UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September ~~26, 2019~~24, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-33296

NATIONAL CINEMEDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware

20-5665602

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

6300 S. Syracuse Way, Suite 300

~~Centennial, Colorado~~

Centennial

Colorado

80111

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (303) 792-3600

Securities registered pursuant to Section 12(b) of the Act:



~~Title of each class~~		~~Trading symbol~~	~~Name of each exchange on which registered~~
Common Stock, par value $0.01 per share	NCMI		The Nasdaq Stock Market LLC
(Title of each class)		(Trading symbol)		(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of ~~November 1, 2019, 79,241,224~~October 29, 2020, 79,580,626 shares of the registrant’s common stock (including unvested restricted shares), par value of $0.01 per share, were outstanding.

TABLE OF CONTENTS

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(In millions, except share and per share data)~~

~~(UNAUDITED)~~

PART I

Item 1. Financial Statements

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

September 26, 2019 December 27, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 46.3
$ 41.4
Short-term marketable securities 8.1
24.0
Receivables, net of allowance of $5.7 and $6.0, respectively 121.6
149.9
Income tax receivable 0.2
0.3
Amounts due from founding members, net 3.7
5.8
Current portion of notes receivable - founding members (including receivables from related parties
   of $2.8 and $4.2, respectively)
4.2
5.6
Prepaid expenses and other current assets 3.5
3.9
Total current assets 187.6
230.9
NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $70.0 and $62.5, respectively 32.1
33.6
Intangible assets, net of accumulated amortization of $193.0 and $172.7, respectively 658.3
684.5
Deferred tax assets, net of valuation allowance of $78.9 and $80.1, respectively 167.9
173.9
Other investments 1.1
3.0
Long-term marketable securities 8.5
10.2
Debt issuance costs, net 4.2
5.0
Other assets 24.4
0.7
Total non-current assets 896.5
910.9
TOTAL ASSETS $ 1,084.1
$ 1,141.8
LIABILITIES AND EQUITY/(DEFICIT)
CURRENT LIABILITIES:
Amounts due to founding members, net $ 24.8
$ 30.0
Payable to founding members under tax receivable agreement (including payables to related
   parties of $11.1 and $11.2, respectively)
15.3
15.5
Accrued expenses 21.6
21.7
Accrued payroll and related expenses 11.7
15.3
Accounts payable 16.5
18.0
Deferred revenue 10.4
7.3
Short-term debt 2.7
2.7
Other current liabilities 1.5
—
Total current liabilities 104.5
110.5
NON-CURRENT LIABILITIES:
Long-term debt, net of debt issuance costs of $6.6 and $7.8, respectively 894.0
920.9
Payable to founding members under tax receivable agreement (including payables to related
   parties of $133.2 and $141.1, respectively)
183.4
195.6
Other liabilities 24.5
4.0
Total non-current liabilities 1,101.9
1,120.5
Total liabilities 1,206.4
1,231.0
COMMITMENTS AND CONTINGENCIES (NOTE 8)

EQUITY/(DEFICIT):
NCM, Inc. Stockholders’ Equity/(Deficit):
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding,
   respectively
—
—
Common stock, $0.01 par value; 175,000,000 shares authorized, 77,362,387 and 76,976,398 issued
   and outstanding, respectively
0.8
0.8
Additional paid in capital/(deficit) (210.8 ) (215.2 )
Retained earnings (distributions in excess of earnings) (176.9 ) (153.6 )
Total NCM, Inc. stockholders’ equity/(deficit) (386.9 ) (368.0 )
Noncontrolling interests 264.6
278.8
Total equity/(deficit) (122.3 ) (89.2 )
TOTAL LIABILITIES AND EQUITY/(DEFICIT) $ 1,084.1
$ 1,141.8
CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)

(UNAUDITED)


	As of
	September 24, 2020		December 26, 2019
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	217.7	$	55.9
Short-term marketable securities	1.3		17.5
Receivables, net of allowance of $2.4 and $6.2, respectively	10.8		170.8
Amounts due from founding members, net	0		6.6
Prepaid expenses and other current assets	3.6		3.5
Total current assets	233.4		254.3
NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $77.3 and $70.7, respectively	28.3		33.2
Intangible assets, net of accumulated amortization of $217.1 and $198.9, respectively	634.4		643.7
Deferred tax assets, net of valuation allowance of $72.7 and $81.6, respectively	170.1		162.1
Other investments	0.9		1.0
Long-term marketable securities	1.7		7.5
Debt issuance costs, net	3.6		3.9
Other assets	25.4		24.3
Total non-current assets	864.4		875.7
TOTAL ASSETS	$	1,097.8	$	1,130.0
LIABILITIES AND EQUITY/(DEFICIT)
CURRENT LIABILITIES:
Amounts due to founding members, net	$	1.6	$	36.8
Payable to founding members under tax receivable agreement (including payables to related parties of $1.0 and $10.3, respectively)	1.4		14.2
Accrued expenses	21.4		22.1
Accrued payroll and related expenses	5.1		13.8
Accounts payable	9.4		20.7
Deferred revenue	7.0		7.6
Short-term debt	2.7		2.7
Other current liabilities	1.8		1.6
Total current liabilities	50.4		119.5
NON-CURRENT LIABILITIES:
Long-term debt, net of debt issuance costs of $8.4 and $9.0, respectively	1,050.5		923.9
Payable to founding members under tax receivable agreement (including payables to related parties of $133.6 and $133.5, respectively)	184.1		183.8
Other liabilities	23.2		24.0
Total non-current liabilities	1,257.8		1,131.7
Total liabilities	1,308.2		1,251.2
COMMITMENTS AND CONTINGENCIES (NOTE 8)
EQUITY/(DEFICIT):
NCM, Inc. Stockholders’ Equity/(Deficit):
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding, respectively	0		0
Common stock, $0.01 par value; 175,000,000 shares authorized, 78,037,611 and 77,568,986 issued and outstanding, respectively	0.8		0.8
Additional paid in capital/(deficit)	(208.4)		(209.2)
Retained earnings (distributions in excess of earnings)	(225.6)		(171.1)
Total NCM, Inc. stockholders’ equity/(deficit)	(433.2)		(379.5)
Noncontrolling interests	222.8		258.3
Total equity/(deficit)	(210.4)		(121.2)
TOTAL LIABILITIES AND EQUITY/(DEFICIT)	$	1,097.8	$	1,130.0

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In millions, except share and per share data)

(UNAUDITED)


														Three Months Ended				Nine Months Ended
	Three Months Ended						Nine Months Ended							September 24, 2020		September 26, 2019		September 24, 2020		September 26, 2019
	September 26, 2019			September 27, 2018			September 26, 2019			September 27, 2018
REVENUE (including revenue from related parties of $5.7, $5.8, $17.5 and $21.8, respectively)	$	110.5		$	110.1		$	297.6		$	304.0
REVENUE (including revenue from related parties of $0.2, $5.7, $4.5 and $17.5, respectively)													REVENUE (including revenue from related parties of $0.2, $5.7, $4.5 and $17.5, respectively)	$	6.0	$	110.5	$	74.7	$	297.6
OPERATING EXPENSES:													OPERATING EXPENSES:
Advertising operating costs	9.6			10.3			26.8			26.5			Advertising operating costs	1.1		9.6		8.4		26.8
Network costs	3.2			3.2			10.1			10.0			Network costs	1.8		3.2		6.3		10.1
Theater access fees—founding members (including fees to related parties of $13.5, $13.4, $40.9 and $55.5, respectively)	20.1			19.7			60.8			61.8
Theater access fees and revenue share to founding members (including fees to related parties of $1.0, $13.5, $13.6 and $40.9, respectively)													Theater access fees and revenue share to founding members (including fees to related parties of $1.0, $13.5, $13.6 and $40.9, respectively)	1.8		20.1		19.5		60.8
Selling and marketing costs	17.0			15.3			48.4			48.0			Selling and marketing costs	7.5		17.0		28.1		48.4
Administrative and other costs	10.4			9.3			32.2			34.7			Administrative and other costs	5.8		10.4		23.0		32.2
Impairment of long-lived assets													Impairment of long-lived assets	0		0		1.7		0
Depreciation expense	3.4			3.1			10.0			9.0			Depreciation expense	3.1		3.4		9.5		10.0
Amortization expense	—			6.9			—			20.5
Amortization of intangibles recorded for network theater screen leases	6.8			—			20.7			—			Amortization of intangibles recorded for network theater screen leases	6.2		6.8		18.4		20.7
Total	70.5			67.8			209.0			210.5			Total	27.3		70.5		114.9		209.0
OPERATING INCOME	40.0			42.3			88.6			93.5
OPERATING (LOSS) INCOME													OPERATING (LOSS) INCOME	(21.3)		40.0		(40.2)		88.6
NON-OPERATING EXPENSES:													NON-OPERATING EXPENSES:
Interest on borrowings	13.8			14.4			42.4			42.3			Interest on borrowings	13.7		13.8		40.9		42.4
Interest income	(0.4		)	(0.3		)	(1.4		)	(1.0		)	Interest income	(0.1)		(0.4)		(0.6)		(1.4)
(Gain) loss on early retirement of debt, net	—			(0.3		)	(0.3		)	0.9
Loss (gain) on modification and retirement of debt, net													Loss (gain) on modification and retirement of debt, net	0		0		0.3		(0.3)
(Gain) loss on re-measurement of the payable to founding members under the tax receivable agreement	(0.5		)	3.2			1.0			(4.6		)	(Gain) loss on re-measurement of the payable to founding members under the tax receivable agreement	(1.0)		(0.5)		(0.7)		1.0
Other non-operating income	—			(0.1		)	(0.3		)	(0.1		)
Other non-operating expense (income)													Other non-operating expense (income)	0.1		0		0.1		(0.3)
Total	12.9			16.9			41.4			37.5			Total	12.7		12.9		40.0		41.4
INCOME BEFORE INCOME TAXES	27.1			25.4			47.2			56.0
Income tax expense (benefit)	4.3			(0.3		)	6.0			16.7
CONSOLIDATED NET INCOME	22.8			25.7			41.2			39.3
Less: Net income attributable to noncontrolling interests	13.6			14.5			24.2			25.8
NET INCOME ATTRIBUTABLE TO NCM, INC.	$	9.2		$	11.2		$	17.0		$	13.5
COMPREHENSIVE INCOME ATTRIBUTABLE TO NCM, INC.	$	9.2		$	11.2		$	17.0		$	13.5
(LOSS) INCOME BEFORE INCOME TAXES													(LOSS) INCOME BEFORE INCOME TAXES	(34.0)		27.1		(80.2)		47.2
Income tax (benefit) expense													Income tax (benefit) expense	(3.1)		4.3		(7.7)		6.0
CONSOLIDATED NET (LOSS) INCOME													CONSOLIDATED NET (LOSS) INCOME	(30.9)		22.8		(72.5)		41.2
Less: Net (loss) income attributable to noncontrolling interests													Less: Net (loss) income attributable to noncontrolling interests	(18.2)		13.6		(42.3)		24.2
NET (LOSS) INCOME ATTRIBUTABLE TO NCM, INC.													NET (LOSS) INCOME ATTRIBUTABLE TO NCM, INC.	$	(12.7)	$	9.2	$	(30.2)	$	17.0
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO NCM, INC.													COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO NCM, INC.	$	(12.7)	$	9.2	$	(30.2)	$	17.0

NET INCOME PER NCM, INC. COMMON SHARE:
NET (LOSS) INCOME PER NCM, INC. COMMON SHARE:													NET (LOSS) INCOME PER NCM, INC. COMMON SHARE:
Basic	$	0.12		$	0.15		$	0.22		$	0.18		Basic	$	(0.16)	$	0.12	$	(0.39)	$	0.22
Diluted	$	0.12		$	0.14		$	0.22		$	0.16		Diluted	$	(0.16)	$	0.12	$	(0.39)	$	0.22
WEIGHTED AVERAGE SHARES OUTSTANDING:													WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	77,356,833			76,924,983			77,293,234			76,825,828			Basic	78,016,737		77,356,833		77,925,552		77,293,234
Diluted	77,883,571			77,485,561			77,687,393			156,987,736			Diluted	78,016,737		77,883,571		77,925,552		77,687,393

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) (UNAUDITED)


	Nine Months Ended							Nine Months Ended
	September 26, 2019			September 27, 2018				September 24, 2020		September 26, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:							CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	41.2		$	39.3
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Deferred income tax expense	6.0			16.6
Consolidated net (loss) income							Consolidated net (loss) income	$	(72.5)	$	41.2
Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities:							Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities:
Deferred income tax (benefit) expense							Deferred income tax (benefit) expense	(7.7)		6.0
Depreciation expense	10.0			9.0			Depreciation expense	9.5		10.0
Amortization expense	—			20.5
Amortization of intangibles recorded for network theater screen leases	20.7			—			Amortization of intangibles recorded for network theater screen leases	18.4		20.7
Non-cash share-based compensation	4.2			6.2			Non-cash share-based compensation	1.1		4.2
Impairment of long-lived assets							Impairment of long-lived assets	1.7		0
Impairment on investment	2.0			0.4			Impairment on investment	0		2.0
Amortization of debt issuance costs	1.9			2.0			Amortization of debt issuance costs	1.9		1.9
(Gain) loss on early retirement of debt, net	(0.3		)	0.9
Non-cash loss (gain) on re-measurement of the payable to founding members under the tax receivable agreement	1.0			(4.6		)
Loss (gain) on modification and retirement of debt, net							Loss (gain) on modification and retirement of debt, net	0.3		(0.3)
Non-cash (gain) loss on re-measurement of the payable to founding members under the tax receivable agreement							Non-cash (gain) loss on re-measurement of the payable to founding members under the tax receivable agreement	(0.7)		1.0
Other	(0.9		)	(0.9		)	Other	0		(0.9)
Payments to third parties for extension of intangible assets	(0.6		)	—			Payments to third parties for extension of intangible assets	0		(0.6)
Proceeds from disposition of intangible assets by network affiliates	0.5			—			Proceeds from disposition of intangible assets by network affiliates	0		0.5
Founding member integration and other encumbered theater payments (including payments from related parties of $0.8 in 2019)	16.3			—
Founding member integration and other encumbered theater payments (including payments from related parties of $0.1 and $0.8, respectively)							Founding member integration and other encumbered theater payments (including payments from related parties of $0.1 and $0.8, respectively)	9.7		16.3
Payment to the founding members under tax receivable agreement (including payments to related parties of $9.0 and $9.8, respectively)							Payment to the founding members under tax receivable agreement (including payments to related parties of $9.0 and $9.8, respectively)	(12.8)		(14.0)

Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Receivables, net	28.3			46.5			Receivables, net	163.3		28.3
Accounts payable and accrued expenses	(3.0		)	(0.4		)	Accounts payable and accrued expenses	(18.7)		(3.0)
Amounts due to/from founding members, net	(0.2		)	(0.5		)	Amounts due to/from founding members, net	(4.7)		(0.2)
Payment to the founding members under tax receivable agreement (including payments to related parties of $9.8 and $17.6, respectively)	(14.0		)	(17.6		)
Deferred revenue	3.1			(0.6		)	Deferred revenue	(0.6)		3.1
Other, net	(2.6		)	2.0			Other, net	(2.3)		(2.6)
Net cash provided by operating activities	113.6			118.8			Net cash provided by operating activities	85.9		113.6
CASH FLOWS FROM INVESTING ACTIVITIES:							CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(9.8		)	(10.0		)	Purchases of property and equipment	(6.6)		(9.8)
Purchases of marketable securities	(9.9		)	(30.9		)	Purchases of marketable securities	(8.2)		(9.9)
Proceeds from sale and maturities of marketable securities	28.3			20.9			Proceeds from sale and maturities of marketable securities	30.3		28.3
Proceeds from notes receivable - founding members	1.4			—
Net cash provided by (used in) investing activities	10.0			(20.0		)
Proceeds from notes receivable - founding members (including payments from related parties of $0.0 and $1.4, respectively)							Proceeds from notes receivable - founding members (including payments from related parties of $0.0 and $1.4, respectively)	0		1.4
Net cash provided by investing activities							Net cash provided by investing activities	15.5		10.0
CASH FLOWS FROM FINANCING ACTIVITIES:							CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends	(40.4		)	(41.2		)	Payment of dividends	(26.5)		(40.4)
Proceeds from revolving credit facility	100.0			139.2			Proceeds from revolving credit facility	210.0		100.0
Repayments of revolving credit facility	(121.0		)	(137.2		)	Repayments of revolving credit facility	(82.0)		(121.0)
Repayments of Notes due 2026	(4.6		)	(7.2		)
Proceeds from term loan facility	—			270.0

Repayment of term loan facility	(2.0		)	(270.7		)	Repayment of term loan facility	(2.0)		(2.0)
Repayment of Senior Notes due 2026							Repayment of Senior Notes due 2026	0		(4.6)
Payment of debt issuance costs	—			(6.6		)	Payment of debt issuance costs	(1.3)		0
Founding member integration and other encumbered theater payments (including payments from related parties of $12.1 in 2018)	—			17.2
Distributions to founding members	(49.4		)	(63.0		)	Distributions to founding members	(36.8)		(49.4)
Repurchase of stock for restricted stock tax withholding	(1.3		)	(2.2		)	Repurchase of stock for restricted stock tax withholding	(1.0)		(1.3)
Net cash used in financing activities	(118.7		)	(101.7		)
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	60.4		(118.7)
CHANGE IN CASH AND CASH EQUIVALENTS:	4.9			(2.9		)	CHANGE IN CASH AND CASH EQUIVALENTS:	161.8		4.9
Cash and cash equivalents at beginning of period	41.4			30.2			Cash and cash equivalents at beginning of period	55.9		41.4
Cash and cash equivalents at end of period	$	46.3		$	27.3		Cash and cash equivalents at end of period	$	217.7	$	46.3

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In millions)

(UNAUDITED)


	Nine Months Ended						Nine Months Ended
	September 26, 2019		September 27, 2018				September 24, 2020		September 26, 2019
Supplemental disclosure of non-cash financing and investing activity:						Supplemental disclosure of non-cash financing and investing activity:
Purchase of an intangible asset with NCM LLC equity	$	7.6	$	15.9		Purchase of an intangible asset with NCM LLC equity	$	10.5	$	7.6
Accrued distributions to founding members (including accrued distributions to related parties of $22.4 and $19.1, respectively)	$	22.5	$	19.1
Accrued integration and other encumbered theater payments due from founding members (including accrued payments due from related parties of $0.0 and $0.3, respectively)	$	5.2	$	5.1
Accrued purchases of property and equipment	$	—	$	1.0
Increase (decrease) in dividend equivalent accrual not requiring cash in the period	$	0.8	$	(1.3	)
Accrued distributions to founding members (including accrued distributions to related parties of $0.0 and $22.4, respectively)						Accrued distributions to founding members (including accrued distributions to related parties of $0.0 and $22.4, respectively)	$	0	$	22.5
Accrued integration and other encumbered theater payments due from founding members						Accrued integration and other encumbered theater payments due from founding members	$	0	$	5.2

(Decrease) increase in dividend equivalent accrual not requiring cash in the period						(Decrease) increase in dividend equivalent accrual not requiring cash in the period	$	(0.2)	$	0.8
Supplemental disclosure of cash flow information:						Supplemental disclosure of cash flow information:
Cash paid for interest	$	37.1	$	38.2		Cash paid for interest	$	37.6	$	37.1
Cash paid for income taxes, net of refunds	$	0.3	$	0.3		Cash paid for income taxes, net of refunds	$	0.5	$	0.3

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY/(DEFICIT)

(In millions, except share and per share data)

(UNAUDITED)


			NCM, Inc.
						Additional Paid in Capital (Deficit)		Retained Earnings (Distribution in Excess of Earnings)		Noncontrolling Interest
			Common Stock
	Consolidated		Shares	Amount
Balance—June 27, 2019	$	(110.5)	77,349,628	$	0.8	$	(211.9)	$	(172.6)	$	273.2
Distributions to founding members	(22.5)		—	—		—		—		(22.5)
Income tax and other impacts of NCM LLC ownership changes	0		—	—		0.1		—		(0.1)
Comprehensive income, net of tax	22.8		—	—		—		9.2		13.6
Share-based compensation issued	0		12,759	—		0		—		—
Share-based compensation expensed/capitalized	1.4		—	—		1.0		—		0.4
Cash dividends declared $0.17 per share	(13.5)		—	—		—		(13.5)		—
Balance—September 26, 2019	$	(122.3)	77,362,387	$	0.8	$	(210.8)	$	(176.9)	$	264.6

Balance—June 25, 2020	$	(175.0)	78,000,338	$	0.8	$	(209.1)	$	(207.4)	$	240.7



Comprehensive loss, net of tax	(30.9)		—	—		—		(12.7)		(18.2)
Share-based compensation issued	0		37,273	—		0		—		—
Share-based compensation expensed/capitalized	1.0		—	—		0.7		—		0.3
Cash dividends declared $0.07 per share	(5.5)		—	—		—		(5.5)		—
Balance—September 24, 2020	$	(210.4)	78,037,611	$	0.8	$	(208.4)	$	(225.6)	$	222.8

Three Months Ended
Additional
Paid in Capital (Deficit) Retained
Earnings
(Distribution in Excess of Earnings) Noncontrolling Interest
Common Stock
Consolidated Shares Amount
Balance—June 28, 2018 $ (95.1 ) 76,915,532
$ 0.8
$ (227.1 ) $ (154.9 ) $ 286.1
Distributions to founding members (19.1 ) —
—
—
—
(19.1 )
Income tax and other impacts of NCM LLC ownership changes 9.9
—
—
10.0
—
(0.1 )
Comprehensive income, net of tax 25.7
—
—
—
11.2
14.5
Share-based compensation issued —
16,962
—
—
—
—
Share-based compensation expense/capitalized 1.3
—
—
0.9
—
0.4
Cash dividends declared $0.17 per share (13.1 ) —
—
—
(13.1 ) —
Balance—September 27, 2018 $ (90.4 ) 76,932,494
$ 0.8
$ (216.2 ) $ (156.8 ) $ 281.8

Balance—June 27, 2019 $ (110.5 ) 77,349,628
$ 0.8
$ (211.9 ) $ (172.6 ) $ 273.2
Distributions to founding members (22.5 ) —
—
—
—
(22.5 )
Income tax and other impacts of NCM LLC ownership changes —
—
—
0.1
—
(0.1 )
Comprehensive income, net of tax 22.8
—
—
—
9.2
13.6
Share-based compensation issued —
12,759
—
—
—
—
Share-based compensation expense/capitalized 1.4
—
—
1.0
—
0.4
Cash dividends declared $0.17 per share (13.5 ) —
—
—
(13.5 ) —
Balance—September 26, 2019 $ (122.3 ) 77,362,387
$ 0.8
$ (210.8 ) $ (176.9 ) $ 264.6


																								NCM, Inc.
				Nine Months Ended																							Additional Paid in Capital (Deficit)			Retained Earnings (Distribution in Excess of Earnings)			Noncontrolling Interest
							Additional Paid in Capital (Deficit)				Retained Earnings (Distribution in Excess of Earnings)				Noncontrolling Interest									Common Stock
				Common Stock
	Consolidated			Shares	Amount
Balance—December 28, 2017	$	(74.8	)	76,242,222	$	0.8			$	(233.1				)					$	(130.2	)	$	287.7
Cumulative-effect adjustment for adoption of ASU 2014-09	(0.2		)	—	—				—										(0.2		)	—
Distributions to founding members	(44.5		)	—	—		—				—				(44.5		)
NCM LLC equity issued for purchase of intangible asset	15.9			—	—		7.7				—				8.2
Income tax and other impacts of NCM LLC ownership changes	9.6			—	—		6.9				—				2.7
Comprehensive income, net of tax	39.3			—	—		—				13.5				25.8
Share-based compensation issued	(2.1		)	690,272	—		(2.1		)		—				—
Share-based compensation expense/capitalized	6.3			—	—		4.4				—				1.9
Cash dividends declared $0.51 per share	(39.9		)	—	—		—				(39.9		)		—
Balance—September 27, 2018	$	(90.4	)	76,932,494	$	0.8	$	(216.2	)		$	(156.8	)		$	281.8
																				Consolidated				Shares	Amount				Additional Paid in Capital (Deficit)			Retained Earnings (Distribution in Excess of Earnings)			Noncontrolling Interest
Balance—December 27, 2018	$	(89.2	)	76,976,398	$	0.8	$	(215.2	)		$	(153.6	)		$	278.8		Balance—December 27, 2018		$	(89.2)			76,976,398	$	0.8
Distributions to founding members	(44.0		)	—	—		—				—				(44.0		)	Distributions to founding members		(44.0)				—	—
NCM LLC equity issued for purchase of intangible asset	7.6			—	—		3.7				—				3.9			NCM LLC equity issued for purchase of intangible asset		7.6				—	—		3.7					—			3.9
Income tax and other impacts of NCM LLC ownership changes	(0.6		)	—	—		(1.2		)		—				0.6			Income tax and other impacts of NCM LLC ownership changes		(0.6)				—	—		(1.2)					—			0.6
Comprehensive income, net of tax	41.2			—	—		—				17.0				24.2			Comprehensive income, net of tax		41.2				—	—		—			17.0			24.2
Share-based compensation issued	(1.3		)	385,989	—		(1.3		)		—				—			Share-based compensation issued		(1.3)				385,989	—		(1.3)			—			—��
Share-based compensation expense/capitalized	4.3			—	—		3.2				—				1.1
Share-based compensation expensed/capitalized																		Share-based compensation expensed/capitalized		4.3				—	—		3.2			—			1.1
Cash dividends declared $0.51 per share	(40.3		)	—	—		—				(40.3		)		—			Cash dividends declared $0.51 per share		(40.3)				—	—		—			(40.3)			—
Balance—September 26, 2019	$	(122.3	)	77,362,387	$	0.8	$	(210.8	)		$	(176.9	)		$	264.6		Balance—September 26, 2019		$	(122.3)			77,362,387	$	0.8	$	(210.8)		$	(176.9)		$	264.6

Balance—December 26, 2019																		Balance—December 26, 2019		$	(121.2)			77,568,986	$	0.8	$	(209.2)		$	(171.1)		$	258.3
Cumulative-effect adjustment for adoption of ASU 2016-13, net of tax																		Cumulative-effect adjustment for adoption of ASU 2016-13, net of tax		2.9				—	—		—			1.2			1.7
Distributions to founding members																		Distributions to founding members		(4.4)				—	—		—			—			(4.4)
NCM LLC equity issued for purchase of intangible asset																		NCM LLC equity issued for purchase of intangible asset		10.5				—	—		5.0			—			5.5
Income tax and other impacts of NCM LLC ownership changes																		Income tax and other impacts of NCM LLC ownership changes		(0.5)				—	—		(3.9)			—			3.4
Comprehensive loss, net of tax																		Comprehensive loss, net of tax		(72.5)				—	—		—			(30.2)			(42.3)
Share-based compensation issued																		Share-based compensation issued		(1.0)				468,625	—		(1.0)			—			—
Share-based compensation expensed/capitalized																		Share-based compensation expensed/capitalized		1.3				—	—		0.7			—			0.6
Cash dividends declared $0.33 per share																		Cash dividends declared $0.33 per share		(25.5)				—	—		—			(25.5)			—
Balance—September 24, 2020																		Balance—September 24, 2020		$	(210.4)			78,037,611	$	0.8	$	(208.4)		$	(225.6)		$	222.8

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. THE COMPANY

Description of Business

National CineMedia, Inc. (“NCM, Inc.”) was incorporated in Delaware as a holding company with the sole purpose of becoming a member and sole manager of National CineMedia, LLC (“NCM LLC”), a limited liability company. NCM LLC is currently owned by NCM, Inc., Regal Cinemas, Inc. and Regal CineMedia Corporation, wholly owned subsidiaries of Cineworld Group plc and Regal Entertainment Group (“Regal”), Cinemark Media, Inc. and Cinemark USA, Inc., wholly owned subsidiaries of Cinemark Holdings, Inc. (“Cinemark”) and American Multi-Cinema, Inc., a wholly owned subsidiary of AMC Entertainment, Inc. (“AMC”). The terms “NCM”, “the Company” or “we” shall, unless the context otherwise requires, be deemed to include the consolidated entity. AMC, Regal, Cinemark and their affiliates are referred to in this document as “founding members”.

~~NCM LLC~~The Company operates the largest cinema advertising network reaching movie audiences in ~~North America,~~the U.S., allowing NCM LLC to sell advertising under long-term exhibitor services agreements (“ESAs”) with the founding members and certain third-party theater circuits, referred to in this document as “network affiliates” under long-term network affiliate agreements. Beginning in mid-March 2020, each of the Company’s founding members and all of its network affiliates announced that their theaters would be temporarily closed to address the COVID-19 Pandemic and almost all of the theaters within the Company’s network remained closed until late August 2020. The Company generated no in-theater advertising revenue for the period that the theaters were closed. On September 4, 2020, the Company resumed advertising within the theaters that were open in its network, however, in-theater advertising revenue continues to be adversely impacted as attendance remains restricted by government mandated patron capacity limitations and a continued lack of new major motion picture releases. As of September 24, 2020, approximately two-thirds of the theaters within the Company’s network had reopened. In October 2020, Regal announced the re-closure of its theaters in the United States and as October 30, 2020, approximately 53% of theaters within our network are open. These developments will be referred to as the “COVID-19 Pandemic.”

On September 17, 2019, NCM LLC entered into amendments to the ESAs with Cinemark and Regal (collectively, the “2019 ESA Amendments”). The 2019 ESA Amendments extended the contract life of the ESAs with Cinemark and Regal by four years resulting in a weighted average remaining term of the ESAs with the founding members (based on attendance) of approximately ~~20.0~~19.0 years as of September ~~26, 2019.~~24, 2020. The network affiliate agreements expire at various dates between ~~December 2019~~January 2021 and July 2031. The weighted average remaining term (based on 2019 attendance) of the ESAs and the network affiliate agreements together is ~~17.4~~16.5 years as of September ~~26, 2019.~~24, 2020.

As of September ~~26, 2019,~~24, 2020, NCM LLC had ~~159,067,874~~162,568,939 common membership units outstanding, of which ~~77,362,387 (48.6%~~78,037,611 (48.0%) were owned by NCM, Inc., ~~41,770,669 (26.3%~~42,290,694 (26.0%) were owned by Regal, ~~39,737,700 (25.0%~~40,850,068 (25.1%) were owned by Cinemark and ~~197,118 (0.1%~~1,390,566 (0.9%) were owned by AMC. The membership units held by the founding members are exchangeable into NCM, Inc. common stock on a ~~one-for-one~~1-for-one basis.

Basis of Presentation

The Company has prepared the unaudited Condensed Consolidated Financial Statements and related notes of NCM, Inc. in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain reclassifications have been made to the prior year's financial statements to conform to the current presentation (refer to the Condensed Consolidated Statements of Income and Condensed Consolidated Statement of Cash Flows, whereby the Company presented depreciation expense and amortization expense as two separate lines and refer to the Condensed Consolidated Statements of Income, whereby the Company presented loss (gain) on retirement of debt, net as a separate line). Certain information and footnote disclosures typically included in an annual report have been condensed or omitted for this quarterly report. The balance sheet as of December ~~27, 2018~~26, 2019 is derived from the audited financial statements of NCM, Inc. Therefore, the unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s annual report on Form 10-K filed for the fiscal year ended December ~~27, 2018.~~26, 2019.

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. ~~The~~Historically, the Company’s business ishas been seasonal and for this and other reasons operating results for interim periods ~~may~~have not bebeen indicative of the Company’s full year results or future performance. Given the temporary closure of the theaters within the Company's network in 2020, management expects the Company's 2020 quarterly results to vary from historical trends. As a result of the various related party agreements discussed in Note 5—Related Party Transactions, the operating results as presented are not necessarily indicative of the results that might have occurred if all agreements were with non-related third parties. The Company manages its business under ~~one~~1 reportable segment of advertising.

Estimates—The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include those related to the reserve for uncollectible accounts receivable, share-based compensation and income taxes. Actual results could differ from those estimates.

Going Concern

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

Based on the Company’s current financial position and liquidity sources, including current cash balances, and forecasted future cash flows, management believes the Company can meet its obligations as they become due, including all interest and debt service payments within one year following the date that these financial statements are issued. Refer to Note 6—Borrowings for information on the Company’s debt obligations, including a current waiver of certain financial covenants. However, the Company does not expect to meet certain of its financial covenants within one year following the date that these financial statements are issued. If any of these financial covenants are not met, a majority of the lenders of the Senior Secured Credit Facility are permitted under the agreement to accelerate the debt which could also result in a cross-default under NCM LLC’s senior notes. Considering current liquidity sources, the Company would not be able to repay the Company’s total outstanding debt balance. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern. In light of this, the Company is actively pursuing with its administrative agent and expects to obtain an amendment to its Senior Secured Credit Facility to extend a waiver of its financial covenants through at least one year following the date that these financial statements are issued. Management expects the amendment to be approved during the next several months, however there can be no assurance that the Company will be successful in obtaining the amendment. As long as an amendment has not been obtained, management’s plan cannot be considered probable and thus does not alleviate the substantial doubt about the Company’s ability to continue as a going concern.

