, upon emergence from bankruptcy, all outstanding debt under the Credit Agreement, including borrowings under the revolving credit facility, was discharged and the Credit Agreement was terminated. The unused line fee was 0.50 % per annum which was consistent with the previous facility. Borrowings under the revolving credit facility accrued 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 %. The margin changed to the aforementioned range from a fixed margin of LIBOR index plus 2.00 % or the base rate plus 1.00 %. The applicable margin for the revolving credit facility was determined quarterly and was subject to adjustment based upon a consolidated net senior secured leverage ratio for NCM LLC (the ratio of secured funded debt less unrestricted cash and cash equivalents of up to $ 100.0 million, divided by Adjusted EBITDA for debt purposes, defined as NCM LLC’s net income before depreciation and amortization expense adjusted to also exclude non-cash share based compensation costs for NCM LLC plus integration payments received). Revolving Credit Facility 2022 —On January 5, 2022, NCM LLC entered into a revolving credit agreement (the “Revolving Credit Agreement 2022”). The Revolving Credit Agreement 2022 provided for revolving loan commitments of $ 50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022. As of August 7, 2023, upon emergence from bankruptcy, all outstanding debt under the Revolving Credit Agreement 2022 was discharged and the Revolving Credit Agreement 2022 was terminated. The Revolving Credit Agreement 2022 provided for (i) a cash interest rate of term Secured Overnight Financing Rate (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 terminated the commitments under the Revolving Credit Agreement 2022 at any time before maturity. Senior Unsecured Notes due 2026 —On August 19, 2016, NCM LLC completed a private placement of $ 250.0 million in aggregate principal amount of 5.750 % Senior Unsecured Notes (the “Notes due 2026”) for which the registered exchange offering was completed on November 8, 2016. The Notes due 2026 paid interest semi-annually in arrears on February 15 and August 15 of each year, which commenced on February 15, 2017. The Notes due 2026 were issued at 100 % of the face amount thereof and were the senior unsecured obligations of NCM LLC. As of August 7, 2023, upon emergence from bankruptcy, all outstanding debt under the Notes due 2026 was discharged and the Notes due 2026 were terminated, following $ 10.0 million made in cure payments. 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. Interest on the Notes due 2028 accrued at a rate of 5.875 % per annum and was payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2020. The Notes due 2028 were issued at 100 % of the face amount thereof and shared in the same collateral that secured NCM LLC’s obligations under the senior secured credit facility. As of August 7, 2023, upon emergence from bankruptcy, all outstanding debt under the Notes due 2028 was discharged and the Notes due 2028 were terminated. 81 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Future Maturities of Borrowings – The scheduled annual maturities on the Revolving Credit Facility 2023 as of December 28, 2023 are as follows (in millions): Year Amount 2024 $ — 2025 — 2026 10.0 2027 — 2028 — Thereafter — Total $ 10.0 11. SHARE-BASED COMPENSATION 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 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 was approved on May 4, 2022. On August 3, 2023, the Company effected a one-for-ten ( 1:10 ) reverse stock split of its common stock, par value $ 0.01 per share. The reverse stock split, which was authorized by its Board of Directors, was approved by the Company’s stockholders on August 2, 2023. The reverse stock split reduced the number of outstanding shares of the Company’s 2020 Plan to 1,500,000 . NCM, Inc.'s stockholders approved an additional 12,000,000 shares of common stock available for issuance or delivery under the 2020 Plan on November 2, 2023. 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. As of December 28, 2023, 12,394,912 shares remain available for future grants (assuming 100 % achievement of targets on performance-based restricted stock). The types of awards that may be granted under the 2020 Plan include stock options, stock appreciation rights, restricted stock, restricted stock units or other stock based awards. Certain option and share awards provide for accelerated vesting if there is a change in control, as defined in the 2016 Plan and 2020 Plan. 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 $ 4.5 million and $ 7.1 million for the years ended December 28, 2023 and December 29, 2022, 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): Years Ended December 28, 2023 December 29, 2022 Share-based compensation costs included in network costs $ 0.3 $ 0.7 Share-based compensation costs included in selling and marketing costs 0.7 1.7 Share-based compensation costs included in administrative and other costs 3.5 4.7 Total share-based compensation costs $ 4.5 $ 7.1 During the years ended December 28, 2023 and December 29, 2022, $ 0.1 million and $ 0.2 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 statements of operations for share-based compensation was approximately $ 0.0 million and $ 0.0 million for the years ended December 28, 2023 and December 29, 2022, respectively. As of December 28, 2023, there was $ 0.3 million unrecognized compensation cost related to unvested options, which will be recognized over a remaining period of 1.4 years. As of December 28, 2023, unrecognized compensation cost related to restricted stock and restricted stock units was approximately $ 2.1 million, which will be recognized over a weighted average remaining period of 1.9 years. Stock Options —The Company granted stock options during 2023 and 2022. A portion of the stock options awarded in 2022 and 2023 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 remaining portion of stock options awarded in 2022 and 2023 were 82 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. All options have either 10 -year or 15 -year contractual terms. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing valuation model that uses the assumptions noted in the table below. Expected volatilities are based on implied volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model. 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 2023 and 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. Treasury yield curve in effect at the time of grant. The following assumptions were used in the valuation of the options for the year ended December 28, 2023 and December 29, 2022: Years Ended December 28, 2023 December 29, 2022 Expected term (in years) 6.6 6.0 Risk free interest rate 4.1 % 2.6 % Expected volatility 86.4 % 68.1 % Dividend yield — % 4.8 % A summary of option award activity as of December 28, 2023, and changes during the year then ended are presented below: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value (in millions) Outstanding as of December 29, 2022 209,779 $ 43.39 8.0 $ — Granted 25,000 $ 35.00 — $ — Forfeited — $ — — $ — Expired — $ — — $ — Outstanding as of December 28, 2023 234,779 $ 42.50 7.3 $ — Exercisable as of December 28, 2023 157,517 $ 49.31 6.6 $ — Vested and expected to vest as of December 28, 2023 233,045 $ 42.59 7.3 $ — Restricted Stock Units —Under the non-vested stock program, common stock of the Company may be granted at no cost to officers, independent directors and employees, subject to requisite service and/or financial performance targets. As such restrictions lapse, the award vests in that proportion. The participants are entitled to dividend equivalents, although the sale and transfer of such shares is prohibited and the shares are subject to forfeiture during the restricted period. Additionally, the accrued dividend equivalents are subject to forfeiture during the vesting period should the underlying units not vest. As of December 28, 2023 and December 29, 2022, accrued dividend equivalents totaled $ 0.3 million and $ 0.8 million, respectively and during the years ended December 28, 2023 and December 29, 2022, the Company paid $ 0.5 million and $ 0.5 million, respectively, for dividend equivalents upon vesting of the restricted stock units. The Company has issued time-based 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 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. Non-employee directors serving on the Board as of August 18, 2023, received a one-time grant with a fair market value equal to $ 100,000 . The RSUs will vest after four years. The RSUs will be settled in shares of the Company’s common stock. The RSU awards include the right to receive dividend equivalents, subject to vesting. Additionally, non-employee directors will receive quarterly grants that vest immediately with a fair market value of $ 50,000 . The number of shares will be determined by utilizing the weighted average closing price of the five days before and five days after the respective quarterly earnings release. Non-employee directors may choose to elect up to 20 % of their quarterly grant in cash. The grant date fair value of restricted stock units is based on the closing market price of NCM, Inc. common stock on the date of grant. An annual forfeiture rate of 2 - 6 % was estimated to reflect the potential separation of employees. The weighted average grant date fair value of non-vested stock was $ 3.42 and $ 2.12 for the years ended December 28, 2023 and December 29, 2022, respectively. The total fair value of awards that vested during the years ended December 28, 2023 and December 29, 2022 was $ 7.1 million and $ 5.9 million, respectively. 83 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of restricted stock unit activity as of December 28, 2023, and changes during the year then ended are presented below: Number of Restricted Stock Units (1) Weighted Average Grant-Date Fair Value Non-vested balance as of December 29, 2022 516,384 $ 28.04 Granted 497,390 $ 3.42 Vested (2) ( 239,450 ) $ 29.40 Forfeited ( 29,927 ) $ 42.96 Non-vested balance as of December 28, 2023 744,397 $ 10.55 (1) Includes 145,043 shares of performance-based restricted stock units as of December 28, 2023, including 74,560 shares granted during the year and 2,475 shares forfeited during the year. (2) Includes 13,057 vested shares that were withheld to cover tax obligations and were subsequently canceled. The above table reflects performance-based restricted stock granted at 100 % achievement of performance conditions and as such does not reflect the maximum or minimum number of shares of performance-based restricted stock contingently issuable. As of December 28, 2023, the total number of restricted stock units that are ultimately expected to vest, after consideration of expected forfeitures and current projections of estimated vesting of performance-based restricted stock is 737,232 shares. 12. EMPLOYEE BENEFIT PLANS 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. The Plan provides that participants may contribute up to 20 % of their compensation, subject to Internal Revenue Service limitations. Employee contributions are invested in various investment funds based upon election made by the employee. In response to the COVID-19 Pandemic and Chapter 11 Case, the Company temporarily suspended its match of a portion of employees 401(k) contributions effective April 2020 through December 28, 2023. 