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 ~~June 25, 2020~~July 1, 2021



☐			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

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:



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

x☒

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 ~~July 31, 2020, 79,610,497~~August 5, 2021, 81,056,362 shares of the registrant’s common stock (including unvested restricted shares), par value of $0.01 per share, were outstanding.

TABLE OF CONTENTS

PART I

Item 1. Financial Statements

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)

(UNAUDITED)


								As of
	June 25, 2020			December 26, 2019				July 1, 2021		December 31, 2020
ASSETS							ASSETS
CURRENT ASSETS:							CURRENT ASSETS:
Cash and cash equivalents	$	245.4		$	55.9		Cash and cash equivalents	$	147.4	$	180.3
Short-term marketable securities	1.5			17.5			Short-term marketable securities	0.3		0.3
Receivables, net of allowance of $3.2 and $6.2, respectively	26.7			170.8
Amounts due from founding members, net	—			6.6
Prepaid expenses and other current assets	4.1			3.5
Receivables, net of allowance of $1.6 and $2.3, respectively							Receivables, net of allowance of $1.6 and $2.3, respectively	11.8		16.2

Other current assets and prepaid expenses							Other current assets and prepaid expenses	16.0		3.1
Total current assets	277.7			254.3			Total current assets	175.5		199.9
NON-CURRENT ASSETS:							NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $75.6 and $70.7, respectively	29.9			33.2
Intangible assets, net of accumulated amortization of $211.0 and $198.9, respectively	640.5			643.7
Deferred tax assets, net of valuation allowance of $72.4 and $81.6, respectively	166.9			162.1
Other investments	1.0			1.0
Property and equipment, net of accumulated depreciation of $57.6 and $77.7, respectively							Property and equipment, net of accumulated depreciation of $57.6 and $77.7, respectively	23.5		27.5
Intangible assets, net of accumulated amortization of $235.4 and $223.0, respectively							Intangible assets, net of accumulated amortization of $235.4 and $223.0, respectively	620.2		627.8
Deferred tax assets, net of valuation allowance of $222.5 and $212.0, respectively							Deferred tax assets, net of valuation allowance of $222.5 and $212.0, respectively	0		0
Long-term marketable securities	3.0			7.5			Long-term marketable securities	1.3		1.2
Debt issuance costs, net	3.9			3.9			Debt issuance costs, net	3.8		3.3
Other assets	25.0			24.3			Other assets	26.7		26.5
Total non-current assets	870.2			875.7			Total non-current assets	675.5		686.3
TOTAL ASSETS	$	1,147.9		$	1,130.0		TOTAL ASSETS	$	851.0	$	886.2
LIABILITIES AND EQUITY/(DEFICIT)							LIABILITIES AND EQUITY/(DEFICIT)
CURRENT LIABILITIES:							CURRENT LIABILITIES:
Amounts due to founding members, net	$	—		$	36.8		Amounts due to founding members, net	$	4.3	$	2.0
Payable to founding members under tax receivable agreement (including payables to related parties of $10.0 and $10.3, respectively)	14.2			14.2
Payable to founding members under tax receivable agreement (including payables to related parties of $0.0 and $0.6, respectively)							Payable to founding members under tax receivable agreement (including payables to related parties of $0.0 and $0.6, respectively)	0		0.9
Accrued expenses	18.8			22.1			Accrued expenses	15.5		19.0
Accrued payroll and related expenses	5.8			13.8			Accrued payroll and related expenses	8.0		4.8
Accounts payable	12.3			20.7			Accounts payable	14.0		13.7
Deferred revenue	7.7			7.6			Deferred revenue	6.4		5.1
Short-term debt	2.7			2.7			Short-term debt	3.2		2.7
Other current liabilities	1.7			1.6			Other current liabilities	2.0		1.8
Total current liabilities	63.2			119.5			Total current liabilities	53.4		50.0
NON-CURRENT LIABILITIES:							NON-CURRENT LIABILITIES:
Long-term debt, net of debt issuance costs of $8.7 and $9.0, respectively	1,050.9			923.9
Payable to founding members under tax receivable agreement (including payables to related parties of $134.7 and $133.5, respectively)	185.1			183.8
Long-term debt, net of debt issuance costs of $11.8 and $8.0, respectively							Long-term debt, net of debt issuance costs of $11.8 and $8.0, respectively	1,093.8		1,049.6
Payable to founding members under tax receivable agreement (including payables to related parties of $22.6 and $23.7, respectively)							Payable to founding members under tax receivable agreement (including payables to related parties of $22.6 and $23.7, respectively)	31.2		32.6
Other liabilities	23.7			24.0			Other liabilities	21.6		22.6
Total non-current liabilities	1,259.7			1,131.7			Total non-current liabilities	1,146.6		1,104.8
Total liabilities	1,322.9			1,251.2			Total liabilities	1,200.0		1,154.8
COMMITMENTS AND CONTINGENCIES (NOTE 8)							COMMITMENTS AND CONTINGENCIES (NOTE 8)
EQUITY/(DEFICIT):							EQUITY/(DEFICIT):
NCM, Inc. Stockholders’ Equity/(Deficit):							NCM, Inc. Stockholders’ Equity/(Deficit):
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding, respectively	—			—			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, 78,000,338 and 77,568,986 issued and outstanding, respectively	0.8			0.8
Common stock, $0.01 par value; 175,000,000 shares authorized, 80,238,751 and 78,040,818 issued and outstanding, respectively							Common stock, $0.01 par value; 175,000,000 shares authorized, 80,238,751 and 78,040,818 issued and outstanding, respectively	0.8		0.8
Additional paid in capital/(deficit)	(209.1		)	(209.2		)	Additional paid in capital/(deficit)	(197.6)		(207.5)
Retained earnings (distributions in excess of earnings)	(207.4		)	(171.1		)	Retained earnings (distributions in excess of earnings)	(317.4)		(266.4)
Total NCM, Inc. stockholders’ equity/(deficit)	(415.7		)	(379.5		)	Total NCM, Inc. stockholders’ equity/(deficit)	(514.2)		(473.1)
Noncontrolling interests	240.7			258.3			Noncontrolling interests	165.2		204.5
Total equity/(deficit)	(175.0		)	(121.2		)	Total equity/(deficit)	(349.0)		(268.6)
TOTAL LIABILITIES AND EQUITY/(DEFICIT)	$	1,147.9		$	1,130.0		TOTAL LIABILITIES AND EQUITY/(DEFICIT)	$	851.0	$	886.2

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				Six Months Ended
	July 1, 2021		June 25, 2020		July 1, 2021		June 25, 2020
REVENUE (including revenue from related parties of $1.6, $0.0, $2.0 and $4.3, respectively)	$	14.0	$	4.0	$	19.4	$	68.7
OPERATING EXPENSES:
Advertising operating costs	3.2		1.1		4.7		7.3
Network costs	1.9		1.6		3.7		4.5
Theater access fees and revenue share to founding members (including fees to related parties of $7.1, $0.0, $8.4 and $12.5, respectively)	11.2		0		14.3		17.7
Selling and marketing costs	8.9		6.7		16.6		20.6
Administrative and other costs	9.6		7.4		19.8		17.2
Impairment of long-lived assets	0		1.7		0		1.7
Depreciation expense	2.6		3.2		5.9		6.4
Amortization of intangibles recorded for network theater screen leases	6.2		6.1		12.3		12.2
Total	43.6		27.8		77.3		87.6
OPERATING LOSS	(29.6)		(23.8)		(57.9)		(18.9)
NON-OPERATING EXPENSES:
Interest on borrowings	16.9		13.6		31.6		27.2
Interest income	(0.1)		(0.3)		(0.1)		(0.5)
Loss on modification and retirement of debt, net	0.4		0.3		0.8		0.3
Loss (gain) on re-measurement of the payable to founding members under the tax receivable agreement	0.1		0.1		(1.4)		0.3
Other non-operating expense	0		0.1		0.1		0
Total	17.3		13.8		31.0		27.3
LOSS BEFORE INCOME TAXES	(46.9)		(37.6)		(88.9)		(46.2)
Income tax benefit	0		(4.2)		0		(4.6)
CONSOLIDATED NET LOSS	(46.9)		(33.4)		(88.9)		(41.6)
Less: Net loss attributable to noncontrolling interests	(24.2)		(19.6)		(46.8)		(24.1)
NET LOSS ATTRIBUTABLE TO NCM, INC.	$	(22.7)	$	(13.8)	$	(42.1)	$	(17.5)
COMPREHENSIVE LOSS ATTRIBUTABLE TO NCM, INC.	$	(22.7)	$	(13.8)	$	(42.1)	$	(17.5)

NET LOSS PER NCM, INC. COMMON SHARE:
Basic	$	(0.28)	$	(0.18)	$	(0.53)	$	(0.22)
Diluted	$	(0.28)	$	(0.18)	$	(0.53)	$	(0.22)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	80,115,377		77,995,951		79,298,366		77,879,959
Diluted	80,115,377		77,995,951		79,298,366		77,879,959

Three Months Ended Six Months Ended

June 25, 2020
June 27,
2019
June 25, 2020
June 27,
2019
REVENUE (including revenue from related parties of $0.0, $6.5, $4.3 and $11.8, respectively) $ 4.0
$ 110.2
$ 68.7
$ 187.1
OPERATING EXPENSES:
Advertising operating costs 1.1
9.9
7.3
17.2
Network costs 1.6
3.4
4.5
6.9
Theater access fees and revenue share to founding members (including fees to related parties of $0.0, $14.5, $12.5 and $27.4, respectively) —
21.6
17.7
40.7
Selling and marketing costs 6.7
16.2
20.6
31.4
Administrative and other costs 7.4
11.1
17.2
21.8
Impairment of long-lived assets 1.7
—
1.7
—
Depreciation expense 3.2
3.3
6.4
6.6
Amortization of intangibles recorded for network theater screen leases 6.1
7.0
12.2
13.9
Total 27.8
72.5
87.6
138.5
OPERATING (LOSS) INCOME (23.8 ) 37.7
(18.9 ) 48.6
NON-OPERATING EXPENSES:
Interest on borrowings 13.6
14.2
27.2
28.6
Interest income (0.3 ) (0.5 ) (0.5 ) (1.0 )
Loss (gain) on modification and retirement of debt, net 0.3
—
0.3
(0.3 )
Loss on re-measurement of the payable to founding members under the tax receivable agreement 0.1
0.8
0.3
1.5
Other non-operating expense (income) 0.1
(0.1 ) —
(0.3 )
Total 13.8
14.4
27.3
28.5
(LOSS) INCOME BEFORE INCOME TAXES (37.6 ) 23.3
(46.2 ) 20.1
Income tax (benefit) expense (4.2 ) 2.3
(4.6 ) 1.7
CONSOLIDATED NET (LOSS) INCOME (33.4 ) 21.0
(41.6 ) 18.4
Less: Net (loss) income attributable to noncontrolling interests (19.6 ) 12.1
(24.1 ) 10.6
NET (LOSS) INCOME ATTRIBUTABLE TO NCM, INC. $ (13.8 ) $ 8.9
$ (17.5 ) $ 7.8
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO NCM, INC. $ (13.8 ) $ 8.9
$ (17.5 ) $ 7.8

NET (LOSS) INCOME PER NCM, INC. COMMON SHARE:
Basic $ (0.18 ) $ 0.11
$ (0.22 ) $ 0.10
Diluted $ (0.18 ) $ 0.11
$ (0.22 ) $ 0.10
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 77,995,951
77,343,093
77,879,959
77,261,435
Diluted 77,995,951
77,636,096
77,879,959
77,575,081

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) (UNAUDITED)


	Six Months Ended							Six Months Ended
	June 25, 2020			June 27, 2019				July 1, 2021		June 25, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:							CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net (loss) income	$	(41.6	)	$	18.4
Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities:
Deferred income tax (benefit) expense	(4.5		)	1.5
Consolidated net loss							Consolidated net loss	$	(88.9)	$	(41.6)
Adjustments to reconcile consolidated net loss to net cash (used in) provided by operating activities:							Adjustments to reconcile consolidated net loss to net cash (used in) provided by operating activities:
Deferred income tax benefit							Deferred income tax benefit	0		(4.5)
Depreciation expense	6.4			6.6			Depreciation expense	5.9		6.4
Amortization of intangibles recorded for network theater screen leases	12.2			13.9			Amortization of intangibles recorded for network theater screen leases	12.3		12.2
Non-cash share-based compensation	0.3			2.8			Non-cash share-based compensation	4.8		0.3
Impairment of long-lived assets	1.7			—			Impairment of long-lived assets	0		1.7
Amortization of debt issuance costs	1.2			1.3			Amortization of debt issuance costs	1.9		1.2
Loss (gain) on modification and retirement of debt, net	0.3			(0.3		)
Non-cash loss on re-measurement of the payable to founding members under the tax receivable agreement	0.3			1.6
Loss on modification and retirement of debt, net							Loss on modification and retirement of debt, net	0.8		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	(1.4)		0.3
Other	—			(1.0		)	Other	(0.1)		0
Proceeds from disposition of intangible assets by network affiliates	—			0.5
Founding member integration and other encumbered theater payments (including payments from related parties of $0.1 and $0.6, respectively)	9.7			10.6
Payment to the founding members under tax receivable agreement (including payments to related parties of $0.0 and $9.8, respectively)	—			(13.9		)
Founding member integration and other encumbered theater payments (including payments from related parties of $0.0 and $0.1, respectively)							Founding member integration and other encumbered theater payments (including payments from related parties of $0.0 and $0.1, respectively)	0.1		9.7
Payment to the founding members under tax receivable agreement (including payments to related parties of $0.6 and $0.0, respectively)							Payment to the founding members under tax receivable agreement (including payments to related parties of $0.6 and $0.0, respectively)	(0.9)		0
Other cash flows from operating activities	(0.2		)	—			Other cash flows from operating activities	0		(0.2)
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Receivables, net	147.3			25.0			Receivables, net	4.4		147.3
Accounts payable and accrued expenses	(17.9		)	(8.9		)
Accounts payable and accrued expenses (including payments to related parties of $0.6 and $0.0, respectively)							Accounts payable and accrued expenses (including payments to related parties of $0.6 and $0.0, respectively)	1.0		(17.9)
Amounts due to/from founding members, net	(6.2		)	0.7			Amounts due to/from founding members, net	2.3		(6.2)
Deferred revenue	0.1			3.4			Deferred revenue	1.2		0.1
Other, net	(1.7		)	(2.9		)	Other, net	(5.0)		(1.7)
Net cash provided by operating activities	107.4			59.3
Net cash (used in) provided by operating activities							Net cash (used in) provided by operating activities	(61.6)		107.4
CASH FLOWS FROM INVESTING ACTIVITIES:							CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(5.2		)	(6.8		)	Purchases of property and equipment	(2.9)		(5.2)
Purchases of marketable securities	(8.2		)	(5.4		)	Purchases of marketable securities	0		(8.2)
Proceeds from sale and maturities of marketable securities	28.9			21.4			Proceeds from sale and maturities of marketable securities	0		28.9
Proceeds from notes receivable - founding members (including payments from related parties of $0.0 and $1.4, respectively)	—			1.4
Net cash provided by investing activities	15.5			10.6