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

Significant Accounting Policies

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The Company’s annual financial statements included in its Form 10-K filed for the fiscal year ended December ~~27, 2018~~26, 2019 contain a complete discussion of the Company’s significant accounting policies. Following is additional information related to the Company’s accounting policies.

Revenue Recognition—The Company derives revenue principally from the advertising business, which includes on-screen and lobby network (LEN) advertising and lobby promotions and advertising on websites and mobile applications owned by NCM LLC and other companies. Revenue is recognized over time as the customer receives the benefits provided by NCM LLC’s advertising services and the Company has the right to payment for performance to date. The Company considers the terms of each arrangement to determine the appropriate accounting treatment.

Concentration of Credit Risk and Significant Customers—~~Bad debts are provided~~The risk of credit loss related to the Company's trade receivables and unbilled receivables balances is accounted for ~~using~~through the allowance for doubtful accounts, ~~method based on~~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 ~~experience and management’s evaluation~~write off percentages to these pools in order to determine the amount of ~~outstanding receivables at the end~~expected credit losses as of the ~~period. Receivables~~balance sheet date. National receivables are~~written off when management determines amounts are uncollectible. Trade accounts receivable are uncollateralized and represent a~~ with large ~~number of geographically dispersed debtors. The collectability risk with respect to national and regional advertising isreduced by transacting with founding members or large, national~~ advertising agencies ~~that have~~with strong reputations in the advertising industry and clients with stable financial ~~positions.~~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 thousands of 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 increased the expected rate of default related to local and regional customers within the calculation of the allowance for doubtful accounts as of September 24, 2020, as compared to September 26, 2019, given the expected adverse impact of the COVID-19 Pandemic on certain businesses, in particular, categories of small businesses (i.e. restaurants, travel, etc.) which the Company expects could lead to an increased rate of default. 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 arewritten off when management determines amounts are uncollectible.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

As of September 24, 2020 the Company had one agency through which the Company sources advertising revenue that accounted for 12.7% of the Company's gross outstanding receivable balance. As of December 26, 2019, ~~and December 27, 2018,~~ there were no advertising agency groups or individual customers through which the Company ~~sources national~~sourced advertising revenue representing more than 10% of the Company’s outstanding gross receivable balance. During the three and nine months ended September 24, 2020, the Company had 1 customer that accounted for 28.8% and 10.6%, respectively, of the Company's revenue. During the three and nine months ended September 26, 2019, ~~and September 27, 2018,~~ the Company had no customers that accounted for more than 10% of revenue.

Long-lived Assets—The Company assesses impairment of long-lived assets pursuant to ASC 360 – Property, Plant and Equipment. This includes determining whether certain triggering events have occurred that could affect the value of an asset. The Company recorded losses of $0.0 million, $0.0 million, $1.7 million and $0.0 million related primarily to the write-off of certain internally developed software during the three months ended September 24, 2020 and September 26, 2019 and the nine months ended September 24, 2020 and September 26, 2019, respectively.

Share-Based Compensation—The Company has issued stock options, ~~and~~ restricted stock, ~~to certain employees~~ and restricted stock units to certain employees and its independent directors. ~~In 2018~~The restricted stock and ~~2019, the~~ restricted stock unit grants for Company management vest upon the achievement of Company performance measures and/or service conditions, while non-management grants vest only upon the achievement of service conditions. Compensation expense of restricted stock and restricted stock units that ~~vests~~vest upon the achievement of Company performance measures is based on management’s financial projections and the probability of achieving the projections, which require considerable judgment. A cumulative adjustment is recorded to share-based compensation expense in periods that management changes its estimate of the number of shares of restricted stock and restricted stock units 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 and restricted stock units that isare expected to vest and are only paid with respect to shares that actually vest. During the three months ended September ~~26, 2019~~24, 2020 and September ~~27, 2018~~26, 2019 and the nine months ended September 24, 2020 and September 26, 2019, 50,052, 18,889, 607,733 and ~~September 27, 2018, 18,889, 21,807,~~ 568,584 ~~and 997,403~~ shares of restricted stock and restricted stock units vested, respectively.

Consolidation—NCM, Inc. consolidates the accounts of NCM LLC under the provisions of ASC 810,Consolidation~~(“ASC 810”)~~. 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):


											Three Months Ended				Nine Months Ended
	Three Months Ended				Nine Months Ended						September 24, 2020		September 26, 2019		September 24, 2020		September 26, 2019
	September 26, 2019		September 27, 2018		September 26, 2019			September 27, 2018
Net income attributable to NCM, Inc.	$	9.2	$	11.2	$	17.0		$	13.5
Net (loss) income attributable to NCM, Inc.										Net (loss) income attributable to NCM, Inc.	$	(12.7)	$	9.2	$	(30.2)	$	17.0
NCM LLC equity issued for purchase of intangible asset	—		—		3.7			7.7		NCM LLC equity issued for purchase of intangible asset	0		0		5.0		3.7
Income tax and other impacts of subsidiary ownership changes	0.1		10.0		(1.2		)	6.9		Income tax and other impacts of subsidiary ownership changes	0		0.1		(3.9)		(1.2)
Change from net income attributable to NCM, Inc. and transfers from noncontrolling interests	$	9.3	$	21.2	$	19.5		$	28.1
Change from net (loss) income attributable to NCM, Inc. and transfers from noncontrolling interests										Change from net (loss) income attributable to NCM, Inc. and transfers from noncontrolling interests	$	(12.7)	$	9.3	$	(29.1)	$	19.5

Recently Adopted Accounting Pronouncements

During the first quarter of ~~2019,~~2020, the Company adopted Accounting Standards Update ~~2016-2 and subsequent amendments,~~ ~~Leases (Topic 842)~~ (together “ASC 842”) utilizing the Comparatives Under 840 option where only the current period financial statements and related disclosures are presented in accordance with the new standard. As of the adoption date of December 28, 2018 the Company recognized the following on the unaudited Condensed Consolidated Balance Sheets: a right-of-use (“ROU”) asset of $21.7 million within 'Other assets', a short-term lease liability of $1.4 million within Other current liabilities', a long-term lease liability of $24.5 million within 'Other liabilities' and reversed the related deferred rent liability balance of $4.2 million for all leases with terms longer than twelve months related to its building operating leases. The Company elected to utilize the following practical expedients: (i) not being required to separate lease and non-lease components

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

when accounting for the lease for all asset classes; and (ii) not accounting for short-term leases under the new standard. The Company also determined that the ESAs and affiliate agreements are considered leases under ASC 842. However, the identification of the asset and determination of the period of control is dependent upon the scheduling of the showtimes by the exhibitors. As the schedules are typically not determined until one week in advance of the showtime, on average, the leases are considered short term in nature, specifically less than one month. As such, no ROU assets or lease liabilities were recognized for these agreements. The issuance of NCM LLC membership units to the founding members in accordance with NCM LLC’s Common Unit Adjustment Agreement and upfront cash payments to affiliates for the contractual rights to provide services within their theaters will continue to be classified as intangible assets. However, the amortization of these intangible assets is now considered lease expense and has been reclassified within the current period from 'Depreciation and amortization expense' to 'Amortization of intangibles recorded for network theater screen leases' on the unaudited Condensed Consolidated Statement of Income. Additionally, these upfront cash payments to affiliates and receipt of integration payments from the founding members, as defined within Note 4 - ~~Intangible Assets~~, will be considered cash flows from operating activities on the unaudited Condensed Consolidated Statement of Cash Flows when incurred as they are related to operating leases and will be reclassified from cash flows from investing and financing activities, respectively. The Company has also incorporated additional disclosures in Note 8 - ~~Commitments and Contingencies~~ ~~to comply with ASC 842.~~

~~During the first quarter of 2019, the Company adopted Accounting Standards Update 2018-7,~~ ~~Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting~~ (“ASU 2018-7”), which amends Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The adoption of ASU 2018-7 had no impact on the unaudited Condensed Consolidated Financial statements or notes thereto.

During the first quarter of 2019, the Company adopted a final rule issued by the SEC in March 2019 simplifying certain Regulation S-K requirements. The rule eliminated the following requirements in certain circumstances: (1) to disclose discussion of the earliest year of three years of audited financial statements presented within Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations section of the Form 10-K, (2) to request permission from the SEC to redact confidential information from exhibits in the event the information is not material to the agreement and would cause competitive harm, (3) to disclose immaterial physical property and (4) to disclose schedules and attachments to exhibits which do not contain material information. The rule also adds the requirement to disclose the registrant's trading symbol on the cover page of certain SEC forms. The applicable amended disclosure requirements have been incorporated within this Quarterly Report on Form 10-Q.

During the fourth quarter of 2018, the Company adopted a final rule issued by the SEC amending certain disclosure requirements deemed by the SEC to be redundant, duplicative, overlapping, outdated or superseded. The rule also added requirements to disclose (1) the changes in each caption of stockholders’ equity and non-controlling interests for the current and comparative year-to-date periods, with subtotals for each interim period and (2) the amount of dividends per share for each class of shares. The Company's adoption of the guidance resulted in changes to the presentation of the unaudited Consolidated Statement of Equity as a quarter to date equity rollforward is now also required for the current and comparable period. The Company implemented the amended disclosure requirements in the first quarter of 2019. The codification was updated to reflect the aforementioned SEC changes within Accounting Standards Update 2019-7, Codification Updates to SEC Sections ("ASU 2019-7") issued and effective during the third quarter of 2019.

~~Recently Issued Accounting Pronouncements~~

~~In June 2016, the FASB issued Accounting Standards Update~~ 2016-13, Financial Instruments –- Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements (“ASU 2016-13”), which requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. Upon the adoption of ASU 2016-13 ~~is effective~~on December 27, 2019, the Company recorded a $3.2 million cumulative-effect adjustment to retained earnings related to the change in methodology surrounding the historical losses utilized in the calculation of the allowance for ~~fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early~~credit losses related to trade and unbilled accounts receivable reducing the allowance to $3.0 million as of the adoption ~~permitted and is to be adopted on a modified retrospective basis.~~date. The Company ~~is currently evaluating~~also recorded a corresponding $0.4 million reduction to the ~~impact that adopting this guidance will have on~~corresponding deferred tax asset with the offset also recorded to retained earnings. The other impacts upon adoption were immaterial to the unaudited Condensed Consolidated Financial Statements. The Company has incorporated additional disclosures in Note 1—The Company, Note 2—Revenue from Contracts with Customers and Accounts Receivable and Note 9—Fair Value Measurements to its Condensed Consolidated Financial Statements ~~or notes thereto.~~to comply with ASU 2016-13. The Company has also designed and implemented changes to certain processes and internal controls related to its adoption of ASU 2016-13.

~~In August 2018,~~

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

During the ~~FASB issued~~first quarter of 2020, the Company adopted Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements on fair value measurements. The Company adoption of ASU 2018-13 did not have a material impact on the unaudited Condensed Consolidated Financial Statements or notes thereto.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which removes the following exceptions for the Company to analyze in a given period: the exception to the incremental approach for intraperiod tax allocation; the exception to accounting for basis differences when there are ownership changes in foreign investments; and the exception in interim periods income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 is effective for fiscal years beginning after December 15, ~~2019,~~2020, including interim periods within those fiscal years, with ~~partial~~ early adoption ~~permitted for eliminated disclosures. The method of adoption varies by the disclosure.~~permitted. The Company does not expect the adoption of ~~ASU 2018-13~~this guidance to have a material impact on the unaudited Condensed Consolidated Financial Statements or notes thereto.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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, 2022. The Company is currently assessing the impact of the LIBOR transition and ASU 2020-04 on the Company’s unaudited Condensed 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 unaudited Condensed Consolidated Financial Statements or notes thereto.

2. REVENUE FROM CONTRACTS WITH CUSTOMERS AND ACCOUNTS RECEIVABLE

Revenue Recognition

The Company derives revenue principally from the sale of advertising to national, regional and local businesses in Noovie, the Company’s cinema advertising and entertainment pre-show. The Company also sells advertising through the LEN, a series of ~~strategically-placed~~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 through Cinema Accelerator and NCM's digital gaming products including Noovie ARcade,Name That Movie, Noovie Shuffle andFantasy Movie League, ~~Name That Movie~~ ~~and~~ ~~Noovie Shuffle,~~ which can be played on the mobile apps or at Noovie.com. The Company also has a long-term agreement to exhibit the advertising of the founding members’ beverage suppliers.

The Company makes contractual guarantees to deliver a specified number of impressions to view the customers’ advertising. If the contracted number of impressions are not delivered, the Company will run additional advertising to deliver the contracted impressions at a later date. The deferred portion of the revenue associated with undelivered impressions is referred to as a make-good provision. The Company defers the revenue associated with the make-good until the advertising airs to the theater attendance specified in the advertising contract. The make-good provision is recorded within accrued expenses in the unaudited Condensed Consolidated Balance Sheet. As of September ~~26, 2019~~24, 2020 and December ~~27, 2018,~~26, 2019, the Company had a make-good provision of ~~$4.8~~$6.4 million and ~~$8.0~~$8.7 million, respectively.

The Company ~~has certain~~does not have any contracts with ~~two-year~~customers with terms in excess of one year that are noncancelable following a specified date within the contract period. The estimated revenue expected to be recognized in the future related to these contracted performance obligations that are unsatisfied (or partially unsatisfied)noncancellable as of September ~~26, 2019, was $25.5 million, which is expected to be recognized in 2019.~~24, 2020. Agreements with a duration less than one year are not included within this disclosure as the Company elected to use the practical expedient in ASC 606-10-50-14 for those contracts. In addition, other of the Company’s contracts longer than one year that are ~~cancelable~~cancellable are not included within this disclosure.

Disaggregation of Revenue

The Company disaggregates revenue based upon the type of customer: national and regional, local ~~regional~~ and beverage concessionaire. This method of disaggregation is in alignment with how revenue is reviewed by management and discussed with and historically disclosed to investors.

~~The following table summarizes revenue from contracts with customers for the three and nine months ended September 26, 2019 and September 27, 2018 (in millions):~~

Three Months Ended Nine Months Ended
September 26,
2019 September 27,
2018 September 26,
2019 September 27,
2018
National advertising revenue $ 82.3
$ 80.8
$ 213.9
$ 214.4
Local advertising revenue 16.8
17.4
47.3
49.0
Regional advertising revenue 4.1
4.5
14.2
16.6
Founding member advertising revenue from beverage concessionaire agreements 7.3
7.4
22.2
24.0
Total revenue $ 110.5
$ 110.1
$ 297.6
$ 304.0

~~Deferred Revenue and Unbilled Accounts Receivable~~

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following table summarizes revenue from contracts with customers for the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and September 26, 2019 (in millions):


	Three Months Ended				Nine Months Ended
	September 24, 2020		September 26, 2019		September 24, 2020		September 26, 2019
National and regional advertising revenue	$	3.5	$	86.4	$	55.0	$	228.1
Local advertising revenue	2.3		16.8		14.0		47.3
Founding member advertising revenue from beverage concessionaire agreements	0.2		7.3		5.7		22.2
Total revenue	$	6.0	$	110.5	$	74.7	$	297.6

Deferred Revenue and Unbilled Accounts Receivable

The changes in deferred revenue for the nine months ended September ~~26, 2019~~24, 2020 were as follows (in millions):

Nine Months Ended
September 26,
2019
Balance at beginning of period $ 7.3
Performance obligations satisfied (7.3 )
New contract liabilities 10.4
Balance at end of period $ 10.4


	Nine Months Ended
	September 24, 2020
Balance at beginning of period	$	(7.6)
Performance obligations satisfied	6.1
New contract liabilities	(5.5)
Balance at end of period	$	(7.0)

As of September ~~26, 2019~~24, 2020 and December ~~27, 2018,~~26, 2019, the Company had ~~$11.6~~$1.2 million and ~~$6.0~~$8.0 million in unbilled accounts receivable, respectively.

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 nine months ended September 24, 2020 were as follows (in millions):


	Nine Months Ended
	September 24, 2020
	Allowance for National Customer Receivables		Allowance for Local/ Regional Customer Receivables
Balance at beginning of period	$	1.1	$	1.9
Provision for bad debt	(0.9)		1.0
Write-offs, net	(0.1)		(0.6)
Balance at end of period	$	0.1	$	2.3

3. (LOSS) EARNINGS PER SHARE

Basic ~~earnings~~loss per share is computed on the basis of the weighted average number of common shares outstanding. Diluted ~~earnings~~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 restricted stock units using the treasury stock method. The components of basic and diluted ~~income~~loss per NCM, Inc. share are as follows:

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


										Three Months Ended				Nine Months Ended
	Three Months Ended				Nine Months Ended					September 24, 2020		September 26, 2019		September 24, 2020		September 26, 2019
Net (loss) income attributable to NCM, Inc. (in millions)									Net (loss) income attributable to NCM, Inc. (in millions)	$	(12.7)	$	9.2	$	(30.2)	$	17.0
	September 26, 2019		September 27, 2018		September 26, 2019		September 27, 2018
Net income attributable to NCM, Inc. (in millions)	$	9.2	$	11.2	$	17.0	$	13.5
Net income attributable to NCM, Inc. following conversion of dilutive membership units (net of estimated taxes of $0.0, $0.0, $0.0 and $14.7)(in millions)	$	9.2	$	11.2	$	17.0	$	24.6
Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	77,356,833		76,924,983		77,293,234		76,825,828		Basic	78,016,737		77,356,833		77,925,552		77,293,234
Add: Dilutive effect of stock options, restricted stock and exchangeable membership units	526,738		560,578		394,159		80,161,908		Add: Dilutive effect of stock options, restricted stock and exchangeable membership units	0		526,738		0		394,159
Diluted	77,883,571		77,485,561		77,687,393		156,987,736		Diluted	78,016,737		77,883,571		77,925,552		77,687,393
Earnings per NCM, Inc. share:
(Loss) earnings per NCM, Inc. share:									(Loss) earnings per NCM, Inc. share:
Basic	$	0.12	$	0.15	$	0.22	$	0.18	Basic	$	(0.16)	$	0.12	$	(0.39)	$	0.22
Diluted	$	0.12	$	0.14	$	0.22	$	0.16	Diluted	$	(0.16)	$	0.12	$	(0.39)	$	0.22

The effect of 84,531,328, 81,705,487, ~~80,660,822~~83,678,699 and 81,410,838 weighted average exchangeable NCM LLC common units held by the founding members for the three months ended September 24, 2020 and September 26, 2019 and ~~September 27, 2018 and the~~ nine months ended September 24, 2020 and September 26, 2019, respectively, have been excluded from the calculation of diluted weighted average shares and loss per NCM, Inc. share as they were anti-dilutive. The diluted weighted average shares outstanding for the nine months ended September 27, 2018 assumes the conversion of all founding member common units to NCM, Inc. shares as they were dilutive. Upon the conversion of all common units, all of the consolidated NCM LLC net income would be attributable to NCM, Inc. and thus has been utilized as the numerator of the diluted earnings per share calculation for the nine months ended September 27, 2018. Consolidated NCM LLC net income for the nine months ended September 27, 2018 has been tax effected utilizing NCM, Inc.’s effective tax rate of 55.3% for the respective period. NCM LLC common units do not participate in dividends paid on NCM, Inc.’s common stock. In addition, there were 4,484,702, 2,553,449, ~~2,016,709,~~4,484,702 and 2,593,231 ~~and 2,223,440~~ stock options and non-vested (restricted) shares for the three months ended September 24, 2020 and September 26, 2019 and ~~September 27, 2018 and the~~ nine months ended September ~~26, 2019~~24, 2020 and September ~~27, 2018,~~26, 2019, respectively, excluded from the calculation as they were anti-dilutive. The Company’s non-vested (restricted) shares do not meet the definition of a participating security as the dividends will not be paid if the shares do not vest.

4. INTANGIBLE ASSETS

Intangible assets consist of contractual rights to provide the Company’s services within the theaters of the founding members and network affiliates and are stated at cost, net of accumulated amortization. The Company’s intangible assets with its founding members are recorded at fair market value of NCM, Inc.’s publicly traded stock as of the date on which the

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

common membership units were issued. The NCM LLC common membership units are fully convertible into NCM, Inc.’s common stock. In addition, the Company records intangible assets for up-front fees paid to network affiliates upon commencement of a network affiliate agreement. The Company’s intangible assets have a finite useful life and the Company amortizes the assets over the remaining useful life corresponding with the ESAs or the term of the network affiliate agreement. The Company ~~extended the useful life~~determined that recent adverse changes in macroeconomic trends, reduced cash flows as a consequence of the ~~intangible asset for Cinemark and Regal following the extension~~temporary closure of the ~~ESA term~~theaters within the Company's network in ~~conjunction with~~response to the ~~2019 ESA Amendments. The Company has adopted an accounting policy to capitalize extension costs on~~outbreak of the COVID-19 Pandemic, a decline in the fair value of NCM LLC’s debt and the further sustained decline in the market price of NCM, Inc.'s common stock as of September 24, 2020 constituted a triggering event for its intangible assets under Accounting Standards Certification No. 360, Impairment and ~~thus capitalized~~Disposal of Long-Lived Assets. Management considered possible scenarios in a probability-weighted estimated future undiscounted cash flow analysis, including the ~~legal~~potential of further delays in major motion picture releases, a recurrence of the temporary theater closures and ~~professional costs incurred~~other potential adverse impacts to NCM LLC's founding members' and affiliates' financial liquidity related to the COVID-19 Pandemic. The estimated future cash flows from the affiliate agreements and ESAs calculated within the probability-weighted analyses were in ~~conjunction with~~excess of the ~~ESA amendments. During~~net book value of these intangible assets and no impairment charges were recorded for the three ~~months ended September 26, 2019~~ and ~~September 27, 2018 and the~~ nine months ended September ~~26, 2019~~24, 2020. Such analysis required management to make estimates and ~~September 27, 2018,~~assumptions based on historical data and consideration of future market conditions. Given the ~~Company capitalized $1.1 million, $0.0 million, $1.1 million, and $0.0 million within~~uncertainty inherent in any projection, heightened by the ~~intangible asset balance. There was no impact to the Payable to founding members under tax receivable agreement as the useful life~~possibility of unforeseen additional effects of the ~~intangible assets were not deemed~~COVID-19 Pandemic, including potential adverse impacts to ~~be extended for tax purposes~~NCM LLC's founding members' and ~~there were no changes made to~~affiliates' financial liquidity, actual results may differ from the ~~tax receivable agreements.~~estimates and assumptions used, or conditions may change, which could result in impairment charges in the future.

Common Unit Adjustments—In accordance with NCM LLC’s Common Unit Adjustment Agreement with its founding members, on an annual basis NCM LLC determines the amount of common membership units to be issued to or returned by the founding members based on theater additions or dispositions during the previous year. In addition, NCM LLC’s Common Unit Adjustment Agreement requires that a Common Unit Adjustment occur for a specific founding member if its acquisition or disposition of theaters, in a single transaction or cumulatively since the most recent Common Unit Adjustment, results in an attendance increase or decrease in excess of ~~two~~2 percent of the annual total attendance at the prior adjustment date.

During the first quarter of 2020, NCM LLC issued 3,022,959 common membership units to its founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions by the founding members to NCM

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

LLC’s network during the 2019 fiscal year and NCM LLC recorded a net intangible asset of $10.5 million during the first quarter of 2020 as a result of the Common Unit Adjustment.

During the first quarter of 2019, NCM LLC issued 1,044,665 common membership units to its founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions by the founding members to NCM LLC’s network during the 2018 fiscal year and NCM LLC recorded a net intangible asset of $7.6 million during the first quarter of 2019 as a result of the Common Unit Adjustment.

During the first quarter of 2018, NCM LLC issued 2,821,710 (3,736,860 issued, net of 915,150 returned) common membership units to its founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions by the founding members to NCM LLC’s network during the 2017 fiscal year and NCM LLC recorded a net intangible asset of $15.9 million during the first quarter of 2018 as a result of the Common Unit Adjustment.

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 ("(“encumbered ~~theaters"~~theaters”), the founding members may elect to receive common membership units related to those encumbered theaters in connection with the Common Unit Adjustment. If the founding members make this election, then they are required to make payments on a quarterly basis in arrears in accordance with certain run-out provisions pursuant to the ESAs (“integration payments”). 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. In 2019, AMC and Cinemark also made integration payments to NCM LLC related to their respective acquisitions of theaters from Rave Cinemas. The advertising agreements with an alternative provider for these theaters ended during 2019 and the theaters were transferred to our network. Integration payments are no longer due related to these theaters. Integration payments are calculated based upon the advertising cash flow that the Company would have generated if it had exclusive access to sell advertising in the theaters with pre-existing advertising agreements. The ESAs additionally entitle NCM LLC to payments related to the founding members’ on-screen advertising commitments under their beverage concessionaire agreements for encumbered theaters. These payments are also accounted for as a reduction to the intangible ~~asset.~~assets. During the three months ended September 24, 2020 and September 26, 2019 and ~~September 27, 2018 and the~~ nine months ended September ~~26, 2019~~24, 2020 and September ~~27, 2018,~~26, 2019, the Company recorded a reduction to net intangible assets of $0.0 million, $5.6 million, ~~$5.5 million, $13.7~~$1.4 million and ~~$13.3~~$13.7 million, respectively, related to integration and other encumbered theater payments. ~~These~~No integrations payments were earned for the three and nine months ended September 24, 2020 because the Company generated negative Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”) during these periods. During the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and September 26, 2019, AMC and Cinemark paid a total of $0.0 million, $5.7 million, $9.7 million and $16.3 million respectively, in integration and other encumbered theater payments (as payments are made one quarter and one month in arrears, respectively). The payments received during the three and nine months ended September 24, 2020 primarily relate to AMC's acquisition of theaters from ~~AMC related~~Carmike. The payments received during the three and nine months ended September 26, 2019 relate to ~~its~~AMC's acquisitions of theaters from Carmike and Rave Cinemas and from Cinemark related primarily to its acquisition of theaters from Rave Cinemas. During the three months ended September 26, 2019 and September 27, 2018 and the nine months ended September 26, 2019 and September 27, 2018, AMC and Cinemark paid a total of $5.7 million, $5.6 million, $16.3 million and $17.2 million, respectively, in integration and other encumbered theater payments (as payments are made one quarter and one month in arrears, respectively). If common membership units are issued to a founding member for newly acquired theaters that are subject to an existing on-screen advertising agreement with an alternative provider, the amortization of the intangible asset commences after the existing agreement expires and NCM LLC can utilize the theaters for all of its services.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5. RELATED PARTY TRANSACTIONS

Founding Member Transactions—In connection with NCM, Inc.’s ~~IPO,~~initial public offering (“IPO”), the Company entered into several agreements to define and regulate the relationships among NCM, Inc., NCM LLC and the founding members which are outlined below. As AMC owns less than 5% of NCM LLC as of September ~~26, 2019,~~24, 2020, AMC is no longer a related party. AMC remains a party to

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

the ESA, Common Unit Adjustment Agreement, Tax Receivable Agreement ~~("TRA"~~(“TRA”) and certain other original agreements and is a member under the terms of the NCM LLC Operating Agreement, subject to fulfilling the requirements of Section 3.1 of the NCM LLC Operating Agreement. AMC will continue to participate in the annual Common Unit Adjustment and receive available cash distributions or allocation of earnings and losses in NCM LLC (as long as its ownership is greater than zero), TRA payments and theater access fees. Further, AMC will continue to pay beverage revenue, among other things. AMC's ownership percentage does not impact future integration payments and other encumbered theater payments owed to NCM LLC by AMC. AMC is considered a related party through the date its ownership fell below the 5% threshold (July 5, 2018) and related party transactions with AMC through this period are included within the disclosures below (specifically the first quarter and first six months of 2018).

The material agreements with the founding members are as follows:

•ESAs. Under the ESAs, NCM LLC is the exclusive provider within the United States of advertising services in the founding members’ theaters (subject to pre-existing contractual obligations and other limited exceptions for the benefit of the founding members). The advertising services include the use of the digital content network (“DCN”) equipment required to deliver the on-screen advertising and other content included in the Noovie pre-show, use of the LEN and rights to sell and display certain lobby promotions. Further, 30 seconds to 60 seconds of advertising included in the Noovie pre-show is sold to NCM LLC’s founding members to satisfy the founding members’ on-screen advertising commitments under their beverage concessionaire agreements. In consideration for access to the founding members’ theaters, theater patrons, the network equipment required to display on-screen and LEN video advertising and the use of theaters for lobby promotions, the founding members receive a monthly theater access fee. In conjunction with the 2019 ESA Amendments, NCM LLC agreed to pay 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 with Cinemark and Regal are considered leases with related parties under ASC 842.

•Common Unit Adjustment Agreement. The Common Unit Adjustment Agreement provides a mechanism for increasing or decreasing the membership units held by the founding members based on the acquisition or construction of new theaters or sale or closure of theaters that are operated by each founding member and included in NCM LLC’s network.

•Tax Receivable Agreement. The TRA provides for the effective payment by NCM, Inc. to the founding members 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 NCM LLC’s founding members to use certain proprietary software that existed at the time for the delivery of digital advertising and other content through the DCN to screens in the U.S. NCM LLC has made improvements to this software since the IPO date and NCM LLC owns those improvements, except for improvements that were developed jointly by NCM LLC and NCM LLC’s founding members, if any.

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

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Three Months Ended Nine Months Ended
Included in the unaudited Condensed Consolidated Statements of Income: (1)
September 26,
2019 September 27,
2018 September 26,
2019 September 27,
2018
Revenue:
Beverage concessionaire revenue (included in advertising revenue) (2)
$ 5.7
$ 5.8
$ 17.5
$ 21.8
Operating expenses:
Theater access fee (3)
13.5
13.4
40.9
55.5
Purchase of movie tickets and concession products and rental of theater space (included in selling and marketing costs) (4)
0.1
0.2
0.3
0.9
Purchase of movie tickets and concession products and rental of theater space (included in advertising operating costs) (4)

0.1
0.1
0.1
0.1
Non-operating expenses:
Interest income from notes receivable (included in interest
income) (5)
0.1
0.1
0.2
0.3


	Three Months Ended				Nine Months Ended
Included in the unaudited Condensed Consolidated Statements of Income:	September 24, 2020		September 26, 2019		September 24, 2020		September 26, 2019
Revenue:
Beverage concessionaire revenue (included in advertising revenue) (1)	$	0.2	$	5.7	$	4.5	$	17.5
Operating expenses:
Theater access fee and revenue share to founding members (2)	$	1.0	$	13.5	$	13.6	$	40.9
Selling and marketing costs (3)	$	0	$	0.1	$	0.1	$	0.3
Advertising operating costs (3)	$	0.4	$	0.1	$	0.4	$	0.1
Non-operating expenses:
Interest income from notes receivable (included in interest income) (4)	$	0	$	0.1	$	0	$	0.2


~~(1)~~	AMC is no longer considered a related party as of July 5, 2018, as described further above. As such, the figures within the table above only include related party activity with AMC for the six months ended June 28, 2018.

~~(2)~~

For the three and nine months ended September 26, 2019 and September 27, 2018, two of the founding members purchased 60 seconds of on-screen advertising time and one founding member purchased 30 seconds (with all three founding members having a right to purchase up to 90 seconds) from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 seconds equivalent CPM rate specified by the ESA.


~~(3)~~	Comprised of payments per theater attendee and payments per digital screen with respect to the founding member theaters included in the Company’s network, including payments for access to higher quality digital cinema equipment.


~~(4)~~	~~Used primarily for marketing to NCM LLC’s advertising clients.~~

~~(5)~~(1)For the three and nine months ended September 24, 2020 and September 26, 2019, Cinemark and Regal purchased 60 seconds of on-screen advertising time from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 seconds equivalent CPM rate specified by the ESA. No beverage revenue was generated for the period of time that the theaters within NCM LLC's network were temporarily closed as there were no attendees upon which beverage revenue is generated.

(2)Comprised of payments per theater attendee, payments per digital screen with respect to the founding member theaters included in the Company’s network and payments for access to higher quality digital cinema equipment. Following the 2019 ESA Amendments in September of 2019 this also includes payments to Cinemark and Regal for their share of the revenue from the sale of an additional single unit that is either 30 or 60 seconds of the Noovie pre-show in the trailer position directly prior to the “attached” trailers preceding the feature film (the “Platinum Spot”). There was no theater access fee or revenue share expense for the period of time that the theaters within NCM LLC's network were temporarily closed.

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

(4)On December 26, 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability company (AC JV, LLC) owned 32% by each of the founding members and 4% by NCM LLC. In consideration for the sale, NCM LLC received a total of $25.0 million in promissory notes from its founding members (one-third or approximately $8.3 million from each founding member). The notes bear interest at a fixed rate of 5.0% per annum, compounded annually. Interest and principal payments ~~are~~were due annually in six equal installments commencing on the first anniversary of the ~~closing.~~

As of
Included in the unaudited Condensed Consolidated Balance Sheets: September 26,
2019 December 27,
2018
Current portion of notes receivable - related parties (1) (2)
2.8
4.2
Interest receivable on notes receivable (included in other current assets) (1) (2)
0.2
0.1
Common unit adjustments, net of amortization and integration payments (included in intangible assets) (3)
633.2
657.6
Current payable to founding members under tax receivable agreement (1)(4)
11.1
11.2
Long-term payable to founding members under tax receivable agreement (1)(4)
133.2
141.1


~~(1)~~	~~AMC is no longer considered a related party as of July 5, 2018, as described further above. As such, the figures as of September 26, 2019 and December 27, 2018 do not include AMC.~~


~~(2)~~	~~Refer to the discussion of notes receivable from the founding members above.~~


~~(3)~~	~~Refer to Note 4—Intangible Assets~~ for further information on common unit adjustments and integration payments. This balance includes common unit adjustments issued to all of the founding members (including AMC) as the Company's intangible balance is considered one asset inclusive of all common unit adjustment activity.