13. COMMITMENTS AND CONTINGENCIES Legal Actions —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 has entered into operating lease agreements for its corporate headquarters and other regional offices. The Company has right-of-use (“ROU”) assets of $ 4.3 million and short-term and long-term lease liabilities of $ 1.0 million and $ 5.0 million, respectively, on the balance sheet as of December 28, 2023 for all material leases with terms longer than twelve months. As of December 29, 2022 the Company had ROU assets of $ 16.9 million and short-term and long-term lease liabilities of $ 2.2 million and $ 18.0 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. Certain leases were rejected or modified in conjunction with NCM LLC’s Chapter 11 Case and are no longer included within these balances. The Company has options on existing 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. None of these options were considered reasonably certain of exercise and thus have not been recognized as part of the ROU assets and lease liabilities. As of December 28, 2023, the Company had a weighted average remaining lease term of 3.8 years on these leases. The Company has also entered into certain short-term leases with a term of less than one year. These leases are not included within the Company’s ROU assets or lease liabilities due to the Company’s election of the practical expedient in ASC 842-20-25-2 for short-term leases. During the twelve months ended December 28, 2023 and December 29, 2022, 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 Operations depending upon the nature of the use of the facility. 84 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 28, 2023 December 29, 2022 Operating lease cost $ 3.2 $ 3.4 Variable lease cost 0.5 0.5 Total lease cost $ 3.7 $ 3.9 The Company made lease payments for the year ended December 28, 2023 and December 29, 2022 of $ 3.6 million and $ 3.8 million, respectively. These payments are included within cash flows from operating activities within the audited Consolidated Statement of Cash Flows. The minimum lease payments under noncancellable operating leases, including leases executed but not yet commenced, as of December 28, 2023 were as follows (in millions): Year Minimum Lease Payments 2024 $ 2.1 2025 2.1 2026 2.6 2027 2.6 2028 1.1 Thereafter 5.5 Total 16.0 Less: Imputed interest on future lease payments ( 10.0 ) Total lease liability as of December 28, 2023 per the Consolidated Balance Sheet $ 6.0 When measuring the ROU assets and lease liabilities recorded, the Company utilized its incremental borrowing rate in order to determine the present value of the lease payments as the leases do not provide an implicit rate. The Company used the rate of interest that it would have paid to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. As of December 28, 2023, the Company’s weighted average annual discount rate used to establish the ROU assets and lease liabilities was 6.9 %. Operating Commitments - ESAs and Affiliate Agreements —The Company has entered into long-term ESAs with the ESA Parties and multi-year agreements with certain network affiliates, or third-party theater circuits. The ESAs and network affiliate agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions. The Company recognizes intangible assets upon issuance of membership units to the ESA Parties in accordance with NCM LLC’s Common Unit Adjustment Agreement and upfront cash payments to the affiliates for the contractual rights to provide the Company’s services within their theaters as further discussed within Note 6— Intangible Assets . These ESAs and network affiliate agreements are considered leases under ASC 842 once the asset is identified and the period of control is determined upon the scheduling of the showtimes by the exhibitors, typically one week prior to the showtime. As such, the leases are considered short-term in nature, specifically less than one month. Within ASC 842, leases with terms of less than one month are exempt from the majority of the accounting and disclosure requirements, including disclosure of short-term lease expense. 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. In consideration for NCM LLC’s access to the ESA Parties’ theater attendees for on-screen advertising and use of lobbies and other space within the ESA Parties’ theaters for the LEN and lobby promotions, the ESA Parties 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 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 %. The theater access fee paid in the aggregate to all ESA Parties cannot be less than 12 % of NCM LLC’s aggregate advertising revenue (as defined in the ESA), or it will be adjusted upward to reach this minimum payment. As of December 28, 2023 and December 29, 2022, the Company had no liabilities recorded for the minimum payment, as the theater access fee was in excess of the minimum. Following the 2019 ESA Amendments, Cinemark and Regal (until July 14, 2023, when Regal ceased being a party to an ESA) 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 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 85 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 (until July 14, 2023, when Regal ceased being a party to an ESA) 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 network affiliates compensation is considered variable lease expense and varies by circuit depending upon the agreed upon terms of the network affiliate agreement. The majority of agreements are centered around a revenue share where an agreed upon percentage of the advertising revenue received from a theater’s attendance is paid to the circuit. As part of the network affiliate agreements entered into in the ordinary