Net cash (used in) provided by investing activities							Net cash (used in) provided by investing activities	(2.9)		15.5
CASH FLOWS FROM FINANCING ACTIVITIES:							CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends	(21.0		)	(27.2		)	Payment of dividends	(8.8)		(21.0)
Proceeds from revolving credit facility	210.0			71.0			Proceeds from revolving credit facility	0		210.0
Repayments of revolving credit facility	(82.0		)	(71.0		)	Repayments of revolving credit facility	0		(82.0)
Issuance of term loans							Issuance of term loans	50.0		0
Repayment of term loan facility	(1.4		)	(1.4		)	Repayment of term loan facility	(1.5)		(1.4)
Repayment of Senior Notes due 2026	—			(4.6		)
Payment of debt issuance costs	(1.2		)	—			Payment of debt issuance costs	(6.7)		(1.2)
Distributions to founding members	(36.8		)	(34.0		)	Distributions to founding members	0		(36.8)
Repurchase of stock for restricted stock tax withholding	(1.0		)	(1.3		)	Repurchase of stock for restricted stock tax withholding	(1.4)		(1.0)
Net cash provided by (used in) financing activities	66.6			(68.5		)
Net cash provided by financing activities							Net cash provided by financing activities	31.6		66.6
CHANGE IN CASH AND CASH EQUIVALENTS:	189.5			1.4			CHANGE IN CASH AND CASH EQUIVALENTS:	(32.9)		189.5
Cash and cash equivalents at beginning of period	55.9			41.4			Cash and cash equivalents at beginning of period	180.3		55.9
Cash and cash equivalents at end of period	$	245.4		$	42.8		Cash and cash equivalents at end of period	$	147.4	$	245.4

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)


	Six Months Ended						Six Months Ended
	June 25, 2020			June 27, 2019			July 1, 2021		June 25, 2020
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	$	10.5		$	7.6	Purchase of an intangible asset with NCM LLC equity	$	14.1	$	10.5
Accrued distributions to founding members (including accrued distributions to related parties of $0.0 and $15.4, respectively)	$	—		$	15.4
Accrued integration and other encumbered theater payments due from founding members (including accrued payments due from related parties of $0.0 and $0.2, respectively)	$	—		$	5.3
(Decrease) increase in dividend equivalent accrual not requiring cash in the period	$	(0.3	)	$	0.4

Purchase of subsidiary equity with NCM, Inc. equity						Purchase of subsidiary equity with NCM, Inc. equity	$	6.6	$	0
Increase (decrease) in dividend equivalent accrual not requiring cash in the period						Increase (decrease) in dividend equivalent accrual not requiring cash in the period	$	0.9	$	(0.3)
Supplemental disclosure of cash flow information:						Supplemental disclosure of cash flow information:
Cash paid for interest	$	27.0		$	27.3	Cash paid for interest	$	29.2	$	27.0
Cash paid for income taxes, net of refunds	$	0.3		$	0.1
Cash (refunds) payments for income taxes						Cash (refunds) payments for income taxes	$	(0.1)	$	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—March 28, 2019 $ (104.7 ) 77,318,971
$ 0.8
$ (213.6 ) $ (168.0 ) $ 276.1
Distributions to founding members (15.4 ) —
—
—
—
(15.4 )
Income tax and other impacts of NCM LLC ownership changes 0.1
—
—
0.1
—
—
Comprehensive income, net of tax 21.0
—
—
—
8.9
12.1
Share-based compensation issued (0.1 ) 30,657
—
(0.1 ) —
—
Share-based compensation expensed/capitalized 2.1
—
—
1.7
—
0.4
Cash dividends declared $0.17 per share (13.5 ) —
—
—
(13.5 ) —
Balance—June 27, 2019 $ (110.5 ) 77,349,628
$ 0.8
$ (211.9 ) $ (172.6 ) $ 273.2

Balance—March 26, 2020 $ (136.3 ) 77,973,648
$ 0.8
$ (209.1 ) $ (188.3 ) $ 260.3
Income tax and other impacts of NCM LLC ownership changes —
—
—
0.1
—
(0.1 )
Comprehensive loss, net of tax (33.4 ) —
—
—
(13.8 ) (19.6 )
Share-based compensation issued (0.1 ) 26,690
—
(0.1 ) —
—
Share-based compensation expensed/capitalized 0.1
—
—
—
—
0.1
Cash dividends declared $0.07 per share (5.3 ) —
—
—
(5.3 ) —
Balance—June 25, 2020 $ (175.0 ) 78,000,338
$ 0.8
$ (209.1 ) $ (207.4 ) $ 240.7

~~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—December 27, 2018 $ (89.2 ) 76,976,398
$ 0.8
$ (215.2 ) $ (153.6 ) $ 278.8
Distributions to founding members (21.5 ) —
—
—
—
(21.5 )
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 ) —
—
(1.3 ) —
0.7
Comprehensive income, net of tax 18.4
—
—
—
7.8
10.6
Share-based compensation issued (1.3 ) 373,230
—
(1.3 ) —
—
Share-based compensation expensed/capitalized 2.9
—
—
2.2
—
0.7
Cash dividends declared $0.34 per share (26.8 ) —
—
—
(26.8 ) —
Balance—June 27, 2019 $ (110.5 ) 77,349,628
$ 0.8
$ (211.9 ) $ (172.6 ) $ 273.2

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 2.9
—
—
—
1.2
1.7
Distributions to founding members (4.4 ) —
—
—
—
(4.4 )
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 (0.5 ) —
—
(3.9 ) —
3.4
Comprehensive loss, net of tax (41.6 ) —
—
—
(17.5 ) (24.1 )
Share-based compensation issued (1.0 ) 431,352
—
(1.0 ) —
—
Share-based compensation expensed/capitalized 0.3
—
—
—
—
0.3
Cash dividends declared $0.26 per share (20.0 ) —
—
—
(20.0 ) —
Balance—June 25, 2020 $ (175.0 ) 78,000,338
$ 0.8
$ (209.1 ) $ (207.4 ) $ 240.7


			NCM, Inc.
						Additional Paid in Capital (Deficit)		Retained Earnings (Distribution in Excess of Earnings)		Noncontrolling Interest
			Common Stock
	Consolidated		Shares	Amount
Balance—March 26, 2020	$	(136.3)	77,973,648	$	0.8	$	(209.1)	$	(188.3)	$	260.3

Distributions to founding members	0		—	—		—		—		0

Income tax and other impacts of NCM LLC ownership changes	0		—	—		0.1		—		(0.1)
Comprehensive loss, net of tax	(33.4)		—	—		—		(13.8)		(19.6)
Share-based compensation issued	(0.1)		26,690	—		(0.1)		—		—
Share-based compensation expensed/capitalized	0.1		—	—		0		—		0.1
Cash dividends declared $0.07 per share	(5.3)		—	—		—		(5.3)		—
Balance—June 25, 2020	$	(175.0)	78,000,338	$	0.8	$	(209.1)	$	(207.4)	$	240.7

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


Income tax and other impacts of NCM LLC ownership changes	(0.2)		—	—		0.2		—		(0.4)


Comprehensive loss, net of tax	(46.9)		—	—		—		(22.7)		(24.2)
Share-based compensation issued	(0.3)		221,200	—		(0.3)		—		—
Share-based compensation expensed/capitalized	2.1		—	—		1.4		—		0.7
Cash dividends declared $0.05 per share	(4.4)		—	—		—		(4.4)		—
Balance—July 1, 2021	$	(349.0)	80,238,751	$	0.8	$	(197.6)	$	(317.4)	$	165.2

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.


			NCM, Inc.
						Additional Paid in Capital (Deficit)		Retained Earnings (Distribution in Excess of Earnings)		Noncontrolling Interest
			Common Stock
	Consolidated		Shares	Amount
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	2.9		—	—		—		1.2		1.7
Distributions to founding members	(4.4)		—	—		—		—		(4.4)
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	(0.5)		—	—		(3.9)		—		3.4
Comprehensive loss, net of tax	(41.6)		—	—		—		(17.5)		(24.1)
Share-based compensation issued	(1.0)		431,352	—		(1.0)		—		—
Share-based compensation expensed/capitalized	0.3		—	—		0		—		0.3
Cash dividends declared $0.26 per share	(20.0)		—	—		—		(20.0)		—
Balance—June 25, 2020	$	(175.0)	78,000,338	$	0.8	$	(209.1)	$	(207.4)	$	240.7

Balance—December 31, 2020	$	(268.6)	78,040,818	$	0.8	$	(207.5)	$	(266.4)	$	204.5

NCM LLC equity issued for purchase of intangible asset	14.1		—	—		6.8		—		7.3
Income tax and other impacts of NCM LLC ownership changes	(0.3)		—	—		0.9		—		(1.2)
Issuance of shares	6.6		1,390,567	—		6.6		—		—
NCM LLC common membership unit redemption	(6.6)		—	—		(6.6)		—		—
Comprehensive loss, net of tax	(88.9)		—	—		—		(42.1)		(46.8)
Share-based compensation issued	(1.4)		807,366	—		(1.4)		—		—
Share-based compensation expensed/capitalized	5.0		—	—		3.6		—		1.4
Cash dividends declared $0.10 per share	(8.9)		—	—		—		(8.9)		—
Balance—July 1, 2021	$	(349.0)	80,238,751	$	0.8	$	(197.6)	$	(317.4)	$	165.2

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”), and 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. On March 23, 2021 American Multi-Cinema, Inc., a wholly owned subsidiary of AMC Entertainment, Inc. (“AMC”) redeemed 1,390,567 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 NCM, Inc. common stock, reducing AMC’s ownership to 0.0% as of July 1, 2021. AMC, Regal, Cinemark and their affiliates are referred to in this document as “founding members”.

The Company operates the largest cinema advertising network reaching movie audiences in the U.S., allowing NCM LLC to sell advertising under long-term exhibitor ~~services~~service agreements (“ESAs”) with the founding members and certain third-party ~~theater circuits, referred to in this document as “network affiliates”~~network affiliates, under long-term network affiliate agreements. ~~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~~As previously disclosed, the COVID-19 ~~Pandemic. As~~pandemic has had a significant impact on the world and the Company’s business beginning in March 2020 as 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. These governmental restrictions resulted in the closure of ~~June 25, 2020, almost all~~most of the theaters within ~~our~~the Company’s network ~~remained closed. The~~for approximately six months and thus the Company ~~was unable~~generated no in-theater advertising revenue during that time. When theaters began to ~~advertise~~reopen late in the third quarter of 2020, in-theater advertising revenue continued to be adversely impacted as attendance at the reopened theaters was significantly less than normal given COVID-19 restrictions around patron capacity limitations and ~~thus did not generate any in-theater revenue,~~a continued lack of new major motion picture releases. These and subsequent developments are referred to as the “COVID-19 Pandemic.” Beginning in 2021, multiple COVID-19 vaccines were approved and have been widely administered throughout the United States. As a result, during the ~~three months ended June 25, 2020 and are~~second quarter of 2021, government restrictions lessened allowing theaters in key larger markets to fully reopen over the course of the second quarter of 2021. As of July 1, 2021, approximately 97.0% of the theaters within the Company’s network were open. With nearly all U.S. theaters reopened, multiple successful major motion pictures were released during the second quarter of 2021 resulting in the highest theater attendance since the start of the COVID-19 Pandemic. Despite the increase in network attendance, second quarter of 2021 in-theater advertising revenue remained significantly below historical levels as management believes many advertisers continued to delay making commitments until they confirmed that industry attendance had achieved necessary critical mass. In addition, the Company was not able to ~~advertise~~participate in the 2021 advertising upfront marketplace during the summer of 2020 while theaters ~~for~~were closed. As of the ~~duration~~filing date, variants of ~~time that~~ the ~~theaters remain closed.~~COVID-19 virus have been spreading throughout the United States resulting in mask mandates being reinstated in certain areas with increased infection rates. It remains unclear how future theater attendance and revenue will be impacted by these developments.

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)~~upon pre-COVID-19 attendance levels) of approximately ~~19.3~~18.2 years as of ~~June 25, 2020~~.July 1, 2021. The network affiliate agreements expire at various dates between ~~September 2020~~August 2021 and ~~July 2031.~~December 2037. The weighted average remaining term ~~(based on 2019 attendance)~~ of the ESAs and the network affiliate agreements together is ~~16.8~~15.9 years as of ~~June 25, 2020~~July 1, 2021 (based upon pre-COVID-19 attendance levels).

As of ~~June 25, 2020~~,July 1, 2021, NCM LLC had ~~162,531,666~~166,427,095 common membership units outstanding, of which ~~78,000,338 (48.0%~~80,238,751 (48.2%) were owned by NCM, Inc., ~~42,290,694 (26.0%~~43,026,794 (25.9%) were owned by Regal ~~40,850,068 (25.1%~~and 43,161,550 (25.9%) were owned by Cinemark and ~~1,390,566 (0.9%~~0 (0.0%) were owned by AMC. The membership units held by the founding members are exchangeable into NCM, Inc. common stock on a 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 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 ~~26, 2019~~31, 2020 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 ~~26, 2019.~~31, 2020.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In the opinion of management, all adjustments necessary to present fairly in all material respects the financial position, results of operations and cash flows for all periods presented have been made. Historically, the Company’s business has been seasonal and for this and other reasons operating results for interim periods have not been indicative of the Company’s full year results or future performance. Given the ~~temporary closure~~impact of the ~~theaters within the Company's network,~~COVID-19 Pandemic during 2021, management expects the Company's ~~2020~~2021 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 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 liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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.