~~(4)~~

The Company paid Cinemark and Regal $3.5 million and $6.3 million, respectively, in payments pursuant to the TRA during 2019 which was for the 2018 tax year. The Company paid AMC, Cinemark and Regal $5.4 million, $4.6 million and $8.4 million, respectively, in payments pursuant to the TRA during 2018 which was for the 2017 tax year. As AMC is no longer considered a related party as of July 5, 2018, the AMC TRA payment includes only related party activity with AMC for the six months ended June 28, 2018.

closing and ended on December 26, 2019.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~


	As of
Included in the unaudited Condensed Consolidated Balance Sheets:	September 24, 2020		December 26, 2019

Common unit adjustments and ESA extension costs, net of amortization and integration payments (included in intangible assets) (1)	$	613.5	$	620.5
Current payable to founding members under tax receivable agreement (2)	$	1.0	$	10.3
Long-term payable to founding members under tax receivable agreement (2)	$	133.6	$	133.5
Other payables to founding members (3)	$	0.4	$	0

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~(1)Refer to Note 4—Intangible Assets for further information on common unit adjustments and integration payments. This balance includes common unit adjustments issued to all of the founding members (including AMC) as the Company's intangible balance is considered one asset inclusive of all common unit adjustment activity.

~~(UNAUDITED)~~

(2)The Company paid Cinemark and Regal $3.2 million and $5.8 million, respectively, in payments pursuant to the TRA during 2020 which was for the 2019 tax year. The Company paid Cinemark and Regal $3.7 million and $6.7 million, respectively, in payments pursuant to the TRA during 2019 which was for the 2018 tax year.

(3)Includes other payments made to the founding members in the ordinary course of business.

Pursuant to the terms of the NCM LLC Operating Agreement in place since the completion of the Company’s IPO, NCM LLC is required to make mandatory distributions on a proportionate basis to its members of available cash, as defined in the NCM LLC Operating Agreement, on a quarterly basis in arrears. Mandatory distributions of available cash for the three and nine months ended September ~~26, 2019~~24, 2020 and September ~~27, 2018~~26, 2019 were as follows (in millions):

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


										Three Months Ended				Nine Months Ended
	Three Months Ended				Nine Months Ended					September 24, 2020		September 26, 2019		September 24, 2020		September 26, 2019
	September 26, 2019		September 27, 2018		September 26, 2019		September 27, 2018
AMC	$	—	$	—	$	—	$	2.2
Cinemark	10.9		9.4		21.4		20.7		Cinemark	$	0	$	10.9	$	2.1	$	21.4
Regal	11.5		9.7		22.5		21.5		Regal	0		11.5		2.2		22.5
Total distributions to related parties	22.4		19.1		43.9		44.4		Total distributions to related parties	0		22.4		4.3		43.9
NCM, Inc.	21.3		18.2		41.7		42.5		NCM, Inc.	0		21.3		4.1		41.7
Total	$	43.7	$	37.3	$	85.6	$	86.9	Total	$	0	$	43.7	$	8.4	$	85.6

Due to the temporary closure of the theaters within NCM LLC's network during a portion of the three months ended September 24, 2020, the mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc. for the three months ended September 24, 2020 were calculated as negative $24.3 million (including negative $6.1 million for Cinemark, negative $6.4 million for Regal and negative $11.8 million for NCM, Inc.). Therefore, there will be no payment made for the third quarter of 2020. The mandatory distributions of available cash by NCM LLC to Regal and Cinemark for the three months ended September 26, 2019 of $22.4 million are included in amounts due to founding members, net on the unaudited Condensed Consolidated Balance Sheets as of September 26, 2019 and will be made in the fourth quarter of 2019. AMC’s distribution for the three months ended June ~~28, 2018 was split equally between~~25, 2020 and the three months ended September 24, 2020 were calculated as negative $54.1 million (including negative $13.7 million for Cinemark, negative $14.2 million for Regal and ~~Regal because~~negative $26.2 million for NCM, Inc.). Under the terms of the NCM LLC ~~used a record date of July 6, 2018 (following~~Operating Agreement, this negative amount will be netted against the ~~sale of AMC's membership units to Cinemark and Regal) to accommodate an agreement between each of AMC and Cinemark and AMC and Regal. These agreements entitled AMC to half of~~available cash distributions for the second quarter of ~~2018~~2021, which would be paid in the third quarter of 2021, contingent upon the Company's compliance with the covenants outlined within the Credit Agreement Amendment defined within Note 6—Borrowings and the Company's generation of future positive available cash ~~distribution, or approximately $2.2 million, of~~to which ~~Cinemark and Regal each independently paid AMC approximately $1.1 million. The mandatory distributions to NCM, Inc. are eliminated in consolidation.~~the above negative amounts above can be applied.

Amounts due to related party founding members, net as of September 24, 2020 were comprised of the following (in millions):


	Cinemark		Regal		Total
Theater access fees and revenue share, net of beverage revenues and other encumbered theater payments	$	0.3	$	0.4	$	0.7


Cost and other reimbursement	0		0.1		0.1
Total amounts due to founding members, net	$	0.3	$	0.5	$	0.8

Amounts due to related party founding members, net as of December 26, 2019 were comprised of the following (in millions):


	Cinemark		Regal		Total
Theater access fees and revenue share, net of beverage revenues and other encumbered theater payments	$	2.0	$	2.5	$	4.5
Distributions payable to founding members	15.8		16.6		32.4
Integration payments due from founding members	(0.1)		0		(0.1)
Total amounts due to founding members, net	$	17.7	$	19.1	$	36.8

Cinemark Regal Total
Theater access fees, net of beverage revenues and other encumbered theater
payments
$ 1.0
$ 1.4
$ 2.4
Distributions payable to founding members 10.9
11.5
22.4
Total amounts due to founding members, net $ 11.9
$ 12.9
$ 24.8

~~Amounts due to founding members, net as~~Network Affiliate Transactions—NCM LLC paid a network affiliate owned by a family member of ~~December 27, 2018 were comprised~~a director on the Company's Board of Directors $0.1 million, $0.2 million, $0.4 million and $0.4 million, in circuit share payments during the ~~following (in millions):~~

Cinemark Regal Total
Theater access fees, net of beverage revenues and other encumbered theater
payments
$ 1.0
$ 1.5
$ 2.5
Distributions payable to founding members 13.7
14.2
27.9
Integration payments due from founding members (0.4 ) —
(0.4 )
Total amounts due to founding members, net $ 14.3
$ 15.7
$ 30.0

~~The Amounts due from founding members, net balance as of~~three months ended September 24, 2020 and September 26, 2019 and December 27, 2018 per the Condensed Consolidated Balance Sheets relates to payments due from AMC to NCM LLC. Given that AMC ceased being a related party as of July 5, 2018, the detail of that balance has not been included within the tables above.

~~During the three~~ and nine months ended September ~~27, 2018, AMC received cash dividends of approximately $0.1 million~~24, 2020 and ~~$0.4 million, respectively, on its shares of NCM, Inc. common stock held at that time.~~September 26, 2019, respectively.

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

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

operations of AC JV, LLC, the Company concluded that its interest was more than minor under the accounting guidance. The Company’s investment in AC JV, LLC was ~~$1.0~~$0.8 million and $0.9 million as of September 24, 2020 and December 26, 2019, ~~and December 27, 2018,~~ respectively. ~~During the three months ended September 26, 2019 and September 27, 2018 and the nine months ended September 26, 2019 and September 27, 2018, NCM LLC received cash distributions~~Equity in (losses) earnings from AC JV, LLC of ~~$0.1~~$(0.1) million, $0.0 million, ~~$0.2~~$(0.1) million and ~~$0.0~~$0.3 million ~~respectively. Equity in earnings from AC JV, LLC~~ for the three months ended September 24, 2020 and September 26, 2019 and ~~September 27, 2018 and the~~ nine months ended September 24, 2020 and

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

September 26, 2019, ~~and September 27, 2018, were $0.0 million, $0.0 million, $0.3 million and $0.1 million,~~ respectively, ~~and~~ is included in “Other non-operating ~~expenses~~income” in the unaudited Condensed Consolidated Statements of Income. NCM LLC also received fees from AC JV, LLC of $0.1 million, $0.1 million, $0.1 million, and $0.2 million in the three months ended September 26, 2019 and September 27, 2018 and the nine months ended September 26, 2019 and September 27, 2018, respectively, related to the transition services agreement with AC JV, LLC whereby the Company provides certain corporate overhead or creative services or use of facilities in exchange for a fee. These fees received by NCM LLC are included as an offset to network costs in the unaudited Condensed Consolidated Statements of Income.

6. BORROWINGS

The following table summarizes NCM LLC’s total outstanding debt as of September ~~26, 2019~~24, 2020 and December ~~27, 2018~~26, 2019 and the significant terms of its borrowing arrangements (in millions):


	Outstanding Balance as of									Outstanding Balance as of
Borrowings	September 26, 2019			December 27, 2018			Maturity Date	Interest Rate	Borrowings	September 24, 2020		December 26, 2019		Maturity Date	Interest Rate
Senior secured notes due 2022	$	400.0		$	400.0		April 15, 2022	6.000%
Revolving credit facility	6.0			27.0			June 20, 2023	(1)	Revolving credit facility	$	167.0	$	39.0	June 20, 2023	(1)
Term loan	267.3			269.4			June 20, 2025	(1)
Term loans									Term loans	264.6		266.6		June 20, 2025	(1)
Senior unsecured notes due 2026	230.0			235.0			August 15, 2026	5.750%	Senior unsecured notes due 2026	230.0		230.0		August 15, 2026	5.750%
Senior secured notes due 2028									Senior secured notes due 2028	400.0		400.0		April 15, 2028	5.875%
Total borrowings	903.3			931.4					Total borrowings	1,061.6		935.6
Less: debt issuance costs related to term loan and senior notes	(6.6		)	(7.8		)
Less: debt issuance costs related to term loans and senior notes									Less: debt issuance costs related to term loans and senior notes	(8.4)		(9.0)
Total borrowings, net	896.7			923.6					Total borrowings, net	1,053.2		926.6
Less: current portion of debt	(2.7		)	(2.7		)			Less: current portion of debt	(2.7)		(2.7)
Carrying value of long-term debt	$	894.0		$	920.9				Carrying value of long-term debt	$	1,050.5	$	923.9


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

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

Senior Secured Credit Facility—On June 20, 2018, NCM LLC entered into a credit agreement (the “Credit Agreement”) to replace NCM LLC's senior secured credit facility, dated as of February 13, 2007, as amended (the “previous facility”). Consistent with the structure of the previous facility, the ~~agreement~~Credit Agreement consists of a term loan facility and a revolving credit facility. As of September ~~26, 2019,~~24, 2020, NCM LLC’s senior secured credit facility consisted of a $175.0 million revolving credit facility and a ~~$267.3~~$264.6 million term loan. The obligations under the senior secured credit facility are secured by a lien on substantially all of the assets of NCM LLC.

On April 30, 2020, NCM LLC amended the Credit Agreement (the “Credit Agreement Amendment”) to allow for the automatic waiver of any non-compliance with its Consolidated Net Senior Secured Leverage Ratio and Consolidated Total Leverage Ratio financial covenants occurring from the quarter ending June 25, 2020 until and including the quarter ending July 1, 2021 (the “Covenant Holiday Period”). The Credit Agreement Amendment requires that, until the fiscal quarter ending July 1, 2021, NCM LLC must not permit the sum of unrestricted cash on hand at NCM LLC and availability under its Revolving Credit Facility to be less than $55.0 million. Further, NCM LLC can make available cash distributions to its members (AMC, Cinemark, Regal and NCM, Inc.) during the Covenant Holiday Period only if trailing 12-month Consolidated EBITDA (as defined in the Credit Agreement) equals or exceeds $277.0 million and outstanding loans under the Revolving Credit Facility are equal to or less than $39.0 million. NCM LLC can make available cash distributions to its members outside of the Covenant Holiday Period so long as NCM LLC’s Consolidated Net Senior Secured Leverage Ratio is equal to or less than 5.00 to 1.00 and no default or event of default under the Credit Agreement has occurred and is continuing.

Revolving Credit Facility—The revolving credit facility portion of NCM LLC’s total borrowings is available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the senior secured credit facility, and a portion is available for letters of credit. 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 to address the COVID-19 Pandemic. As of September ~~26, 2019,~~24, 2020, NCM LLC’s total availability under the $175.0 million revolving credit facility was ~~$164.2~~$4.4 million, net of ~~$6.0~~$167.0 million outstanding and ~~$4.8~~$3.6 million in letters of credit. The unused line fee is 0.50% per annum which is consistent with the previous facility. Borrowings under the revolvingcredit facility bear interest at NCM LLC’s option of either the LIBOR index plus an applicable margin ranging from 1.75% to 2.25% or the base rate plus an applicable margin ranging from 0.75% to 1.25%. The applicable margin for the revolving credit facility is determined quarterly and is subject to adjustment based upon a consolidated net senior secured leverage ratio for NCM LLC (the ratio of secured funded debt less unrestricted cash and cash equivalents of up to $100.0 million, divided by Adjusted EBITDA for debt purposes, defined as NCM LLC's net income before depreciation and amortization expense adjusted to also exclude non-cash share based compensation costs for NCM LLC plus integration payments received). The revolving credit facility will mature on June 20, 2023. The weighted-average interest rate on the revolving credit facility as of September ~~26, 2019~~24, 2020 was ~~6.00%~~3.00%.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Term ~~Loan~~Loans—The interest rate on the term ~~loan~~loans is a rate chosen at NCM LLC’s option of either the LIBOR index plus 3.00% or the base rate plus 2.00%. The interest rate on the term ~~loan~~loans as of September ~~26, 2019~~24, 2020 was ~~5.19%~~4.00%. The term ~~loan amortizes~~loans amortize at a rate equal to 1.00% annually, to be paid in equal quarterly installments. As of September ~~26, 2019,~~24, 2020, NCM LLC has paid principal of ~~$2.7~~$5.4 million, reducing the outstanding balance to ~~$267.3~~$264.6 million. The term ~~loan~~loans will mature on June 20, 2025.

The senior secured credit facility contains a number of covenants and various financial ratio requirements, including, (i) a consolidated net total leverage ratio covenant of 6.25 times for each quarterly period and (ii) with respect to the revolving credit facility, maintaining a consolidated net senior secured leverage ratio of equal to or less than 4.50 times on a quarterly basis for each quarterly period in which a balance is outstanding on the revolving credit facility. In addition, NCM LLC is permitted to make quarterly dividend payments and other restricted payments with its available cash as long as NCM LLC’s consolidated net senior secured leverage ratio (after giving effect to any such payment) is below 5.50 times and no default or event of default has occurred and continues to occur under the senior secured credit facility. As of September ~~26, 2019,~~24, 2020, NCM LLC’s consolidated net senior secured leverage ratio was ~~3.11~~7.93 times (versus the dividend payment restriction of 5.50 times and the covenant of 4.50 times) and NCM LLC's consolidated net total leverage ratio was ~~4.17~~10.43 times (versus the covenant of 6.25 times).

~~Senior Secured Notes due 2022—On April 27, 2012,~~ As of September 24, 2020, NCM LLC ~~completed a private placement~~was in compliance with the requirements of ~~$400.0 million in aggregate principal amount of 6.000% Senior Secured Notes (the “Notes due 2022”) for which~~ the ~~registered exchange offering~~Credit Agreement Amendment described above and the noncompliance with the financial covenants was completed on November 26, 2012. The Notes due 2022 pay interest semi-annually in arrears on April 15 and October 15 of each year, which commenced on October 15, 2012. The Notes due 2022 share in the same collateral that secures NCM LLC's obligations under the senior secured credit facility.automatically waived.

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 pay 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 are the senior unsecured obligations of NCM LLC. NCM LLC repurchased and canceled a total of $5.0 million and $15.0 million of the Notes due 2026 during 2019 and 2018, respectively, reducing the principal amount to $230.0 million as of September ~~26, 2019.~~24, 2020. These repurchases were treated as partial debt extinguishments and resulted in the realization of a non-operating gain, net of written off debt issuance costs, of ~~$0.3~~$0.0 million, $0.0 million, $0.0 million and $0.3 million during the three months and nine months ended September 24, 2020 and September 26, 2019, respectively.

Senior Secured Notes due 2028—On October 8, 2019, NCM LLC completed a private offering of $400.0 million aggregate principal amount of 5.875% Senior Secured Notes due 2028 (the “Notes due 2028”) to eligible purchasers. The Notes due 2028 will mature on April 15, 2028. Interest on the Notes due 2028 accrues at a rate of 5.875% per annum and is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2020. The Notes due 2028 were issued at 100% of the face amount thereof and share in the same collateral that secures NCM LLC's obligations under the senior secured credit facility.

7. INCOME TAXES

Changes in the Company’s Effective Tax Rate—The Company recorded an income tax benefit of $7.7 million for the nine months ended September 24, 2020 compared to income tax expense of $6.0 million for the nine months ended September 26, 2019 ~~and September 27, 2018, respectively.~~

~~7. INCOME TAXES~~

~~Changes~~resulting in ~~the Company’s Effective Tax Rate—The Company’s~~an effective tax rate increased from (2.8)% for the three months ended September 27, 2018 to 33.4% for the three months ended September 26, 2019 primarily due to lower deferred tax expense for the three months ended September 27, 2018 from the Company's remeasurement of ~~its deferred tax assets as a result of revised state tax apportionment rates. The Company’s effective tax rate decreased from 55.3%~~20.4% for the nine months ended September ~~27, 2018~~24, 2020 as compared to 26.9% for the nine months ended September 26, ~~2019 primarily due to a decrease in tax expense recorded for the change in the state effective tax rate.~~2019. The decrease in ~~income~~the effective tax ~~expense~~rate was primarily due to ~~a decrease in deferred~~the relative impact of the tax benefit recorded on pretax book losses attributable to NCM Inc. of $37.8 million for the nine months ended September 24, 2020 compared to tax expense recorded on pretax book income of $22.5 million for the nine months ended September 26, ~~2019, compared to the nine months ended September 27, 2018 related to the Company's remeasurement of its deferred taxes as a result of a 2018 state tax law change.~~2019. The Company's current blended state and federal rate is(net of federal benefit) was 24.4% as of September 24, 2020 and 24.3% as of September 26, ~~2019 as compared to 25.6% as of September 27, 2018.~~2019.

8. 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 or in the 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 ~~$21.9~~$20.9 million and short-term and long-term lease liabilities of ~~$1.5~~$1.8 million and ~~$24.5~~$23.2 million, respectively, on the balance sheet as of September ~~26, 2019~~24, 2020 for all material leases with terms longer than twelve months. These balances are included within ~~'Other assets'~~“Other assets”, ~~'Other~~“Other current ~~liabilities'~~liabilities” and ~~'Other liabilities'~~“Other liabilities”, respectively, on the unaudited Condensed Consolidated Balance Sheets. The Company has options on certain of these facilities to extend the lease or to terminate part or all of the leased space prior to the lease end date. 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

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~the ROU assets and lease liabilities.~~ As of September ~~26, 2019,~~24, 2020, the Company had a weighted average remaining lease term of ~~10.25~~9.4 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 three and nine months ended September 26, 2019, the Company recognized the following components of total lease cost (in millions). These costs are presented within selling and marketing costs and administrative and other costs within the unaudited Condensed Consolidated Statements of Income depending upon the nature of the use of the facility.

Three Months Ended Nine Months Ended
September 26,
2019 September 26,
2019
Operating lease cost $ 0.7
$ 2.3
Short-term lease cost 0.1
0.2
Variable lease cost 0.1
0.4
Total lease cost $ 0.9
$ 2.9

The Company made total lease payments of $0.9 million and $2.5 million during the three and nine months ended September 26, 2019. These payments are included within cash flows from operating activities within the unaudited Condensed Consolidated Statement of Cash Flows. The minimum lease payments under noncancelable operating leases as of December 27, 2018 were as follows (in millions).

Year Minimum Lease Payments
2019 $ 3.5
2020 3.3
2021 3.4
2022 3.4
2023 3.4
Thereafter 22.1
Total $ 39.1

~~The future lease payments under noncancelable operating leases as of September 26, 2019 were as follows (in millions).~~

Year Future Lease Payments
2019 (September 27, 2019 - December 26, 2019) $ 0.8
2020 3.5
2021 3.5
2022 3.7
2023 3.7
2024 3.7
Thereafter 18.6
Total 37.5
Less: Imputed interest on future lease payments (11.5 )
Total lease liability as of September 26, 2019 per the Condensed Consolidated Balance Sheet $ 26.0

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

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

environment. As of September ~~26, 2019,~~24, 2020, the Company’s weighted average annual discount rate used to establish the ROU assets and lease liabilities was ~~7.35%~~7.34%.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~During the three and nine months ended September 24, 2020 and September 26, 2019, the Company recognized the following components of total lease cost (in millions). These costs are presented within “Selling and marketing costs” and “Administrative and other costs” within the unaudited Condensed Consolidated Statements of Income depending upon the nature of the use of the facility.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~


	Three Months Ended				Nine Months Ended
	September 24, 2020		September 26, 2019		September 24, 2020		September 26, 2019
Operating lease cost	$	0.9	$	0.7	$	2.7	$	2.3
Short-term lease cost	0		0.1		0		0.2
Variable lease cost	0.1		0.1		0.4		0.4
Total lease cost	$	1.0	$	0.9	$	3.1	$	2.9

~~(UNAUDITED)~~

The Company made total lease payments of $0.9 million, $0.9 million, $2.7 million and $2.5 million during the three months ended September 24, 2020 and September 26, 2019 and nine months ended September 24, 2020 and September 26, 2019, respectively. These payments are included within cash flows from operating activities within the unaudited Condensed Consolidated Statement of Cash Flows.

Operating Commitments - ESAs and Affiliate Agreements- —The Company has entered into long-term ESAs with the founding members 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 founding members 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 4 - 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. However, the amortization of these intangible assets is considered lease expense and ~~was therefore, reclassified in the current period from 'Depreciation and amortization expense' to 'Amortization~~is presented within “Amortization of intangibles recorded for network theater screen ~~leases'~~leases” within the unaudited Condensed Consolidated Statement of Income.

In consideration for NCM LLC’s access to the founding members’ theater attendees for on-screen advertising and use of lobbies and other space within the founding members’ theaters for the LEN and lobby promotions, the founding members receive a monthly theater access fee under the ESAs. The theater access fee is composed of a fixed payment per patron, a fixed payment per digital screen (connected to the DCN) and a fee for access to higher quality digital cinema equipment. The payment per theater patron increases by 8% every five years, with this next increase occurring in fiscal year 2022, and the payment per digital screen and for digital cinema equipment increases annually by 5%. The theater access fee paid in the aggregate to all founding members cannot be less than 12% of NCM LLC’s aggregate advertising revenue (as defined in the ESA), or it will be adjusted upward to reach this minimum payment. As of September ~~26, 2019~~24, 2020 and December ~~27, 2018,~~26, 2019, the Company had no0 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 ~~will~~ receive an additional monthly theater access fee ~~beginning~~that began on November 1, 2019 in consideration for NCM LLC's access to certain on-screen advertising inventory after the advertised showtime of a feature film. These fees are also based upon a fixed payment per ~~patron~~patron: (i) beginning at $0.025 per patron on November 1, 2019, (ii) $0.0375 per patron beginning on November 1, 2020, (iii) $0.05 per patron beginning on November 1, 2021, (iv) $0.052 per patron beginning on November 1, 2022 and (v) increase 8% every five years beginning November 1, 2027. Additionally, following the 2019 ESA Amendments, beginning on November 1, 2019, NCM LLC ~~will be~~is entitled to display the Platinum Spot, an additional single unit that is either 30 or 60 seconds of the Noovie pre-show in the trailer position directly prior to the “attached” trailers preceding the feature ~~film (the “Platinum Spot”).~~film. The “attached” trailers are those provided by studios to Cinemark and Regal that are with the feature film, which is at least one trailer, but sometimes two or more trailers. In consideration for the utilization of the theaters for the Platinum Spots, Cinemark and Regal ~~will be~~are entitled to receive 25% of all revenue generated for the actual display of Platinum Spots in their applicable theaters, subject to a specified minimum. If NCM LLC runs advertising in more than one concurrent advertisers’ Platinum Spot for any portion of the network over a period of time, then NCM LLC will be required to satisfy a minimum average CPM for that period of time. The Company does not owe the founding members any theater access fees or any Platinum Spot revenue share when the theaters are not displaying the Company's pre-show or

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

when the Company does not have access to the theaters. As such, the Company did not and will not owe these fees for the period of time the founding members' theaters were temporarily closed due to the COVID-19 Pandemic and future fees will be reduced if attendance remains lower than historical levels. The digital screen fee is calculated based upon average screens in use during each month. No digital screen fees were or will be incurred for the period of time the founding member's theaters were temporarily closed due to the COVID-19 Pandemic and future fees will be reduced for months where screens are in use for only part of the month.

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. If a network affiliate achieves the attendance set forth in their respective agreement, the Company has guaranteed minimum revenue for the network affiliate per attendee if such amount paid under the revenue share arrangement is less than its guaranteed amount. As of September ~~26, 2019,~~24, 2020, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is ~~$83.6~~$64.0 million over the remaining terms of the network affiliate agreements. These minimum guarantees relate to various affiliate agreements ranging in term from ~~one~~three years to twenty years, prior to any renewal periods of which some are at the option of the Company. ~~During the three months ended September 26, 2019 and September 27, 2018 and the nine months ended September 26, 2019 and September 27, 2018,~~

~~the~~The Company ~~paid $0.3 million, $0.7 million, $0.3~~accrued $0.2 million and ~~$0.7 million related to these minimum guarantees. Additionally, the Company accrued $0.4 million and $0.1~~$0.5 million related to affiliate agreements with guaranteed minimums in excess of the revenue share agreement as of September 24, 2020 and December 26, 2019, respectively. 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 ~~December 27, 2018, respectively.~~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.

9. FAIR VALUE MEASUREMENTS

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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.

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, other investments, notes receivable and borrowings.

Long-Lived Assets, Intangible Assets and Other Investments ~~and Notes Receivable~~—The Company regularly reviews long-lived assets (primarily property, plant and equipment), intangible assets and investments accounted for under the cost or equity method ~~and notes receivable~~ for impairment whenever certain qualitative factors, 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					As of
	September 26, 2019		December 27, 2018			September 24, 2020		December 26, 2019
Investment in AC JV, LLC (1)	$	1.0	$	0.9	Investment in AC JV, LLC (1)	$	0.8	$	0.9
Other investments (2)	0.1		2.1
Other investments					Other investments	0.1		0.1
Total	$	1.1	$	3.0	Total	$	0.9	$	1.0


~~(1)~~	~~Refer to Note 5—Related Party Transactions. This investment is accounted for utilizing the equity method.~~ (1)Refer to Note 5—Related Party Transactions. This investment is accounted for utilizing the equity method. 19 NATIONAL CINEMEDIA, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~(2)~~

The Company received equity securities in privately held companies as consideration for a portion of advertising contracts. The equity securities are accounted for at adjusted cost in accordance with the practicability exception under Accounting Standards Update 2016-1, ~~Recognition and Measurement of Financial Assets and Financial Liabilities, and represent an ownership of less than 20%. The Company does not exert significant influence on these companies’ operating or financial activities.~~

During the three months ended September ~~26, 2019~~24, 2020 and September ~~27, 2018~~26, 2019 and the nine months ended September ~~26, 2019~~24, 2020 and September ~~27, 2018,~~26, 2019, the Company recorded impairment charges of $0.0 million, $2.0 million, $0.0 million ~~$2.0 million~~ and ~~$0.4~~$2.0 million, respectively, on certain of its investments due to a significant deterioration in the business prospects of the investee or new information regarding the fair value of the investee, which brought the total remaining value of the respective impaired investments to $0.0 million as of September ~~26, 2019~~24, 2020 and September ~~27, 2018.~~26, 2019. As of September ~~26, 2019,~~24, 2020, no ~~other~~ observable price changes or impairments have been recorded as a result of the Company’s qualitative assessment of identified events or changes in the circumstances of the remaining investments. The investment in AC JV, LLC 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. 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.

As of September 26, 2019 and December 27, 2018, the Company had notes receivable totaling $4.2 million and $5.6 million, respectively, from its founding members related to the sale of Fathom Events, as described in Note 5—~~Related Party Transactions~~. These notes were initially valued using comparative market multiples. There were no identified events or changes in circumstances that had a significant adverse effect on the fair value of the notes receivable. The notes are classified as Level 3 in the fair value hierarchy as the inputs to the determination of fair value are based upon non-identical assets and use significant unobservable inputs.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Borrowings—The carrying amount of the revolving credit facility is considered a reasonable estimate of fair value due to its floating-rate terms. The estimated fair values of the Company’s financial instruments where carrying values do not approximate fair value were as follows (in millions):

As of September 26,
2019 As of December 27,
2018
Carrying Value Fair Value (1) Carrying Value
Fair Value (1)
Term loan $ 267.3
$ 267.5
$ 269.4
$ 261.2
Notes due 2022 400.0
406.0
400.0
401.8
Notes due 2026 230.0
224.4
235.0
211.0


	As of September 24, 2020				As of December 26, 2019
	Carrying Value		Fair Value (1)		Carrying Value		Fair Value (1)
Term loans	$	264.6	$	217.0	$	266.6	$	266.9
Notes due 2026	230.0		158.2		230.0		226.2
Notes due 2028	400.0		343.0		400.0		426.7


~~(1)~~	~~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 based upon the inputs utilized.~~

(1)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 based upon the inputs utilized.

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


			Fair Value Measurements at Reporting Date Using
	Fair Value as of September 24, 2020		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)	$	51.3	$	51.3	$	0	$	0
Short-term marketable securities (2)	1.3		0		1.3		0
Long-term marketable securities (2)	1.7		0		1.7		0
Total assets	$	54.3	$	51.3	$	3.0	$	0


			Fair Value Measurements at Reporting Date Using
	Fair Value as of December 26, 2019		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)	$	28.8	$	16.8	$	12.0	$	0
Short-term marketable securities (2)	17.5		0		17.5		0
Long-term marketable securities (2)	7.5		0		7.5		0
Total assets	$	53.8	$	16.8	$	37.0	$	0

(1)Cash Equivalents—The Company’s cash equivalents are carried at estimated fair value following the Company's election of the fair value option. Cash equivalents consist of money market accounts which the Company has classified as Level 1 given the active market for these accounts and commercial paper with original maturities of three months or less, which are classified as Level 2 and are valued as described below.

(2)Short-Term and Long-Term Marketable Securities—The carrying amount and fair value of the marketable securities are equivalent since the Company accounts for these instruments at fair value. The Company’s government agency bonds, commercial paper and certificates of deposit are valued using third party broker quotes. The value of the

Fair Value Measurements at Reporting Date Using
Fair Value as of September 26,
2019 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)
$ 36.9
$ 15.2
$ 21.7
$ —
Short-term marketable securities (2)
8.1
—
8.1
—
Long-term marketable securities (2)
8.5
—
8.5
—
Total assets $ 53.5
$ 15.2
$ 38.3
$ —

Fair Value Measurements at Reporting Date Using
Fair Value as of December 27,
2018 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)
$ 18.2
$ 11.2
$ 7.0
$ —
Short-term marketable securities (2)
24.0
—
24.0
—
Long-term marketable securities (2)
10.2
—
10.2
—
Total assets $ 52.4
$ 11.2
$ 41.2
$ —


~~(1)~~	~~Cash Equivalents~~—The Company’s cash equivalents are carried at estimated fair value. Cash equivalents consist of money market accounts which the Company has classified as Level 1 given the active market for these accounts and commercial paper with original maturities of three months or less, which are classified as Level 2 and are valued as described below.

~~(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 is derived from quoted market information. The inputs in the valuation are classified as Level 1 if there is an active market for these securities; however, if an active market does not exist, the inputs are recorded at a lower level in the fair value hierarchy. The value of commercial paper and certificates of deposit is derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy. For the three and nine months ended September 26, 2019 and September 27, 2018, there was an inconsequential amount of net realized gains (losses) recognized in interest income and an inconsequential amount of net unrealized holding gains (losses) included in interest income. Original cost of short-term marketable securities is based on the specific identification method. As of September 26, 2019 and

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~December 27, 2018,~~Company’s government agency bonds is derived from quoted market information. The inputs in the valuation are classified as Level 1 if there is an active market for these securities; however, if an active market does not exist, the inputs are recorded at a lower level in the fair value hierarchy. The value of commercial paper and certificates of deposit is derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy. As of September 24, 2020, there was $2.8 million of available-for-sale debt securities in unrealized loss positions without an inconsequential amount and $0.2 million, respectively, of gross unrealized losses related to individual securities of $6.5 million and $11.8 million, respectively, that had been in a continuous loss positionallowance for ~~12 months or longer.~~credit losses. The Company has not recorded an ~~impairment because it has~~allowance for credit losses for the ~~intention~~marketable securities balance as of September 24, 2020 given the immaterial difference between the amortized cost basis and ~~ability to hold these securities to maturity.~~the aggregate fair value of the Company's securities.