course of business under which the Company sells advertising for display in various network affiliate theater chains, the Company has agreed to certain minimum revenue guarantees on a per attendee basis, which in some cases may exceed the applicable revenue share rate. If a network affiliate achieves the attendance or minimum revenue per attendee set forth in their respective agreement, the Company has guaranteed minimum revenue for the network affiliate per attendee if such amount paid under the revenue share arrangement is less than its guaranteed amount. As of December 28, 2023, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $ 276.2 million over the remaining terms of the network affiliate agreements. These minimum guarantees relate to various affiliate agreements ranging in term from one to fourteen years, prior to any renewal periods of which some are at the option of the Company. During the year ended December 28, 2023 and December 29, 2022 the Company paid $ 0.0 million and $ 0.0 million , respectively, related to these minimum guarantees. As of December 28, 2023 and December 29, 2022, the Company had $ 0.0 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. 14. FAIR VALUE MEASUREMENTS Non-Recurring Measurements — Certain assets are measured at fair value on a non-recurring basis. 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 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. Other investments consisted of the following (in millions): As of December 28, 2023 December 29, 2022 Investment in AC JV, LLC $ 0.7 $ 0.8 Other investments — 0.1 Total $ 0.7 $ 0.9 During the years ended December 28, 2023 and December 29, 2022, the Company recorded impairment charges of $ 0.0 million and $ 0.1 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 $ 0.0 million as of December 28, 2023. As of December 28, 2023, 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. The other investments were recorded based upon the fair value of the services provided in exchange for the investment. Refer to Note 1— Basis of Presentation and Summary of Significant Accounting Policies for more details. 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 facilities are considered a reasonable estimate of fair value due to its floating-rate terms. As of August 7, 2023, upon emergence from bankruptcy, all historical debt of NCM LLC was discharged. The estimated fair values of the Company’s financial instruments where carrying values did not approximate fair 86 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS value are as follows (in millions): As of December 28, 2023 As of December 29, 2022 Carrying Value Fair Value Carrying Value Fair Value (1) Revolving credit facilities $ — $ — $ 217.0 $ 58.0 Term Loans - first tranche $ — $ — $ 258.5 $ 65.8 Term Loans - second tranche $ — $ — $ 49.3 $ 13.1 Senior Notes due 2028 $ — $ — $ 374.2 $ 91.7 Senior Notes due 2026 $ — $ — $ 230.0 $ 6.9 (1) The Company has estimated the fair value on an average of at least two non-binding broker quotes and the Company’s analysis. 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 —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 Reporting Date Using Fair Value As of December 29, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) ASSETS: Cash equivalents (1) $ 0.8 $ 0.8 $ — $ — Short-term marketable securities (2) 0.7 — 0.7 — Long-term marketable securities (2) 0.3 — 0.3 — Total assets $ 1.8 $ 0.8 $ 1.0 $ — (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. (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. The Company’s government agency bonds, commercial paper and certificates of deposit are valued using third-party broker quotes. The value of the Company’s government agency bonds and municipal bonds are derived from quoted market information. The inputs in the valuation are classified as Level 1 if there is an active market for these securities; however, if an active market does not exist, the inputs are recorded at a lower level in the fair value hierarchy. The value of commercial paper and certificates of deposit is derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy. Original cost of short term marketable securities is based on the specific identification method. The Company did not recorded an allowance for credit losses for the marketable securities balance as of December 29, 2022 given the immaterial difference between the amortized cost basis and the aggregate fair value of the Company's securities. The amortized cost basis, aggregate fair value and maturities of the marketable securities the Company held as of December 29, 2022 are as follows: 87 NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 29, 2022 Amortized Cost Basis (in millions) Aggregate Fair Value (in millions) Maturities (1) (in years) MARKETABLE SECURITIES: Short-term certificates of deposit $ 0.7 $ 0.7 1.0 Total short-term marketable securities 0.7 0.7 Long-term certificates of deposit 0.3 0.3 1.3 Total long-term marketable securities 0.3 0.3 Total marketable securities $ 1.0 $ 1.0 (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. 15. VALUATION ACCOUNT The Company’s valuation allowance on deferred tax assets for the years ended December 28, 2023 and December 29, 2022 was as follows (in millions): Years Ended December 28, 2023 December 29, 2022 VALUATION ALLOWANCE ON DEFERRED TAX ASSETS: Balance at beginning of period $ 245.5 $ 223.8 Valuation allowance added (1) — 21.7 Valuation allowance reversed ( 99.5 ) — Balance at end of period $ 146.0 $ 245.5 (1) The changes within the valuation allowance during the years ended December 28, 2023 and December 29, 2022 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. 88 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.