Significant Accounting Policies

The Company’s annual financial statements included in its Form 10-K filed for the fiscal year ended December ~~26, 2019~~31, 2020 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 and out-of-home locations 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—The risk of credit loss related to the Company's trade receivables and unbilled receivables balances is accounted for through the allowance for doubtful accounts, a contra asset account which reduces the net receivables balance. The allowance for doubtful accounts balance is determined by pooling the Company's receivables with similar risk characteristics, specifically by type of customer (national or local/ regional) and then age of receivable, and applying historical write off percentages to these pools in order to determine the amount of expected credit losses as of the balance sheet date. National receivables are with large advertising agencies with strong reputations in the advertising industry and clients with stable financial positions and good credit ratings, represent larger receivables balances per customer and have significantly lower historical and expected credit loss patterns. Local and regional receivables are with smaller companies sometimes with less credit history and represent smaller receivable balances per customer and higher historical and expected credit loss patterns. The Company has smaller contracts with ~~thousands of~~many local clients that are not individually significant. The Company also considers current economic conditions and trends to determine whether adjustments to historical loss rates are necessary. The Company increased the expected rate of default related to local and regional customers within the calculation of the allowance for doubtful accounts as of June 25, 2020 given the 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 are written off when management determines amounts are uncollectible.

~~As of~~ ~~June 25, 2020~~ ~~and December 26, 2019, there were no advertising agency groups or individual customers~~The Company had 0 agencies through which the Company ~~sources~~sourced advertising revenue ~~representing~~that accounted for more than 10% of the Company’s gross outstanding receivable balance as of July 1, 2021. The Company had 1 agency through which the Company sourced advertising revenue that accounted for 10.1% of the Company's gross outstanding receivable ~~balance.~~balance as of December 31, 2020. During the three months ended July 1, 2021 and June 25, 2020,, the Company had 1 customer that accounted for ~~approximately 18%~~14.1% and 18.0% of the Company's ~~revenue.~~revenue, respectively. During the six months ended July 1, 2021 and June 25, 2020, ~~and the three and six months ended June 27, 2019,~~ the Company had noone customer that account for 11.3% and 0 customers that accounted for more than 10% of ~~revenue.~~revenue, respectively.

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, $1.7 million, $0.0 million ~~$1.7 million~~ and ~~$0.0~~$1.7 million related to the write-off of certain internally developed software during the three months ended July 1, 2021 and June 25, 2020 ~~and June 27, 2019~~ and the six months ended July 1, 2021 and June 25, 2020, ~~and June 27, 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. The restricted stock and restricted stock unit grants for Company management vest upon the achievement of Company performance measures and/or service conditions, while non-management grants vest

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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. On February 28, 2021 and March 2, 2021, the Company’s Board of Directors approved certain modifications to equity awards awarded under the Company’s 2016 Equity Incentive Plan to adjust performance metrics, vesting amount and future performance goals in light of the COVID-19 Pandemic resulting in incremental share-based compensation expense of $0.2 million and $1.5 million for the three months and six months ended July 1, 2021, respectively. During the three months ended July 1, 2021 and June 25, 2020 ~~and June 27, 2019~~ and the six months ended July 1, 2021 and June 25, 2020, 281,810, 33,378, 1,125,539 and ~~June 27, 2019, 33,378, 37,699,~~ 557,681 ~~and 549,695~~ 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,

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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

Three Months Ended Six Months Ended
June 25,
2020 June 27,
2019
June 25, 2020
June 27,
2019
Net (loss) income attributable to NCM, Inc. $ (13.8 ) $ 8.9
$ (17.5 ) $ 7.8
NCM LLC equity issued for purchase of intangible asset —
—
5.0
3.7
Income tax and other impacts of subsidiary ownership changes 0.1
0.1
(3.9 ) (1.3 )
Change from net (loss) income attributable to NCM, Inc. and transfers from noncontrolling interests $ (13.7 ) $ 9.0
$ (16.4 ) $ 10.2


	Three Months Ended				Six Months Ended
	July 1, 2021		June 25, 2020		July 1, 2021		June 25, 2020
Net loss attributable to NCM, Inc.	$	(22.7)	$	(13.8)	$	(42.1)	$	(17.5)
NCM LLC equity issued for purchase of intangible asset	0		0		6.8		5.0
Income tax and other impacts of subsidiary ownership changes	0.2		0.1		0.9		(3.9)
NCM LLC common membership unit redemption	—		—		(6.6)		—
Issuance of shares to founding members	—		—		6.6		—
Change from net loss income attributable to NCM, Inc. and transfers from noncontrolling interests	$	(22.5)	$	(13.7)	$	(34.4)	$	(16.4)

Recently Adopted Accounting Pronouncements

~~During the first quarter of 2020, the Company adopted 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 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 credit losses related to trade and unbilled accounts receivable reducing the allowance to $3.0 million as of the adoption date. The Company also recorded a corresponding $0.4 million reduction to the 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 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.

During the first quarter of ~~2020,~~2021, 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. The Company’s adoption of ASU 2019-12 ~~is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. The Company does~~did not ~~expect the adoption of this guidance to~~ have a material impact on the unaudited Condensed Consolidated Financial Statements or notes thereto.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update No. 2020-04, Reference Rate Reform (“ASU 2020-04”), which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This guidance is effective upon issuance and expires on December 31, 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

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The Company derives revenue principally from the sale of advertising to national, regional and local businesses in ~~Noovie~~Noovie®, the Company’s cinema advertising and entertainment pre-show. The Company also sells advertising through the LEN, a series of strategically placed screens located in movie theater lobbies, as well as other forms of advertising and

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

promotions in theater lobbies. In addition, the Company sells online and mobile advertising, including through ~~Cinema~~Noovie Audience Accelerator, ~~and~~through NCM's digital gaming products includingNoovie Trivia, Noovie ARcade, Name That Movie andNoovie Shuffle,~~and~~ ~~Fantasy Movie League,~~ which can be played on the mobile apps or at Noovie.comand through partnerships with certain internet platforms.Further the Company sells advertising in a variety of complementary out of home venues, including restaurants, retail locations, convenience stores, college campuses and office and residential buildings. 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~~audience specified in the advertising contract. The make-good provision is recorded within accrued expenses in the unaudited Condensed Consolidated Balance Sheet. As of ~~June 25, 2020~~July 1, 2021 and December ~~26, 2019,~~31, 2020, the Company had a make-good provision of ~~$6.3~~$3.1 million and ~~$8.7~~$7.1 million, respectively.

The Company does not have any contracts with customers with terms in excess of one year that are ~~noncancelable~~noncancellable as of ~~June 25, 2020.~~July 1, 2021. 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 other 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 ~~months ended June 25, 2020 and June 27, 2019~~ and six months ended July 1, 2021 and June 25, 2020 ~~and June 27, 2019~~ (in millions):

Three Months Ended Six Months Ended
June 25,
2020 June 27,
2019 June 25,
2020 June 27,
2019
National and regional advertising revenue $ 1.7
$ 84.3
$ 51.5
$ 141.7
Local advertising revenue 2.3
17.7
11.7
30.5
Founding member advertising revenue from beverage concessionaire agreements —
8.2
5.5
14.9
Total revenue $ 4.0
$ 110.2
$ 68.7
$ 187.1


	Three Months Ended				Six Months Ended
	July 1, 2021		June 25, 2020		July 1, 2021		June 25, 2020
National and regional advertising revenue	$	8.9	$	1.7	$	12.6	$	51.5
Local advertising revenue	3.0		2.3		4.2		11.7
Founding member advertising revenue from beverage concessionaire agreements	2.1		0		2.6		5.5
Total revenue	$	14.0	$	4.0	$	19.4	$	68.7

Deferred Revenue and Unbilled Accounts Receivable

The changes in deferred revenue for the six months ended ~~June 25, 2020~~July 1, 2021 were as follows (in millions):

Six Months Ended
June 25,
2020
Balance at beginning of period $ (7.6 )
Performance obligations satisfied 5.4
New contract liabilities (5.5 )
Balance at end of period $ (7.7 )


	Six Months Ended
	July 1, 2021
Balance at beginning of period	$	(5.1)
New contract liabilities	(2.9)
Performance obligations satisfied	1.6
Balance at end of period	$	(6.4)

As of ~~June 25, 2020~~July 1, 2021 and December ~~26, 2019,~~31, 2020, the Company had ~~$2.2~~$3.5 million and ~~$8.0~~$2.5 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 six months ended ~~June 25, 2020~~July 1, 2021 were as follows (in millions):

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Six Months Ended
	July 1, 2021
	Allowance for National Customer Receivables		Allowance for Local/ Regional Customer Receivables
Balance at beginning of period	$	0.2	$	2.1
Provision for bad debt	0		(0.3)
Write-offs, net	0		(0.4)
Balance at end of period	$	0.2	$	1.4

Six Months Ended
June 25,
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 (0.6 ) 1.3
Write-offs, net (0.1 ) (0.4 )
Balance at end of period $ 0.4
$ 2.8

3. ~~(LOSS) EARNINGS~~LOSS PER SHARE

Basic loss per share is computed on the basis of the weighted average number of common shares outstanding. Diluted 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 loss per NCM, Inc. share are as follows:

Three Months Ended Six Months Ended
June 25,
2020 June 27,
2019 June 25,
2020 June 27,
2019
Net (loss) income attributable to NCM, Inc. (in millions) $ (13.8 ) $ 8.9
$ (17.5 ) $ 7.8
Weighted average shares outstanding:
Basic 77,995,951
77,343,093
77,879,959
77,261,435
Add: Dilutive effect of stock options, restricted stock and exchangeable membership units —
293,003
—
313,646
Diluted 77,995,951
77,636,096
77,879,959
77,575,081
(Loss) earnings per NCM, Inc. share:
Basic $ (0.18 ) $ 0.11
$ (0.22 ) $ 0.10
Diluted $ (0.18 ) $ 0.11
$ (0.22 ) $ 0.10


	Three Months Ended				Six Months Ended
	July 1, 2021		June 25, 2020		July 1, 2021		June 25, 2020
Net loss attributable to NCM, Inc. (in millions)	$	(22.7)	$	(13.8)	$	(42.1)	$	(17.5)

Weighted average shares outstanding:
Basic	80,115,377		77,995,951		79,298,366		77,879,959
Add: Dilutive effect of stock options, restricted stock and exchangeable membership units	0		0		0		0
Diluted	80,115,377		77,995,951		79,298,366		77,879,959
Loss per NCM, Inc. share:
Basic	$	(0.28)	$	(0.18)	$	(0.53)	$	(0.22)
Diluted	$	(0.28)	$	(0.18)	$	(0.53)	$	(0.22)

The effect of 86,084,305, 84,531,328, ~~81,705,487,~~85,307,817 and 83,252,384 ~~and 81,263,513~~ weighted average exchangeable NCM LLC common units held by the founding members for the three months ended July 1, 2021 and June 25, 2020 and ~~June 27, 2019 and~~ six months ended July 1, 2021 and June 25, 2020, ~~and June 27, 2019,~~ respectively, have been excluded from the calculation of diluted weighted average shares and loss per NCM, Inc. share as they were anti-dilutive. NCM LLC common units do not participate in dividends paid on NCM, Inc.’s common stock. In addition, there were 4,376,000, 3,777,240, ~~1,969,086,~~4,376,000 and 3,777,240, ~~and 2,125,728~~ stock options and non-vested (restricted) shares for the three months ended July 1, 2021 and June 25, 2020 and ~~June 27, 2019 and~~ six months ended July 1, 2021 and June 25, 2020, ~~and June 27, 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 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~~During 2020, the Company determined that recent adverse changes in macroeconomic trends, reduced cash flows as a consequence of the temporary, and sometimes permanent, closure of the theaters within the Company's network in response to the 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 June 25, 2020~~ constituted a triggering event for ~~certain of~~ its intangible assets under Accounting Standards Certification No. 360, Impairment and Disposal of Long-Lived Assets. Management considered possible scenarios in a probability-weighted estimated future undiscounted cash flow analysis, including the potential ~~extension~~ of orfurther delays in major motion picture releases, a ~~later~~ recurrence of the temporary theater closures ~~due to the COVID-19 Pandemic~~ and other potential adverse impacts to NCM LLC's founding members' and affiliates' financial liquidity related to the COVID-19 ~~Pandemic theater closures.~~Pandemic. The estimated future

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

cash flows from the affiliate agreements and ESAs calculated within the probability-weighted analyses were in excess of the net book value of these intangible assets and ~~thus,~~ no impairment charges were recorded ~~for~~in the ~~three and six months~~year ended ~~June 25,~~December 31, 2020. Such analysis required

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Common Unit Adjustments—In accordance with NCM LLC’s Common Unit Adjustment Agreement with its founding members, on an annual basis NCM LLC determines the amount of common membership units to be issued to or returned by the founding members based on theater additions, new builds or dispositions during the previous year. In the event a founding member does not have sufficient common membership units to return, the adjustment is satisfied in cash in an amount calculated pursuant to NCM LLC’s Common Unit Adjustment Agreement. In addition, NCM LLC’s Common Unit Adjustment Agreement requires that a Common Unit Adjustment occur for 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 2 percent of the annual total attendance at the prior adjustment date.

During the first quarter of 2021, NCM LLC issued 3,047,582 common membership units to two founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions, to NCM LLC’s network during the 2020 fiscal year and calculated a negative common membership unit adjustment for one founding member resulting in a receivable included within “Other assets and prepaid expenses” on the unaudited Consolidated Balance Sheet. The net impact as a result of the Common Unit Adjustment to the intangible asset was $4.8 million during the first quarter of 2021.

During the first quarter of 2020, NCM LLC issued 3,022,959 common membership units to its founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions by the founding members to NCM LLC’s network during the 2019 fiscal year and NCM LLC recorded a net intangible asset of $10.5 million during the first quarter of 2020 ~~as a result of the Common Unit Adjustment.~~

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.