The amortized cost basis, aggregate fair value and maturities of the marketable securities the Company held as of September ~~26, 2019~~24, 2020 and December ~~27, 2018~~26, 2019 were as follows:


	As of September 24, 2020
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:





Short-term certificates of deposit	$	1.3	$	1.3	0.3
Total short-term marketable securities	1.3		1.3


Long-term certificates of deposit	1.8		1.7		3.4
Total long-term marketable securities	1.8		1.7
Total marketable securities	$	3.1	$	3.0

As of September 26, 2019
Amortized Cost
Basis
(in millions) Aggregate Fair
Value
(in millions)
Maturities (1)
(in years)
MARKETABLE SECURITIES:
Short-term U.S. government agency bonds $ 3.0
$ 3.0
0.6
Short-term commercial paper:
Industrial 2.0
2.0
0.2
Short-term municipal bonds 1.2
1.2
0.8
Short-term certificates of deposit 1.9
1.9
0.1
Total short-term marketable securities 8.1
8.1

Long-term U.S. government agency bonds 5.9
6.0
3.0
Long-term certificates of deposit 2.5
2.5
2.5
Total long-term marketable securities 8.4
8.5

Total marketable securities $ 16.5
$ 16.6


	As of December 27, 2018						As of December 26, 2019
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)		Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:						MARKETABLE SECURITIES:
Short-term U.S. government agency bonds	$	3.9	$	3.9	0.5	Short-term U.S. government agency bonds	$	3.5	$	3.5	0.4
Short-term U.S. government treasury bonds	0.3		0.3		0.5

Short-term certificates of deposit	3.6		3.6		0.6	Short-term certificates of deposit	0.9		0.9		0.8
Short-term municipal bonds	0.5		0.5		0.1	Short-term municipal bonds	1.2		1.2		0.5
Short-term commercial paper:						Short-term commercial paper:
Financial	3.8		3.8		0.1	Financial	8.0		7.9		0.3
Industrial	12.0		11.9		0.1	Industrial	4.0		4.0		0.2
Total short-term marketable securities	24.1		24.0			Total short-term marketable securities	17.6		17.5

Long-term municipal bonds	1.2		1.3		1.5
Long-term U.S. government agency bonds	6.9		6.8		2.1	Long-term U.S. government agency bonds	4.5		4.5		2.2
Long-term certificates of deposit	2.4		2.1		2.9	Long-term certificates of deposit	3.0		3.0		3.6
Total long-term marketable securities	10.5		10.2			Total long-term marketable securities	7.5		7.5
Total marketable securities	$	34.6	$	34.2		Total marketable securities	$	25.1	$	25.0

~~(1)~~

(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.

~~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.

10. SUBSEQUENT ~~EVENTS~~EVENT

On October 8, 2019, NCM LLC completed a private offering of $400.0 million aggregate principal amount of 5.875% senior secured notes due 2028 (the “Notes due 2028”) to eligible purchasers. The Notes due 2028 will mature on April 15

, 2028. Interest on the Notes due 2028 accrues at a rate of 5.875% per annum and is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2020. Also, on October 8, 2019, NCM LLC called for redemption the entire $400.0 million aggregate principal amount of NCM LLC’s existing Notes due 2022. The redemption price for the Notes due 2022 is 101.000% of the principal amount thereof plus accrued and unpaid interest thereon, to but not including the redemption date. The redemption date will be November 7, 2019. Following the delivery of the redemption notice for the Notes due 2022, NCM LLC deposited funds with the trustee for the Notes due 2022 in an amount that is sufficient for the trustee to pay the full redemption price (including accrued and unpaid interest) to the holders of the Notes due 2022 on the redemption date.

~~On November 4, 2019,~~30, 2020, the Company declared a cash dividend of ~~$0.17~~$0.07 per share (approximately ~~$13.2~~$5.5 million) on each share of the Company’s common stock (not including outstanding restricted stock which will accrue dividends until the shares vest) to stockholders of record on November ~~14, 2019~~16, 2020 to be paid on ~~November 29, 2019.~~December 1, 2020.

Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

Some of the information in this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations,”~~Operations” and statements related to the impact of the current COVID-19 Pandemic on our business and results, may constitute forward-looking statements. In some cases, you can identify these “forward-looking statements” by the specific words, including but not limited to “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of those words and other comparable words. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these statements as a result of certain factors as more fully discussed under the heading “Risk Factors” below and in our annual report on Form 10-K for the Company’s fiscal year ended December ~~27, 2018.~~26, 2019 and as updated within our quarterly report on Form 10-Q filed with the SEC on May 5, 2020 for the quarter ended March 26, 2020. Among other risks, we face significant risk and volatility related to the COVID-19 Pandemic as discussed in this report. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. The following discussion and analysis should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herein and the audited financial statements and other disclosure included in our annual report on Form 10-K for the Company’s fiscal year ended December ~~27, 2018.~~26, 2019. In the following discussion and analysis, the term net income refers to net income attributable to NCM, Inc.

Overview

We are America's Movie Network. As the ~~#1 weekend~~largest cinema advertising network ~~for Millennials (age 18-34)~~ in the U.S., we ~~are~~unite brands with the ~~connector between brands~~power of movies and engage movie ~~audiences.~~fans anytime and anywhere. We currently derive revenue principally from the sale of advertising to national, regional and local businesses in Noovie, our cinema advertising and entertainment pre-show seen on movie screens across the U.S. Beginning in mid-March 2020, each of our founding members and all of our network affiliates announced that their theaters would be temporarily closed to address the COVID-19 Pandemic and almost all of the theaters within our network remained closed until late August 2020. On September 4, 2020 the Company resumed in-theater advertising and as of September 24, 2020, approximately two-thirds of the theaters within our network were open. As of October 30, approximately 53% of theaters within our network are open. Refer to the “Recent Developments” section below for further information regarding the impact of and the Company's response to the COVID-19 Pandemic.

Beginning in November 2019 following the completion of the 2019 ESA Amendments, we now present two different formats of our Noovie pre-show depending on the theater circuit in which it runs. In Regal and Cinemark and 14 of our network affiliates' theaters, Noovie now includes advertising inventory after the advertised showtime consisting of (1) the lights down segment that runs for five minutes after the advertised showtime with trailer lighting and (2) the 30- or 60-second Platinum Spot (together, the “Post-Showtime Inventory”). As of September 24, 2020, theaters presenting the new Noovie format with Post-Showtime Inventory made up approximately 58% of our network based upon 2019 attendance. All other NCM network theater circuits, which make up the remaining 42% of our network, present the Classic Noovie pre-show, which ends approximately at the advertised movie showtime when the movie trailers begin. The movie trailers that run before the feature film are not part of Noovie.

We also sell advertising on our LEN, a series of ~~strategically-placed~~strategically placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. In addition, we sell online and mobile advertising through our Cinema Accelerator and across our ~~other~~suite of Noovie digital ~~gaming products~~properties, including Noovie.com, Noovie ~~ARcade, Fantasy Movie League,~~ Shuffle, Name That Movie, Noovie Arcade and ~~Noovie Shuffle~~ ~~which can be played on~~Fantasy Movie League in order to reach entertainment audiences beyond the ~~mobile apps or at~~ ~~Noovie.com~~.theater. As of September ~~26, 2019, over 3.5~~24, 2020, approximately 4.2 million ~~movie goers~~moviegoers have downloaded our mobile apps. These downloads and the acquisition of second party data have resulted in ~~first~~first- and ~~second party~~second-party data sets of over ~~75 million.~~146million as of September 24, 2020. We have long-term ESAs (approximately ~~20.0~~ 19.0weighted average years remaining ~~as of September 26, 2019)~~based on 2019 attendance) with the founding members and multi-year agreements with our network affiliates, which expire at various dates between ~~December 2019~~ January 2021and July 2031. The weighted average remaining term (based on 2019 attendance) of the ESAs and the network affiliate agreements is ~~17.4~~16.5 years as of September ~~26, 2019.~~24, 2020. The ESAs and network affiliate agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions. Our Noovie pre-show and LEN programming are distributed predominantly via satellite through our proprietary DCN. Approximately ~~98%~~99% of the aggregate founding member and network affiliate theater attendance is generated by theaters connected to our DCN (the remaining screens receive advertisements on USB drives) and 100% of the Noovie pre-show is projected on digital projectors ~~(95%~~(96% digital cinema projectors and 5%4% LCD projectors) as of September ~~26, 2019.~~24, 2020.

Management focuses on several measurements that we believe provide us with the necessary ratios and key performance indicators to manage our business, determine how we are performing versus our internal goals and targets, and against the performance of our competitors and other benchmarks in the marketplace in which we operate. Senior executives hold meetings at least once per quarter with members of management to discuss and analyze operating results and address significant variances to budget and prior year in an effort to identify trends and changes in our business. We focus on operating metrics including changes in revenue, Adjusted OIBDA and Adjusted OIBDA margin, as defined and discussed below, as some of our primary measurement metrics. In addition, we monitor our monthly advertising performance measurements, including advertising inventory utilization, national and regional advertising pricing (CPM), local advertising rate per screen per week, national and local and regional and total advertising revenue per attendee. We also monitor free cash flow, the dividend coverage ratio, financial leverage ratio (net debt divided by Adjusted OIBDA plus integration payments and other encumbered theater payments), cash balances and revolving credit facility availability to ensure financial debt covenant compliance and that there is adequate cash availability to fund our working capital needs and debt obligations and current and future dividends declared by our Board of Directors. ~~Financial results, including the metrics outlined above, are presented to the Board of Directors on a monthly basis.~~

Our operating results may be affected by a variety of internal and external factors and trends described more fully in the section entitled “Risk Factors” below and in our annual report on Form 10-K filed with the SEC on February ~~22, 2019~~20, 2020 for our fiscal year ended December ~~27, 2018.~~26, 2019 and as updated within our quarterly report on Form 10-Q filed with the SEC on May 5, 2020 for the quarter ended March 26, 2020.

Recent Developments

COVID-19— Following the World Health Organization’s declaration of the COVID-19 virus as a pandemic, the United States’ government and other state and local governments issued precautionary restrictions on travel, public gatherings and other events and issued social distancing guidelines. Beginning in mid-March 2020, each of our founding members and all of our network affiliates announced that their theaters would be temporarily closed and almost all of the theaters within our network remained closed until late August 2020. The Company generated no in-theater advertising revenue for the approximate six months that the theaters were closed. Major motion picture releases expected to occur during the temporary closure period were delayed until late 2020 or into 2021 or have been released directly to alternative delivery methods bypassing the theater entirely.

~~Amendment to Cinemark and Regal ESAs~~

On September ~~17, 2019, NCM LLC entered into~~4, 2020 the ~~2019 ESA Amendments with affiliates~~Company resumed advertising within the theaters that were open in our network; however in-theater advertising revenue continues to be adversely impacted as attendance at the reopened theaters has been less than normal given COVID-19 restrictions around patron capacity limitations and a continued lack of ~~each~~new major motion picture releases. As of ~~Cinemark and Regal. The 2019 ESA Amendments extended the terms~~September 24, 2020, approximately two-thirds of the ~~ESAs~~theaters within our network had reopened. The results of the three and nine months ended September 24, 2020 were significantly impacted by the COVID-19 Pandemic.

In October 2020, Regal announced the re-closure of its theaters in the United States and as of the date of this filing, approximately 53% of theaters within our network are open. Many of the open theaters are operating at reduced hours and offering a limited number of movie showtimes and attendance at open theaters has not reached historical levels. As of the filing date, the COVID-19 virus continues to spread in the United States, and there can be no assurance when theaters within our network will return to normal operations, that the theaters that have reopened will remain open or that patrons will return to the theaters at historical levels.

The Company's ability to advertise has been and will continue to be limited due to the portion of our network that remains closed or has re-closed, reduced movie schedules and patron capacities at many network theaters and the timing and frequency of major motion picture releases as compared to prior years due to the COVID-19 Pandemic. Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens and/or in-theater advertising revenue, and therefore, were not incurred for the duration of time that the theaters were closed and attendance-based fees will be reduced for the period of time that attendance is lower than historical levels. Even though our ability to generate in-theater advertising revenue will be negatively impacted by government mandated capacity restrictions and the limited new content currently available, we are still required to pay these screen-based fees when theaters are open, which may be reduced for months where screens are in use for only part of the month. We have been working to preserve cash and ensure sufficient liquidity to endure the impacts of the COVID-19 Pandemic, even if prolonged.

During the temporary theater closures, when we were not running advertising, we temporarily furloughed approximately 30% of our staff and temporarily reduced the pay of the remaining employees by up to 50%, which in aggregate reduced our compensation expense by 50% (“Temporary Salary and Wage Reductions”). In response to the reopening of a portion of our network, we brought back most of our staff from furlough by September 24, 2020 and lifted some of the Temporary Salary and Wage Reductions. All full-time employees are still at salary reductions of up to 20%, although the Company expects to restore all salaries for full-time employees over its next two quarters.

In November 2020, given the limited attendance levels and expected delay in new movie releases, we re-implemented a combination of temporary furloughs, permanent layoffs and further salary reductions. In total, we have permanently reduced our total headcount by approximately 20% from pre-COVID-19 Pandemic headcount levels.

Since the start of the COVID-19 Pandemic, we have also taken the following cash preservation actions that the Company anticipates continuing until the Company’s operations normalize:

•Continued some of the temporary reductions in cash compensation of employees by up to 20%;

•Temporarily reduced cash compensation of the Company's Board of Directors by 20%;

•Suspended certain non-essential operating expenditures, including marketing, research, employee travel and consulting services;

•Implemented a hiring freeze on non-essential positions;

•Temporarily suspended the 401K employee match program;

•Terminated or deferred certain non-essential capital expenditures;

•Strategically worked with ~~Cinemark~~our landlords, vendors, and ~~Regal~~other business partners to manage, defer, and/or abate certain costs during the disruptions caused by the COVID-19 Pandemic;

•Decreased our quarterly dividend to $0.07 per share beginning in the first quarter of 2020 from ~~February 13, 2037~~$0.19 per share in the fourth quarter of 2019. When compared to ~~February 13, 2041~~the fourth quarter of 2019 this results in quarterly cash savings of $9.3 million and ~~modified~~year to date cash savings of $27.9 million for NCM, Inc.; and

•Introduced an active cash management process, which, among other things, requires CEO approval of all outgoing payments.

The Company's ability to normalize operations is dependent upon the ~~Noovie~~ ~~pre-show in Cinemark~~reopening of the remaining theaters within our network, the release of major motion pictures to the theaters, and ~~Regal theaters.~~the attendance of theater patrons. However, there can be no assurance that theater patrons will return to movie theaters or the overall attendance will return to levels comparable to those prior to the COVID-19 Pandemic.

~~Beginning~~In March 2020, we drew down an additional $110.0 million on ~~November 1, 2019,~~our revolving credit facility increasing our cash and marketable securities balance to $215.3 million as of March 26, 2020 ($132.2 million at NCM LLC). Further, as of March 26, 2020, we had approximately $112.3 million of trade accounts receivable outstanding from customers, of which we have collected approximately $103.3 million as of September 24, 2020, increasing our cash and marketable securities balance to $220.7 million as of September 24, 2020 ($157.4 million at NCM LLC) and decreasing our trade accounts receivable outstanding, net of the allowance for doubtful accounts, to $9.0 million. The $157.4 million of cash at NCM LLC will be ~~entitled~~used to ~~display up~~fund operations during the period of expected reduced cash flows. Cash at NCM, Inc. is held for future payment of dividends to ~~five minutes~~NCM, Inc. shareholders, income tax payments, income tax receivable payments to NCM LLC’s founding members and other obligations.

On April 30, 2020, NCM LLC amended its Credit Agreement, dated as of June 20, 2018 (“Credit Agreement Amendment”) to allow for the ~~Noovie~~ ~~pre-show after~~automatic waiver of any non-compliance with its Consolidated Net Senior Secured Leverage Ratio and Consolidated Total Leverage Ratio financial covenants occurring from the ~~advertised showtime of a feature film in Cinemark~~quarter ending June 25, 2020 until and ~~Regal theaters.~~including the quarter ending July 1, 2021 (the “Covenant Holiday Period”). The ~~amount of time included in~~Credit Agreement Amendment requires that, until the ~~Noovie~~ ~~pre-show displayed prior to showtime will be reduced by~~fiscal quarter ending July 1, 2021, NCM LLC must not permit the sum of ~~five minutes plus~~unrestricted cash on hand at NCM LLC and availability under its Revolving Credit Facility to be less than $55.0 million. Further, NCM LLC can make available cash distributions to its members (AMC, Cinemark, Regal and NCM, Inc.) during the ~~aggregate length of time of any Platinum Spot.~~

~~In consideration for utilization~~Covenant Holiday Period only if trailing 12-month Consolidated EBITDA (as defined in the Credit Agreement) equals or exceeds $277.0 million and outstanding loans under the Revolving Credit Facility are equal to or less than $39.0 million. NCM LLC can make available cash distributions to its members outside of the ~~theaters post-showtime, Cinemark~~Covenant Holiday Period so long as NCM LLC’s Consolidated Net Senior Secured Leverage Ratio is equal to or less than 5.00 to 1.00 and ~~Regal~~no default or event of default under the Credit Agreement has occurred and is continuing. NCM LLC may continue to reimburse NCM, Inc. for its services provided under the management services agreement during the period of the automatic waiver.

Management is currently actively pursuing with its administrative agent an additional amendment to its Senior Secured Credit Facility to obtain a waiver to its financial covenants. Management expects the amendment to be approved during the next several months, however, there can be no assurance that the Company will be ~~entitled~~successful in obtaining the amendment.

On March 27, 2020, the U.S. Government enacted various relief and stimulus measures in response to ~~receive post-showtime theater access fees. These fees are based upon Cinemark’s~~the unprecedented adverse economic impacts of the COVID-19 Pandemic commonly referred to as the CARES Act. We currently have recognized or ~~Regal’s attendance and a post-showtime theater access fee per patron. NCM LLC will pay a post-showtime theater access fee~~expect to ~~Cinemark and Regal as follows: (i)~~recognize the following benefits under the CARES Act:

•Deferral of the payment of the 6.2% FICA portion of Company's payroll taxes beginning on ~~November 1, 2019, $0.025 per patron, (ii) beginning on November 1,~~the enactment date through December 31, 2020 ~~$0.0375 per patron, (iii) beginning on November 1,~~until the end of 2021 $0.05 per patron, (iv) beginning on November 1, 2022, $0.052 per patron, and (v) beginning on November 1, 2027 and every five years thereafter on November 1, the post-showtime theater access fee per patron will increase by 8%.

~~In addition, beginning on November 1, 2019, NCM LLC will be entitled to display a Platinum Spot, an additional single unit that is either 30 or 60 seconds~~for one-half of the ~~Noovie~~ ~~pre-show~~tax and the remaining half to the end of 2022. The Company deferred $0.4 million and $0.4 million in qualifying payments in the ~~trailer position directly prior to the “attached” trailers preceding the feature film. The “attached” trailers are those provided by studios to Cinemark~~second and ~~Regal that are with the feature film, which is at least one trailer, but sometimes two trailers.~~third quarter of 2020, respectively; and

~~In consideration~~•A refundable Employee Retention Payroll Tax Credit for the utilization of the theaters post-showtime for Platinum Spots, Cinemark and Regal will be 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 anyCompany's portion of the 6.2% FICA payroll tax for certain qualifying employees from March 13, 2020 through December 31, 2020.

The Company will continue to monitor the provisions of the CARES Act and associated regulations and any other government action and intends to seek available potential benefits that would positively impact the Company.

We believe that the exhibition industry has historically fared well during periods of economic stress, and we remain optimistic, though cannot guarantee, that our founding members and network ~~over~~affiliates will rebound and attendance figures will benefit from pent-up social demand as state and local restrictions or other social distancing orders subside and people seek togetherness with a ~~period~~return to normalcy. However, the ultimate significance of ~~time, then NCM LLC~~the COVID-19 Pandemic, including the extent of the adverse impact on our financial and operational results, will be ~~required to satisfy a minimum average CPM for that period~~dictated by the currently unknowable duration of ~~time.~~

~~Refinancing~~the pandemic, the effect of ~~Notes due 2022~~

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 to eligible purchasers. The Notes due 2028 will mature on April 15, 2028. Interestthe pandemic on the ~~Notes due 2028 accrues at a rate~~overall economy and the advertising market and responsive governmental regulations, including mandated business closures which could recur after the initial reopening causing subsequent closure periods, social distancing guidelines, theater capacity restrictions, shifting movie slates, voluntary theater closures and the level of ~~5.875% per annum and is payable semi-annually~~theater attendance. Our business also could be significantly affected should the disruptions caused by the COVID-19 Pandemic lead to changes in ~~arrears on April 15 and October 15 of each year, commencing on April 15, 2020. Also, on October 8, 2019, NCM LLC called for redemption~~consumer behavior (such as the entire $400.0 million aggregate principal amount of NCM LLC’s existing Notes due 2022. The redemption price for the Notes due 2022 is 101.000% of the principal amount thereof plus accrued and unpaid interest thereon,movie audience’s willingness to but not including the redemption date. The redemption date will be November 7, 2019. Following the delivery of the redemption notice for the Notes due 2022, NCM LLC deposited funds with the trustee for the Notes due 2022 in an amount that is sufficient for the trustee to pay the full redemption price (including accrued and unpaid interest)return to the ~~holders~~movie theaters and the impacts of ~~the Notes due 2022~~social distancing, facemask requirements and other measures on the ~~redemption date.~~movie going experience), or further reductions or impacts to the customary theatrical release window. The COVID-19 Pandemic also makes it more challenging for management to estimate the future performance of our business, particularly over the near to medium term. We are monitoring the rapidly evolving situation and its potential impacts on our financial position, results of operations, liquidity and cash flows.

Summary Historical and Operating Data

You should read this information with the other information contained in this document, and our unaudited historical financial statements and the notes thereto included elsewhere in this document.

Our Operating Data—The following table presents operating data and Adjusted OIBDA (dollars in millions, except share and margin data):


													% Change
	Q3 2020			Q3 2019			YTD 2020			YTD 2019			Q3 2020 to Q3 2019		YTD 2020 to YTD 2019
Revenue	$	6.0		$	110.5		$	74.7		$	297.6		(94.6)	%	(74.9)	%
Operating expenses:
Advertising	8.1			44.3			50.5			130.8			(81.7)	%	(61.4)	%
Network, administrative and unallocated costs	19.2			26.2			64.4			78.2			(26.7)	%	(17.6)	%
Total operating expenses	27.3			70.5			114.9			209.0			(61.3)	%	(45.0)	%
Operating (loss) income	(21.3)			40.0			(40.2)			88.6			(153.3)	%	(145.4)	%
Non-operating expenses	12.7			12.9			40.0			41.4			(1.6)	%	(3.4)	%
Income tax (benefit) expense	(3.1)			4.3			(7.7)			6.0			(172.1)	%	(228.3)	%
Net (loss) income attributable to noncontrolling interests	(18.2)			13.6			(42.3)			24.2			(233.8)	%	(274.8)	%
Net (loss) income attributable to NCM, Inc.	$	(12.7)		$	9.2		$	(30.2)		$	17.0		(238.0)	%	(277.6)	%

Net (loss) income per NCM, Inc. basic share	$	(0.16)		$	0.12		$	(0.39)		$	0.22		(233.3)	%	(277.3)	%
Net (loss) income per NCM, Inc. diluted share	$	(0.16)		$	0.12		$	(0.39)		$	0.22		(233.3)	%	(277.3)	%

Adjusted OIBDA	$	(11.2)		$	51.7		$	(9.5)		$	124.0		(121.7)	%	(107.7)	%
Adjusted OIBDA margin	(186.7)		%	46.8		%	(12.7)		%	41.7		%	(233.5)	%	(54.4)	%
Total theater attendance (in millions) (1)	5.2			163.4			125.8			497.4			(96.8)	%	(74.7)	%

% Change
Q3 2019 Q3 2018 YTD 2019 YTD 2018 Q3 2019 to Q3 2018 YTD 2019 to YTD 2018
Revenue $ 110.5
$ 110.1
$ 297.6
$ 304.0
0.4 % (2.1 )%
Operating expenses:
Advertising 44.3
44.2
130.8
133.4
0.2 % (1.9 )%
Network, administrative and unallocated costs 26.2
23.6
78.2
77.1
11.0 % 1.4 %
Total operating expenses 70.5
67.8
209.0
210.5
4.0 % (0.7 )%
Operating income 40.0
42.3
88.6
93.5
(5.4 )% (5.2 )%
Non-operating expenses 12.9
16.9
41.4
37.5
(23.7 )% 10.4 %
Income tax expense (benefit) 4.3
(0.3 ) 6.0
16.7
NM
(64.1 )%
Net income attributable to noncontrolling interests 13.6
14.5
24.2
25.8
(6.2 )% (6.2 )%
Net income attributable to NCM, Inc. $ 9.2
$ 11.2
$ 17.0
$ 13.5
(17.9 )% 25.9 %

Net income per NCM, Inc. basic share $ 0.12
$ 0.15
$ 0.22
$ 0.18
(20.0 )% 22.2 %
Net income per NCM, Inc. diluted share $ 0.12
$ 0.14
$ 0.22
$ 0.16
(14.3 )% 37.5 %

Adjusted OIBDA $ 51.7
$ 53.6
$ 124.0
$ 129.2
(3.5 )% (4.0 )%
Adjusted OIBDA margin 46.8 % 48.7 % 41.7 % 42.5 % (1.9 )% (0.8 )%
Total theater attendance (in millions) (1)
163.4
164.7
497.4
535.8
(0.8 )% (7.2 )%

_________________________

~~NM = Not Meaningful~~(1)Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike, AMC Rave and Cinemark Rave theaters that were part of another cinema advertising network for certain periods presented. Refer to Note 4 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document.


~~(1)~~	Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike, AMC Rave and Cinemark Rave theaters that were part of another cinema advertising network for certain periods presented. Refer to Note 4 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document.

Non-GAAP Financial Measures

Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”) and Adjusted OIBDA margin are not financial measures calculated in accordance with GAAP in the United States. Adjusted OIBDA represents operating income before depreciation ~~and amortization~~ expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation costs, impairment of long-lived assetsand Chief Executive Officer transition costs. Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. Our management uses these non-GAAP financial measures to evaluate operating performance, to forecast future results and as a basis for compensation. The Company believes these are important supplemental measures of operating performance because they eliminate items that have less bearing on the Company's operating performance and so highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes the presentation of these measures is relevant and useful for investors because it enables them to view performance in a manner similar to the method used by the Company’s management, helps improve their ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that may have different depreciation ~~and amortization~~ policies, amortization of intangibles recorded for network theater screen leases, non-cash share based compensation programs, impairments of long-lived assets, CEO turnover, interest rates, debt levels or income tax rates. A limitation of these measures, however, is that they exclude depreciation and amortization of intangibles recorded for network theater screen leases, which represent a proxy for the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company’s business. In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s ~~amortization~~share-based payment costs, impairments of ~~intangibles recorded for network theater screen leases, share based payment costs~~long-lived assets or costs associated with the resignation of the Company’s former Chief Executive Officer. Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as an indicator of operating performance, nor should it be considered in isolation of, or as a substitute for, financial measures prepared in accordance with GAAP. The Company believes that operating income is the most directly comparable GAAP financial measure to Adjusted OIBDA. Because not all companies use identical calculations, these non-GAAP presentations may not be comparable to other similarly titled measures of other companies, or calculations in the Company’s debt agreement.

The following table reconciles operating income to Adjusted OIBDA for the periods presented (dollars in millions):

Q3 2019 Q3 2018 YTD 2019 YTD 2018
Operating income $ 40.0
$ 42.3
$ 88.6
$ 93.5
Depreciation expense 3.4
3.1
10.0
9.0
Amortization expense (1)
—
6.9
—
20.5
Amortization of intangibles recorded for network theater screen leases (1)
6.8
—
20.7
—
Share-based compensation costs (2)
1.4
1.3
4.3
6.2
CEO transition costs 0.1
—
0.4
—
Adjusted OIBDA $ 51.7
$ 53.6
$ 124.0
$ 129.2
Total revenue $ 110.5
$ 110.1
$ 297.6
$ 304.0
Adjusted OIBDA margin 46.8 % 48.7 % 41.7 % 42.5 %


	Q3 2020			Q3 2019			YTD 2020			YTD 2019
Operating (loss) income	$	(21.3)		$	40.0		$	(40.2)		$	88.6
Depreciation expense	3.1			3.4			9.5			10.0
Amortization of intangibles recorded for network theater screen leases	6.2			6.8			18.4			20.7
Share-based compensation costs (1)	0.8			1.4			1.1			4.3
Impairment of long-lived assets (2)	—			—			1.7			—
CEO transition costs (3)	—			0.1			—			0.4
Adjusted OIBDA	$	(11.2)		$	51.7		$	(9.5)		$	124.0
Total revenue	$	6.0		$	110.5		$	74.7		$	297.6
Adjusted OIBDA margin	(186.7)		%	46.8		%	(12.7)		%	41.7		%

~~(1)~~

Following the adoption of ASC 842, as discussed within Note 1 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document, amortization of the ESA and affiliate intangible balances is considered a form of lease expense and has been reclassified to this account as of the adoption date, December 28, 2018. The Company adopted ASC 842 prospectively and thus, prior period balances remain within amortization expense.


~~(2)~~	~~Share-based compensation costs are included in network operations, selling and marketing and administrative expense in the accompanying unaudited Condensed Consolidated Financial Statements.~~

(1)Share-based compensation costs are included in network operations, selling and marketing and administrative expense in the accompanying unaudited Condensed Consolidated Financial Statements.

(2)The impairments of long-lived assets primarily relate to the write-off of certain internally developed software.

(3)Chief Executive Officer transition costs represents costs associated with the search for a new Company CEO during the beginning of 2019.

Our Network—The change in the number of screens in our network by the founding members and network affiliates during the nine months ended September ~~26, 2019~~24, 2020 was as follows.


	Number of screens
	Founding Members	Network Affiliates	Total
Balance as of December 26, 2019	16,880	4,328	21,208
Lost affiliates, net of new affiliates (1)	—	(183)	(183)
Closures, net of openings (2)	(128)	(199)	(327)
Balance as of September 24, 2020	16,752	3,946	20,698

Number of screens
Founding Members Network Affiliates Total
Balance as of December 27, 2018 16,768
4,404
21,172
Lost affiliates, net of new affiliates (1)
—
(246 ) (246 )
Openings, net of closures 84
63
147
Balance as of September 26, 2019 16,852
4,221
21,073
(1)Represents the loss of three of our affiliates that did not renew their contracts as of the end of the first nine months of 2020 resulting in a reduction of 193 affiliate screens to our network, offset by the addition of two new affiliates which added 10 new screens to our network during the nine months ended September 24, 2020.


~~(1)~~	Represents the loss of three of our affiliates that did not renew their contracts resulting in a reduction of 250 affiliate screens to our network, offset by the addition of one new affiliate which added 4 new screens to our network during the nine months ended September 26, 2019.

(2)Excludes the temporary theater closures in response to the COVID-19 Pandemic.

Our founding member and network affiliate agreements allow us to sell cinema advertising across the largest network of digitally equipped theaters in the U.S. We believe that our market coverage strengthens our selling proposition and competitive positioning against other national, regional and local video advertising platforms, including television, online and mobile video platforms and other out of home video advertising platforms by allowing advertisers the broad reach and national scale that they need to effectively reach their target audiences.

Basis of Presentation

The results of operations data for the three months ended September 24, 2020 (third quarter of 2020) and September 26, 2019 (third quarter of 2019) and ~~September 27, 2018 (third quarter of 2018) and~~ the nine months ended September ~~26, 2019~~24, 2020 and September ~~27, 2018~~26, 2019 was derived from the unaudited Condensed Consolidated Financial Statements and accounting records of NCM, Inc. and should be read in conjunction with the notes thereto.

Results of Operations

Third Quarter of ~~2019~~2020 and Third Quarter of ~~2018~~2019

Revenue. Total revenue ~~increased 0.4%~~decreased 94.6%, from ~~$110.1 million for the~~ ~~third quarter of 2018 to~~ $110.5million for the third quarter of ~~2019.~~2019 to $6.0million for the third quarter of 2020. The following is a summary of revenue by category (in millions):


															$ Change		% Change
					$ Change			% Change			Q3 2020		Q3 2019		Q3 2020 to Q3 2019		Q3 2020 to Q3 2019
	Q3 2019		Q3 2018		Q3 2019 to Q3 2018			Q3 2019 to Q3 2018
National advertising revenue	$	82.3	$	80.8	$	1.5		1.9	%
National and regional advertising revenue										National and regional advertising revenue	$	3.5	$	86.4	$	(82.9)	(95.9)	%
Local advertising revenue	16.8		17.4		(0.6		)	(3.4	)%	Local advertising revenue	2.3		16.8		(14.5)		(86.3)	%
Regional advertising revenue	4.1		4.5		(0.4		)	(8.9	)%
Founding member advertising revenue from beverage concessionaire agreements	7.3		7.4		(0.1		)	(1.4	)%	Founding member advertising revenue from beverage concessionaire agreements	0.2		7.3		(7.1)		(97.3)	%
Total revenue	$	110.5	$	110.1	$	0.4		0.4	%	Total revenue	$	6.0	$	110.5	$	(104.5)	(94.6)	%

The following table shows data on theater attendance and revenue per attendee for the nine months ended September 24, 2020 and September 26, 2019:


	Three Months Ended				% Change
	Q3 2020 (1)		Q3 2019		Q3 2020 to Q3 2019
National and regional advertising revenue per attendee	$	0.673	$	0.529	27.2	%
Local advertising revenue per attendee	$	0.442	$	0.103	329.1	%
Total advertising revenue (excluding founding member beverage revenue) per attendee	$	1.115	$	0.632	76.4	%
Total advertising revenue per attendee	$	1.154	$	0.676	70.7	%
Total theater attendance (in millions) (1)	5.2		163.4		(96.8)	%

________________________________________________________

(1)Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike, AMC Rave and Cinemark Rave theaters that were part of another cinema advertising network for certain periods presented.