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”), 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 July 1, 2021 and June 25, 2020 and ~~June 27, 2019 and~~ six months ended July 1, 2021 and June 25, 2020, ~~and June 27, 2019,~~ the Company recorded a reduction to net intangible assets of $0.2 million, $0.0 million, ~~$5.7 million, $1.4~~$0.2 million and ~~$8.1~~$1.4 million, respectively, related to integration and other encumbered theater payments. ~~Because the encumbered theaters~~No integrations payments were ~~temporarily closed during~~earned for the three months ended ~~June 25, 2020, no advertising cash flows could have been~~July 1, 2021 because the Company generated ~~from the encumbered theaters~~negative Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”) during ~~the period if the theaters were within NCM LLC's network and thus no integration payments were earned during the three months ended June 25, 2020.~~this period. During the three months ended July 1, 2021 and June 25, 2020 and ~~June 27, 2019 and~~ six months ended July 1, 2021 and June 25, 2020, ~~and June 27, 2019,~~ AMC and Cinemark paid a total of $0.1 million, $1.2 million, ~~$2.5 million, $9.7~~$0.1 million and ~~$10.6~~$9.7 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 six~~ months ended June 25, 2020 primarily relate to AMC's acquisition of theaters from Carmike. The payments received during the three and six months ended June 27, 2019 relate to AMC's acquisitions of theaters from Carmike and Rave Cinemas and from Cinemark related primarily to its acquisition of theaters from Rave Cinemas. 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.

5. RELATED PARTY TRANSACTIONS

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Founding Member Transactions—In connection with NCM, Inc.’s initial public offering (“IPO”), the Company entered into several agreements to define and regulate the relationships among NCM, Inc., NCM LLC and the founding members which are outlined below. As AMC ~~owns~~has owned less than 5% of NCM LLC ~~as of~~ ~~June 25, 2020, AMC~~since July 2018 and is no longer a related party. AMC remains a party to the ESA, Common Unit Adjustment Agreement, Tax Receivable Agreement (“TRA”) and certain other original agreements and is a member under the terms of the NCM LLC Operating Agreement, subject to fulfilling the requirements of Section 3.1 of the NCM LLC Operating Agreement. AMC will continue to participate in the annual

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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. As of July 1, 2021, AMC’s ownership was 0.0%.

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.

•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, NCM LLC’s founding members have elected to purchase 30 seconds to 60 seconds of advertising, out of the 90 seconds allowed for under the ESA, in the Noovie pre-show 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):


	Three Months Ended				Six Months Ended
Included in the unaudited Condensed Consolidated Statements of Income:	July 1, 2021		June 25, 2020		July 1, 2021		June 25, 2020
Revenue:
Beverage concessionaire revenue (included in advertising revenue) (1)	$	1.6	$	0	$	2.0	$	4.3
Operating expenses:
Theater access fee and revenue share to founding members (2)	$	7.1	$	0	$	8.4	$	12.5
Selling and marketing costs (3)	$	0	$	0	$	0	$	0.1
Advertising operating costs (3)	$	0	$	0	$	0.1	$	0

(1)For the three and six months ended July 1, 2021 and June 25, 2020, 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

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

theaters within NCM LLC's network were temporarily closed as there were no attendees upon which beverage revenue is generated and beverage revenue was limited for periods of reduced attendance due to the COVID-19 Pandemic.

Three Months Ended Six Months Ended
Included in the unaudited Condensed Consolidated Statements of Income:
June 25, 2020
June 27,
2019
June 25, 2020
June 27,
2019
Revenue:
Beverage concessionaire revenue (included in advertising revenue) (1)
$ —
$ 6.5
$ 4.3
$ 11.8
Operating expenses:
Theater access fee and revenue share to founding members (2)
$ —
$ 14.5
$ 12.5
$ 27.4
Purchase of movie tickets and concession products and rental of theater space (included in selling and marketing costs) (3)
$ —
$ 0.1
$ 0.1
$ 0.2
Non-operating expenses:
Interest income from notes receivable (included in interest
income) (4)
$ —
$ —
$ —
$ 0.1

~~________________________________________~~(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 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 and reduced fees for periods of reduced attendance due to the COVID-19 Pandemic.

~~(1)~~

~~For the three and six months ended~~ ~~June 25, 2020~~ ~~and June 27, 2019, Cinemark and Regal purchased 60 seconds of on-screen advertising time from NCM LLC~~

(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.


	As of
Included in the unaudited Condensed Consolidated Balance Sheets:	July 1, 2021		December 31, 2020

Common unit adjustments and ESA extension costs, net of amortization and integration payments (included in intangible assets) (1)	$	602.0	$	608.1
Current payable to founding members under tax receivable agreement (2)	$	0	$	0.6
Long-term payable to founding members under tax receivable agreement (2)	$	22.6	$	23.7
Other payables to founding members (3)	$	0	$	0.6

(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 satisfy their obligations under their beverage concessionaire agreements at a 30 seconds equivalent CPM rate specified by the ESA. There was no beverage revenue for the three months ended June 25, 2020 due to the temporary closure of all ~~the founding member theaters within NCM LLC's network in response to the COVID-19 Pandemic and thus there not being any attendees upon which beverage revenue is based.~~

~~(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 three months ended June 25, 2020 due to the temporary closure of all the founding member theaters within NCM LLC's network.


~~(3)~~	~~Used primarily for marketing to NCM LLC’s advertising clients.~~

~~(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 (including AMC) as the Company's intangible balance is considered one asset inclusive of all common unit adjustment activity.

(2)The Company paid Cinemark and ~~4% by NCM LLC. In consideration~~Regal $0.2 million and $0.4 million during 2021 and $3.2 million and $5.8 million during 2020, respectively, in payments pursuant to the TRA which were for the ~~sale, NCM LLC received a total of $25.0 million in promissory notes from its~~2019 tax year.

(3)Includes other payments made to the founding members ~~(one-third or approximately $8.3 million from each founding member). The notes bear interest at a fixed rate~~in the ordinary course of ~~5.0% per annum, compounded annually. Interest and principal payments were due annually in six equal installments commencing on the first anniversary of the closing and ended on December 26, 2019.~~

As of
Included in the unaudited Condensed Consolidated Balance Sheets:
June 25, 2020
December 26,
2019
Common unit adjustments and ESA extension costs, net of amortization and integration payments (included in intangible assets) (1)
$ 619.0
$ 620.5
Current payable to founding members under tax receivable agreement (2)
$ 10.0
$ 10.3
Long-term payable to founding members under tax receivable agreement (2)
$ 134.7
$ 133.5

~~_________________________________~~business.


~~(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.

~~(2)~~

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. On March 21, 2020, a Treasury Department Notice postponed the original due date for the Company's U.S. federal income tax return to July 15, 2020 from April 15, 2020. The Company made the TRA payments to Cinemark and Regal on July 15, 2020 of $3.2 million and $5.8 million, respectively.

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

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

the NCM LLC Operating Agreement, on a quarterly basis in arrears. Mandatory distributions of available cash for the three and six months ended July 1, 2021 and June 25, 2020 ~~and June 27, 2019~~ were as follows (in millions):

Three Months Ended Six Months Ended

June 25, 2020
June 27,
2019 June 25,
2020 June 27,
2019
Cinemark $ —
$ 7.5
$ 2.1
$ 10.5
Regal —
7.9
2.2
11.0
Total distributions to related parties —
15.4
4.3
21.5
NCM, Inc. —
14.6
4.1
20.4
Total $ —
$ 30.0
$ 8.4
$ 41.9


	Three Months Ended				Six Months Ended
	July 1, 2021		June 25, 2020		July 1, 2021		June 25, 2020
Cinemark	$	0	$	0	$	0	$	2.1
Regal	0		0		0		2.2
Total distributions to related parties	0		0		0		4.3
NCM, Inc.	0		0		0		4.1
Total	$	0	$	0	$	0	$	8.4

Due to the temporary closure of the theaters within NCM LLC's network during a portion of the three and six months ended ~~June 25, 2020,~~July 1, 2021, the mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc. for the three months ended ~~June 25, 2020~~July 1, 2021 were calculated as negative ~~$29.8~~$39.2 million (including ~~$7.6~~negative $10.2 million for Cinemark, ~~$7.8~~negative $10.1 million for Regal and ~~$14.4~~negative $18.9 million for NCM, Inc.). Therefore, there will be no payment made for the second quarter of ~~2020.~~2021. The mandatory distributions of available cash by NCM LLC for the six months ended July 1, 2021 were calculated as negative $70.1 million (including negative $18.2 million for Cinemark, negative $18.1 million for Regal and negative $33.8 million for NCM, Inc.). Under the terms of the NCM LLC Operating Agreement, ~~this~~these negative ~~amount~~amounts will be netted against ~~the~~future positive available cash distributions ~~for~~after the ~~second quarter of 2021, which will be paid in the third quarter of 2021,~~extended covenant waiver holiday, contingent upon the Company's compliance with the covenants outlined within the Credit Agreement Second Amendment defined within Note 6—Borrowings and in accordance with the ~~Company's generation~~NCM LLC Operating Agreement.

Amounts due to related party founding members, net, as of ~~future positive available cash to which~~July 1, 2021 were comprised of the ~~above negative amounts above can be applied.~~following (in millions):

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Cinemark		Regal		Total
Theater access fees and revenue share, net of beverage revenues and other encumbered theater payments	$	1.3	$	1.7	$	3.0



Total amounts due to founding members, net	$	1.3	$	1.7	$	3.0

Amounts due to related party founding members, net as of December ~~26, 2019~~31, 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 $ 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 ) —
(0.1 )
Total amounts due to founding members, net $ 17.7
$ 19.1
$ 36.8

~~Network Affiliate Transactions~~—NCM LLC paid a network affiliate owned by a family member of a director on the Company's Board of Directors $0.1 million, $0.1 million, $0.3 million and $0.2 million, in circuit share payments during the three months ended ~~June 25, 2020~~ ~~and June 27, 2019 and six months ended~~ ~~June 25, 2020~~ ~~and June 27, 2019, respectively.~~


	Cinemark		Regal		Total
Theater access fees and revenue share, net of beverage revenues and other encumbered theater payments	$	0.6	$	0.9	$	1.5

Integration payments due from founding members	(0.1)		(0.1)		(0.2)
Total amounts due to founding members, net	$	0.5	$	0.8	$	1.3

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 operations of AC JV, LLC, the Company concluded that its interest was more than minor under the accounting guidance. The Company’s investment in AC JV, LLC was ~~$0.9~~$0.6 million and ~~$0.9~~$0.7 million as of ~~June 25, 2020~~July 1, 2021 and December ~~26, 2019,~~31, 2020, respectively. Equity in (losses) earnings from AC JV, LLC of $0.0 million, $(0.1) million, ~~$0.1 million, $0.0~~$(0.1) million and ~~$0.3~~$0.0 million for the three months ended July 1, 2021 and June 25, 2020 ~~and June 27, 2019~~ and six months ended July 1, 2021 and June 25, 2020, ~~and June 27, 2019,~~ respectively, is included in “Other non-operating income” in the unaudited Condensed Consolidated Statements of Income.

6. BORROWINGS

The following table summarizes NCM LLC’s total outstanding debt as of ~~June 25, 2020~~July 1, 2021 and December ~~26, 2019~~31, 2020 and the significant terms of its borrowing arrangements (in millions):


	Outstanding Balance as of
Borrowings	July 1, 2021		December 31, 2020		Maturity Date	Interest Rate
Revolving credit facility	$	167.0	$	167.0	June 20, 2023	(1)
Term loans - first tranche	261.9		263.3		June 20, 2025	(1)
Term loans - second tranche	49.9		0		December 20, 2024	(1)
Senior unsecured notes due 2026	230.0		230.0		August 15, 2026	5.750%
Senior secured notes due 2028	400.0		400.0		April 15, 2028	5.875%
Total borrowings	1,108.8		1,060.3
Less: debt issuance costs and debt discounts related to term loans and senior notes	(11.8)		(8.0)
Total borrowings, net	1,097.0		1,052.3
Less: current portion of debt	(3.2)		(2.7)
Carrying value of long-term debt	$	1,093.8	$	1,049.6

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Outstanding Balance as of
Borrowings
June 25, 2020
December 26,
2019 Maturity
Date Interest
Rate
Revolving credit facility $ 167.0
$ 39.0
June 20, 2023 (1)
Term loans 265.3
266.6
June 20, 2025 (1)
Senior unsecured notes due 2026 230.0
230.0
August 15, 2026 5.750%
Senior secured notes due 2028 400.0
400.0
April 15, 2028 5.875%
Total borrowings 1,062.3
935.6

Less: debt issuance costs related to term loans and
senior notes
(8.7 ) (9.0 )
Total borrowings, net 1,053.6
926.6

Less: current portion of debt (2.7 ) (2.7 )
Carrying value of long-term debt $ 1,050.9
$ 923.9

~~___________________________________________________~~(1)The interest rates on the revolving credit facility and term loans 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~~LLC’s 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 Credit Agreement consists of a term loan facility and a revolving credit facility. As of ~~June 25, 2020~~,July 1, 2021, NCM LLC’s senior secured credit facility consisted of a $175.0 million revolving credit facility, a $261.9 million term loan (first tranche) and a ~~$265.3~~$49.9 million term ~~loan.~~loan (second tranche). The obligations under the senior secured credit facility are secured by a lien on substantially all of the assets of NCM LLC.

On ~~April 30, 2020,~~March 8, 2021, NCM LLC ~~amended~~entered into an amendment to its Credit Agreement (“Credit Agreement Second Amendment”). Among other things, the Credit Agreement ~~(the “Credit Agreement Amendment”)~~Second Amendment provides for certain modifications to ~~allow~~the

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

negative covenants, with respect to NCM LLC’s audited financial statements for the ~~automatic~~fiscal year ended December 31, 2020, a waiver of ~~any non-compliance with its Consolidated Net Senior Secured Leverage Ratio~~the requirement to deliver such financial statements without a “going concern” or like qualification or exception, additional waivers and ~~Consolidated Total Leverage Ratio financial covenants occurring from the quarter ending June 25, 2020 until~~term changes outlined below 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 sumgrants security interests in certain assets of ~~unrestricted cash on hand at~~ NCM LLC and ~~availability under its Revolving Credit Facility~~other potential loan parties that are not currently pledged to ~~be less than $55.0 million. Further, NCM LLC can make available cash distributions~~the lenders. In addition, pursuant 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~~Second Amendment, NCM LLC incurred a second tranche of the term loans in an aggregate principal amount of $50.0 million, the net proceeds of $43.0 million will be used for general corporate purposes. Upon execution of the Credit Agreement Second Amendment, the Company recorded $2.3 million as a discount, $3.9 million as debt issuance costs and ~~is continuing.~~$0.8 million within “Loss on modification and retirement of debt, net”.

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 ~~June 25, 2020~~,July 1, 2021, NCM LLC’s total availability under the $175.0 million revolving credit facility was ~~$4.4~~$5.6 million, net of $167.0 million outstanding and ~~$3.6~~$2.4 million in letters of credit. The unused line fee is 0.50% per annum which is consistent with the previous facility. ~~Borrowings under~~Following the ~~revolvingcredit facility bear interest at NCM LLC’s option of either~~Credit Agreement Second Amendment effective March 8, 2021, the applicable margin for the LIBOR index ~~plus an applicable margin ranging~~increased from a range of 1.75% to 2.25% orto a range of 2.75% to 3.25% and the applicable margin for the base rate ~~plus an applicable margin ranging~~increased from a range of 0.75% to 1.25% to a range of 1.75% to 2.25%. 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 ~~June 25, 2020~~July 1, 2021 was ~~3.00%~~4.50%.

Term Loans—First Tranche—The interest rate on the initial tranche of term loans iswas originally a rate chosen at NCM LLC’s option of either the LIBOR index plus 3.00% or the base rate plus 2.00%. Following the Credit Agreement Second Amendment effective March 8, 2021, the rate is either the LIBOR index plus 4.00% or the base rate plus 3.00%. The interest rate on the term loans as of ~~June 25, 2020~~July 1, 2021 was ~~4.00%~~5.00%. The term loans amortize at a rate equal to 1.00% annually, to be paid in equal quarterly installments. As of ~~June 25, 2020~~,July 1, 2021, NCM LLC has paid principal of ~~$4.7~~$8.1 million, reducing the outstanding balance to ~~$265.3~~$261.9 million.

Term Loans—Second Tranche—The interest rate on the second tranche of term loans is the LIBOR index plus 8.00%. The interest rate on the term loans as of July 1, 2021 was 9.00%. The term loans ~~will mature on June 20, 2025.~~amortize at a rate equal to 1.00% annually, to be paid in equal quarterly installments.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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,~~Following the Credit Agreement Second Amendment, the Company has a waiver of non-compliance with the consolidated Net Total Leverage and Consolidated Net Senior Secured Leverage financial covenants through the quarter ending June 30, 2022 (“Extended Covenant Waiver Holiday”) and the Consolidated Net Total Leverage Ratio and Consolidated Net Senior Secured Leverage Ratio financial covenants to be set to 6.75 to 1.00 and 5.50 to 1.00, respectively, for the quarter ending on or about September 29, 2022. Under the Credit Agreement, for the period beginning in the second quarter of 2020 through the date that NCM LLC delivers a compliance certificate for the third quarter of 2022, NCM LLC must maintain a minimum liquidity balance of $55.0 million consisting of a combination of unrestricted cash on hand and availability under NCM LLC's revolving credit facility. 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. Pursuant to the terms of the Credit Agreement Second Amendment, NCM LLC is restricted from making available cash distributions until after NCM LLC delivers a compliance certificate for the quarter ending on or about September 29, 2022, and, thereafter, NCM LLC may only make available cash distributions if: (i) no default or event of default under the Credit Agreement has occurred and is continuing; (ii) the senior secured financial covenant leverage ratio is equal to or less than 4.00 to 1.00; and (iii) the aggregate principal amount of all outstanding revolving loans under the Credit Agreement is $39.0 million or less. As of ~~June 25, 2020~~, NCM LLC’s consolidated net senior secured leverage ratio was 4.58 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 6.01 times (versus the covenant of 6.25 times). As of ~~June 25, 2020~~,July 1, 2021, NCM LLC was in compliance with the requirements of the Credit Agreement Second Amendment described above and ~~thus~~ the noncompliance with the financial covenants was automatically waived.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Due to the future market uncertainties discussed within Note 1 - The Company and in order to provide additional liquidity while revenue levels build and accounts receivable balances are collected, the Board of Directors of NCM, Inc. and required NCM LLC founding members approved the material terms of a $20.0 million unsecured revolving loan agreement between NCM Inc. and NCM LLC. Borrowings by NCM LLC will be available from October 1, 2021 through March 31, 2022. The final definitive loan agreement will be approved by the Audit Committee of NCM, Inc. and is expected to be completed in the third quarter of 2021. Once entered into, this revolving loan facility will provide NCM LLC with short-term working capital loans as NCM LLC rebuilds its advertising revenue base and collects related accounts receivable and will provide additional cushion with respect to the NCM LLC debt covenants.

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~~$20.0 million of the Notes due 2026 during 2019 and 2018, respectively, reducing the principal amount to $230.0 million as of ~~June 25, 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 $0.0 million, $0.0 million, $0.0 million and $0.3 million during the three months and six months ended ~~June 25, 2020~~ ~~and June 27, 2019, respectively.~~July 1, 2021.

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 income tax expense of $0.0 million for the six months ended July 1, 2021 compared to an income tax benefit of $4.6 million for the six months ended June 25, 2020 ~~compared to income tax expense of $1.7 million for the six months ended June 27, 2019~~ resulting in an effective tax rate of 0.0% for the six months ended July 1, 2021 as compared to 20.8% for the six months ended June 25, 2020. The Company recorded a full valuation allowance on its net deferred tax assets as of December 31, 2020 following the determination it was more-likely-than-not that the Company will not be able to realize the benefit of those assets. The Company maintained a full valuation allowance as ~~compared~~of July 1, 2021, reducing deferred tax expense to 17.9% for the six months ended June 27, 2019. The increase in the effective tax rate was primarily due to the relative impact of the tax benefit recorded on pretax book losses attributable to NCM Inc. of $22.0$0.0 million for the six months ended ~~June 25, 2020 compared to tax expense recorded on pretax book income of $9.4 million for~~July 1, 2021 and the six months ended June 27, 2019. This increase in income tax benefit was partially offset by the 2019 impact of deferred state tax recorded during the six months ended June 27, 2019 that did not recur during the same period in 2020. The tax provision through June 25, 2020 was computed using the annualCompany’s effective tax ~~rate. The Company's current blended state and federal~~ rate ~~(net of federal benefit) was 24.4% as of June 25, 2020 and 24.5% as of June 27, 2019.~~to 0.0%.

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 ~~$21.4~~$19.7 million and short-term and long-term lease liabilities of ~~$1.7~~$2.0 million and ~~$23.7~~$21.6 million, respectively, on the balance sheet as of ~~June 25, 2020~~July 1, 2021 for all material leases with terms longer than twelve months. These balances are included within “Other assets”, “Other current liabilities” and “Other liabilities”, respectively, on the unaudited Condensed Consolidated Balance Sheets. As of ~~June 25, 2020,~~July 1, 2021, the Company had a weighted average remaining lease term of ~~9.6~~8.6 years on these leases. When measuring the ROU assets and lease liabilities recorded, the Company utilized its incremental borrowing rate in order to determine the present value of the lease payments as the leases do not provide an implicit rate. The Company used the rate of interest that it would have paid to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

environment. As of ~~June 25, 2020,~~July 1, 2021, the Company’s weighted average annual discount rate used to establish the ROU assets and lease liabilities was ~~7.33%~~7.35%.

During the three and six months ended July 1, 2021 and June 25, 2020, ~~and June 27, 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 Six Months Ended
June 25,
2020 June 27,
2019 June 25,
2020 June 27,
2019
Operating lease cost $ 0.9
$ 0.8
$ 1.8
$ 1.6
Short-term lease cost —
—
—
0.1
Variable lease cost 0.2
0.2
0.3
0.3
Total lease cost $ 1.1
$ 1.0
$ 2.1
$ 2.0

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Three Months Ended				Six Months Ended
	July 1, 2021		June 25, 2020		July 1, 2021		June 25, 2020
Operating lease cost	$	0.9	$	0.9	$	1.8	$	1.8

Variable lease cost	0.1		0.2		0.2		0.3
Total lease cost	$	1.0	$	1.1	$	2.0	$	2.1

The Company made total lease payments of $1.1 million, $0.9 million, ~~$0.8 million, $1.8~~$2.0 million and ~~$1.6~~$1.8 million during the three months ended July 1, 2021 and June 25, 2020 and ~~June 27, 2019 and~~ six months ended July 1, 2021 and June 25, 2020, ~~and June 27, 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 is presented within “Amortization of intangibles recorded for network theater screen 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 ~~June 25, 2020~~July 1, 2021 and December ~~26, 2019,~~31, 2020, the Company had 0 liabilities recorded for the minimum payment, as the theater access fee was in excess of the minimum.

Following the 2019 ESA Amendments, Cinemark and Regal receive an additional monthly theater access fee that began on November 1, 2019 in consideration for NCM LLC's access to certain on-screen advertising inventory after the advertised showtime of a feature film. 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 is entitled to display the Platinum Spot, an additional single unit that is either 30 or 60 seconds of the ~~Noovie~~Noovie® pre-show in the trailer position directly prior to the “attached” trailers preceding the feature 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 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

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

will be required to satisfy a minimum average CPM for that period of time. The Company ~~does~~did not owe the founding members any theater access fees or any Platinum Spot revenue share when the theaters ~~are~~were not displaying the Company's pre-show or when the Company ~~does~~did not have access to the theaters. As such, the Company did not owe these fees for the ~~three months ended June 25, 2020 and will not owe these fees while~~period of time the founding members' theaters ~~are~~were temporarily closed ~~in connection with~~due to the COVID-19 ~~Pandemic.~~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 incurred for the ~~three months ended June 25, 2020~~period of time the founding member's theaters were temporarily closed due to the COVID-19 Pandemic and nofuture fees ~~will be incurred for months where no screens are in use and fees will~~may be reduced for months where screens are in use for only part of the month.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 ~~June 25, 2020,~~July 1, 2021, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is ~~$71.2~~$107.6 million over the remaining terms of the network affiliate agreements. These minimum guarantees relate to various affiliate agreements ranging in term from three years to twenty years, prior to any renewal periods of which some are at the option of the Company. The Company accrued ~~$0.4~~$0.1 million and ~~$0.5~~$0.0 million related to affiliate agreements with guaranteed minimums in excess of the revenue share agreement as of ~~June 25, 2020~~July 1, 2021 and December ~~26, 2019,~~31, 2020, 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 ~~three months ended June 25, 2020~~period of time the respective affiliate's theaters were temporarily closed due to the COVID-19 Pandemic and will not ~~for the remaining duration~~so long as an affiliate's ~~theaters are closed or during a period where~~minimum theater attendance or ~~affiliate~~ revenue levels are ~~low as the minimum levels must first be~~not met by the affiliate.

9. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1—Quoted prices in active markets for identical assets or liabilities.

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

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

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—The Company regularly reviews long-lived assets (primarily property, plant and equipment), intangible assets and investments accounted for under the cost or equity method 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.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Other investments consisted of the following (in millions):

As of
June 25,
2020 December 26,
2019
Investment in AC JV, LLC (1)
$ 0.9
$ 0.9
Other investments 0.1
0.1
Total $ 1.0
$ 1.0


	As of
	July 1, 2021		December 31, 2020
Investment in AC JV, LLC (1)	$	0.6	$	0.7
Other investments	0.1		0.1
Total	$	0.7	$	0.8


~~(1)~~	(1)Refer to Note 5—Related Party Transactions. This investment is accounted for utilizing the equity method.

As of ~~June 25, 2020,~~July 1, 2021, no observable price changes or impairments have been recorded as a result of the Company’s qualitative assessment of identified events or changes in the circumstances of the remaining investments. The investment in AC JV, LLC was initially valued using comparative market multiples. The other investments were recorded based upon the fair

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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.

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 June 25,
2020 As of December 26,
2019
Carrying Value Fair Value (1) Carrying Value
Fair Value (1)
Term loans $ 265.3
$ 220.2
$ 266.6
$ 266.9
Notes due 2026 230.0
162.3
230.0
226.2
Notes due 2028 400.0
329.4
400.0
426.7


	As of July 1, 2021				As of December 31, 2020
	Carrying Value		Fair Value (1)		Carrying Value		Fair Value (1)
Term loans - first tranche	$	261.9	$	250.1	$	263.3	$	217.2
Term loans - second tranche	49.9		51.0		—		—
Notes due 2026	230.0		210.0		230.0		160.7
Notes due 2028	400.0		393.5		400.0		337.5


~~(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 Disclosures are as follows (in millions):


			Fair Value Measurements at Reporting Date Using
	Fair Value as of July 1, 2021		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)	$	41.8	$	41.8	$	0	$	0
Short-term marketable securities (2)	0.3		0		0.3		0
Long-term marketable securities (2)	1.3		0		1.3		0
Total assets	$	43.4	$	41.8	$	1.6	$	0


			Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
	Fair Value as of June 25, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Fair Value as of December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
ASSETS:									ASSETS:
Cash equivalents (1)	$	49.8	$	49.8	$	—	$	—	Cash equivalents (1)	$	52.8	$	52.8	$	0	$	0
Short-term marketable securities (2)	1.5		—		1.5		—		Short-term marketable securities (2)	0.3		0		0.3		0
Long-term marketable securities (2)	3.0		—		3.0		—		Long-term marketable securities (2)	1.2		0		1.2		0
Total assets	$	54.3	$	49.8	$	4.5	$	—	Total assets	$	54.3	$	52.8	$	1.5	$	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 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

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
$ —
Short-term marketable securities (2)
17.5
—
17.5
—
Long-term marketable securities (2)
7.5
—
7.5
—
Total assets $ 53.8
$ 16.8
$ 37.0
$ —

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

are generally classified as Level 2 in the fair value hierarchy. As of July 1, 2021 and December 31, 2020, there were $1.3 million and $1.3 million, respectively, of available-for-sale debt securities in unrealized loss positions without an allowance for credit losses. The Company has not recorded an allowance for credit losses for the marketable securities balance as of July 1, 2021 or December 31, 2020 given the immaterial difference between the amortized cost basis and the aggregate fair value of the Company's securities.

~~(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 Company’s government agency bonds is derived from quoted market information. The inputs in the valuation are classified as Level 1 if there is an active market for these securities; however, if an active market does not exist, the inputs are recorded at a lower level in the fair value hierarchy. The value of commercial paper and certificates of deposit is derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy. As of June 25, 2020, there was $2.0 million of Available-for-sale debt securities in unrealized loss positions without an allowance for credit losses. The Company has not recorded an allowance for credit losses for the marketable securities balance as of June 25, 2020 given the immaterial difference between the amortized cost basis and the aggregate fair value of the Company's securities. For the three and six months ended June 25, 2020 and June 27, 2019, 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 June 25, 2020 and December 26, 2019, there was $0.0 million and an inconsequential amount, respectively, of gross unrealized losses related to individual securities of $0.0 million and $6.5 million, respectively, that had been in a continuous loss position for 12 months or longer. The Company has not recorded an impairment because it has the intention and ability to hold these securities to maturity.