National and regional advertising revenue. The $82.9 million, or 95.9%, decrease in national and regional advertising revenue (excluding beverage revenue from founding members) was due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic preventing the Company from performing in-theater advertising for over three-fourths of the third quarter of 2020. The national and regional advertising revenue recognized in the third quarter of 2020 was primarily related to revenue associated with our digital service offerings and onscreen revenue during the last three weeks of the quarter when some of the theaters within our network that had reopened.

Local advertising revenue. The $14.5 million, or 86.3%, decrease in local advertising revenue was due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic and preventing the Company from performing in-theater advertising for over three-fourths of the third quarter of 2020. The local advertising revenue recognized in the third quarter of 2020 was primarily related to revenue associated with our digital service offerings.

Founding member beverage revenue. The $7.1 million, or 97.3%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to a 96.9% decrease in founding member attendance for the third quarter of 2020, compared to the third quarter of 2019. The decrease in founding member attendance was due to the temporary theater closure described above related to the COVID-19 Pandemic.

Operating expenses. Total operating expenses decreased$43.2million, or 61.3%, from $70.5 million for the third quarter of 2019 to $27.3million for the third quarter of 2020. The following table shows the changes in operating expense for the third quarter of 2020 (in millions):


					$ Change		% Change
	Q3 2020		Q3 2019		Q3 2020 to Q3 2019		Q3 2020 to Q3 2019
Advertising operating costs	$	1.1	$	9.6	$	(8.5)	(88.5)	%
Network costs	1.8		3.2		(1.4)		(43.8)	%
Theater access fees and revenue share—founding members	1.8		20.1		(18.3)		(91.0)	%
Selling and marketing costs	7.5		17.0		(9.5)		(55.9)	%
Administrative and other costs	5.8		10.4		(4.6)		(44.2)	%
Depreciation expense	3.1		3.4		(0.3)		(8.8)	%
Amortization of intangibles recorded for network theater screen leases	6.2		6.8		(0.6)		(8.8)	%
Total operating expenses	$	27.3	$	70.5	$	(43.2)	(61.3)	%

Advertising operating costs. Advertising operating costs decreased $8.5 million, or 88.5%, from $9.6 million for the third quarter of 2019 to $1.1 million for the third quarter of 2020. The decrease was due to a $7.8 million decrease in advertising affiliate expense due to the limited attendance at affiliate theaters during the third quarter of 2020 due to the COVID-19 Pandemic and the corresponding lower revenue. The decrease was also due to a $0.5 million decrease in personnel primarily related expenses related to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic.

Network costs. Network costs decreased $1.4 million, or 43.8%, from $3.2 million for the third quarter of 2019 to $1.8 million for the third quarter of 2020. The decrease was primarily related to a $1.0 million decrease in personnel expenses primarily related to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic and a $0.2 million decrease in maintenance expenses related to our Digital Content Network due to the temporary closure of almost all the theaters within our network for the majority of the third quarter of 2020 in response to the COVID-19 Pandemic.

Theater access fees and revenue share—founding members. Theater access fees and revenue share decreased $18.3 million, or 91.0%, from $20.1 million in the third quarter of 2019 to $1.8 million in the third quarter of 2020. The decrease was due to the temporary closure of almost all the founding member theaters in response to the COVID-19 Pandemic until a portion of founding member theaters reopened in late August 2020. The Company did not owe the founding members any theater access fees for the period the theaters were not open and these fees were reduced, as compared to the third quarter of 2019, after theaters opened due to lower attendance and fewer open theaters.

Selling and marketing costs. Selling and marketing costs decreased $9.5 million, or 55.9%, from $17.0 million for the third quarter of 2019 to $7.5 million for the third quarter of 2020. This decrease was primarily related to a $4.3 million decrease in personnel related expenses related to a decrease in commission and bonus expense due to lower revenue generated in the third quarter of 2020, as compared to the third quarter of 2019, as well as, the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic. Selling and marketing costs also decreased 1) $2.0 million related to non-cash impairment expense realized in the third quarter of 2019 related to investments obtained in prior years in exchange for advertising services, 2) $1.2 million related to a reduction in non-essential operating expenditures including marketing, research and employee travel that were suspended as part of the measures taken to reduce expenses and preserve cash during the COVID-19 Pandemic, 3) $0.9 million due to a decrease in barter

expense for the third quarter of 2020, as compared to the third quarter of 2019 and 4) $0.4 million due to a decrease in bad debt expense resulting from lower revenue in the third quarter of ~~2018:~~2020, as compared to the third quarter of 2019.

% Change
Q3 2019 Q3 2018 Q3 2019 to Q3 2018
National advertising revenue per attendee $ 0.504
$ 0.491
2.6 %
Local advertising revenue per attendee $ 0.103
$ 0.106
(2.8 )%
Regional advertising revenue per attendee $ 0.025
$ 0.027
(7.4 )%
Total advertising revenue (excluding founding
member beverage revenue) per attendee
$ 0.632
$ 0.624
1.3 %
Total advertising revenue per attendee $ 0.676
$ 0.668
1.2 %
Total theater attendance (in millions) (1)
163.4
164.7
(0.8 )%
Administrative and other costs. Administrative and other costs decreased $4.6 million, or 44.2%, from $10.4 million in the third quarter of 2019 to $5.8 million in the third quarter of 2020. This decrease was primarily due to a $4.0 million decrease in personnel related expenses due to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic and a decrease in performance based compensation expense related to lower projected performance against internal bonus and performance based restricted stock targets as of the third quarter of 2020, compared to the third quarter of 2019. Administrative and other costs also decreased $0.4 million due to a decrease in consulting services.

Depreciation expense. Depreciation expense decreased $0.3 million, or 8.8%, from $3.4 million for the third quarter of 2019 to $3.1 million for the third quarter of 2020, as assets became fully depreciated.

Amortization of intangibles recorded for network theater screen leases. Amortization of intangibles recorded for network theater screen leases decreased $0.6 million, or 8.8%, from $6.8 million for the third quarter of 2019, to $6.2 million for the third quarter of 2020, primarily due to the four year extension of the contractual life of the intangible assets for Cinemark and Regal following the 2019 ESA Amendments at the end of the third quarter of 2019.

Non-operating expenses. Total non-operating expenses decreased $0.2 million, or 1.6%, from $12.9 million for the third quarter of 2019 to $12.7 million for the third quarter of 2020. The following table shows the changes in non-operating expense for the third quarter of 2020 and the third quarter of 2019 (in millions):


					$ Change		% Change
	Q3 2020		Q3 2019		Q3 2020 to Q3 2019		Q3 2020 to Q3 2019
Interest on borrowings	$	13.7	$	13.8	$	(0.1)	(0.7)	%
Interest income	(0.1)		(0.4)		0.3		(75.0)	%

Gain on the re-measurement of the payable to founding members under the tax receivable agreement	(1.0)		(0.5)		(0.5)		100.0	%
Other non-operating expense	0.1		—		0.1		100.0	%
Total non-operating expenses	$	12.7	$	12.9	$	(0.2)	(1.6)	%

The decrease in non-operating expense was primarily due to a $0.5 million increase in the gain on the re-measurement of the payable to founding members under the tax receivable agreement due to the reduction of the payable balance related to certain state net operating losses which the Company expects to expire prior to utilization and a $0.3 million decrease in interest income on the Company's marketable securities due to a decrease in the rate of return and the outstanding balance of securities in the third quarter of 2020 as compared to the third quarter of 2019.

Income Tax Benefit. Income Tax Benefit increased from income tax expense of $4.3 million for the third quarter of 2019 to $3.1 million of income tax benefit for the third quarter of 2020. The increase in income tax benefit was primarily due to the decrease in pretax book income attributable to NCM Inc. from income of $13.1 million for the third quarter of 2019 to loss of $15.8 million for the third quarter of 2020.

Net Loss. Net loss increased $21.9 million from net income of $9.2 million for the third quarter of 2019 to net loss of $12.7 million for the third quarter of 2020. The increase in net loss was due to a $61.3 million increase in operating loss, partially offset by a $31.8 million increase in net loss attributable to noncontrolling interests, a $7.4 million increase in income tax benefit and a $0.2 million decrease in non-operating expenses.

Nine months ended September 24, 2020 and September 26, 2019

Revenue. Total revenue decreased 74.9%, from $297.6 million for the nine months ended September 26, 2019 to $74.7 million for the nine months ended September 24, 2020. The following is a summary of revenue by category (in millions):


	Nine Months Ended				$ Change		% Change
	September 24, 2020		September 26, 2019		YTD 2020 to YTD 2019		YTD 2020 to YTD 2019
National and regional advertising revenue	$	55.0	$	228.1	$	(173.1)	(75.9)	%
Local advertising revenue	14.0		47.3		(33.3)		(70.4)	%
Founding member advertising revenue from beverage concessionaire agreements	5.7		22.2		(16.5)		(74.3)	%
Total revenue	$	74.7	$	297.6	$	(222.9)	(74.9)	%

The following table shows data on theater attendance and revenue per attendee for the nine months ended September 24, 2020 and September 26, 2019:


	Nine Months Ended				% Change
	September 24, 2020		September 26, 2019		YTD 2020 to YTD 2019
National and regional advertising revenue per attendee	$	0.437	$	0.459	(4.8)	%
Local advertising revenue per attendee	$	0.111	$	0.095	16.8	%
Total advertising revenue (excluding founding member beverage revenue) per attendee	$	0.548	$	0.554	(1.1)	%
Total advertising revenue per attendee	$	0.594	$	0.598	(0.7)	%
Total theater attendance (in millions) (1)	125.8		497.4		(74.7)	%

________________________________________________________


~~(1)~~	Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike, AMC Rave and Cinemark Rave theaters that were part of another cinema advertising network for certain periods presented.

National and regional advertising revenue. The ~~$1.5~~$173.1 million, or ~~1.9%~~75.9%, ~~increase~~decrease in national and regional advertising revenue (excluding beverage revenue from founding members) was primarily due to a ~~$7.4 million increase~~74.9% decrease in ~~other revenue not included in the inventory measured by~~ impressions sold due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic preventing the Company from performing in-theater advertising beginning in mid-March 2020 until the beginning of September 2020 when some of the theaters within our network reopened and ~~CPMs. The increase in other revenue was primarily~~in-theater advertising resumed. National advertising CPMs for the impressions delivered for the portion of the nine months ended September 24, 2020 the theaters were open decreased 8.8% driven by ~~higher sales of advertiser branded content segments within our~~ ~~Noovie~~ ~~pre-show, lobby promotions, and national digital advertisements. This increase was partially offset by a 9.0% decrease in national advertising CPMs (excluding beverage) driven by~~1) a decrease in upfront and scatter market ~~demand~~CPMs due to the churn of certain higher CPM deals, that were replaced by lower CPM deals, as well as, 2) a change in the ~~third quarter~~mix of ~~2019,~~clients with a higher proportion of upfront clients and fewer higher CPM scatter market and content partner clients in the nine months ended September 24, 2020, as compared to the ~~third quarter of 2018.~~nine months ended September 26, 2019. The scatter market represents inventory not included within an upfront or content partner commitment sold closer to the advertisement air date for typically higher CPMs. Impressions sold remained relatively flat with a 0.4% increase primarily related to an increase in national advertising utilization from 133.2% in third quarter of 2018 to 134.8% in the third quarter of 2019 due in part to the placement of more of the make good balance that existed at the end of the second quarter of 2019, compared to the same period in 2018. The increase was partially offset by a 0.8% decrease in network attendance. Inventory utilization is calculated as utilized impressions divided by total advertising impressions, which is based on eleven 30-second salable national advertising units in our ~~Noovie~~ ~~pre-show, which can be expanded, should market demand dictate.~~

Local advertising revenue. The ~~$0.6~~$33.3 million, or ~~3.4%~~70.4%, decrease in local advertising revenue was primarily due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic preventing the Company from performing in-theater advertising beginning in mid-March 2020 until the beginning of September 2020 when some of the theaters within our network reopened and in-theater advertising resumed. The decrease is also due to a ~~6.8%~~ decrease in the volume of ~~local~~ contracts and the average contract value for the ~~third quarter~~portion of ~~2019,~~the nine months ended September 24, 2020 that the theaters were open, compared to the ~~third quarter of 2018, partially offset by an increase in local digital sales revenue driven by an increase in the number of integrated on-screen and digital sales.~~

~~Regional advertising revenue.~~ ~~The $0.4 million, or 8.9%, decrease in regional advertising revenue was primarily due to a decrease in average contract value driven by a reduction in spend of a few large customers~~same time period during the ~~third quarter of 2019, compared to the third quarter of 2018.~~nine months ended September 26, 2019.

Founding member beverage revenue. The ~~$0.1~~$16.5 million, or ~~1.4%~~74.3%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to a ~~0.3%~~74.8% decrease in founding member attendance ~~partially offset by a 0.7% increase~~for the nine months ended September 24, 2020, as compared to nine months ended September 26, 2019, due to the temporary theater closures describe above related to the COVID-19 Pandemic. The national advertising revenue from the founding members’ beverage concessionaire agreements recognized in ~~beverage revenue CPMs~~the nine months ended September 24, 2020 was due to founding member attendance that occurred in the first quarter of 2020 and the latter part of the third quarter of ~~2019, compared to the~~2020.

~~third quarter of 2018. The 2019 beverage revenue CPM is based on the change in CPM during segment one of our pre-show from 2017 to 2018, which increased 0.7%.~~

Operating expenses.Total operating expenses ~~increased$2.7~~decreased $94.1 million, or ~~4.0%~~45.0%, from ~~$67.8~~$209.0 million for the ~~third quarter of 2018~~nine months ended September 26, 2019 to ~~$70.5~~$114.9 million for the ~~third quarter of 2019.~~nine months ended September 24, 2020. The following table shows the changes in operating expense for the ~~third quarter of~~nine months ended September 24, 2020 and September 26, 2019 ~~and the third quarter of 2018~~ (in millions):


					$ Change			% Change			Nine Months Ended				$ Change		% Change
	Q3 2019		Q3 2018		Q3 2019 to Q3 2018			Q3 2019 to Q3 2018			September 24, 2020		September 26, 2019		YTD 2020 to YTD 2019		YTD 2020 to YTD 2019
Advertising operating costs	$	9.6	$	10.3	$	(0.7	)	(6.8	)%	Advertising operating costs	$	8.4	$	26.8	$	(18.4)	(68.7)	%
Network costs	3.2		3.2		—			—	%	Network costs	6.3		10.1		(3.8)		(37.6)	%
Theater access fees—founding members	20.1		19.7		0.4			2.0	%
Theater access fees and revenue share—founding members										Theater access fees and revenue share—founding members	19.5		60.8		(41.3)		(67.9)	%
Selling and marketing costs	17.0		15.3		1.7			11.1	%	Selling and marketing costs	28.1		48.4		(20.3)		(41.9)	%
Administrative and other costs	10.4		9.3		1.1			11.8	%	Administrative and other costs	23.0		32.2		(9.2)		(28.6)	%
Impairment of long-lived assets										Impairment of long-lived assets	1.7		—		1.7		100.0	%
Depreciation expense	3.4		3.1		0.3			9.7	%	Depreciation expense	9.5		10.0		(0.5)		(5.0)	%
Amortization expense	—		6.9		(6.9		)	(100.0	)%
Amortization of intangibles recorded for network theater screen leases	6.8		—		6.8			100.0	%	Amortization of intangibles recorded for network theater screen leases	18.4		20.7		(2.3)		(11.1)	%
Total operating expenses	$	70.5	$	67.8	$	2.7		4.0	%	Total operating expenses	$	114.9	$	209.0	$	(94.1)	(45.0)	%

Advertising operating costs. Advertising operating costs decreased ~~$0.7~~$18.4 million, or ~~6.8%~~68.7%, from ~~$10.3~~$26.8 million for the ~~third quarter of 2018~~nine months ended September 26, 2019 to ~~$9.6~~$8.4 million for the ~~third quarter~~nine months ended September 24, 2020. The decrease was due to a $17.4 million decrease in advertising affiliate expense due to the temporary closure of ~~2019.~~almost all the affiliate theaters within our network in response to the COVID-19 Pandemic and the corresponding lower revenue and a $0.8 million decrease in personnel related expenses primarily related to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic.

Network costs. Network costs decreased $3.8 million, or 37.6%, from $10.1 million for the nine months ended September 26, 2019 to $6.3 million for the nine months ended September 24, 2020. The decrease was primarily related to a ~~$0.9~~$2.8 million decrease in ~~affiliate advertising payments driven by a 3.6%, or 156 screens, decrease in the number of average affiliate screens as of the third quarter of 2019, compared~~personnel related expenses related to the ~~third quarter of 2018~~Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic and a decrease in ~~minimum guarantee payments~~performance based compensation expense related to ~~affiliates.~~lower projected performance against internal bonus and performance based restricted stock targets as of September 24, 2020, as compared to September 26, 2019, and a $0.6 million decrease in maintenance expense primarily related to our Digital Content Network due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic.

Theater access fees and revenue share—founding members. Theater access fees and revenue share decreased $41.3 million, or 67.9%, from $60.8 million for the nine months ended September 26, 2019 to $19.5 million for the nine months ended September 24, 2020. The decrease was primarily due to a 74.8% decrease in founding member attendance for the nine months ended September 24, 2020, as compared to nine months ended September 26, 2019, due to the temporary closure of almost all the founding member theaters in response to the COVID-19 Pandemic beginning in mid-March 2020 until late August when a portion of the founding member theaters reopened. The Company did not owe the founding members any theater access fees for the period the theaters were not open. This decrease was partially offset by ~~a $0.2~~$1.7 million ~~increase in production costs associated with content produced for national advertisers.~~

~~Network costs.~~ ~~Network costs remained consistent at $3.2 million for the third quarter~~ of ~~2018 and the third quarter of 2019.~~

~~Theater access fees—founding members.~~ ~~Theater access fees increased $0.4 million, or 2.0%, from $19.7 million~~higher expense in the ~~third quarter of 2018~~nine months ended September 24, 2020 to ~~$20.1 million~~Cinemark and Regal as compensation for post-showtime advertising in ~~the third quarter of 2019. The increase was due to a $0.4 million increase in the expense associated~~accordance with the founding member digital screens that are connected to the DCN (nearly 100% of our founding member screens as of September 26, 2019), due to the annual 5% increase specified in the ESAs. The expense associated with founding member attendance remained approximately flat due to a 0.3% decrease in attendance at founding members’ theaters during the third quarter of 2019 ~~compared to the third quarter of 2018.~~ESA Amendments.

Selling and marketing costs. Selling and marketing costs ~~increased $1.7~~decreased $20.3 million, or ~~11.1%~~41.9%, from ~~$15.3~~$48.4 million for the ~~third quarter of 2018~~nine months ended September 26, 2019 to ~~$17.0~~$28.1 million for the ~~third quarter of 2019.~~nine months ended September 24, 2020. This ~~increase~~decrease was primarily related to a $11.8 million decrease in personnel related expenses primarily due to a decrease in commission and bonus expense due to the revenue declines in the nine months ended September 24, 2020, as compared to the nine months ended September 26, 2019, as well as, the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic. Selling and marketing costs also decreased $3.2 million related to non-essential operating expenditures, including marketing, research, consulting and employee travel that were suspended as part of the measures taken to reduce expenses and preserve cash during the COVID-19 Pandemic, $2.2 million due to a decrease in barter expense for the nine months ended September 24, 2020, compared to the nine months ended September 26, 2019, a $2.0 million ofdecrease in non-cash impairment expense realized in the third quarter of 2019 related to investments obtained in prior years in exchange for advertising services, and a $0.6 million increase in digital advertising expense driven by the increase in digital advertising sales in the third quarter of 2019, compared to the third quarter of 2018. These increases were partially offset by a $0.5 million decrease in ~~expenses~~production and royalty related ~~to sales meetings, including related travel expenses,~~costs due to the ~~timing of meetings.~~

~~Administrative and other costs.~~ Administrative and other costs increased $1.1 million, or 11.8%, from $9.3 million in the third quarter of 2018 to $10.4 million in the third quarter of 2019. Administrative and other costs increased primarily due to a $1.4 million increase in personnel related expenses driven by an increase in bonus expense due to performance-based compensation expense accrued.

~~Depreciation expense.~~ Depreciation expense increased $0.3 million, or 9.7%, from $3.1 million for the third quarter of 2018 to $3.4 million for the third quarter of 2019, primarily due to new fixed assets being placed into service during the fourth quarter of 2018.

~~Amortization expense and Amortization of intangibles recorded for network theater screen leases.~~ Amortization of our ESA and affiliate intangibles was at $6.9 million for the third quarter of 2018, consistent with the $6.8 million of amortization of intangibles recorded for network theater screen leases for the third quarter of 2019. Following the adoption of ASC 842, as discussed within Note 1 to the unaudited Condensed Consolidated Financial Statements

included elsewhere in this document, amortization of the ESA and affiliate intangible balances is considered a form of lease expense and has been reclassified from amortization expense to amortization of intangibles recorded for network theater screen leases as of the adoption date, December 28, 2018. The Company adopted ASC 842 prospectively and thus, prior period balances remain within amortization expense.

~~Non-operating expenses.~~ Total non-operating expenses decreased $4.0 million, or 23.7%, from $16.9 million for the third quarter of 2018 to $12.9 million for the third quarter of 2019. The following table shows the changes in non-operating expense for the third quarter of 2019 and the third quarter of 2018 (in millions):

$ Change % Change
Q3 2019 Q3 2018 Q3 2019 to Q3 2018 Q3 2019 to Q3 2018
Interest on borrowings $ 13.8
$ 14.4
$ (0.6 ) (4.2 )%
Interest income (0.4 ) (0.3 ) (0.1 ) 33.3 %
Gain on extinguishment of debt —
(0.3 ) 0.3
(100.0 )%
(Gain) loss on the re-measurement of the payable
to founding members under the tax receivable
agreement
(0.5 ) 3.2
(3.7 ) (115.6 )%
Other non-operating income (expense) —
(0.1 ) 0.1
(100.0 )%
Total non-operating expenses $ 12.9
$ 16.9
$ (4.0 ) (23.7 )%

~~The~~ decrease in non-operating expense was primarily due to a $3.2 million loss on the re-measurement of the payable to founding members under the tax receivable agreement for the third quarter of 2018 as compared to a $0.5 million gain on the re-measurement of the payable for the third quarter of 2019 primarily due to a changerevenue generated in the state tax rates in 2018. The decrease was also due to a $0.6 million decrease in interest on borrowings due to a decrease in the amount of debt outstanding for the third quarter of 2019, compared to the third quarter of 2018. These decreases were partially offset by the absence of a $0.3 million gain on the extinguishment of debt related to the repurchase of some of our Notes due 2026 during the third quarter of 2018.

~~Income Tax Expense (Benefit).~~ Income tax expense (benefit) increased $4.6 million from $0.3 million of income tax benefit in the third quarter of 2018 to $4.3 million of income tax expense in the third quarter of 2019. The increase was due primarily to an increase in the deferred tax rate in the third quarter of 2018 related to revised state tax apportionment rates following the completion of the 2017 tax return.

~~Net Income~~. Net income decreased $2.0 million from $11.2 million for the third quarter of 2018 to $9.2 million for the third quarter of 2019. The decrease in net income was due to a $4.6 million increase in income tax expense and a $2.3 million decrease in operating income. These decreases were partially offset by a decrease of $4.0 million in non-operating expenses and a $0.9 million decrease in net income attributable to noncontrolling interests.

~~Nine months ended September 26, 2019 and September 27, 2018~~

~~Revenue.~~ ~~Total revenue decreased 2.1%, from $304.0 million for~~ the nine months ended September ~~27, 2018~~24, 2020, compared to ~~$297.6 million for the nine months ended September 26, 2019. The following is a summary of revenue by category (in millions):~~

Nine Months Ended $ Change % Change
September 26, 2019 September 27, 2018 YTD 2019 to YTD 2018 YTD 2019 to YTD 2018
National advertising revenue $ 213.9
$ 214.4
$ (0.5 ) (0.2 )%
Local advertising revenue 47.3
49.0
(1.7 ) (3.5 )%
Regional advertising revenue 14.2
16.6
(2.4 ) (14.5 )%
Founding member advertising revenue from
beverage concessionaire agreements 22.2
24.0
(1.8 ) (7.5 )%
Total revenue $ 297.6
$ 304.0
$ (6.4 ) (2.1 )%

~~The following table shows data on theater attendance and revenue per attendee for~~ the nine months ended September 26, 2019 and ~~September 27, 2018:~~

Nine Months Ended % Change
September 26, 2019 September 27, 2018 YTD 2019 to YTD 2018
National advertising revenue per attendee $ 0.430
$ 0.400
7.5 %
Local advertising revenue per attendee $ 0.095
$ 0.091
4.4 %
Regional advertising revenue per attendee $ 0.029
$ 0.031
(6.5 )%
Total advertising revenue (excluding founding
member beverage revenue) per attendee $ 0.554
$ 0.523
5.9 %
Total advertising revenue per attendee $ 0.598
$ 0.567
5.5 %
Total theater attendance (in millions) (1)
497.4
535.8
(7.2 )%


~~(1)~~	Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike, AMC Rave and Cinemark Rave theaters that are currently part of another cinema advertising network for all periods presented.

~~National advertising revenue.~~ ~~The $0.5~~$0.4 million ~~or 0.2%,~~due to a decrease in ~~national advertising~~bad debt expense resulting from lower revenue ~~(excluding beverage revenue from~~in the ~~founding members) was due primarily~~nine months ended September 24, 2020, compared to ~~a 4.8% decrease in national advertising CPMs (excluding beverage),~~the nine months ended

September 26, 2019. These decreases were partially offset by a ~~$9.4~~$0.9 million increase in other revenue not included in the inventory measured by impressions sold and CPMs. The decrease in national advertising CPMs (excluding beverage) was driven by a decrease in scatter market demand in the first nine months of 2019, compared to the first nine months of 2018. The scatter market represents inventory not included within an upfront or content partner commitment sold closer to the advertisement air date for typically higher CPMs. The increase in other revenue was primarily driven by higher sales of advertiser branded content segments withinexpense associated with our ~~Noovie~~ pre-show, lobby promotions, and online and mobile advertisements. Impressions sold remained relatively flat with a 0.8% decrease related to a 7.2% decrease in network attendance, partially offset by an increase in national advertising utilization from 109.1% in the first nine months of 2018 to 116.7% in the first nine months of 2019 due in part to the placement of more of the make good balance that existed at the end of 2018, compared to the same period in 2018. Inventory utilization is calculated as utilized impressions divided by total advertising impressions, which is based on eleven 30-second salable national advertising units in our ~~Noovie~~ ~~pre-show, which can be expanded, should market demand dictate.~~

~~Local advertising revenue.~~ The $1.7 million, or 3.5%, decrease in local advertising revenue was primarily due to a 10.4% decrease in the volume of contracts. This decrease was partially offset by an increase in local digital sales revenue driven by an increase in the number of integrated on-screen and digital sales and a 4.1% increase in the average on-screen contract value driven by contracts under $100,000 in the first nine months of 2019, compared to the first nine months of 2018.

~~Regional advertising revenue.~~ The $2.4 million, or 14.5%, decrease in regional advertising revenue was primarily due to the shift of a handful of clients from regional advertising to national advertising during the first nine months of 2019, compared to the first nine months of 2018, partially offset by an increase in the volume of contracts under $100,000 in the first nine months of 2019, compared to the first nine months of 2018.

~~Founding member beverage revenue.~~ The $1.8 million, or 7.5%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to a 6.7% decrease in founding member attendance, partially offset by a 0.7% increase in beverage revenue CPMs, in the first nine months of 2019, compared to the first nine months of 2018. The 2019 beverage revenue CPM is based on the change in CPM during segment one of our pre-show from 2017 to 2018, which increased 0.7%.

~~Operating expenses.~~ ~~Total operating expenses decreased$1.5 million, or 0.7%, from $210.5 million~~Cinema Accelerator service offering for the nine months ended September ~~27, 2018~~24, 2020, compared to ~~$209.0 million for~~ the nine months ended September 26, 2019. ~~The following table shows the changes in operating expense for the nine months ended September 26, 2019 and September 27, 2018 (in millions):~~

Nine Months Ended $ Change % Change
September 26, 2019 September 27, 2018 YTD 2019 to YTD 2018 YTD 2019 to YTD 2018
Advertising operating costs $ 26.8
$ 26.5
$ 0.3
1.1 %
Network costs 10.1
10.0
0.1
1.0 %
Theater access fees—founding members 60.8
61.8
(1.0 ) (1.6 )%
Selling and marketing costs 48.4
48.0
0.4
0.8 %
Administrative and other costs 32.2
34.7
(2.5 ) (7.2 )%
Depreciation expense 10.0
9.0
1.0
11.1 %
Amortization expense —
20.5
(20.5 ) (100.0 )%
Amortization of intangibles recorded for
network theater screen leases 20.7
—
20.7
100.0 %
Total operating expenses $ 209.0
$ 210.5
$ (1.5 ) (0.7 )%

~~Advertising operating costs.~~ Advertising operating costs increased $0.3 million, or 1.1%, from $26.5 million for the nine months ended September 27, 2018 to $26.8 million for the nine months ended September 26, 2019. The increase was primarily related to a $0.3 million increase in production costs associated with content produced for national advertisers.

~~Network costs.~~ Network costs remained relatively consistent and increased $0.1 million, or 1.0%, from $10.0 million for the nine months ended September 27, 2018 to $10.1 million for the nine months ended September 26, 2019.

~~Theater access fees—founding members.~~ Theater access fees decreased $1.0 million, or 1.6%, from $61.8 million in the nine months ended September 27, 2018 to $60.8 million for the nine months ended September 26, 2019. The decrease was due to a $2.4 million decrease in the expense associated with founding member attendance due to a 6.7% decrease in attendance at founding members’ theaters. The decrease was partially offset by a $1.4 million increase in the expense associated with the founding member digital screens that are connected to the DCN (nearly 100% of our screens as of September 26, 2019), including higher quality digital cinema projectors and related equipment, due to the annual 5% rate increase specified in the ESAs.

~~Selling and marketing costs.~~ Selling and marketing costs increased $0.4 million, or 0.8%, from $48.0 million for the nine months ended September 27, 2018 to $48.4 million for the nine months ended September 26, 2019. The increase was due to 1) a $2.0 million non-cash impairment charge realized in the first nine months of 2019, compared to $0.4 million realized in the first nine months of 2018 related to investments obtained in prior years in exchange for advertising services, 2) a $0.8 million increase in digital advertising expense driven partly by the increase in digital advertising sales and 3) a $0.6 million increase in company advertising expense associated with online and social media platforms to promote our ~~Noovie~~ products in the first nine months of 2019, compared to the first nine months of 2018. These increases were partially offset by a $2.6 million decrease in personnel related expenses driven by lower salaries and commissions due to a reduction in sales force in late 2018 and lower non-cash share-based compensation expense due to a decrease in the volume of awards granted in 2019, compared to 2018.

Administrative and other costs. Administrative and other costs decreased ~~$2.5~~$9.2 million, or ~~7.2%~~28.6%, from ~~$34.7 million for the nine months ended September 27, 2018 to~~ $32.2 million for the nine months ended September 26, ~~2019. This decrease was~~2019 to $23.0 million for the nine months ended September 24, 2020. Administrative and other costs decreased primarily ~~related~~due to a ~~$1.6~~$7.4 million decrease in personnel related expenses primarily due to 1) a $1.5 million increase in capitalized personnel costs driven by the nature of the work being performed by our information technology department in 2019, compared to 2018 and 2) a $1.8 million decrease in compensation expense due to the ~~absence~~Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic and a decrease in performance based compensation expense related to lower projected performance against internal bonus and performance based restricted stock targets as of ~~a CEO during a portion of~~September 24, 2020, as compared to September 26, 2019. ~~These decreases were partially offset by a $1.6 million increase in personnel related costs for our digital service offerings.~~ Administrative and other costs also decreased $1.1 million due to a ~~$2.1 million~~ decrease in legal and professional services partially due to the absence of professional fees incurred related to the negotiation of the settlement agreement with a large shareholder during the second quarter of 2018. These decreases were partially offset by a $0.7 million increase in consulting services and a $0.4 million ~~increase~~decrease in CEO transition fees related to costs incurred in the first nine months of 2019.