The amortized cost basis, aggregate fair value and maturities of the marketable securities the Company held as of ~~June 25, 2020~~July 1, 2021 and December ~~26, 2019~~31, 2020 were as follows:


	As of July 1, 2021
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:





Short-term certificates of deposit	$	0.3	$	0.3	0.1
Total short-term marketable securities	0.3		0.3


Long-term certificates of deposit	1.3		1.3		2.3
Total long-term marketable securities	1.3		1.3
Total marketable securities	$	1.6	$	1.6

As of June 25, 2020
Amortized Cost
Basis
(in millions) Aggregate Fair
Value
(in millions)
Maturities (1)
(in years)
MARKETABLE SECURITIES:
Short-term municipal bonds $ 0.3
$ 0.3
0.1
Short-term certificates of deposit 1.2
1.2
0.4
Total short-term marketable securities 1.5
1.5

Long-term U.S. government agency bonds 1.0
1.0
3.7
Long-term certificates of deposit 2.0
2.0
3.3
Total long-term marketable securities 3.0
3.0

Total marketable securities $ 4.5
$ 4.5

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~


							As of December 31, 2020
							Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:						MARKETABLE SECURITIES:

Short-term certificates of deposit						Short-term certificates of deposit	0.3		0.3		0.6

	As of December 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	$	3.5	$	3.5	0.4
Short-term certificates of deposit	0.9		0.9		0.8
Short-term municipal bonds	1.2		1.2		0.5
Short-term commercial paper:
Financial	8.0		7.9		0.3
Industrial	4.0		4.0		0.2
Total short-term marketable securities	17.6		17.5			Total short-term marketable securities	0.3		0.3

Long-term U.S. government agency bonds	4.5		4.5		2.2

Long-term certificates of deposit	3.0		3.0		3.6	Long-term certificates of deposit	1.3		1.2		2.8
Total long-term marketable securities	7.5		7.5			Total long-term marketable securities	1.3		1.2
Total marketable securities	$	25.1	$	25.0		Total marketable securities	$	1.6	$	1.5

~~(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 EVENT

On August ~~3, 2020,~~9, 2021, the Company declared a cash dividend of ~~$0.07~~$0.05 per share (approximately ~~$5.5~~$4.1 million) on each share of the Company’s common stock (not including outstanding restricted stock which will accrue dividends until the shares vest) to stockholders of record on August ~~17, 2020~~23, 2021 to be paid on ~~August 31, 2020.~~September 6, 2021.

Item 2. Management’s Discussion and Analysis of Financial 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” and statements related to the impact of the current COVID-19 Pandemic on our business and results of operations, 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 ~~26, 2019 and as updated within our Form 10-Q filed with the SEC on May 5, 2020 the three months ended March 26,~~31, 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 ~~26, 2019.~~31, 2020. 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 largest cinema advertising network in the U.S., we unite brands with the power of movies and engage movie fans anytime and anywhere. We currently derive revenue principally from the sale of advertising to national, regional and local businesses in ~~Noovie~~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. As of June 25, 2020 almost all of the theaters within our network remained closed. We were unable to advertise in the theaters, and thus did not generate any in theater revenue, for the three months ended June 25, 2020 and will not for the duration of time that the theaters remain closed. 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~~We present two different formats of our Noovie pre-show depending on the theater circuit in which it runs. In Regal and Cinemark and 1418 of our network affiliates' theaters, the Nooviepre-show 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 ~~June 25, 2020,~~July 1, 2021, theaters presenting the new Noovie format with Post-Showtime Inventory made up approximately ~~58%~~56% of our ~~network based upon 2019 attendance.~~network. All other NCM network theater circuits, which make up the remaining ~~42%~~44% 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 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~~Noovie Audience Accelerator, ~~and~~ across our suite of Noovie digital properties, including Noovie.com, Noovie Shuffle, Name That Movie, andNoovie Arcade,on third party partner’s internet sites, as well as a variety of complementary out of home venues, including restaurants, retail locations, convenience stores, college campuses and ~~Fantasy Movie League~~office and residential buildings, in order to reach entertainment audiences beyond the theater. As of ~~June 25, 2020, approximately 4.2~~July 1, 2021, over 5.6 million moviegoers have downloaded our mobile apps. These downloads and the acquisition of second party data have resulted in first- and second-party data sets of over ~~146~~202.6 million as of ~~June 25, 2020.~~July 1, 2021. We have long-term ESAs (approximately ~~19.3~~18.2 weighted average years remaining based on ~~2019 attendance)~~pre-COVID-19 attendance levels) with the founding members and multi-year agreements with our network affiliates, which expire at various dates between ~~September 2020~~ August 2021and ~~July 2031.~~December 2037. The weighted average remaining term ~~(based on 2019 attendance)~~ of the ESAs and the network affiliate agreements is ~~16.8~~15.9 years as of ~~June 25, 2020.~~July 1, 2021. 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 99% of the aggregate founding member and~~digital content network ~~affiliate theater attendance is generated by theaters connected to our DCN (the remaining screens receive advertisements on USB drives) and 100% of the~~ “DCN”.~~Noovie~~ ~~pre-show is projected on digital projectors (96% digital cinema projectors and 4% LCD projectors) as of June 25, 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.

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 20, 2020~~March 8, 2021 for our fiscal year ended December ~~26, 2019 and as updated within our Form 10-Q filed with the SEC on May 5, 2020 the three months ended March 26,~~31, 2020.

Recent Developments

COVID-19 Impact and Outlook— ~~Following the World Health Organization’s declaration of~~As previously disclosed, the COVID-19 ~~virus~~Pandemic has had a significant impact on the world and our business beginning in March 2020 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~~These governmental restrictions resulted in ~~mid-March 2020, each~~the closure of ~~our founding members and all~~most of our network ~~affiliates announced~~theaters for approximately six months and thus the Company generated no in-theater advertising revenue during that ~~their~~time. When theaters ~~would~~began to reopen in late in the third quarter of 2020, in-theater advertising revenue continued to be ~~temporarily closed~~adversely impacted as attendance at the reopened theaters was significantly less than normal given COVID-19 restrictions around patron capacity limitations and a continued lack of new major motion picture releases.

Beginning in 2021, Multiple COVID-19 vaccines were approved and have been widely administered throughout the United States. As a result, during the second quarter of 2021, government restrictions lessened allowing theaters in key larger markets to ~~address this pandemic.~~fully reopen over the course of the second quarter of 2021. As of ~~June 25, 2020, almost all~~July 1, 2021, approximately 97.0% of the theaters within the Company’s network were open. Multiple, successful major motion pictures were released during the second quarter of 2021 resulting in the highest attendance numbers within our network since the start of the COVID-19 Pandemic. The movie slate for the remainder of 2021 and into 2022 remains packed due to the addition of the major motion pictures originally scheduled for 2020. Despite the increase in network attendance, second quarter of 2021 in-theater advertising revenue remained ~~closed. Major motion picture releases expected~~significantly below historical levels as we believe many advertisers continued to ~~occur~~delay making commitments until they confirmed that industry attendance had achieved necessary critical mass. We were also not able to participate in the 2021 advertising upfront marketplace during the ~~temporary closure period were delayed until later in~~summer of 2020 or 2021 or have been released directly to alternative delivery methods bypassing the theater entirely. The results of the three and six months ended June 25, 2020 were significantly impacted by these temporary closures as theater attendance was less than expected beginning in March, as the public was told to practice social distancing, and then whenwhile theaters were ~~closed following stay at home orders. As of the date of this filing, the COVID-19 virus continues to spread in certain areas of the United States, and there~~closed. There can be no assurance that the cases of the COVID-19 virus will continue to decline; new variants will not continue to spread; recently reinstated mask mandates will not negatively impact network attendance, advertiser sentiment, and our business in general; social distancing, capacity restrictions, and other public safety measures will not be reintroduced; when or if theaters within our network will return to ~~normal operations. These developments will be referred to as the “COVID-19 Pandemic.”~~

~~We are unable to advertise in the theaters,~~historic attendance levels and ~~thus we have not and will not generate any in theater revenue, for the duration of time~~ that the theaters ~~are closed.~~which have reopened will remain open.

To ensure sufficient liquidity to endure the impacts of the COVID-19 Pandemic, even if prolonged, we continued to manage our liquidity position through various cost control methods discussed further within the “Financial Condition and Liquidity”section below. Since the beginning of the COVID-19 Pandemic, the Company has significantly reduced payroll related costs through a combination of temporary furloughs, permanent layoffs and salary reductions (“Payroll Related Cost Reductions”). In total, the Company’s headcount has been reduced by over 30% as compared to headcount levels prior 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 ~~and will not be~~ incurred for the duration of time that the theaters were closed and attendance-based fees will continue to be reduced for the period of time that attendance is lower than historical levels. We were still required to pay these screen-based fees when theaters are ~~closed. We have been working to preserve cash and ensure sufficient liquidity to endure the impacts~~open, which were reduced for months where screens are in use for only part of the ~~COVID-19 Pandemic, even if prolonged. Among other measures, we have:~~month. As a result of these actions and lower attendance, total operating expenses were over 20% lower in the six months ended July 1, 2021, as compared to the six months ended June 25, 2020.

~~Temporarily furloughed approximately 30% of our staff~~Further, due to these future market uncertainties and ~~temporarily reduced~~in order to provide additional liquidity while revenue levels build and accounts receivable balances are collected, the ~~pay of the remaining employees by up to 50%, which in aggregate reduced our compensation expense by 50% (“Temporary Salary and Wage Reductions”);~~

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

~~Suspended non-essential operating expenditures, including marketing, research, employee travel~~of NCM, Inc. and ~~consulting services;~~

~~Implemented~~required NCM LLC founding members approved the material terms of a ~~hiring freeze;~~

~~Temporarily suspended the 401K employee match program;~~

~~Terminated or deferred certain non-essential capital expenditures;~~

~~Strategically worked with our landlords, vendors,~~$20.0 million unsecured revolving loan agreement between NCM Inc. and ~~other business partners to manage, defer, and/or abate certain costs during the disruptions caused~~NCM LLC. Borrowings by ~~the COVID-19 Pandemic;~~

Decreased our quarterly dividend to $0.07 per share beginning in the second quarter of 2020 from $0.19 per share in the fourth quarter of 2019. When compared to the fourth quarter of 2019 this results in quarterly cash savings of $9.3 million for NCM, Inc.; and

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

As of the date of this filing, almost all of the theaters in our network remain closed. Given the capacity restrictions we expect to be in place for most of the theaters within our network upon reopening, the Company expects its network attendance to increase gradually, and thus, expects to remove the temporary cash preservation measures outlined above as the Company's operations normalize and in consideration of the Company's liquidity needs. The Company's ability to resume advertising is dependent upon the reopening of the theaters, the release of major motion pictures to the theaters, and 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.~~

In March 2020, we drew down an additional $110.0 million on 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 $89.7 million as of June 25, 2020, increasing our cash and marketable securities balance to $249.9 million as of June 25, 2020 ($168.1 million at NCM LLC) and decreasing our trade accounts receivable outstanding to $25.3 million. The $168.1 million of cash at NCM LLC will be ~~used to fund operations during~~available from October 1, 2021 through March 31, 2022. The final definitive loan agreement will be approved by the ~~period~~Audit Committee of ~~expected reduced cash flows. Cash at~~ NCM, Inc. ~~cannot~~and is expected to be ~~used to fund operations at~~completed in the third quarter of 2021. Once entered into, this revolving loan facility will provide NCM LLC ~~and 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.~~

~~On April 30, 2020,~~with short-term working capital loans as NCM LLC ~~amended~~rebuilds its ~~Credit Agreement, dated as of June 20, 2018 (“Credit Agreement Amendment”)~~advertising revenue base and collects related accounts receivable and will provide additional cushion with respect 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. NCM LLC may continue to reimburse NCM, Inc. for its services provided under the management services agreement during the period of the automatic waiver.

On March 21, 2020, a Treasury Department Notice postponed the original due date for the Company's U.S. federal income tax return to July 15, 2020 from April 15, 2020. The Company made the TRA payments to the founding members on July 15, 2020 totaling $12.8 million and expect to pay $1.4 million in the fourth quarter of 2020.

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. We currently have recognized or expect to 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 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. The Company deferred $0.4 million in qualifying payments in the second quarter of 2020; and

~~A refundable 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 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.debt covenants.