~~Depreciation expense.~~ ~~Depreciation expense~~Impairment of long-lived assets. Impairment of long-lived assets increased ~~$1.0~~$1.7 million, or ~~11.1%~~100.0%, from ~~$9.0~~$0.0 million ~~for~~in the nine months ended September ~~27, 2018~~26, 2019 to $1.7 million in the nine months ended September 24, 2020. This increase in impairment expense was primarily related to the write-off of certain long-lived assets during the nine months ended September 24, 2020.

Depreciation expense. Depreciation expense decreased $0.5 million, or 5.0%, from $10.0 million for the nine months ended September 26, 2019 ~~primarily due~~ to ~~new fixed~~$9.5 million for the nine months ended September 24, 2020, as assets ~~placed into service during the fourth quarter of 2018.~~became fully depreciated.

~~Amortization expense and~~ Amortization of intangibles recorded for network theater screen leases. Amortization of ~~the ESA and affiliate~~ intangibles ~~was~~recorded for network theater screen leases decreased $2.3 million, or 11.1%, from $20.7 million for the nine months ended September 26, 2019, ~~up from the $20.5 million of amortization expense for the nine months ended September 27, 2018. Following the adoption of ASC 842, as discussed within Note 1~~ to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document, amortization of the ESA and affiliate intangible balances is considered a form of lease expense and has been reclassified from amortization expense to amortization of intangibles recorded for network theater screen leases as of the adoption date, December 28, 2018. The Company adopted ASC 842 prospectively and thus, prior period balances remain within amortization expense. The $0.2 million increase was due to an increase in the underlying intangible asset balances following our annual common unit adjustment.

~~Non-operating expenses.~~ ~~Total non-operating expenses increased $3.9 million, or 10.4%, from $37.5~~$18.4 million for the nine months ended September ~~27, 2018~~24, 2020, primarily due to the four year extension of the contractual life of the intangible assets for Cinemark and Regal following the 2019 ESA Amendments during the end of the third quarter of 2019.

Non-operating expenses. Total non-operating expenses decreased $1.4 million, or 3.4%, from $41.4 million for the nine months ended September 26, ~~2019.~~2019 to $40.0 million for the nine months ended September 24, 2020. The following table shows the changes in non-operating expense for the nine months ended September ~~26, 2019~~24, 2020 and September ~~27, 2018~~26, 2019 (in millions):


	Nine Months Ended				$ Change		% Change
	September 24, 2020		September 26, 2019		YTD 2020 to YTD 2019		YTD 2020 to YTD 2019
Interest on borrowings	$	40.9	$	42.4	$	(1.5)	(3.5)	%
Interest income	(0.6)		(1.4)		0.8		(57.1)	%
Loss (gain) on modification and retirement of debt, net	0.3		(0.3)		0.6		(200.0)	%
(Gain) loss on the re-measurement of the payable to founding members under the tax receivable agreement	(0.7)		1.0		(1.7)		(170.0)	%
Other non-operating expense (income)	0.1		(0.3)		0.4		(133.3)	%
Total non-operating expenses	$	40.0	$	41.4	$	(1.4)	(3.4)	%

Nine Months Ended $ Change % Change
September 26, 2019 September 27, 2018 YTD 2019 to YTD 2018 YTD 2019 to YTD 2018
Interest on borrowings $ 42.4
$ 42.3
$ 0.1
0.2 %
Interest income (1.4 ) (1.0 ) (0.4 ) 40.0 %
(Gain) loss on early retirement of debt, net (0.3 ) 0.9
(1.2 ) (133.3 )%
Loss (gain) on re-measurement of the
payable to founding members under the
tax receivable agreement 1.0
(4.6 ) 5.6
(121.7 )%
Other non-operating income (0.3 ) (0.1 ) (0.2 ) NM
Total non-operating expenses $ 41.4
$ 37.5
$ 3.9
10.4 %

The ~~increase~~decrease in non-operating expense was primarily due to a ~~$4.6~~decrease of $1.5 million ~~gain~~in interest on borrowings due to a 0.69% decrease in the weighted average interest rate, partially offset by an increase in the weighted average balance of debt outstanding for the nine months ended September 24, 2020, as compared to the nine months ended September 26, 2019 and a decrease of $1.7 million in the loss on the re-measurement of the payable to founding members under the TRA due to the reduction of the payable balance related to certain state net operating losses which the Company no longer expects to utilize and a smaller increase in the deferred state tax ~~receivable agreement for~~rate in the nine months ended September ~~27, 2018~~24, 2020 as compared to ~~a $1.0 million loss on the re-measurement of the payable for~~ the nine months ended September 26, ~~2019 due to a change in the deferred tax rate related to a change in state tax law regarding sales sourcing during the first nine months of 2018. This increase was~~2019. These decreases were partially offset by a ~~$0.3 million gain~~1) $0.6 increase in the loss (gain) on ~~early~~modification and retirement of ~~our~~ debt, ~~during the first nine months of 2019 as compared to a $0.9 million loss on the extinguishment of debt~~net primarily related to the ~~refinancing of the senior secured credit facility~~Credit Agreement Amendment that occurred in the second quarter of ~~2018.~~

~~Income Tax Expense.~~ ~~Income tax expense decreased $10.7~~2020 and the absence of a gain realized on the repurchase of a portion of the Notes due 2026 in the first quarter of 2019 and 2) a $0.8 million ~~from $16.7 million for~~decrease in interest income on the Company's marketable securities due to a decrease in the rate of return and the outstanding balance of securities in the nine months ended September ~~27, 2018~~24, 2020 as compared to the nine months ended September 26, 2019.

Income Tax Benefit. Income Tax Benefit increased from income tax expense of $6.0 million for the nine months ended September 26, ~~2019. The decrease was primarily due~~2019 to ~~a decrease in deferred~~income tax ~~expense for the first nine months~~benefit of 2019, compared to the first nine months of 2018 related to the Company's re-measurement of its deferred tax assets as a result of a 2018 state tax law change. The remaining decrease was primarily due to lower income before income taxes for the first nine months of 2019, compared to the first nine months of 2018.

~~Net Income. Net income increased $3.5 million from $13.5~~$7.7 million for the nine months ended September ~~27, 2018~~24, 2020. The increase in income tax benefit was primarily due to the decrease in pretax book income attributable to NCM Inc. from income of $22.5 million for the nine months ended September 26, 2019 to loss of $37.8 million for the nine months ended September 24, 2020.

Net Loss. Net loss increased $47.2 million from net income of $17.0 million for the nine months ended September 26, ~~2019.~~2019 to net loss of $30.2 million for the nine months ended September 24, 2020. The increase in net ~~income~~loss was due to a ~~$10.7~~$128.8 million ~~decrease~~increase in ~~income tax expense and~~operating loss, partially offset by a ~~$1.6~~$66.5 million ~~decrease~~increase in net ~~income~~loss attributable to noncontrolling interests, ~~partially offset by~~ a ~~$4.9~~$13.7 million increase in income tax benefit and a $1.4 million decrease in ~~operating income related to lower revenue and a $3.9 million increase in~~ non-operating expenses.

Known Trends and Uncertainties

COVID-19—As discussed within the 'Recent Developments' section, due to the COVID-19 Pandemic, the Company was unable to advertise in the theaters, and thus generate the majority of its revenue, for the approximate six months of 2020 that the theaters were closed. The Company's ability to advertise within the reopened theaters has been and will continue to be limited due to reduced movie schedules and patron capacities at many network theaters and the timing and frequency of new major motion picture releases as compared to prior years due to the COVID-19 Pandemic. Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens and/or revenue, and therefore, were not incurred for the duration of time that the theaters were closed and attendance-based fees will be reduced for the period of time that attendance is lower than historical levels. Even though our ability to generate in-theater advertising revenue will be negatively impacted by government mandated capacity restrictions and the limited new content currently available, we are still required to pay these screen-based fees when theaters are open, which may be reduced for months where screens are in use for only part of the month.

Due to the rapidly changing business environment, unprecedented market volatility, and other circumstances resulting from the COVID-19 Pandemic, we are currently unable to fully determine the extent of COVID-19’s impact on our business in future periods. However, we are monitoring the rapidly evolving situation and its potential impacts on our financial position, results of operations, liquidity and cash flows.

CARES Act—On March 27, 2020, the U.S. Government enacted various relief and stimulus measures in response to the unprecedented adverse economic impacts of the COVID-19 Pandemic commonly referred to as the CARES Act. The CARES Act made changes to the U.S. tax code that affect our fiscal year ending December 31, 2020, including, but not limited to, (1) reducing the limitation on deductible interest expense, (2) changing uses and limitations of net operating losses generated in tax years 2018, 2019, and 2020, (3) deferring the payment of the 6.2% FICA portion of Company's payroll taxes beginning on the enactment date through December 31, 2020 until the end of 2021 for one-half of the tax and the remaining half to the end of 2022 and (4) creating the Employee Retention Payroll Tax Credit for the Company's portion of the 6.2% FICA payroll tax for certain qualifying employees from March 13, 2020 through December 31, 2020. The impact of these relief measures that are estimable as of September 24, 2020 have been incorporated within the Company's financial statements.

Beverage Revenue—Under the ESAs, up to 90 seconds of theNooviepre-show program can be sold to the founding members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements. For the first three and nine months of ~~2019~~2020 and ~~2018,~~2019, two of the founding members purchased 60 seconds of on-screen advertising time and one founding member purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements. The founding members’ current long-term contracts with their beverage suppliers require the 30 or 60 seconds of beverage advertising, although such commitments could change in the future. Should the amount of time required as part of these beverage concessionaire agreements decline, this premium time will be available for sale to other clients. ~~Historically, the~~The time sold to the ~~founding member~~ beverage supplier ~~has been~~for AMC is priced equal to the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of theNooviepre-show, limited to the highest advertising CPM being then-charged by NCM LLC, ~~pursuant to the ESAs. Due to a 0.7% increase~~which in ~~segment one CPMs in~~

~~2018,~~2019 decreased 0.3%. Thus, the CPM on our beverage concessionaire revenue ~~increased during the first three and nine months of 2019~~related to AMC in 2020 will decrease by ~~0.7% and the remainder of 2019 will increase by an equivalent percentage.~~

0.3% compared to 2019. Beginning in 2020 and in accordance with the 2019 ESA Amendments, the price for the time sold to Cinemark and Regal's beverage suppliers ~~will~~ instead ~~increase 2% each year.~~increased at a fixed rate of 2.0%. The Company did not recognize any beverage revenue for the period of time ~~sold~~that our founding members' theaters were closed due to ~~AMC’s beverage supplier will~~the COVID-19 Pandemic. Further, attendance has been and may continue to be ~~priced based upon~~lower than historical levels following the ~~annual increase in CPMs as outlined above to be calculated at~~re-opening of theaters which could reduce the ~~end of 2019.~~ Company’s beverage revenue.

Theater Access Fees—In consideration for NCM LLC’s access to the founding members’ theater attendees for on-screen advertising and use of lobbies and other space within the founding members’ theaters for the LEN and lobby promotions, the founding members receive a monthly theater access fee under the ESAs. The theater access fee is composed of a fixed payment per patron and a fixed payment per digital screen (connected to the DCN). The payment per theater patron increases by 8% every five years, with the next increase occurring in fiscal year 2022. Pursuant to the ESAs, the payment per digital screen increases annually by 5%. Pursuant to the 2019 ESA Amendments, Cinemark and Regal ~~will~~ each 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~~patron: (i) beginning at $0.025 per patron on November 1, 2019, (ii) $0.0375 per patron beginning on November 1, 2020, (iii) $0.05 per patron beginning on November 1, 2021, (iv) $0.052 per patron beginning on November 1, 2022 and (v) increasing 8% every five years beginning November 1, 2027. The Company does not owe the founding members any theater access fees when the theaters are closed. As such, the Company did not owe these fees for the approximate 6 months the founding member theaters were closed and will not owe these fees during the duration of time a founding member's theaters are closed in connection with the COVID-19 Pandemic. The digital screen fee is calculated based upon screens in use during each month. No digital screen fees were incurred for approximately 6 months the founding member theaters were closed and no fees will be incurred for the months where no screens are in use and fees may be reduced for months where screens are in use for only part of the month. Further, attendance has been and may continue to be lower than historical levels following the re-opening of theaters which could reduce the Company’s theater access fees.

Platinum Spot—In consideration for the utilization of the theaters post-showtime for Platinum Spots, Cinemark and Regal ~~will be 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.

Financial Condition and Liquidity

Liquidity and Capital Resources

Our cash balances can fluctuate due to the seasonality of our business and related timing of collections of accounts receivable balances and operating expenditure payments, as well as available cash payments (as defined in the NCM LLC Operating Agreement) to NCM LLC’s founding members, interest or principal payments on our term loan and the Notes due ~~2022~~2026 and Notes due ~~2026,~~2028, income tax payments, TRA payments to NCM LLC’s founding members and amount of quarterly dividends to NCM, Inc.’s common stockholders.

As discussed within the 'Recent Developments' section, due to the COVID-19 Pandemic, the Company was unable to advertise in the theaters, and thus generate the majority of its revenue, for the approximate 6 months that the theaters were generally closed. The Company's ability to advertise within the reopened theaters has been and will continue to be limited due to reduced movie schedules and patron capacities at many network theaters and the timing and frequency of major motion picture releases as compared to prior years due to the COVID-19 Pandemic. The Company will have limited cash receipts until the full network of theaters reopen, major motion pictures are released and theater patrons feel comfortable returning to the theaters allowing attendance levels to normalize. Further, once the above conditions are met there will be a lag between when revenue is generated and when the Company ultimately collects the associated accounts receivable balance. The Company also has reduced cash payments during the period theaters within the Company's network are closed or attendance levels are low as expenses related to theater attendance are either not incurred or incurred at lower levels (i.e. theater access fees, Platinum Spot revenue share and network affiliate revenue share payments). The Company also implemented a number of cost-saving measures in order to preserve cash as further outlined within the 'Recent Developments' section above. In March 2020, we drew down an additional $110.0 million on our revolving credit facility. Further, as of March 26, 2020, we had approximately $112.3 million of trade accounts receivable outstanding from customers, of which we have collected approximately $103.3 million as of September 24, 2020, increasing our cash and marketable securities balance to $220.7 million as of September 24, 2020 ($157.4 million at NCM LLC) and reducing trade accounts receivable to $9.0 million. The $157.4 million of cash at NCM LLC will be used to fund operations during the period of expected reduced cash flows. Cash at NCM, Inc. is held for future payment of dividends to NCM, Inc. shareholders, income tax payments, income tax receivable payments to NCM LLC’s founding members and other obligations.

In accordance with the Credit Agreement Amendment entered into in order to obtain a waiver of the financial covenants for the period beginning in the second quarter of 2020 through the second quarter of 2021, NCM LLC must maintain a total balance of $55.0 million of a combination of unrestricted cash on hand and availability under NCM LLC's revolving credit facility. As of September 24, 2020, NCM LLC was in compliance with the requirements of the Credit Agreement Amendment. Management believes the Company can meet its obligations, including all interest and debt service payments within the twelve months following the date of issuance of these financial statements, based on its current financial position and liquidity sources, including current cash balances, and forecasted future cash flows. The Company may not be able to meet certain of its financial covenants within one year following the date that these financial statements are issued. If any of these financial covenants are not met, a majority of the lenders of the Senior Secured Credit Facility are permitted under the agreement to accelerate the debt which could also result in a cross-default under NCM LLC’s senior notes. Considering current liquidity sources, the Company would not be able to repay the Company’s total outstanding debt balance. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern. In light of this, the Company is actively pursuing with it administrative agent and expects to obtain an amendment to its Senior Secured Credit Facility to extend a waiver of its financial covenants through at least one year following the date that these financial statements are issued. Management expects the

amendment to be approved during the next several months, however there can be no assurance that the Company will be successful in obtaining the amendment. As long as an amendment has not been obtained, management’s plan cannot be considered probable and thus does not alleviate the substantial doubt about the Company’s ability to continue as a going concern.

A summary of our financial liquidity is as follows (in millions):


	As of						$ Change			$ Change				As of						$ Change		$ Change
	September 26, 2019		December 27, 2018		September 27, 2018		Q3 2019 to YE 2018			Q3 2019 to Q3 2018				September 24, 2020		December 26, 2019		September 26, 2019		Q3 2020 to YE 2019		Q3 2020 to Q3 2019
Cash, cash equivalents and marketable securities (1)	$	62.9	$	75.6	$	66.7	$	(12.7	)	$	(3.8	)	Cash, cash equivalents and marketable securities (1)	$	220.7	$	80.9	$	62.9	$	139.8	$	157.8
NCM LLC revolver availability (2)	164.2		143.2		156.2		21.0			8.0			NCM LLC revolver availability (2)	4.4		132.4		164.2		(128.0)		(159.8)
Total liquidity	$	227.1	$	218.8	$	222.9	$	8.3		$	4.2		Total liquidity	$	225.1	$	213.3	$	227.1	$	11.8	$	(2.0)

_________________________


~~(1)~~	Included in cash, cash equivalents and marketable securities as of September 26, 2019, December 27, 2018 and September 27, 2018, was $2.0 million, $7.2 million and $4.4 million, respectively, of cash and marketable securities held by NCM LLC that is not available to satisfy NCM, Inc.’s dividend, income tax, tax receivable payments to NCM LLC’s founding members and other obligations.

~~(2)~~

The revolving credit facility portion of NCM LLC’s total borrowings is available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the senior secured credit facility, and a portion is available for letters of credit. NCM LLC’s total capacity under the revolving credit facility was $175.0 million as of September 26, 2019, December 27, 2018 and September 27, 2018. As of September 26, 2019, December 27, 2018 and September 27, 2018, the amount available under the NCM LLC revolving credit facility in the table above, was net of amount outstanding under the revolving credit facility of $6.0 million, $27.0 million and $14.0 million, respectively, and net letters of credit of $4.8 million in each respective period.

(1)Included in cash, cash equivalents and marketable securities as of September 24, 2020, December 26, 2019 and September 26, 2019, was $157.4 million, $11.4 million and $2.0 million, respectively, of cash held by NCM LLC that is not available to satisfy dividends declared by NCM, Inc., income tax, tax receivable payments to NCM LLC’s founding members and other obligations.

(2)The revolving credit facility portion of NCM LLC’s total borrowings is available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the senior secured credit facility, and a portion is available for letters of credit. NCM LLC’s total capacity under the revolving credit facility was $175.0 million as of September 24, 2020, December 26, 2019 and September 26, 2019. As of September 24, 2020, December 26, 2019 and September 26, 2019, the amount available under the NCM LLC revolving credit facility in the table above, was net of the amount outstanding under the revolving credit facility of $167.0 million, $39.0 million and $6.0 million, respectively, and net letters of credit of $3.6 million, $3.6 million and $4.8 million, respectively.

As of September ~~26, 2019,~~24, 2020, the weighted average remaining maturity of our debt was ~~4.6~~5.7 years. As of September ~~26, 2019,~~24, 2020, approximately ~~70%~~59% of our total borrowings bear interest at fixed rates. The remaining ~~30%~~41% of our borrowings bear interest at variable rates and ~~as such,~~ our net income and earnings per share could fluctuate with market interest rate

fluctuations that could increase or decrease the interest paid on our borrowings. ~~See “Recent Developments—Refinancing of Notes due 2022” for discussion surrounding the refinancing of the Notes due 2022 subsequent to the end of the third quarter of 2019.~~

We have generated and used cash as follows (in millions):


	Nine Months Ended							Nine Months Ended
	September 26, 2019			September 27, 2018				September 24, 2020		September 26, 2019
Operating cash flow	$	113.6		$	118.8		Operating cash flow	$	85.9	$	113.6
Investing cash flow	10.0			(20.0		)	Investing cash flow	$	15.5	$	10.0
Financing cash flow	(118.7		)	(101.7		)	Financing cash flow	$	60.4	$	(118.7)

•Operating Activities.The ~~$5.2~~$27.7 million decrease in cash provided by operating activities for the ~~first~~ nine months ~~of 2019~~ended September 24, 2020, compared to the ~~first~~ nine months ~~of 2018~~ended September 26, 2019 was primarily due ~~primarily~~ to 1) a $113.7 million decrease in consolidated net income due the ~~change~~temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic during the period, 2) a $15.7 million larger decrease in accounts ~~receivable of $18.2 million related to timing of collections in~~payable and accrued expenses during the ~~first~~ nine months ~~of 2019,~~ended September 24, 2020 as compared to the ~~first~~ nine months ~~of 2018 and~~ended September 26, 2019, related to the decrease in operating expenses for the corresponding periods as described above, 3) a ~~$5.0~~$15.4 million ~~decrease~~increase in deferred income tax ~~expense net of~~benefit and the ~~increase in the loss~~gain on re-measurement of the payable to founding members under the TRA due to a change in the deferred tax rate related to a change in state tax law regarding sales sourcing during the first nine months of 2018. These decreases were partially offset by a $16.3 million increase in cash provided by operating activitiesprimarily due to the ~~reclassification~~Company recognizing an income tax benefit in the ~~current~~nine months ended September 24, 2020 driven by the Company's consolidated net loss for the period ofand 4) a $6.6 million decrease in founding member integration and other encumbered theater ~~payments from~~payments. These decreases in cash ~~flows from financing~~provided by operating activities ~~upon adoption of ASC 842,~~were partially offset by $135.0 million larger decrease in the accounts receivable balance during the nine months ended September 24, 2020, as ~~further discussed within Note 1~~compared to the ~~unaudited Condensed Consolidated Financial Statements included elsewhere in this document and a $2.0 million non-cash impairment charge realized in the first~~ nine months ofended September 26, 2019, ~~compared to $0.4 million realized in the first nine months of 2018~~ related to ~~investments obtained~~the collection of the accounts receivable balance and the decrease in ~~prior years in exchange for advertising services,~~

revenue described above.

•Investing Activities. The ~~$30.0~~$5.5 million increase in cash provided by investing activities for the ~~first~~ nine months ~~of 2019,~~ended September 24, 2020, compared to the ~~first~~ nine months ~~of 2018~~ended September 26, 2019 was primarily due ~~primarily~~ to a ~~decrease~~$3.7 million increase in ~~purchases~~proceeds from the sale of marketable securities, net of ~~proceeds, of $28.4 million,~~purchases and a ~~$1.4~~$3.2 million ~~increase~~decrease in ~~the proceeds from the notes receivable from the founding members~~purchases of property and equipment for the ~~first~~ nine months ~~of 2019,~~ended September 24, 2020, compared to the ~~first~~ nine ~~months of 2018.~~

~~Financing Activities.~~ ~~The $17.0 million increase~~months ended September 26, 2019 driven by the Company's measures to preserve cash in ~~cash used in financing activities during the first nine months of 2019, compared~~response to the ~~first nine months 2018 was due primarily to~~COVID-19 Pandemic, partially offset by a ~~$21.7~~$1.4 million decrease in proceeds from ~~borrowings,~~the founding member notes receivable.

•Financing Activities. The $179.1 million increase in cash provided by financing activities for the nine months ended September 24, 2020, compared to the nine months ended September 26, 2019 was primarily due to a $149.0 million increase in proceeds from our revolving credit facility, net of repayments ~~and~~made early in 2020, in order to fund operations during the period of expected reduced cash flows due to the temporary closure of the theaters within NCM LLC's network to address the COVID-19 Pandemic. The increase was also due to a ~~$17.2~~$13.9 million decrease in ~~cash inflows from financing activities due~~dividends paid related to the ~~reclassification~~a decrease in the ~~current period of founding member integration and other encumbered theater payments~~dividend amounts declared from ~~cash flows from financing activities upon adoption of ASC 842, as further discussed within Note 1~~$0.51 per share during the nine months ended September 26, 2019 to $0.33 per share during the ~~unaudited Condensed Consolidated Financial Statements included elsewhere in this document. These increases in cash used were partially offset by~~nine months ended September 24, 2020, a ~~$13.6~~$12.6 million decrease in distributions to founding members ~~period over period, and a decrease of $6.6 million~~ in the ~~payment of debt issuance costs related~~nine months ended September 24, 2020, compared to the ~~refinancing~~nine months ended September 26, 2019 and the absence of a $4.6 million repurchase of the ~~senior secured credit facility~~retired Notes due 2026 that occurred in the ~~second~~first quarter of ~~2018.~~

2019.

Sources of Capital and Capital ~~Requirements.~~Requirements

NCM, Inc.’s primary source of liquidity and capital resources is the quarterly available cash distributions from NCM LLC as well as its existing cash balances and marketable securities, which as of September ~~26, 2019~~24, 2020 were ~~$60.9~~$63.3 million (excluding NCM LLC). NCM LLC’s primary sources of liquidity and capital resources are its cash provided by operating activities, availability under its revolving credit facility and cash on hand. NCM LLC drew down an additional $110.0 million of its revolving credit facility in March 2020 in order to supplement the decrease in cash provided by operating activities during the period our network theaters are closed. The $157.4 million of cash at NCM LLC will be used to fund operations during the period of expected reduced cash flows. Cash at NCM, Inc. is used to fund income taxes, payments associated with the TRA with the founding members and for future payment of dividends to NCM, Inc. shareholders.

~~Management believes~~On April 30, 2020, NCM LLC entered into the Credit Agreement Amendment to allow for the automatic waiver of any non-compliance with its Consolidated Net Senior Secured Leverage Ratio and Consolidated Total Leverage Ratio financial covenants occurring from the quarter ending June 25, 2020 until and including the quarter ending July 1, 2021. The Credit Agreement Amendment requires that, ~~future funds generated from~~until the fiscal quarter ending July 1, 2021, NCM ~~LLC’s operations and~~LLC must not permit the sum of unrestricted cash on hand ~~should~~at NCM LLC and availability under its Revolving Credit Facility to be ~~sufficient~~less than $55.0 million. Further, NCM LLC can make available cash distributions to ~~fund working capital requirements,~~its members (AMC, Cinemark, Regal and NCM, Inc.) during the Covenant Holiday Period only if trailing 12-month Consolidated EBITDA (as defined in the Credit Agreement) equals or exceeds $277.0 million and outstanding loans under the Revolving Credit Facility are equal to or less than $39.0 million. NCM LLC can make available cash distributions to its members outside of the Covenant Holiday Period so long as NCM LLC’s ~~debt service~~Consolidated Net Senior Secured Leverage Ratio is equal to or less than 5.00 to 1.00 and no default or event of default under the Credit Agreement has occurred and is continuing. As of September 24, 2020, NCM LLC was in compliance with the requirements ~~opportunistic debt repurchases, and capital expenditures, through~~of the ~~next twelve months.~~ Credit Agreement Amendment.

Cash flows generated by NCM LLC’s distributions to NCM, Inc. and the founding members ~~can~~will be impacted by the ~~seasonality~~temporary closure of ~~advertising sales, interest~~our network theaters and ~~repayments on borrowings under our credit agreements and~~may even be deferred for the quarter ending June 25, 2020 through the quarter ending July 1, 2021 until at least August 2021 due to ~~a lesser extent theater attendance.~~the limitations instituted by the Credit Agreement Amendment. NCM LLC is required pursuant to the terms of the NCM LLC Operating Agreement to distribute its available cash, as defined in the operating agreement and unless prohibited by NCM LLC's Credit Agreement, quarterly to its members (Regal, Cinemark, AMC and NCM, Inc.). The available cash distribution to the members of NCM LLC for the three months ended September ~~26, 2019~~24, 2020 was calculated as approximately ~~$43.7~~negative $24.5 million, of which ~~approximately $21.3 million was distributed to~~ NCM Inc.'s share is approximately negative $11.8 million. The available cash distribution to the members of NCM LLC for the combined three months ended June 25, 2020 and three months ended September 24, 2020 was calculated as approximately negative $54.5 million, of which NCM Inc.'s share is approximately negative $26.2 million. Pursuant to the NCM LLC Operating Agreement and the Credit Agreement Amendment, there will be no available cash distributions made for the third quarter of 2020. These negative available cash distributions for the third quarter of 2020 are expected to be netted against any positive available cash distribution related to the second quarter of 2021, to be paid in the third quarter of 2021, if the Company is in compliance with the Credit Agreement Amendment requirements noted above and sufficient positive available cash is generated.

NCM, Inc. expects to use its cash balances and cash received from future available cash distributions ~~and its cash balances~~(as allowed for under the Amended Credit Agreement) to fund income taxes, payments associated with the TRA with the founding members, including the TRA payment of $12.8 million made on July 15, 2020, and current and future dividends as declared by the Board of Directors, including a dividend declared on November ~~4, 2019~~2, 2020 of ~~$0.17~~$0.07 per share (approximately ~~$13.2~~$5.5 million) on

each share of the Company’s common stock (not including outstanding restricted stock) to stockholders of record on November ~~14, 2019~~16, 2020 to be paid on November 29, 2019. NCM LLC will also continue to evaluate discretionary use of cash based on future expected leverage levels, NCM LLC investment opportunities and NCM, Inc. dividend policy. Distributions from NCM LLC and NCM, Inc. cash balancesDecember 1, 2020. These items should be sufficient to fund payments associated with the TRA with ~~NCM LLC’s~~the founding members, income taxes and ~~regular dividends~~its quarterly dividend for the foreseeable future at the discretion of the Board of Directors. The declaration, payment, timing and amount of any future dividends payable will be at the sole discretion of the Board of Directors who will take into account general economic and advertising market business conditions, NCM, Inc.’s financial condition, available cash, current and anticipated cash needs, and any other factors that the Board of Directors considers relevant. The

Company intends to pay a regular quarterly dividend for the foreseeable future at the discretion of the Board of Directors consistent with the Company’s intention to distribute ~~over time a substantial portion of~~substantially all its free cash ~~flow.~~ flow to stockholders through its quarterly dividend. The declaration, payment, timing and amount of any future dividends payable will be at the sole discretion of the Board of Directors who will consider general economic and advertising market business conditions, the Company’s financial condition, available cash, current and anticipated cash needs and any other factors that the Board of Directors considers relevant, which includes short-term and long-term impacts to the Company related to the COVID-19 Pandemic and restrictions under the NCM LLC Credit Agreement.

Critical Accounting Policies

For a discussion of accounting policies that we consider critical to our business operations and understanding of our results of operations, and that affect the more significant judgments and estimates used in the preparation of our unaudited Condensed Consolidated Financial Statements, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations –~~ Operations—Critical Accounting Policies” contained in our annual report on Form 10-K filed for the fiscal year ended December ~~27, 2018~~26, 2019 and incorporated by reference herein. As of September ~~26, 2019,~~24, 2020, there were no significant changes in those critical accounting policies except for the change in ~~leases~~allowance for doubtful accounts upon the adoption of ASC ~~842~~326 in the first quarter of ~~2019~~2020 and discussed further within Note 8—~~Commitments and Contingencies~~1—The Company, to the unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see the information provided under Note 1—The Company to the unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Related Party Transactions

For a discussion of related party transactions, see the information provided under Note 5—Related Party Transactions to the unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Off-Balance Sheet Arrangements

We do not believe the Company has any off-balance sheet arrangements that are material to our current or future financial condition, results of operations, liquidity, capital resources or capital expenditures.

Contractual and Other Obligations

See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual and Other Obligations” contained in our annual report on Form 10-K for the fiscal year ended December ~~27, 2018~~26, 2019 and incorporated by reference herein. There were no material changes to our contractual obligations during the nine months ended September ~~26, 2019.~~24, 2020.

Seasonality

Our revenue and operating results are seasonal in nature, coinciding with the timing of marketing expenditures by our advertising clients and to a lesser extent the attendance patterns within the film exhibition industry. ~~Both~~Historically, both advertising expenditures and theater attendance ~~tend~~have tended to be higher during the second, third, and fourth fiscal quarters. Advertising revenue is primarily correlated with advertising clients' new product releases, advertising client marketing priorities and economic cycles and to a lesser extent theater attendance levels. Seasonal demand during the summer is driven by the absence of alternative attractive advertising mediums and during the winter holiday season due to high client demand across all advertising mediums. The actual quarterly results for each quarter could differ materially depending on these factors or other risks and uncertainties. Based on our historical experience, our first quarter typically has less revenue than the other quarters of a given year due primarily to lower advertising client demand and increased inventory availability in competitive advertising mediums. Given the temporary closure of our theaters, we expect our 2020 quarterly results to vary from the historical trend. Accordingly, there can be no assurances that seasonal variations will not materially affect our results of operations in the future.

The following table reflects the quarterly percentage of total revenue for the fiscal years ended ~~2016,~~ 2017, 2018 and ~~2018.~~

2019.


										First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
FY 2016	17.0	%	25.8	%	25.4	%	31.8	%
FY 2017	16.9	%	22.8	%	27.3	%	33.0	%	FY 2017	16.9	%	22.8	%	27.3	%	33.0	%
FY 2018	18.2	%	25.8	%	24.9	%	31.1	%	FY 2018	18.2	%	25.8	%	24.9	%	31.1	%
FY 2019									FY 2019	17.3	%	24.8	%	24.8	%	33.1	%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The primary market risk to which we are exposed is interest rate risk. The ~~Notes due 2022, the~~ Notes due 2026 and the Notes due 2028 are at fixed rates, and therefore are not subject to market risk. As of September ~~26, 2019,~~24, 2020, the only interest rate risk that we are exposed to is related to our $175.0 million revolving credit facility and our term loan. A 100-basis point fluctuation in market interest rates underlying our term loan and revolving credit facility would have the effect of increasing or decreasing our cash interest expense by approximately ~~$2.7~~$4.3 million for an annual period on the ~~$6.0~~$167.0 million revolving credit balance and ~~$267.3~~$264.6 million term loan outstanding as of September ~~26, 2019. For a discussion~~24, 2020.

In response to the COVID-19 Pandemic, the government lowered the Federal Reserve interest rate leading to historically low interest rates as of ~~market risks, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” contained in our annual report on Form 10-K for~~September 24, 2020 that has had the ~~fiscal year ended December 27, 2018 and incorporated by reference herein.~~effect of reducing the Company's interest rate risk.

Item 4. Controls and Procedures

The Company maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer (principal executive ~~officer)~~ and ~~Chief Financial Officer (principal~~ financial ~~and accounting~~ officer), as appropriate, to allow timely decisions regarding required disclosure.

Management, with the participation of the Chief Executive ~~Officer and Chief Financial~~ Officer, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of September ~~26, 2019,~~24, 2020, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s Chief Executive Officer ~~and Chief Financial Officer~~ concluded that the Company’s disclosure controls and procedures as of September ~~26, 2019~~24, 2020 were effective.

In designing and evaluating our disclosure controls and procedures, management recognizes that any control, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the quarter ended September ~~26, 2019~~24, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are sometimes involved in legal proceedings arising in the ordinary course of business. We are not aware of any other litigation currently pending that would have a material adverse effect on our operating results or financial condition.

Item 1A. Risk Factors

~~The following description of~~Excluding the risk factors ~~includes any~~outlined below, there have been no material changes ~~to, and supersedes the description of,~~from risk factors ~~associated with the Company’s business~~as previously disclosed in our annual report on Form 10-K filed with the SEC on February ~~22, 2019~~20, 2020 for the fiscal year ended December ~~27, 2018.~~26, 2019 and updated in our quarterly report on Form 10-Q filed with the SEC on May 5, 2020 for the quarter ended March 26, 2020.

~~Ownership~~Pandemics, epidemics or disease outbreaks, such as the novel coronavirus (COVID-19 virus), have disrupted and are continuing to disrupt our business and the business of ~~the common stock~~our founding members and ~~other securities of the Company involves certain risks. Holders of the Company’s securities~~network affiliates, which has and prospective investors should consider carefully the following material risks and other information in this document, including our historical financial statements and related notes included herein. The material risks and uncertainties described in this document are not the only ones facing us. Additional risks and uncertainties that we do not presently know about or that we currently believe are not material may also adverselycould continue to materially affect our ~~business. If any of the risks and uncertainties described in this document actually occur, our business, financial condition~~operations, liquidity and results of ~~operations could be adversely~~operations.

~~affected in a material way. This could cause~~Pandemics or disease outbreaks such as the ~~trading price of our common stock~~novel coronavirus (COVID-19 virus) have and are continuing to ~~decline, perhaps significantly, and you may lose part or all of your investment.~~

~~Risks related to~~disrupt our business and ~~industry~~the business of our founding member and network affiliates’ theaters. Following the World Health Organization’s declaration of the COVID-19 virus as a pandemic, the United States’ government and other state and local governments issued

~~Significant declines~~

precautionary restrictions on travel, public gatherings and other events and issued social distancing guidelines. Beginning in ~~theater attendance could reduce the attractiveness~~mid-March 2020, each of ~~cinema advertising~~our founding members and ~~could reduce our revenue.~~

~~Our business is affected by the level~~all of ~~attendance at the founding members’ theaters and to a lesser extent~~ our network affiliates ~~who operate in~~announced that their theaters would be temporarily closed and almost all of the theaters within our network remained closed until late August 2020. The Company generated no in-theater advertising revenue for the approximate six months that the theaters were closed.As of the date of this filing, approximately 53% of theaters within our network are open, with 47% remaining closed due to local government mandates or the lack of major motion picture releases. Many of the open theaters are operating at reduced hours and offering a ~~highly competitive industry~~limited number of movie showtimes and ~~whose attendance is reliant on the presence of motion pictures that attract audiences. Over the last 20 years, theater~~ attendance has ~~fluctuated from year~~not returned to ~~year but on average has remained relatively flat. The value~~historical levels.

A number of ~~our advertising business could be adversely affected by~~major motion picture releases were delayed until later in 2020 or 2021 and a decline in theater attendance or even the perception by media buyers that our network is no longer relevant to their marketing plan due to the decreases in attendance and geographic coverage. Factors that could reduce attendance at our network theaters include the following:

~~if NCM LLC’s network theater circuits cannot compete with other out-of-home entertainment due to an increase in the use of alternative film delivery methods (and the shortening of~~few studios shortened the “release window” between the release of ~~major~~ motion pictures ~~to the~~in theaters and an alternative delivery ~~methods), including network, syndicated cable and satellite television and DVDs, as well as video-on-demand, pay-per-view services, video streaming and downloads via the Internet;~~

theater circuits in NCM LLC’s network continue to renovate auditoriums in certain of their theaters to install new larger, more comfortable seating, which reduces the number of seats in a theater auditorium. This renovation has been viewed favorably by patrons and many theater circuits have noted an intent to continue such renovations;

changes in theater operating policies, including the number and length of trailers for upcoming films that are played prior to the start of the feature film, which if the length of trailers increases, may result in mostmethod or ~~all of the~~ ~~Noovie~~ ~~pre-show starting further out from the actual start of the feature film;~~

~~any reduction in consumer confidence or disposable income in general that reduces the demand for~~released motion pictures ~~or adversely affects the motion picture production industry;~~

~~the success of first-run motion pictures, which depends upon the production and marketing efforts of the major studios and the attractiveness and value proposition of the movies~~directly to ~~consumers compared to other forms of entertainment;~~

~~if the theaters in our network fail to maintain their theaters and provide amenities that consumers prefer;~~

~~if studios begin to reduce the number of feature films produced and their investments in those films or reduce the investments made to market those films;~~

if future theater attendance declines significantly over an extended time period, one or more of the founding members or network affiliates may face financial difficulties and could be forced to sell or close theaters or reduce the number of screens it builds or upgrades or increase ticket prices; and

NCM LLC’s network theater circuits also may not successfully compete for licenses to exhibit quality films and are not assured a consistent supply of motion pictures since they do not have long-term arrangements with major film distributors.

Any of these circumstances could reduce our revenue because our national and regional advertising revenue, and local advertising to a lesser extent, depends on the number of theater patrons who attend movies. Additionally, if attendance declines significantly, the Company will be required to provide additional advertising time (makegoods) to national advertisers to reach agreed-on audiencealternative delivery thresholds. Certain of these circumstances can also lead to volatility within our utilization. We have also experienced volatility in our utilization over the years, with annual national inventory utilization ranging from 113.5% to 128.3% from 2014 through 2018. We experience even more substantial volatility quarter-to-quarter.

~~Changes in theater patron behavior could result in declines in the viewership of our Nooviepreshow which could reduce the attractiveness of cinema advertising and our revenues.~~

The value of our national and regional on-screen advertising and to a lesser extent our local advertising is based on the number of theater patrons that are in their seats and thus have the opportunity to view the ~~Noovie~~ ~~pre-show. Trends in patron behavior that could reduce viewership of our~~ ~~Noovie~~ ~~pre-show include the following:~~

~~theater patrons are increasingly purchasing tickets ahead of time via on-line ticketing mediums and when available reserving a seat in~~methods bypassing the theater ~~(offered in approximately 54.2% of our network as of December 27, 2018), which could affect how early patrons arrive to the theater~~entirely and ~~reduce the number of patrons that are in a theater seat to view most or all of the~~ ~~Noovie~~ ~~pre-show; and~~

~~changes in theater patron amenities, including, online ticketing, bars and entertainment within exhibitor lobbies causing increased dwell time of patrons.~~

~~National advertising sales and rates are dependent on the methodology used to measure audience impressions. If a change is made to~~ this ~~methodology that reflects fewer audience impressions available~~may continue during the ~~pre-show, this could adversely affect the Company’s revenue~~COVID-19 Pandemic and ~~results of operations.~~after it has subsided.

~~We may not realize the anticipated benefits of the 2019 ESA Amendments.~~

On September 17, 2019, NCM LLC entered into the 2019 ESA Amendments with affiliates of each of Cinemark and Regal. Among other things, the 2019 ESA Amendments provide that, beginning November 1, 2019, NCM LLC is entitled to display up to five minutes of the ~~Noovie~~ ~~pre-show after the scheduled showtime of a feature film and a Platinum Spot that is either 30 or 60 seconds of the~~ ~~Noovie~~ ~~pre-show in the trailer position directly prior to the “attached” trailers preceding the feature film.~~

We expect the 2019 ESA Amendments to result in an increase in average CPM, revenues and Adjusted OIBDA, however we may not realize any or all such benefits. Potential difficulties and uncertainties that may impair the full realization of the anticipated benefits include, among others:

~~the behavior of theater patrons may change in response to the display of a portion of the~~ ~~Noovie~~ ~~pre-show after the advertised showtime, resulting in a reduction to the number of patrons that are in a theater seat to view most or all of the~~ ~~Noovie~~ ~~pre-show;~~

~~exhibitors may encounter issues in displaying a portion of the~~ ~~Noovie~~ ~~pre-show after the advertised showtime because of technical issues, access issues with their content providers, or other issues that may arise in the future;~~

~~potential advertisers may not view the Platinum Spot or Post-Showtime Inventory as a premium advertising opportunity and the average CPMs for the~~ ~~Noovie~~ ~~pre-show may not increase as much as anticipated, or at all;~~

~~NCM LLC may not satisfy the minimum average CPM which is required by the 2019 ESA Amendments for it to have the right to display the Platinum Spot for more than one concurrent advertiser;~~

~~the extended length of time between the advertised showtime and the beginning of the feature film may decrease the average CPM for that portion of the~~ ~~Noovie~~ ~~pre-show appearing before the advertised showtime, which may partially or fully offset any increase in average CPM for the Platinum Spot or Post-Showtime Inventory; and~~

the increased theater access fees payable to Cinemark and Regal in connection with the Post-Showtime Inventory and revenue share applicable to the Platinum Spot may exceed the increase, if any, in revenue resulting from the 2019 ESA Amendments.

The anticipated benefits we expect to receive as a result of the 2019 ESA Amendments are subject to factors that we do not and cannot control. Failure to realize the anticipated benefits could result in decreases in revenue and Adjusted OIBDA and diversion of management’s time and energy, and could adversely affect our business, financial condition and operating results.

~~We may not be successful in increasing the number of theaters in which NCM LLC has the right to display Post-Showtime Inventory or a Platinum Spot.~~

As a result of the ~~2019 ESA Amendments, NCM LLC is entitled to display up to five minutes~~impact of the ~~Noovie~~ ~~pre-show after~~COVID-19 Pandemic, the ~~scheduled showtime~~Company may not be able to meet certain of its financial covenants within the next twelve months. The Company is actively pursuing and expects to obtain an amendment to its Senior Secured Credit Facility to obtain a ~~feature film~~waiver to its financial covenants. Until an amendment is obtained, substantial doubt exists about the Company’s ability to continue as a going concern during the next twelve months. If the amendment is not finalized before the completion of the Company’s 2020 annual audit in the first quarter of 2021 and a ~~Platinum Spot~~qualified audit opinion is issued by the Company’s independent auditors at that ~~is either 30 or 60 seconds~~time, a majority of the ~~Noovie~~ ~~pre-show~~lenders could choose to accelerate the debt, which could also result in a cross-default under NCM LLC’s senior notes. Management expects to complete the trailer position directly prior to the “attached” trailers preceding the feature film. However, at this time NCM LLC only has the right to display Post-Showtime Inventory and a Platinum Spot in Cinemark and Regal theaters, which constituted approximately 54% of the attendance in our networkamendment during the ~~first half of 2019. While we intend to seek to enter into agreements that provide similar access to inventory as the 2019 ESA Amendments with our other network affiliates,~~next several months. However, there can be no assurance that weNCM LLC will be ~~successful in increasing~~able to amend the Credit Agreement before the completion of the Company’s 2020 annual audit, or at all.

In response to the COVID-19 Pandemic, we implemented a number of cost-saving measures, described elsewhere in this filing.To prepare for the reopening of theaters and resumption of in ~~which NCM LLC has the right~~theater advertising we began to ~~display Post-Showtime Inventory or a Platinum Spot. AMC, which constituted approximately 29%~~ease certain of these measures, but as of the ~~attendance in~~date of this filing the revenue generated by our operations has not reached historical levels and 47% of the theaters within our network ~~during~~remain closed. We may not generate sufficient revenue in the ~~first half of 2019, has recently announced that it has no plans~~short term to introduce commercial advertising close to the start of a feature film’s commencement. In addition, any agreements with other network affiliates may be on terms less favorable to us than the 2019 ESA Amendments. If we are unable to expand the number of theaters displaying a portioncover these increased costs.

The impact, extent and duration of the ~~Noovie~~ ~~pre-show after the advertised showtime, we will only experience the benefits of post-showtime advertising, if any, in Cinemark~~government-imposed restrictions on travel, public gatherings, other events and ~~Regal theaters.~~

~~Our plans for developing additional revenue opportunities may not be implemented and may not be achieved.~~

We have invested significant resources in pursuing potential opportunities for revenue growth, which we describe in our annual report on Form 10-K under “Business-Our strategy.” The development of our online and mobile advertising network and mobile apps and our ability to collect and leverage our first party movie audience data from these products remains at an early stage, is under increasing competitive pressure and may not deliver the future benefits that we are expecting. If we are unable to execute on products relevant to the marketplace or integrate these digital marketing products with our core on-screen and theater lobby products, and if these offerings do not continue to provide relevant first party data or to grow in importance to

~~advertising clients and agencies, they may not provide a way to help expand our cinema advertising~~ business as it matures and begins to compete with new or improved advertising platforms including online and mobile video services. As such, there can be no assurance that we will recoup our investments made pursuing additional revenue opportunities.

~~The markets for advertising are competitive and we may be unable to compete successfully.~~

The market for advertising is very competitive. Cinema advertising is a small component of video advertising in the U.S. and thus, we must compete with established, larger and better known national and local media platforms such as cable, broadcast and satellite television networks and other video media platforms including those distributed on the internet and mobile networks. In addition to these video advertising platforms, we compete for advertising directly with several additional media platforms, including radio, various local print media and billboards. We also compete with several other local and national cinema advertising companies. We expect all of these competitors to devote significant effort to maintaining and growing their business at our expense. We also expect existing competitors and new entrants to the advertising business, most notably the online and mobile advertising companies, to constantly revise and improve their business models to meet expectations of advertising clients. In addition, the pricing and volume of advertising may be affected by shifts in spending toward online and mobile offerings from more traditional media, or toward new ways of purchasing advertising, such as through automated purchasing, dynamic advertising insertion, third parties selling local advertising posts and advertising exchanges, some or all of which may not be as advantageous to the Company as current advertising methods. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions,generally, as well as ~~budgeting and buying patterns. A decline in~~ the economic prospects of advertisers or the economy in general could alter current or prospective advertisers’ spending priorities. If we cannot respond effectively to changes in the media marketplace in response to new entrants or advances by our existing competitors, our business may be adversely affected.

~~Additionally, the mix of film ratings~~overall effect of the ~~available motion pictures, such as a higher proportion of G~~COVID-19 virus is currently unknown but has had and ~~PG rated films, could cause advertisers~~is continuing to ~~reduce their spending with us as the theater patrons for these films do not represent those advertisers’ target markets.~~

Advertising demand also impacts the price (CPM) we are able to charge our customers. Due to increased competition from other national video networks, including online and mobile advertising platforms, television networks and other out-of-home video, combined with seasonal marketplace supply and demand characteristics, we have experienced volatility in our pricing (CPMs) over the years, with annual national CPM increases (decreases) ranging from (16.4%) to 9.6% from 2014 to 2018.

~~If we do not continue to upgrade our technology, our business could fail to grow and revenue and operating margins could decline.~~

Failure to successfully or cost-effectively implement upgrades to our in-theater advertising network and proposal and inventory control, audience targeting and other management systems could limit our ability to offer our clients innovative unique, integrated and targeted marketing products, which could limit our future revenue growth. New advertising platforms such as online and mobile networks, and traditional mediums including television networks are beginning to use new digital technology to reach a broader audience with more targeted marketing products, and failure by us to upgrade our technology could hurt our ability to compete with those companies. Under the ESAs, the founding members are required to provide technology that is consistent with that in place at the signing of the ESA. We may request that the founding members upgrade the equipment or software installed in their theaters, but we must negotiate with the founding members as to the terms of such upgrade, including cost sharing terms, if any. If we are not able to come to an agreement on a future upgrade request, we may elect to pay for the upgrades requested which could result in our incurring significant capital expenditures, which could adversely affect our results.

We also have many internally developed systems which support our operations due to the unique nature of our business model. The failure to continue to develop or the failure of the system to meet our needs may require us to make significant additional investments in our infrastructure or seek alternative technology which may impact our costs and prevent our growth. The failure or delay in implementation of the system or problems with the integration with our other systems and software could cause operational difficulties and slow or prevent the growth of our business in the future. In addition, the failure or delay in implementation of such upgrades or problems with the integration of our systems and software could slow or prevent the growth of our business.

~~Economic uncertainty or deterioration in economic conditions may adversely impact our business, operating results or financial condition.~~

The financial markets have experienced extreme disruption and volatility at times. A decline in consumer confidence in the U.S. may lead to decreased demand for our services or delay in payments by our advertising customers. As a result, our results of operations and financial condition could be adversely affected. These challenging economic conditions also may result in:

~~increased competition for fewer advertising and entertainment programming dollars;~~

~~pricing pressure that may adversely affect revenue and gross margin;~~

~~declining attendance and thus a decline in the impressions available for our pre-show;~~

~~reduced credit availability and/or access to capital markets;~~

~~difficulty forecasting, budgeting and planning due to limited visibility into the spending plans of current or prospective customers; or~~

~~customer financial difficulty and increased risk of uncollectible accounts.~~

Our Adjusted OIBDA is derived from high margin advertising revenue. The reduction in spending by or loss of a national or group of local advertisers or failure to grow our advertising revenue in line with the growth of our contractual costs could have a meaningful adverse effect on our business.

We generated all of our Adjusted OIBDA from our high margin advertising business. A substantial portion of our advertising revenue relates to contracts with terms of a month or less. Advertisers will not continue to do business with us if they believe our advertising medium is ineffective or overly expensive. In addition, large advertisers generally have set advertising budgets, most of which are focused on traditional media platforms like television and, increasingly, online and mobile networks. Reductions in the size of advertisers’ budgets due to local or national economic trends, a shift in spending to new advertising mediums like the internet and mobile platforms or other factors could result in lower spending on cinema advertising. Because of the high incremental margins on our individual advertising contracts, if we are unable to remain competitive and provide value to our advertising clients, they may reduce their advertising purchases or stop placing advertisements with us. Even the loss of a small number of clients on large contracts would negatively affect our Adjusted OIBDA. In addition, the ESAs and certain of our network affiliate agreements include automatic annual cost or fee increases, and if we are unable to grow our high margin advertising revenue at a similar rate, our Adjusted OIBDA could be negatively affected.

~~The loss of any major content partner or advertising customer could significantly reduce our revenue.~~

We derive a significant portion of our revenue from our contracts with our content partners, public service announcement (“PSAs”) and NCM LLC’s founding members’ agreements to purchase on-screen advertising for their beverage concessionaires. We are not direct parties to the agreements between the founding members’ and their beverage concessionaires but do not expect these agreements to expire in the foreseeable future. None of these companies individually accounted for over 10% of our total revenue during the year ended December 27, 2018. However, the agreements with the content partners, PSAs and beverage advertising with the founding members in aggregate accounted for approximately 26%, 30% and 30% of our total revenue during the years ended December 27, 2018, December 28, 2017 and December 29, 2016, respectively. Because we derive a significant percentage of our total revenue from a relatively small number of large companies, the loss of one or more of them as a customer could decrease our revenue and adversely affect current and future operating results.

~~We depend upon our senior management and our business may be adversely affected if we cannot retain or replace them.~~

Our success depends in part upon the retention of our experienced senior management with specialized industry, sales and technical knowledge and/or industry relationships. In November 2017, our former General Counsel resigned and a new General Counsel was appointed in February 2018. In November 2018, our Chief Executive Officer stepped down and a new Chief Executive Officer was appointed in August 2019. If we are not able to find qualified internal or external replacements for critical members of our senior management team, the loss of these key employees could have a material adverse ~~effect~~impact on our ~~ability~~business, liquidity, financial conditions and/or results of operations. Even when the COVID-19 Pandemic subsides, we cannot guarantee that we will recover as rapidly as other industries as advertising expenditures may remain decreased due to ~~effectively pursue~~an economic slowdown, consumers may be hesitant to return to theaters or other long-term changes may have impacted the advertising or exhibition industries. We cannot predict when the effects of the COVID-19 Pandemic will subside when all of our theaters will reopen and patrons are comfortable attending, or when our business ~~strategy~~will return to normal levels. The longer and more severe the pandemic, including repeat or cyclical outbreaks or increases in rates of infection, the more severe the adverse effects will be on our ~~relationships with advertisers and content partners. We do not have key-man life insurance covering any~~business, liquidity, financial conditions and/or results of operations. Significant impacts on our ~~employees.~~

~~Changes in the ESAs with, or lack of support~~business caused by the ~~founding members could adversely affect our revenue, growth~~COVID-19 Pandemic and ~~profitability.~~other pandemics include and are likely to continue to include among others:

The ESAs with the founding members are critical to our business. The ESA with AMC has an initial term of 30 years and the ESAs with each of Cinemark and Regal (as amended by the 2019 ESA Amendments) have an initial term of 34 years, each

such term beginning February 13, 2007. Each ESA provides NCM LLC with a five-year right of first refusal for the services that it provides to the founding members, which begins one year prior to the end of the term of each respective ESA. The founding members’ theaters represent approximately 79.2% of the screens and approximately 82.4% of the•decreased attendance in ~~our network as~~theaters after they reopen, including due to (i) continued safety and health concerns and social distancing requirements or (ii) a change in consumer behavior in favor of ~~December 27, 2018~~alternative forms of entertainment;

•advertisers’ perception of cinema advertising may change based on future attendance, shortened theatrical windows, and ~~approximately 80.0%~~potential impacts of film production;

•due to adverse business impacts, advertisers may be less willing to invest in advertising and may prioritize other types of investment during the ~~screens and approximately 83.0% of the attendance in our network as of September 26, 2019. If any one of the ESAs was terminated, not renewed at its expiration or found~~COVID-19 Pandemic;

•advertisers may be unwilling to ~~be unenforceable, it would have a material adverse effect on our revenue, profitability and financial condition.~~

The ESAs require the continuing cooperation, investment and support of the founding members, the absence of which could adversely affect us. Pursuant to the ESAs, the founding members must make investments to replace digital network equipment within their theaters and equip newly constructed theaters with digital network equipment. If the founding members do not have adequate financial resources or operational strength, and if they do not replace equipment or equip new theaters to maintain the level of operating functionality that we have today, or if such equipment becomes obsolete, we may have to make additional capital expenditures or ourenter into upfront advertising ~~revenue and operating margins may decline. In addition, the ESAs give the founding members the right to object to certain content in our~~ ~~Noovie~~ ~~pre-show, including content that competes~~arrangements with us or commit to allocate budgets to cinema advertising due to uncertainty regarding the ~~applicable founding member. If~~opening of cinemas, upcoming film releases, and the availability of other advertising options;

•the bankruptcy or restructuring of our founding members ~~do not agree with our decisions on what content is permitted under~~or other network affiliates in which the ESAs, we may lose clients and the resulting revenue, which would harm our business. In March 2018, Regal was acquired by a U.K.-based cinema operator and we are uncertain how this new ownership of Regal may affect its financial resources or its cooperation with us under the ESA or otherwise. In July 2018 AMC closed on the sale of all of the NCM LLC membership units held by AMC at the time to Cinemark and Regal. On October 24, 2019, AMC redeemed 197,118 membership units, which were issued to AMC in accordance with the terms of the common unit adjustment agreement with the founding members, in exchange for shares of our common stock. AMC is eligible to be issued additional shares pursuant to the terms of the common unit adjustment agreement. We are uncertain how AMC’s significantly reduced ownership interest in NCM LLC may affect its cooperation with us under its ESA or otherwise going forward.

~~If the non-competition provisions of the ESAs are deemed unenforceable, the founding members could compete against us and our business could be adversely affected.~~

~~With certain limited exceptions, each of the ESAs prohibits the applicable founding member from engaging in any of the business activities~~ that we provide in the founding member’s theaters under the amended ESAs, and from owning interests in other entities that compete with us. These provisions are intended to prevent the founding members from harming our business by providing cinema advertising services directly to their theaters or by entering into agreements with third-party cinema advertising providers. However, under state and federal law, a court may determine that a non-competition covenant is unenforceable, in whole or in part, for reasons including, but not limited to, the court’s determination that the covenant:

~~is not necessary to protect a legitimate business interest of the~~ party ~~seeking enforcement;~~

~~unreasonably restrains the party against whom enforcement is sought; or~~

~~is contrary to the public interest.~~

Enforceability of a non-competition covenant is determined by a court based on all of the facts and circumstances of the specific case at the time enforcement is sought. For this reason, it is not possible for us to predict whether, or to what extent, a court would enforce the non-competition provisions contained in the ESAs. If a court were to determine that the non-competition provisions are unenforceable, the founding members could compete directly against us or enter into an agreement with another cinema advertising provider that competes against us. Any inability to enforce the non-competition provisions, in whole or in part, could cause our revenue to decline.

~~If one of the founding members declared bankruptcy, the ESA with that founding member~~ may be rejected, renegotiated or deemed ~~unenforceable.~~unenforceable;

~~Each of the founding members currently~~•increased operating costs without associated revenues during periods where theaters are open but attendance has a significant amount of indebtedness. In 2000 and 2001, several major motion picture exhibition companies filed for bankruptcy including United Artists, Edwards Theatres and Regal Cinemas (which are predecessor companiesnot reached historical levels;

•an inability to Regal), and General Cinemas and Loews Cineplex (which are predecessor companies to AMC). The industry-wide construction of larger, more expensive megaplexes featuring stadium seating in the late 1990s that rendered existing, smaller, sloped-floor theaters under long-term leases obsolete and unprofitable, were significant contributing factors to these bankruptcies. If a bankruptcy case were commenced by or against a founding member, it is possible that all or part of the ESA with that founding member could be rejected by a trustee in the bankruptcy case pursuant to Section 365 or Section 1123 of the United States Bankruptcy Code, or by the founding member, and thus not be enforceable. Alternatively, the founding member could seek to renegotiate the ESA in a manner less favorable to us than the existing agreement. Should the founding member seek to sell or otherwise dispose of theaters or remove theaterscollect accounts receivable from ~~our network through bankruptcy or for other~~small business reasons, if the acquirer did not agree to continue to allow us to sell advertising in the acquired theaters the number of theaters in our advertising networks would be reduced which in turn would reduce the number of advertising impressions available to us and thus could reduce our advertising revenue.

~~The ESAs allow the founding members to engage in activities that might compete with certain elements of our business, which could reduce our revenue and growth potential.~~

The ESAs contain certain limited exceptions to our exclusive right to use the founding members’ theaters for our advertising business. The founding members have the right to enter into a limited number of strategic cross-marketing relationships with third-party, unaffiliated businesses for the purpose of generating increased attendance or revenue (other than revenue from the sale of advertising). These strategic marketing relationships can include the use of one minute on the lobby network (“LEN”) per 30 minute cycle and certain types of lobby promotions and can be provided at no cost, but only for the purpose of promoting the products or services of those businesses while at the same time promoting the theater circuit or the movie-going experience. The use of LEN or lobby promotions by the founding members for these advertisements and programs could result in the founding members creating relationships with advertisers that ~~could adversely affect our current LEN~~have been temporarily or permanently closed;

•reductions and ~~lobby promotions advertising revenue~~delays associated with planned operating and profitability, as well as the potential we have to grow that advertising revenue in the future. The LEN and lobby promotions represented approximately 4% of our total advertising revenue for the year ended December 27, 2018. The founding members do not have the right to use their movie screens (including the ~~Noovie~~ ~~pre-show or otherwise) for promoting these cross-marketing relationships, and thus we will have the exclusive rights to advertise on the movie screens, except for limited advertising~~capital expenditures;

•increased risk related to ~~theater operations.~~employee matters, including increased turnover and litigation and claims relating to furloughs or pay reductions;

~~The founding members also have the right to install a second network of video monitors in the theater lobbies in excess of those required to be installed for the LEN,~~

•potential impairment charges and ~~the founding members have exercised this right to install a significant number of video monitors in their theater lobbies. This~~ additional ~~lobby video network, which we refer to as the founding members’ lobby network, may be used by the founding members to promote products or services~~deferred tax expense related to ~~operating~~ the ~~theaters, such as concessions, bars and dining operations, online ticketing partner promotions, gift card and loyalty programs, and special events. The presence~~increase of the founding members’ lobby network within the lobby areas could reduce the effectiveness of our LEN, thereby reducing our current LEN advertising revenue and profitability and adversely affecting future revenue potential associated with that marketing platform.

~~The founding members and our network affiliates are subject to substantial government regulation, which could slow their future growth of locations and screens and in turn slow our growth prospects.~~

The founding members and our network affiliates are subject to various federal, state and local laws, regulations and administrative practices affecting their movie theater business, including provisions regulating antitrust, health and sanitation standards, access for those with disabilities, environmental, and licensing. Some of these laws and regulations also apply directly to us and NCM LLC. Changes in existing laws or implementation of new laws, regulations and practices could have a significant impact on the founding members, our network affiliates’ and our respective businesses. For example, to the extent that antitrust laws, regulation and enforcement policy restrict the ability of the founding members or the network affiliates to acquire additional theaters, it may slow the future growth of those founding members or network affiliates and in turn the growth of our network.

~~We may be unable to effectively manage changes to our business strategy to continue the growth of our advertising inventory and network.~~

~~If we do not effectively implement the changes within our strategy, we may not be able to continue our historical growth. To effectively execute~~valuation allowances on our strategy to expand our digital offerings and continue to grow our inventory, we will need to develop additional products. These enhancements and improvements could require an additional allocation of financial and management resources and acquisition of talent. High turnover, loss of specialized talent or insufficient capital could also place significant demands on management, the success of the organization, and our strategic outlook.deferred tax assets;

~~The amount of inventory we have to sell is limited by the length of the~~ ~~Noovie~~ pre-show. In order to maintain in-theater growth we will need to expand the number of theaters and screens in our network. Considering our current market share, we may not be able to continue to expand our network which could negatively affect •our ability to ~~add new advertising clients. If we are unable to maintain the size of our network, or grow our network, our revenue and operating results could be adversely impacted.~~

~~Our~~implement business ~~relies heavily on our technology systems, and any failures or disruptions may materially and adversely affect our operations.~~

In order to conduct our business, we rely on information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information and manage and support a variety of business processes and activities. The temporary or permanent loss of our computer equipment and software systems through cyber and other security threats, operating malfunction, software virus, human error, natural disaster, power loss, terrorist attacks or other catastrophic

events could disrupt our operations and cause a material adverse impact. These problems may arise in both internally developed systems and the systems of third-party service providers. We devote significant resources to maintaining a disaster recovery location separate from our operations, network security and other measures to protect our network from unauthorized access and misuse. However, depending on the nature and scope of a disruption, if our technology systems were to fail and we were unable to recovercontinuity plans in a ~~timely way through our disaster recovery site, we would be unable to fulfill critical business functions,~~fast-moving emergency, which ~~could lead to a loss of customers and could harm our reputation. Technological breakdown could also interfere with our ability to comply with financial reporting and other regulatory requirements.~~

Our business, services, or technology may infringe on intellectual property rights owned by others, which may interfere with our ability to provide services or expose us to increased liability or expense.

Intellectual property rights of our business include the copyrights, trademarks, trade secrets and patents of our in-theater, online, and mobile services, including the websites we operate at ncm.com and ~~Noovie.com, our digital gaming products including~~ ~~Noovie Arcade~~, ~~Fantasy Movie League~~, ~~Name That Movie~~ ~~and~~ ~~Noovie Shuffle~~, and the features and functionality, content, and software we make available through those websites and apps. We rely on our own intellectual property rights as well as intellectual property rights obtained from third parties to conduct our business and provide our in-theater, online, and mobile services. We may discover that our business or the technology we use to provide our in-theater, online, or mobile services infringes patent, copyright, or other intellectual property rights owned by others. In addition, our competitors or others may claim rights in patents, copyrights, or other intellectual property rights that will prevent, limit or interfere with our ability to provide our in-theater, online, or mobile services either in the U.S. or in international markets. Further, the laws of certain foreign countries may not protect our intellectual property rights to the same extent as do the laws of the U.S.