We believe that the exhibition industry has historically fared well during ~~recessions,~~periods of economic stress, and we remain optimistic, though cannot guarantee, that our founding members and network affiliates will rebound and attendance figures will continue to benefit from pent-up social demand as ~~state and local restrictions or other social distancing orders subside and~~ people seek togetherness with a return to normalcy. However, the ultimate significance of the COVID-19 Pandemic, including the extent of the adverse impact on our financial and operational results, will be dictated by the currently unknowable duration ~~and~~of the pandemic, the effect of the pandemic on the overall economy and the advertising market, ~~and of~~ responsive governmental regulations, including ~~state and local restrictions or other social distancing orders and resulting~~mandated business closures which ~~are recurring in certain areas and~~ could recur ~~on multiple occasions after the initial reopening~~ causing subsequent closure ~~periods.~~periods, social distancing guidelines, theater capacity restrictions, government restrictions, shifting movie slates, voluntary theater closures and decreasing levels of theater attendance. Our business also could be significantly affected

should the disruptions caused by the COVID-19 Pandemic lead to permanent changes in consumer behavior (such as ~~what~~ the movie audience’s willingness to return to the movie theaters, ~~and~~which may be influenced by the ~~impacts~~adoption or continued use of ~~social distancing, facemask requirements and other measures on the movie going experience)~~streaming services), ~~which we believe will be temporary,~~ 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																	% Change
	Q2 2020			Q2 2019			YTD 2020			YTD 2019			Q2 2020 to Q2 2019		YTD 2020 to YTD 2019			Q2 2021			Q2 2020			YTD 2021			YTD 2020			Q2 2021 to Q2 2020		YTD 2021 to YTD 2020
Revenue	$	4.0		$	110.2		$	68.7		$	187.1		(96.4	)%	(63.3	)%	Revenue	$	14.0		$	4.0		$	19.4		$	68.7		250.0	%	(71.8)	%
Operating expenses:																	Operating expenses:
Advertising	5.6			47.3			42.4			86.5			(88.2	)%	(51.0	)%	Advertising	20.7			5.6			31.2			42.4			269.6	%	(26.4)	%
Network, administrative and unallocated costs	22.2			25.2			45.2			52.0			(11.9	)%	(13.1	)%	Network, administrative and unallocated costs	22.9			22.2			46.1			45.2			3.2	%	2.0	%
Total operating expenses	27.8			72.5			87.6			138.5			(61.7	)%	(36.8	)%	Total operating expenses	43.6			27.8			77.3			87.6			56.8	%	(11.8)	%
Operating (loss) income	(23.8		)	37.7			(18.9		)	48.6			(163.1	)%	(138.9	)%
Operating loss																	Operating loss	(29.6)			(23.8)			(57.9)			(18.9)			24.4	%	206.3	%
Non-operating expenses	13.8			14.4			27.3			28.5			(4.2	)%	(4.2	)%	Non-operating expenses	17.3			13.8			31.0			27.3			25.4	%	13.6	%
Income tax (benefit) expense	(4.2		)	2.3			(4.6		)	1.7			(282.6	)%	(370.6	)%
Net (loss) income attributable to noncontrolling interests	(19.6		)	12.1			(24.1		)	10.6			(262.0	)%	(327.4	)%
Net (loss) income attributable to NCM, Inc.	$	(13.8	)	$	8.9		$	(17.5	)	$	7.8		(255.1	)%	(324.4	)%
Income tax benefit																	Income tax benefit	—			(4.2)			—			(4.6)			(100.0)	%	(100.0)	%
Net loss attributable to noncontrolling interests																	Net loss attributable to noncontrolling interests	(24.2)			(19.6)			(46.8)			(24.1)			23.5	%	94.2	%
Net loss attributable to NCM, Inc.																	Net loss attributable to NCM, Inc.	$	(22.7)		$	(13.8)		$	(42.1)		$	(17.5)		64.5	%	140.6	%

Net (loss) income per NCM, Inc. basic share	$	(0.18	)	$	0.11		$	(0.22	)	$	0.10		(263.6	)%	(320.0	)%
Net (loss) income per NCM, Inc. diluted share	$	(0.18	)	$	0.11		$	(0.22	)	$	0.10		(263.6	)%	(320.0	)%
Net loss per NCM, Inc. basic share																	Net loss per NCM, Inc. basic share	$	(0.28)		$	(0.18)		$	(0.53)		$	(0.22)		55.6	%	140.9	%
Net loss per NCM, Inc. diluted share																	Net loss per NCM, Inc. diluted share	$	(0.28)		$	(0.18)		$	(0.53)		$	(0.22)		55.6	%	140.9	%

Adjusted OIBDA	$	(12.7	)	$	50.2		$	1.7		$	72.3		(125.3	)%	(97.6	)%	Adjusted OIBDA	$	(18.7)		$	(12.7)		$	(34.9)		$	1.7		47.2	%	(2152.9)	%
Adjusted OIBDA margin	(317.5		)%	45.6		%	2.5		%	38.6		%	NM		(36.1	)%	Adjusted OIBDA margin	(133.6)		%	(317.5)		%	(179.9)		%	2.5		%	183.9	%	(182.4)	%
Total theater attendance (in millions) (1)	0.2			185.3			120.6			334.0			(99.9	)%	(63.9	)%	Total theater attendance (in millions) (1)	49.1			0.2			62.9			120.6			NM		(47.8)	%

_________________________

~~_________________________~~(1)Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike 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.

~~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. The attendance for the second quarter of 2020 relates to a small number of affiliate theaters that reopened throughout May and June of 2020. Given the minimal amount of attendance, the Company did not advertise in these theaters during the second quarter of 2020.

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 expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation costs and impairment of long-lived ~~assetsand Chief Executive Officer transition costs.~~assets. 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 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 share-based payment ~~costs, impairments of long-lived assets or costs associated with the resignation of the Company’s former Chief Executive Officer.~~costs. 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):


														Q2 2021			Q2 2020			YTD 2021			YTD 2020
	Q2 2020			Q2 2019			YTD 2020			YTD 2019
Operating (loss) income	$	(23.8	)	$	37.7		$	(18.9	)	$	48.6
Operating loss													Operating loss	$	(29.6)		$	(23.8)		$	(57.9)		$	(18.9)
Depreciation expense	3.2			3.3			6.4			6.6			Depreciation expense	2.6			3.2			5.9			6.4
Amortization of intangibles recorded for network theater screen leases	6.1			7.0			12.2			13.9			Amortization of intangibles recorded for network theater screen leases	6.2			6.1			12.3			12.2
Share-based compensation costs (1)	0.1			2.1			0.3			2.9			Share-based compensation costs (1)	2.1			0.1			4.8			0.3
Impairment of long-lived assets (2)	1.7			—			1.7			—			Impairment of long-lived assets (2)	—			1.7			—			1.7
CEO transition costs (3)	—			0.1			—			0.3
Adjusted OIBDA	$	(12.7	)	$	50.2		$	1.7		$	72.3		Adjusted OIBDA	$	(18.7)		$	(12.7)		$	(34.9)		$	1.7
Total revenue	$	4.0		$	110.2		$	68.7		$	187.1		Total revenue	$	14.0		$	4.0		$	19.4		$	68.7
Adjusted OIBDA margin	(317.5		)%	45.6		%	2.5		%	38.6		%	Adjusted OIBDA margin	(133.6)		%	(317.5)		%	(179.9)		%	2.5		%

____________________________________________


~~(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 first six months of 2019.~~

(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 impairment of long-lived assets primarily relate to the write off of certain internally developed software.

Our Network—The change in the number of screens in our network by the founding members and network affiliates during the six months ended ~~June 25, 2020~~July 1, 2021 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)
—
(175 ) (175 )
Openings, net of closures (2)
73
(98 ) (25 )
Balance as of June 25, 2020 16,953
4,055
21,008


	Number of screens
	Founding Members	Network Affiliates	Total
Balance as of December 31, 2020	16,515	3,935	20,450
New affiliates, net of lost affiliates (1)	—	464	464
Closures, net of openings (2)	(23)	(8)	(31)
Balance as of July 1, 2021	16,492	4,391	20,883


~~(1)~~	Represents the loss of two of our affiliates that did not renew their contracts as of the end of the first quarter of 2020 resulting in a reduction of 185 affiliate screens to our network, offset by the addition of two new affiliates which added 10 new screens to our network during the six months ended June 25, 2020.


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

(1)Represents the addition of one new affiliate which added 501 new screens to our network, offset by the loss of three of our affiliates that closed during the first six months of 2021 resulting in a reduction of 37 affiliate screens to our network as of July 1, 2021.

(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~~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 July 1, 2021 (second quarter of 2021) and June 25, 2020 (second quarter of 2020) and ~~June 27, 2019 (second quarter of 2019) and~~ the six months ended July 1, 2021 and June 25, 2020 and ~~June 27, 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

Second Quarter of ~~2020~~2021 and Second Quarter of ~~2019~~2020

Revenue. Total revenue ~~decreased 96.4%~~increased 250.0%, from ~~$110.2~~$4.0 million for the second quarter of ~~2019~~2020 to ~~$4.0~~$14.0 million for the second quarter of ~~2020.~~2021. The following is a summary of revenue by category (in millions):


					$ Change			% Change							$ Change		% Change
	Q2 2020		Q2 2019		Q2 2020 to Q2 2019			Q2 2020 to Q2 2019			Q2 2021		Q2 2020		Q2 2021 to Q2 2020		Q2 2021 to Q2 2020
National and regional advertising revenue	$	1.7	$	84.3	$	(82.6	)	(98.0	)%	National and regional advertising revenue	$	8.9	$	1.7	$	7.2	423.5	%
Local advertising revenue	2.3		17.7		(15.4		)	(87.0	)%	Local advertising revenue	3.0		2.3		0.7		30.4	%
Founding member advertising revenue from beverage concessionaire agreements	—		8.2		(8.2		)	(100.0	)%	Founding member advertising revenue from beverage concessionaire agreements	2.1		—		2.1		100.0	%
Total revenue	$	4.0	$	110.2	$	(106.2	)	(96.4	)%	Total revenue	$	14.0	$	4.0	$	10.0	250.0	%

The ~~Company did not include~~following table shows data on theater attendance and revenue per attendee ~~data~~ for the ~~second quarter~~three months ended July 1, 2021 and June 25, 2020:

% Change

Q2 2021

Q2 2020

Q2 2021 to Q2 2020

National and regional advertising revenue per attendee

0.181

Local advertising revenue per attendee

0.061

Total advertising revenue (excluding founding
member beverage revenue) per attendee

0.242

Total advertising revenue per attendee

0.285

Total theater attendance (in millions) (1)

49.1

0.2

________________________________________________________

(1)Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike theaters that were part of ~~2020 given the minimal amount of attendance and revenue as the metrics were not meaningful.~~another cinema advertising network for certain periods presented.

National and regional advertising revenue. The ~~$82.6~~$7.2 million, or ~~98.0%~~423.5%, ~~decrease~~increase in national and regional advertising revenue (excluding beverage revenue from founding members) was due to a significant increase in impressions sold and attendance as 97.0% of the theaters within our network were open and multiple major motion pictures were released during the second quarter of 2021 compared to the temporary closure of almost all of the theaters ~~within~~in our network in response to the COVID-19 Pandemic ~~and thus the Company's inability to perform~~ in ~~theater advertising during~~ the second quarter of 2020. ~~The national and regional advertising revenue recognized in the second quarter of 2020 was primarily related to revenue associated with our digital service offerings.~~

Local advertising revenue. The ~~$15.4~~$0.7 million, or ~~87.0%~~30.4%, ~~decrease~~increase in local advertising revenue was due primarily to the ability to generate onscreen advertising revenue in the second quarter of 2021, compared to the second quarter of 2020 as 97.0% of the theaters within our network were open and multiple major motion pictures were released during the second quarter of 2021 compared to the temporary closure of almost all of the theaters ~~within~~in our network in response to the COVID-19 Pandemic ~~and thus the Company's inability to perform~~ in ~~theater advertising during~~ the second quarter of 2020. ~~The local advertising revenue recognized in the second quarter of 2020 was primarily related to revenue associated with our digital service offerings.~~

Founding member beverage revenue. The ~~$8.2~~$2.1 million, or 100.0%, ~~decrease~~increase in national advertising revenue from the founding members’ beverage concessionaire agreements was due to the reopening of 98.8% of founding member theaters within our network and the release of multiple major motion pictures during the second quarter of 2021 compared to the temporary closure of ~~almost~~ all of the founding member theaters ~~within~~in our network in response to the COVID-19 Pandemic ~~and thus there not being any attendees upon which beverage revenue is based.~~during the second quarter of 2020.

Operating expenses. Total operating expenses ~~decreased~~increased $~~44.7~~15.8 million, or ~~61.7%~~56.8%, from ~~$72.5~~$27.8 million for the second quarter of ~~2019~~2020 to ~~$27.8~~$43.6 million for the second quarter of ~~2020.~~2021. The following table shows the changes in operating expense for the second quarter of ~~2020~~2021 (in millions):


					$ Change			% Change							$ Change		% Change
	Q2 2020		Q2 2019		Q2 2020 to Q2 2019			Q2 2020 to Q2 2019			Q2 2021		Q2 2020		Q2 2021 to Q2 2020		Q2 2021 to Q2 2020
Advertising operating costs	$	1.1	$	9.9	$	(8.8	)	(88.9	)%	Advertising operating costs	$	3.2	$	1.1	$	2.1	190.9	%
Network costs	1.6		3.4		(1.8		)	(52.9	)%	Network costs	1.9		1.6		0.3		18.8	%
Theater access fees and revenue share—founding members	—		21.6		(21.6		)	(100.0	)%	Theater access fees and revenue share—founding members	11.2		—		11.2		100.0	%
Selling and marketing costs	6.7		16.2		(9.5		)	(58.6	)%	Selling and marketing costs	8.9		6.7		2.2		32.8	%
Administrative and other costs	7.4		11.1		(3.7		)	(33.3	)%	Administrative and other costs	9.6		7.4		2.2		29.7	%
Impairment of long-lived assets	1.7		—		1.7			100.0	%	Impairment of long-lived assets	—		1.7		(1.7)		(100.0)	%
Depreciation expense	3.2		3.3		(0.1		)	(3.0	)%	Depreciation expense	2.6		3.2		(0.6)		(18.8)	%
Amortization of intangibles recorded for network theater screen leases	6.1		7.0		(0.9		)	(12.9	)%	Amortization of intangibles recorded for network theater screen leases	6.2		6.1		0.1		1.6	%
Total operating expenses	$	27.8	$	72.5	$	(44.7	)	(61.7	)%	Total operating expenses	$	43.6	$	27.8	$	15.8	56.8	%

Advertising operating costs. Advertising operating costs ~~decreased $8.8~~increased $2.1 million, or ~~88.9%~~190.9%, from ~~$9.9 million for the second quarter of 2019 to~~ $1.1 million for the second quarter of ~~2020.~~2020 to $3.2 million for the second quarter of 2021. The ~~decrease~~increase was due primarily to ~~an $8.3~~a $2.0 million ~~decrease~~increase in advertising affiliate ~~payments~~expense due to higher revenue in the ~~temporary closure~~second quarter of ~~almost all the affiliate theaters within our network in response~~2021 as compared to the ~~COVID-19 Pandemic~~second quarter of 2020 and the addition of a ~~$0.4 million decrease in personnel related expenses related to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic.~~new affiliate representing 501 screens during 2021.

Network costs. Network costs ~~decreased $1.8~~increased $0.3 million, or ~~52.9%~~18.8%, from ~~$3.4 million for the second quarter of 2019 to~~ $1.6 million for the second quarter of ~~2020.~~2020 to $1.9 million for the second quarter of 2021. The ~~decrease~~increase was primarily related to a ~~$1.3~~$0.4 million ~~decrease~~increase in personnel

~~related~~ expenses primarily related to the ~~Temporary Salary~~return of certain employees from furlough and ~~Wage Reductions~~restoration of hours and/or salaries of certain other employees from reductions that had been implemented at the beginning of the second quarter of 2020 in response to the COVID-19 Pandemic and a $0.3 million decrease in maintenance expenses 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 $21.6 million, or 100.0%,~~increased from ~~$21.6 million in the second quarter of 2019 to~~ $0.0 million in the second quarter of ~~2020.~~2020 to $11.2 million in the second quarter of 2021. The ~~decrease~~increase was due to there being theater attendance and active founding member screens in the ~~temporary closure~~second quarter of ~~almost~~2021, compared to closures of all the founding member theaters ~~within~~in our network in ~~response to~~ the ~~COVID-19 Pandemic. The Company did not owe the founding members any theater access fees as the theaters were not displaying the Company's pre-show and the Company did not have access to the theaters.~~second quarter of 2020.