~~The content we distribute through our in-theater, online or mobile services may expose us to liability.~~

Our in-theater, online, and mobile services facilitate the distribution of content. This content includes advertising-related content, as well as movie, television, music, gaming and other media content, much of which is obtained from third parties. Our websites and social media channels also include features enabling users to upload or add their own content to the websites and modify certain content on the websites. As a distributor of content, we face potential liability for negligence, copyright, patent or trademark infringement, or other claims based on the content that we distribute. We or entities that we license content from may not be adequately insured or indemnified to cover claims of these types or liability that may be imposed on us.

~~The user information we collect and maintain through our online and mobile services may expose us to liability.~~

In order to take advantage of some of the online and mobile services we provide, users may, now or in the future, be required to establish an account on one of our websites. As a result, we may collect and maintain personal identifying information about those users. We also may, now or in the future, collect and maintain information about users who view certain advertising displayed through our online and mobile services and users who enter the theaters in our network. The collection and use of this information is governed by applicable privacy, information security and consumer protection-related laws and regulations. These laws continue to evolve and may be inconsistent from one jurisdiction to another. Compliance with all such laws and regulations may increase our operating costs and adversely impact our ability to interact with users of our online and mobile services. Our collection and use of information, including personal identifying information, regarding users of our online and mobile services could result in legal liability. For example, the failure, or perceived failure, to comply with applicable privacy information security or consumer protection-related laws or regulations or our posted privacy policies could result in actions against us by governmental entities or others. If an actual or perceived breach of our data occurs, the market perception of the effectiveness of our security measures could be harmed, and we could lose users of these services and the associated benefits from gathering such user data.

~~Changes in regulations relating to the Internet or other areas of our online or mobile services may result in the need to alter our business practices or incur greater operating expenses.~~

A number of regulations, including those referenced below, may impact our business as a result of our online or mobile services. The Digital Millennium Copyright Act has provisions that limit, but do not necessarily eliminate, liability for posting, or linking to third-party websites that include materials that infringe copyrights or other rights. Portions of the Communications Decency Act are intended to provide statutory protections to online service providers who distribute third-party content. The Child Online Protection Act and the Children’s Online Privacy Protection Act restrict the distribution of materials considered harmful to children and impose additional restrictions on the ability of online services to collect information from minors. The costs of compliance with these regulations, and other regulations relating to our online and mobile services or other areas of our business, may be significant. The manner in which these and other regulations may be interpreted or enforced may subject us to potential liability, which in turn could have an adverse effect on our internal controls (potentially giving rise to significant deficiencies or material weaknesses) and also increase our vulnerability to information technology and other systems disruptions;

•our inability to generate significant cash flow from operations, which could lead to a substantial increase in indebtedness and negatively affect our ability to comply with the financial covenants, if applicable, in our debt agreements;

•our inability to access lending, capital markets and other sources of liquidity, if needed, on reasonable terms, or at all, or obtain amendments, extensions and waivers;

•our inability to effectively meet our short- and long-term obligations; and

•our inability to service our existing and future indebtedness.

The spread of COVID-19 has developed into a worldwide health crisis and may have broader macro-economic implications. The United States has experienced significantly increased rates of unemployment and these deteriorating economic conditions, including reduced levels of economic growth and possibly a recession, may extend well beyond the time the spread of infection is contained. Consumers and advertisers may also change their long-term behavior related to perceived risk of infection or health risk, other pandemic fears, quarantines and other restrictions. Many of our clients and prospective clients have experienced significant negative impacts from the COVID-19 Pandemic and have decreased advertising budgets during the COVID-19 Pandemic. Additionally, a significant number of small businesses have temporarily or permanently closed, which may reduce local advertising revenue. The perceived risk of infection or health risk may adversely affect our business, liquidity, financial condition and results of operations ~~or financial condition. Changes to these and other regulations may impose additional burdens on us or otherwise~~even after the COVID-19 Pandemic subsides.

To the extent the COVID-19 Pandemic adversely ~~affect~~affects our business and financial results, because of, for example, increased costs relating to legal compliance, defense against adverse claims or damages, or the reduction or elimination of features, functionality or content from our online or mobile services. Likewise, any failure on our part to comply with these and other regulationsit may ~~subject us to additional liabilities.~~

~~Our revenue and Adjusted OIBDA fluctuate from quarter to quarter and may be unpredictable, which could increase the volatility of our stock price.~~

A weak advertising market or the shift in spending of a major client from one quarter to another, the performance of films released in a given quarter, a disruption in the release schedule of films or changes in the television scatter market could significantly affect quarter-to-quarter results or even affect results for the entire fiscal year. In addition, our revenue and operating results are seasonal in nature, coinciding with the timing of marketing expenditures by our advertising clients and, to a lesser extent, the attendance patterns within the film exhibition industry. Advertising expenditures tend be higher during the second, third, and fourth fiscal quarters. Because our results may vary from quarter to quarter and may be unpredictable, our financial results for one quarter cannot necessarily be compared to another quarter or the same quarter in prior years and may not be indicative of our financial performance in subsequent quarters. These variations in our financial results could contribute to volatility in our stock price.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud, and as a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required controls, or difficulties encountered in implementing new or improved controls, could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also ~~cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.~~

~~Risks related to our corporate structure~~

We are a holding company with no operations of our own, and we depend on distributions and payments under the NCM LLC operating and management services agreements from NCM LLC to meet our ongoing obligations and to pay cash dividends on our common stock.

We are a holding company with no operations of our own and have no independent ability to generate cash flow other than interest income on cash balances. Consequently, our ability to obtain operating funds primarily depends upon distributions from NCM LLC. The distribution of cash flows and other transfers of funds by NCM LLC to us are subject to statutory and contractual restrictions based upon NCM LLC’s financial performance, including NCM LLC’s compliance with the covenants in its senior secured credit facility and indentures, and the NCM LLC operating agreement. The NCM LLC senior secured credit facility and indentures limit NCM LLC’s ability to distribute cash to its members, including us, based upon certain leverage tests, with exceptions for, among other things, payment of our income taxes and a management fee to NCM, Inc. pursuant to the terms of the management services agreement (incorporated in the ESA). Refer to the information provided under Note 6 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document for leverage discussion. The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including NCM LLC’s results of operations, financial condition, earnings, capital requirements, limitations in NCM LLC’s debt agreements and legal requirements. In the event NCM LLC fails to comply with these covenants and is unable to distribute cash to us quarterly, once NCM, Inc. cash balances and investments are extinguished, we will be unable to pay dividends to our stockholders or pay other expenses outside the ordinary course of business.

Pursuant to the management services agreement between us and NCM LLC, NCM LLC makes payments to us to fund our day-to-day operating expenses, such as payroll. However, if NCM LLC has insufficient cash flow to make the payments pursuant to the management services agreement, we may be unable to cover these expenses.

As a member of NCM LLC, we incur income taxes on our proportionate share of any net taxable income of NCM LLC. We have structured the NCM LLC senior secured credit facility and indentures to allow NCM LLC to distribute cash to its members (including us and NCM LLC’s other members) in amounts sufficient to cover their tax liabilities and management

fees, if any. To the extent that NCM LLC has insufficient cash flow to make such payments, it could have a material adverse effect on our business, financial condition, results of operations or prospects.

~~NCM LLC’s substantial debt obligations could impair our financial condition or prevent us from achieving our business goals.~~

NCM LLC is party to substantial debt obligations. The senior secured credit facility and indentures contain restrictive covenants that limit NCM LLC’s ability to take specified actions and prescribe minimum financial maintenance requirements that NCM LLC must meet. Because NCM LLC is our only operating subsidiary, complying with these restrictions may prevent NCM LLC from taking actions that we believe would help us to grow our business. For example, NCM LLC may be unable to make acquisitions, investments or capital expenditures as a result of such covenants. Moreover, if NCM LLC violates those restrictive covenants or fails to meet the minimum financial requirements, it would be in default, which could, in turn, result in defaults under other obligations of NCM LLC. Any such defaults could materially impair our financial condition and liquidity. For further information, refer to Note 6 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document.

If NCM LLC is unable to meet its debt service obligations, it could be forced to restructure or refinance the obligations, seek additional equity financing or sell assets. NCM LLC may be unable to restructure or refinance these obligations, obtain additional equity financing, sell assets on satisfactory terms or at all or make cash distributions. In addition, NCM LLC’s indebtedness could have other negative consequences for us, including without limitation:

•~~limiting NCM LLC’s ability to obtain financing in the future;~~

•~~requiring much of our cash flow to be dedicated to interest obligations and making it unavailable for other purposes, including payments to its members (including NCM, Inc.);~~

•limiting NCM LLC’s liquidity and operational flexibility in changing economic, business and competitive conditions which could require NCM LLC to consider deferring planned capital expenditures, reducing discretionary spending, selling assets, restructuring existing debt or deferring acquisitions or other strategic opportunities; and

•~~making NCM LLC more vulnerable to an increase in interest rates, a downturn in operating performance or decline in general economic conditions.~~

~~Despite NCM LLC’s current levels of debt, it or NCM, Inc. may still incur substantially more debt, including secured debt, which would increase the risks associated with NCM LLC’s level of debt~~

The agreements relating to NCM LLC’s debt, including the Notes due 2022, Notes due 2026, Notes due 2028 and the senior secured credit facility, limit but do not prohibit NCM LLC’s ability to incur additional debt, and do not place any restrictions on NCM, Inc.’s ability to incur debt. Accordingly, NCM, Inc. or NCM LLC could incur additional debt in the future, including additional debt under the senior secured credit facility, additional senior or senior subordinated notes and additional secured debt. If new debt is added to current debt levels, the related risks that we now face, including those described above under “—NCM LLC’s substantial debt obligations could impair our financial condition or prevent us from achieving our business goals,” could intensify.

~~NCM LLC’s other founding members or their affiliates may have interests that differ from those of our public stockholders and they may be able to influence our affairs.~~

So long as either Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units, if the two directors appointed by Cinemark or the two directors appointed by Regal to our Board of Directors (except that if either Cinemark or Regal has only appointed one director, and such director qualifies as an “independent director” under the applicable rules of the Nasdaq Stock Market LLC, then such director) vote against any of the corporate actions listed below, we and NCM, LLC. will be prohibited from taking any such actions:

~~assign, transfer, sell or pledge all or a portion of the membership units of NCM LLC beneficially owned by NCM, Inc.;~~

~~acquire, dispose, lease or license assets with an aggregate value exceeding 20% of the fair market value of the business of NCM LLC operating as a going concern;~~

~~merge, reorganize, recapitalize, reclassify, consolidate, dissolve, liquidate or enter into a similar transaction;~~

~~incur any funded indebtedness or repay, before due, any funded indebtedness with a fixed term in an aggregate amount in excess of $15.0 million per year;~~

issue, grant or sell shares of NCM, Inc. common stock, preferred stock or rights with respect to common or preferred stock, or NCM LLC membership units or rights with respect to membership units, except under specified circumstances;

~~amend, modify, restate or repeal any provision of NCM, Inc.’s certificate of incorporation or bylaws or the NCM LLC operating agreement;~~

~~enter into, modify or terminate certain material contracts not in the ordinary course of business as defined under applicable securities laws;~~

~~except as specifically set forth in the NCM LLC operating agreement, declare, set aside or pay any redemption of, or dividends with respect to membership interests;~~

~~amend any material terms or provisions (as defined in the Nasdaq rules) of NCM, Inc.’s equity incentive plan or enter into any new equity incentive compensation plan;~~

make any change in the current business purpose of NCM, Inc. to serve solely as the manager of NCM LLC or any change in the current business purpose of NCM LLC to provide the services as set forth in the ESAs; and

~~approve any actions relating to NCM LLC that could reasonably be expected to have a material adverse tax effect on NCM LLC’s founding members.~~

Pursuant to a director designation agreement, so long as Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units, such NCM LLC founding member will have the right to designate a total of two nominees to our Board of Directors who will be voted upon by our stockholders. One such designee by each of Cinemark and Regal must meet the independence requirements of the stock exchange on which our common stock is listed. If, at any time, Cinemark or Regal owns less than 5% of NCM LLC’s then issued and outstanding common membership units, then such NCM LLC founding member shall cease to have any rights of designation. AMC no longer has seats on our Board of Directors or the right to nominate any person to serve on our Board of Directors.

If any director designee to our board designated by Cinemark or Regal is not appointed to our board, nominated by us or elected by our stockholders, as applicable, then Cinemark and Regal (so long as such they each continue to own at least 5% of NCM LLC’s issued and outstanding common membership units) will be entitled to approve specified actions of NCM LLC.

For purposes of calculating the 5% ownership threshold for the director veto rights and director designation agreement provisions discussed above, shares of our common stock held by a founding member and received upon redemption of NCM LLC common membership units will be counted toward the threshold. Common membership units issued to NCM, Inc. in connection with the redemption of common membership units by an NCM LLC founding member will be excluded, so long as such NCM LLC founding member continues to hold the common stock acquired through such redemption or such NCM LLC founding member has disposed of such shares of common stock to another NCM LLC founding member. Shares of our common stock otherwise acquired by NCM LLC’s founding members will also be excluded, unless such shares of common stock were transferred by one founding member to another and were originally received by the transferring NCM LLC founding member upon redemption of NCM LLC common membership units.

Under these circumstances, our corporate governance documents allow NCM LLC’s other members and their affiliates to exercise a greater degree of influence in the operation of our business and that of NCM LLC and the management of our affairs and those of NCM LLC than is typically available to stockholders of a publicly-traded company. Even if NCM LLC’s other members or their affiliates own a minority economic interest (but not less than 5%) in NCM LLC, they may be able to continue exerting such degree of influence over us and NCM LLC.

~~Different interests among the founding members or between the founding members and us could prevent us from achieving our business goals.~~

For the foreseeable future, we expect that our Board of Directors will include directors and certain executive officers of Cinemark and Regal and other directors who may have commercial or other relationships with Cinemark and Regal. The majority of NCM LLC’s outstanding membership interests also are owned by Cinemark and Regal. Such members compete with each other in the operation of their respective businesses and could have individual business interests that may conflict. Their differing interests could make it difficult for us to pursue strategic initiatives that require consensus among NCM LLC’s current members. In addition, to the extent the founding members sell some or all their NCM LLC membership units, such as was the case for AMC during 2017 and 2018, the founding members could have increasingly different interests because they no longer mutually benefit from an increase in NCM LLC’s revenues or the value of the NCM, Inc. common stock into which the NCM LLC membership units are convertible.

In addition, the structural relationship we have with NCM LLC’s founding members could create conflicts of interest among NCM LLC’s founding members, or between NCM LLC’s founding members and us, in a number of areas relating to our past and ongoing relationships. These conflicts of interests could also increase upon the sale of NCM LLC membership

units by a founding member because the founding member would have little incentive to agree to changes that may result in higher revenue for NCM LLC or a higher price for our common stock. There is not any formal dispute resolution procedure in place to resolve conflicts between us and an NCM LLC founding member or between NCM LLC founding members. We may not be able to resolve any potential conflicts between us and an NCM LLC founding member and, even if we do, the resolution may be less favorable to us than if we were negotiating with an unaffiliated party.

~~The corporate opportunity provisions in our certificate of incorporation could enable NCM LLC’s members to benefit from corporate opportunities that might otherwise be available to us.~~

Our certificate of incorporation contains provisions related to corporate opportunities that may be of interest to NCM LLC’s other members and us. It provides that if a corporate opportunity is offered to us, NCM LLC or one or more of the officers, directors or stockholders (both direct and indirect) of NCM, Inc. or a member of NCM LLC that relates to the provision of services to motion picture theaters, use of theaters for any purpose, sale of advertising and promotional services in and around theaters and any other business related to the motion picture theater business (except services as provided in the ESAs as from time to time amended and except as may be offered to one of our officers in his capacity as an officer), no such person shall be liable to us or any of our stockholders (or any affiliate thereof) for breach of any fiduciary or other duty by reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to us. This provision applies even if the business opportunity is one that we might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so.

In addition, our certificate of incorporation and the NCM LLC operating agreement expressly provide that NCM LLC’s founding members may have other business interests and may engage in any other businesses not specifically prohibited by the terms of the certificate of incorporation, including the exclusivity provisions of the ESAs. The parent companies of NCM LLC’s founding members could develop new media platforms that could compete for advertising dollars with our services. Further, we may also compete with NCM LLC’s founding members or their affiliates in the area of employee recruiting and retention. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are allocated by NCM LLC’s founding members to themselves or their other affiliates or we lose key personnel to them.

The agreements between us and NCM LLC’s founding members were made in the context of an affiliated relationship and may contain different terms than comparable agreements with unaffiliated third parties.

The ESAs and the other contractual agreements that we have with NCM LLC’s founding members were originally negotiated in the context of an affiliated relationship in which representatives of NCM LLC’s founding members and their affiliates comprised our entire Board of Directors. As a result, the financial provisions and the other terms of these agreements, such as covenants, contractual obligations on our part and on the part of NCM LLC’s founding members and termination and default provisions may be less favorable to us than terms that we might have obtained in negotiations with unaffiliated third parties in similar circumstances.

Our certificate of incorporation and bylaws contain anti-takeover protections that may discourage or prevent strategic transactions, including a takeover of our company, even if such a transaction would be beneficial to our stockholders.

Provisions contained in our certificate of incorporation and bylaws, the NCM LLC operating agreement, and provisions of the Delaware General Corporation Law (“DGCL”), could delay or prevent a third party from entering into a strategic transaction with us, even if such a transaction would benefit our stockholders. For example, our certificate of incorporation and bylaws:

~~provide veto rights to the directors designated by Cinemark and Regal over certain actions specified in our certificate of incorporation;~~

~~authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares, making a takeover more difficult and expensive;~~

~~prohibit stockholder action by written consent; and~~

~~do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates.~~

NCM LLC’s operating agreement also provides that NCM LLC’s other members will be able to exercise a greater degree of influence over the operations of NCM LLC, which may discourage other nominations to our Board of Directors, if any director nominee designated by NCM LLC’s other members is not elected by our stockholders. In addition, we entered into a

letter agreement with Standard General L.P., our largest stockholder, on June 1, 2018, that contains customary standstill provisions that may discourage a third party from seeking to enter into a strategic transaction with us.

These restrictions could keep us from pursuing relationships with strategic partners and from raising additional capital, which could impede our ability to expand our business and strengthen our competitive position. These restrictions could also limit stockholder value by impeding a sale of us or NCM LLC. Further, these restrictions could restrict or limit certain investors from owning our stock.

Any future issuance of membership units by NCM LLC and subsequent redemption of such units for common stock could dilute the voting power of our existing common stockholders and adversely affect the market value of our common stock.

The common unit adjustment agreement and the ESAs provide that NCM LLC will issue common membership units to account for changes in the number of theater screens NCM LLC’s founding members operate and which are made part of our advertising network. Historically, in most years each of NCM LLC’s founding members has increased the number of screens it operates. If this trend continues, NCM LLC may issue additional common membership units to NCM LLC’s founding members to reflect their increase in net screen count. Each common membership unit may be redeemed in exchange for, at our option, shares of our common stock on a one-for-one basis or a cash payment equal to the market price of one share of our common stock. If a significant number of common membership units were issued to NCM LLC’s founding members, NCM LLC’s founding members elected to redeem such units, and we elected to issue common stock rather than cash upon redemption, the voting power of our common stockholders could be diluted. Other than the maximum number of authorized shares of common stock in our certificate of incorporation, there is no limit on the number of shares of our common stock that we may issue upon redemption of an NCM LLC founding member’s common membership units in NCM LLC. For further information, refer to Note 4 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document.

~~Our future issuance of preferred stock could dilute the voting power of our common stockholders and adversely affect the market value of our common stock.~~

The future issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of our other classes of voting stock, either by diluting the voting power of our other classes of voting stock if they vote together as a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote even if the action were approved by the holders of our other classes of voting stock.

The future issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive. For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.

~~If we or NCM LLC’s founding members are determined to be an investment company, we would become subject to burdensome regulatory requirements and our business activities could be restricted.~~

We do not believe that we are an “investment company” under the Investment Company Act of 1940, as amended. As sole manager of NCM LLC, we control NCM LLC, and our interest in NCM LLC is not an “investment security” as that term is used in the Investment Company Act of 1940. If we were to stop participating in the management of NCM LLC, our interest in NCM LLC could be deemed an “investment security” for purposes of the Investment Company Act of 1940. Generally, a company is an “investment company” if it owns investment securities having a value exceeding 40% of the value of its total assets (excluding U.S. government securities and cash items). Our sole material asset is our equity interest in NCM LLC. A determination that such asset was an investment security could result in our being considered an investment company under the Investment Company Act of 1940. As a result, we would become subject to registration and other burdensome requirements of the Investment Company Act. In addition, the requirements of the Investment Company Act of 1940 could restrict our business activities, including our ability to issue securities.

We and NCM LLC intend to conduct our operations so that we are not deemed an investment company under the Investment Company Act. However, if anything were to occur that would cause us to be deemed an investment company, we would become subject to restrictions imposed by the Investment Company Act of 1940. These restrictions, including limitations on our capital structure and our ability to enter into transactions with our affiliates, could make it impractical for us

~~to continue our business as currently conducted and could have a material adverse effect on our financial performance and operations.~~

We also rely on representations of NCM LLC’s founding members that they are not investment companies under the Investment Company Act. If any NCM LLC founding member were deemed an investment company, the restrictions placed upon that NCM LLC founding member might inhibit its ability to fulfill its obligations under its ESA or restrict NCM LLC’s ability to borrow funds.

Our TRA with NCM LLC’s founding members is expected to reduce the amount of overall cash flow that would otherwise be available to us and will increase our potential exposure to the financial condition of NCM LLC’s founding members.

~~Our initial public offering and related transactions~~ have the effect of ~~reducing~~heightening many of the ~~amounts NCM, Inc. would otherwise pay~~other risks described herein and in the ~~future to various tax authorities as a result~~“Risk Factors” section of an increase in its proportionate share of tax basis in NCM LLC’s tangible and intangible assets. We have agreed in our TRA with NCM LLC’s founding members to pay to NCM LLC’s founding members 90% of the amount by which NCM, Inc.’s tax payments to various tax authorities are reduced as a result of the increase in tax basis. After paying these reduced amounts to tax authorities, if it is determined as a result of an income tax audit or examination that any amount of NCM, Inc.’s claimed tax benefits should not have been available, NCM, Inc. may be required to pay additional taxes and possibly penalties and interest to one or more tax authorities. If this were to occur and if one or more of NCM LLC’s founding members was insolvent or bankrupt or otherwise unable to make payment under its indemnification obligation under the TRA, then NCM, Inc.’s financial condition could be negatively impacted.

~~The substantial number of shares that are eligible for sale could cause the market price for our common stock to decline or make it difficult for us to sell equity securities in the future.~~

We cannot predict the effect, if any, that market sales of shares of common stock by Regal, Cinemark, or Standard General will have on the market price of our common stock from time to time. Sales of substantial amounts of shares of our common stock in the public market, or the perception that those sales will occur, could cause the market price of our common stock to decline or make future offerings of our equity securities more difficult. If we are unable to sell equity securities at times and prices that we deem appropriate, we may be unable to fund growth. Cinemark and Regal may receive up to 80.7 million shares of common stock as of September 26, 2019 upon redemption of their outstanding common membership units of NCM LLC. The resale of these shares of common stock has been registered as required by the terms of the registration rights agreement between NCM, Inc. and the founding members. Standard General also owns 15.8 million shares that it may sell at any time. Additionally, once options and restricted stock held by our employees become vested and/or exercisable, as applicable, to the extent that they are not held by one of our affiliates, the shares acquired upon vesting or exercise are freely tradable. Refer to Note 11 to the audited Consolidated Financial Statements included in our annual report on Form ~~10-K.~~

~~The interests of~~10-K for the fiscal year ended December 26, 2019 and our ~~largest stockholder and~~quarterly report on Form 10-Q for the quarter ended March 26, 2020, including but not limited to those relating to NCM LLC’s ~~other members may be different from~~high level of indebtedness, the risks associated with the loss of major content partners or ~~conflict with those of our other stockholders.~~advertising clients, and reductions in spending on advertising.

Standard General beneficially owns 15.8 million shares of our common stock, and as of September 26, 2019, Cinemark and Regal held NCM LLC membership interests that are convertible into another 80.7 million shares of our common stock. As a result, each of Regal, Cinemark and Standard General is in a position to influence or control to some degree the outcome of matters requiring stockholder approval, including the adoption of amendments to our certificate of incorporation or bylaws and the approval of mergers and other significant corporate transactions. Their influence or control of our company and NCM LLC may have the effect of delaying or promoting a change of control of our company and may adversely affect the voting and other rights of other stockholders. In addition, each of Regal, Cinemark and Standard General has the right to designate directors to our Board. These directors have the authority, subject to applicable rules and regulations, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions.

It is possible that the interests of Regal, Cinemark and Standard General may in some circumstances conflict with our interests and the interests of our other stockholders. For example, Cinemark and Regal may have different tax positions from us, especially in light of the TRA we entered into with founding members that provides for the payment by us to the founding members of 90% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize. This could influence their decisions regarding whether and when we should dispose of assets, and whether and when we or NCM LLC should incur indebtedness. As another example, Standard General is in the business of making investments in companies and may hold, and may from time to time in the future acquire, interests in or provide advice to businesses that directly or indirectly compete with us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below provides information about shares delivered to the Company from restricted stock held by Company employees upon vesting for purpose of funding the recipient’s tax withholding obligations.


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs
June 26, 2020 through July 23, 2020	3,722	$	3.05	—	N/A
July 24, 2020 through August 27, 2020	3,897	$	2.51	—	N/A
August 28, 2020 through September 24, 2020	5,160	$	3.43	—	N/A

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs
June 28, 2019 through July 25, 2019 —
$ —
—
N/A
July 26, 2019 through August 29, 2019 6,130
$ 7.19
—
N/A
August 30, 2019 through September 26, 2019 —
$ —
—
N/A

The Company's Second Amended and Restated Certificate of Incorporation and NCM LLC’s Third Amended and Restated Limited Liability Company Operating Agreement, as amended, provide a redemption right to certain of NCM LLC’s members to exchange common membership units of NCM LLC for shares of the Company’s common stock on a one-for-one basis, or at the Company’s option, a cash payment equal to the market price of one share of the Company’s Common Stock.

On October 24, 2019, in response to a notice of redemption delivered by AMC to NCM LLC, the Company contributed 197,118 shares of Common Stock to NCM LLC in exchange for an equal number of common membership units of NCM LLC, which represents all of AMC’s interest in NCM LLC. NCM LLC in turn transferred the shares of Common Stock to AMC.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Reference Description

3.1 *
The Bylaws, as amended August 1, 2019.
4.1 (1)
Indenture, dated as of October 8, 2019, by and between NCM LLC and Wells Fargo Bank, National Association, as trustee.
4.2 (2)
Form of 5.875% Senior Secured Notes due 2028 (included in Exhibit 4.1).
10.1 (3)
First Amendment to the Amended and Restated Exhibitor Services Agreement dated as of September 17, 2019, by and between National CineMedia, LLC and Cinemark USA, Inc.
10.2 (4)
Second Amendment to the Amended and Restated Exhibitor Services Agreement dated as of September 17, 2019, by and between National CineMedia, LLC and Regal Cinemas, Inc.
10.3 *
Employment Agreement dated as of August 1, 2019, by and between National CineMedia, Inc. and Thomas F. Lesinski.
10.4 *
Form of 2019 Stock Option Agreement.
31.1 *
Rule 13a-14(a) Certification of Chief Executive Officer.
31.2 *
Rule 13a-14(a) Certification of Chief Financial Officer.
32.1 **
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2 **
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS * XBRL Instance Document
101.SCH * XBRL Taxonomy Extension Schema Document
101.CAL * XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF * XBRL Taxonomy Extension Definition Linkbase Document
101.LAB * XBRL Taxonomy Extension Label Linkbase Document
101.PRE * XBRL Taxonomy Extension Presentation Linkbase Document



*Exhibit	~~Filed herewith.~~Reference	Description
**	~~Furnished herewith.~~
~~(1)~~10.1	~~Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on~~ *	Form ~~8-K (File No. 001-33296) filed on October 8, 2019.~~of 2020 Restricted Stock Unit Agreement (Performance Based). +
~~(2)~~31.1	~~Incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K (File No. 001-33296) filed on October 8, 2019.~~*	Rule 13a-14(a) Certification of Chief Executive Officer and Interim PFO.
~~(3)~~32.1	~~Incorporated by reference~~**	Certification of Chief Executive Officer and Interim PFO Pursuant to ~~Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File No. 001-33296) filed on September 17, 2019.~~18 U.S.C. Section 1350.
~~(4)~~101.SCH	~~Incorporated by reference to~~*	Inline XBRL Taxonomy Extension Schema Document
101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit ~~10.2 to the Registrant's Current Report on Form 8-K (File No. 001-33296) filed on September 17, 2019.~~101)

__________________________________


*			Filed herewith.
**			Furnished herewith.
+			Management contract.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		NATIONAL CINEMEDIA, INC.
		(Registrant)

Date:	November 2, 2020	/s/ Thomas F. Lesinski
		Thomas F. Lesinski
		Chief Executive Officer and Director
		(Principal Executive Officer and Interim Principal Financial Officer)



			~~NATIONAL CINEMEDIA, INC.~~
		~~(Registrant)~~

~~Date:~~	~~November 4, 2019~~	~~/s/ Thomas F. Lesinski~~
		~~Thomas F. Lesinski~~
		~~Chief Executive Officer and Director~~
		~~(Principal Executive Officer)~~



~~Date:~~	~~November 4, 2019~~	~~/s/ Katherine L. Scherping~~
		~~Katherine L. Scherping~~
		~~Chief Financial Officer~~ ~~(Principal Financial and Accounting Officer)~~

5142



		Page

	PART I

Item 1.	Unaudited Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income	2
	Unaudited Condensed Consolidated Statements of Cash Flows	3
	Unaudited Condensed Consolidated Statements of Equity/(Deficit)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2322
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3638
Item 4.	Controls and Procedures	3638

	PART II

Item 1.	Legal Proceedings	3638
Item 1A.	Risk Factors	3638
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4940
Item 3.	Defaults Upon Senior Securities	4940
Item 4.	Mine Safety Disclosures	4940
Item 5.	Other Information	4940
Item 6.	Exhibits	5041

Signatures		5142



Year	Minimum Lease Payments
2019	$	3.5
2020	3.3
2021	3.4
2022	3.4
2023	3.4
Thereafter	22.1
Total	$	39.1



Year	Future Lease Payments
2019 (September 27, 2019 - December 26, 2019)	$	0.8
2020	3.5
2021	3.5
2022	3.7
2023	3.7
2024	3.7
Thereafter	18.6
Total	37.5
Less: Imputed interest on future lease payments	(11.5		)
Total lease liability as of September 26, 2019 per the Condensed Consolidated Balance Sheet	$	26.0



	As of September 26, 2019				As of December 27, 2018
	Carrying Value		Fair Value (1)		Carrying Value		Fair Value (1)
Term loan	$	267.3	$	267.5	$	269.4	$	261.2
Notes due 2022	400.0		406.0		400.0		401.8
Notes due 2026	230.0		224.4		235.0		211.0



			Fair Value Measurements at Reporting Date Using
	Fair Value as of September 26, 2019		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)	$	36.9	$	15.2	$	21.7	$	—
Short-term marketable securities (2)	8.1		—		8.1		—
Long-term marketable securities (2)	8.5		—		8.5		—
Total assets	$	53.5	$	15.2	$	38.3	$	—



			Fair Value Measurements at Reporting Date Using
	Fair Value as of December 27, 2018		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)	$	18.2	$	11.2	$	7.0	$	—
Short-term marketable securities (2)	24.0		—		24.0		—
Long-term marketable securities (2)	10.2		—		10.2		—
Total assets	$	52.4	$	11.2	$	41.2	$	—



	As of September 26, 2019
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:
Short-term U.S. government agency bonds	$	3.0	$	3.0	0.6
Short-term commercial paper:
Industrial	2.0		2.0		0.2
Short-term municipal bonds	1.2		1.2		0.8
Short-term certificates of deposit	1.9		1.9		0.1
Total short-term marketable securities	8.1		8.1

Long-term U.S. government agency bonds	5.9		6.0		3.0
Long-term certificates of deposit	2.5		2.5		2.5
Total long-term marketable securities	8.4		8.5
Total marketable securities	$	16.5	$	16.6



Exhibit	Reference	Description

3.1	*	The Bylaws, as amended August 1, 2019.
4.1	(1)	Indenture, dated as of October 8, 2019, by and between NCM LLC and Wells Fargo Bank, National Association, as trustee.
4.2	(2)	Form of 5.875% Senior Secured Notes due 2028 (included in Exhibit 4.1).
10.1	(3)	First Amendment to the Amended and Restated Exhibitor Services Agreement dated as of September 17, 2019, by and between National CineMedia, LLC and Cinemark USA, Inc.
10.2	(4)	Second Amendment to the Amended and Restated Exhibitor Services Agreement dated as of September 17, 2019, by and between National CineMedia, LLC and Regal Cinemas, Inc.
10.3	*	Employment Agreement dated as of August 1, 2019, by and between National CineMedia, Inc. and Thomas F. Lesinski.
10.4	*	Form of 2019 Stock Option Agreement.
31.1	*	Rule 13a-14(a) Certification of Chief Executive Officer.
31.2	*	Rule 13a-14(a) Certification of Chief Financial Officer.
32.1	**	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2	**	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS	*	XBRL Instance Document
101.SCH	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document