Selling and marketing costs. Selling and marketing costs ~~decreased $9.5~~increased $2.2 million, or ~~58.6%~~32.8%, from ~~$16.2 million for the second quarter of 2019 to~~ $6.7 million for the second quarter of ~~2020.~~2020 to $8.9 million for the second quarter of 2021. This ~~decrease~~increase was primarily related to a ~~$6.1~~$1.9 million ~~decrease~~increase in personnel ~~related~~ expenses primarily related to the ~~Temporary Salary~~return of a portion of our sales and ~~Wage Reductions~~marketing departments from furlough and restoration of hours and/or salaries of certain other employees from reductions that had been implemented at the beginning of the second quarter of 2020 in response to the COVID-19 Pandemic, ~~as well as, a decrease~~an increase in commission ~~and bonus~~ expense ~~due~~related to ~~the~~higher revenue ~~declines in~~during the second quarter of ~~2020,~~2021, as compared to the second quarter of ~~2019. Selling~~2020, and ~~marketing costs also decreased $1.7 million related to 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, $1.1 million due to a decrease in barter expense and $0.7 million due to a decrease bad debt expense related to the revenue declines in the second quarter of 2020, as compared to the second quarter of 2019. These decreases were partially offset by a $0.6 million increase in expense associated with our Cinema Accelerator service offering for the second quarter of 2020, compared to the second quarter of 2019.higher share-based compensation expense.

Administrative and other costs. Administrative and other costs ~~decreased $3.7~~increased $2.2 million, or ~~33.3%~~29.7%, from ~~$11.1 million in the second quarter of 2019 to~~ $7.4 million in the second quarter of ~~2020.~~2020 to $9.6 million in the second quarter of 2021. This ~~decrease~~increase was primarily due to a ~~$3.5~~$2.5 million ~~decrease~~increase in personnel ~~related~~ expenses due to higher share-based compensation expense primarily from the ~~Temporary Salary~~issuance of equity grants in late 2020 and ~~Wage Reductions implemented in response~~early 2021, higher projected performance against internal bonus targets during the six months ended July 1, 2021 and due to ~~the COVID-19 Pandemic and~~ a decrease in ~~performance-based compensation expense accrued following lower projected performance against internal bonus and performance based restricted stock targets as~~capitalized personnel costs resulting from the nature of the work being performed by our technology department during the second quarter of ~~2020,~~2021, as compared to the second quarter of ~~2019.~~2020. Administrative and other costs also ~~decreased~~increased $0.5 million ~~due~~related to ~~a decrease~~cloud computing expense incurred in ~~consulting services~~the second quarter of 2021 related to the implementation of our new end-to-end order management and ~~$0.2 million lower CEO transition costs.~~scheduling system in January 2021. These ~~decreases~~increases were partially offset by a ~~$0.7~~$0.9 million ~~increase~~decrease in legal and professional ~~expenses~~fees primarily related to legal services obtained in the second quarter of 2020 related to the various implications of the COVID-19 Pandemic.

Impairment of long-lived assets. Impairment of long-lived assets ~~increased~~decreased $1.7 million, or 100.0%, from $1.7 million in the second quarter of 2020 to $0.0 million in the second quarter of ~~2019 to $1.7 million in the second quarter of 2020.~~2021. This ~~increase~~decrease in impairment expense was primarily related to the write-off of certain long-lived assets during the second quarter of 2020.

Depreciation expense. Depreciation expense decreased ~~$0.1~~$0.6 million, or ~~3.0%~~18.8%, from ~~$3.3 million for the second quarter of 2019 to~~ $3.2 million for the second quarter of ~~2020.~~2020 to $2.6 million in the second quarter of 2021, as assets became fully depreciated.

Amortization of intangibles recorded for network theater screen leases. Amortization of intangibles recorded for network theater screen leases ~~decreased $0.9~~increased $0.1 million, or ~~12.9%~~1.6%, from ~~$7.0 million for the second quarter of 2019, to~~ $6.1 million for the second quarter of 2020 ~~primarily due~~ to $6.2 million for the ~~four year extension of the contractual life of the intangible assets for Cinemark and Regal following the 2019 ESA Amendments during the third~~second quarter of ~~2019.~~2021.

Non-operating expenses. Total non-operating expenses ~~decreased $0.6~~increased $3.5 million, or ~~4.2%~~25.4%, from ~~$14.4 million for the second quarter of 2019 to~~ $13.8 million for the second quarter of ~~2020.~~2020 to $17.3 million for the second quarter of 2021. The following table shows the changes in non-operating expense for the second quarter of ~~2020~~2021 and the second quarter of ~~2019~~2020 (in millions):


							$ Change			% Change							$ Change		% Change
	Q2 2020			Q2 2019			Q2 2020 to Q2 2019			Q2 2020 to Q2 2019			Q2 2021		Q2 2020		Q2 2021 to Q2 2020		Q2 2021 to Q2 2020
Interest on borrowings	$	13.6		$	14.2		$	(0.6	)	(4.2	)%	Interest on borrowings	$	16.9	$	13.6	$	3.3	24.3	%
Interest income	(0.3		)	(0.5		)	0.2			(40.0	)%	Interest income	(0.1)		(0.3)		0.2		(66.7)	%
Loss on modification and retirement of debt, net	0.3			—			0.3			(100.0	)%	Loss on modification and retirement of debt, net	0.4		0.3		0.1		33.3	%
Loss on the re-measurement of the payable to founding members under the tax receivable agreement	0.1			0.8			(0.7		)	(87.5	)%	Loss on the re-measurement of the payable to founding members under the tax receivable agreement	0.1		0.1		—		—	%
Other non-operating expense (income)	0.1			(0.1		)	0.2			(200.0	)%	Other non-operating expense (income)	—		0.1		(0.1)		(100.0)	%
Total non-operating expenses	$	13.8		$	14.4		$	(0.6	)	(4.2	)%	Total non-operating expenses	$	17.3	$	13.8	$	3.5	25.4	%

The ~~decrease~~increase in non-operating expense was primarily due to a ~~$0.7~~$3.3 million ~~decrease in the loss on the re-measurement of the payable to founding members under the TRA due to a smaller~~ increase ~~in the deferred state tax rate in the second quarter of 2020, as compared to the second quarter of 2019, and a $0.6 million decrease~~ in interest on borrowings ~~due~~related to ~~a 0.83% decrease in~~ the ~~weighted average interest rate, partially offset by an~~issuance of the second tranche of the terms loans and the increase in the ~~weighted average balance~~contracted interest rate on the initial tranche of ~~debt outstanding for~~ the ~~second quarter of 2020, as compared to~~term loans and the ~~second quarter of 2019. These decreases were partially offset by a $0.3 million increase in the loss on modification and retirement of debt, net due to~~revolving credit facility following the Credit Agreement Second Amendment ~~that occurred in the second quarter of 2020 and a $0.2 million decrease in interest income~~entered into on ~~the Company's marketable securities due to a decrease in the rate of return and the outstanding balance of securities in the second quarter of 2020 as compared to the second quarter of 2019.~~March 8, 2021.

Income Tax Benefit. Income ~~Tax Benefit increased~~tax benefit decreased from ~~income tax expense of $2.3 million for the second quarter of 2019 to~~ income tax benefit of $4.2 million for the second quarter of ~~2020.~~2020 to $0.0 million of income tax benefit for the second quarter of 2021. The ~~increase~~decrease in income tax benefit was primarily due to the ~~decrease in pretax book income attributable~~full valuation allowance recorded against the Company’s deferred tax assets as of July 1, 2021 which reduced deferred tax expense to ~~NCM Inc. from income of $11.1~~$0.0 million for the second quarter of 2019 to loss of $18.0 million for the second quarter of 2020. This increase in income tax benefit was partially offset by an increase in income tax expense due to a much smaller increase in the deferred state tax rate during the second quarter of 2020, as compared to the second quarter of 2019.three months ended July 1, 2021.

Net Loss. Net loss increased ~~$22.7~~$8.9 million from ~~net income of $8.9 million for the second quarter of 2019 to~~ net loss of $13.8 million for the second quarter of ~~2020.~~2020 to $22.7 million for the second quarter of 2021. The increase in net loss was due to a ~~$61.5~~$5.8 million increase in operating loss, a $4.2 million decrease in income tax benefit and a $3.5 million increase in non-operating expense, partially offset by a ~~$31.7~~$4.6 million increase in net loss attributable to noncontrolling ~~interests, a $6.5 million increase in income tax benefit and a $0.6 million decrease in non-operating expenses.~~interests.

Six months ended July 1, 2021 and June 25, 2020 ~~and June 27, 2019~~

Revenue.Total revenue decreased ~~63.3%%~~71.8%, from ~~$187.1 million for the six months ended June 27, 2019 to~~ $68.7 million for the six months ended June 25, ~~2020.~~2020 to $19.4million for the six months ended July 1, 2021. The following is a summary of revenue by category (in millions):

Six Months Ended $ Change % Change
June 25, 2020 June 27, 2019 YTD 2020 to YTD 2019 YTD 2020 to YTD 2019
National and regional advertising revenue $ 51.5
$ 141.7
$ (90.2 ) (63.7 )%
Local advertising revenue 11.7
30.5
(18.8 ) (61.6 )%
Founding member advertising revenue from
beverage concessionaire agreements
5.5
14.9
(9.4 ) (63.1 )%
Total revenue $ 68.7
$ 187.1
$ (118.4 ) (63.3 )%


	Six Months Ended				$ Change		% Change
	July 1, 2021		June 25, 2020		YTD 2021 to YTD 2020		YTD 2021 to YTD 2020
National and regional advertising revenue	$	12.6	$	51.5	$	(38.9)	(75.5)	%
Local advertising revenue	4.2		11.7		(7.5)		(64.1)	%
Founding member advertising revenue from beverage concessionaire agreements	2.6		5.5		(2.9)		(52.7)	%
Total revenue	$	19.4	$	68.7	$	(49.3)	(71.8)	%

The following table shows data on theater attendance and revenue per attendee for ~~the~~ six months ended July 1, 2021 and June 25, ~~2020 and June 27, 2019:~~

2020:


	Six Months Ended				% Change			Six Months Ended				% Change
	June 25, 2020		June 27, 2019		YTD 2020 to YTD 2019			July 1, 2021		June 25, 2020		YTD 2021 to YTD 2020
National and regional advertising revenue per attendee	$	0.427	$	0.424	0.7	%	National and regional advertising revenue per attendee	$	0.200	$	0.427	(53.2)	%
Local advertising revenue per attendee	$	0.097	$	0.091	6.6	%	Local advertising revenue per attendee	$	0.067	$	0.097	(30.9)	%
Total advertising revenue (excluding founding member beverage revenue) per attendee	$	0.524	$	0.516	1.6	%	Total advertising revenue (excluding founding member beverage revenue) per attendee	$	0.267	$	0.524	(49.0)	%
Total advertising revenue per attendee	$	0.570	$	0.560	1.8	%	Total advertising revenue per attendee	$	0.308	$	0.570	(46.0)	%
Total theater attendance (in millions) (1)	120.6		334.0		(63.9	)%	Total theater attendance (in millions) (1)	62.9		120.6		(47.8)	%

________________________________________________________


~~(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.

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

National and regional advertising revenue. The ~~$90.2~~$38.9 million, or ~~63.7%~~75.5%, decrease in national and regional advertising revenue (excluding beverage revenue from founding members) was ~~primarily~~ due to ~~a 60.8%~~an 81.8% decrease in impressions sold due to the ~~temporary closure~~significant decrease in attendance from historical levels as a result of ~~almost all the~~fewer open theaters within our network, ~~in response to the COVID-19 Pandemic~~fewer motion picture releases and ~~thus the Company's inability to perform in theater advertising beginning in mid-March 2020 through the end~~a longer period of the second quarter of 2020. National advertising CPMs for the impressions delivered prior to the temporary theater closures also decreased 8.7% driven by a decrease in upfront and scatter market CPMs due to the churn of certain higher CPM deals that shifted to later in 2020 or did not return from 2019, that were replaced by lower CPM deals, as well as, a change in the mix of clients with a higher proportion of upfront clients and fewer higher CPM scatter market and content partner clients ingovernment mandated capacity restrictions during the six months ended ~~June 25, 2020, as~~July 1, 2021, compared to the six months ended June ~~27, 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.~~25, 2020.

Local advertising revenue. The ~~$18.8~~$7.5 million, or ~~61.6%~~64.1%, decrease in local advertising revenue was ~~primarily~~ due to ~~the temporary closure of almost all the~~fewer open theaters within our network, ~~in response~~fewer motion picture releases and a longer period of government mandated capacity restrictions during the six months ended July 1, 2021, compared to the COVID-19 Pandemic and thus the Company's inability to perform in theater advertising beginning in mid-March 2020 through the end of the second quarter of 2020. The decrease is also due to a decrease in the volume of contracts and the average contract value for the portion of the six months ended June 25, ~~2020 that the theaters were open, compared to the same time period during the six months ended June 27, 2019.~~2020.

Founding member beverage revenue. The ~~$9.4~~$2.9 million, or ~~63.1%~~52.7%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to a ~~64.0%~~51.2% decrease in founding member attendance for the six months ended ~~June 25, 2020,~~July 1, 2021, as compared to the six months ended June ~~27, 2019,~~25, 2020, due to the temporary ~~closure of almost all the theaters within our network in response~~theater closures and lower attendance described above related to the COVID-19 Pandemic.

Operating expenses.Total operating expenses decreased ~~$50.9~~ $10.3million, or ~~36.8%~~11.8%, from ~~$138.5 million for the six months ended June 27, 2019 to~~ $87.6 million for the six months ended June 25, ~~2020.~~2020 to $77.3million for the six months ended July 1, 2021. The following table shows the changes in operating expense for the six months ended July 1, 2021 and June 25, 2020 ~~and June 27, 2019~~ (in millions):


	Six Months Ended				$ Change			% Change			Six Months Ended				$ Change		% Change
	June 25, 2020		June 27, 2019		YTD 2020 to YTD 2019			YTD 2020 to YTD 2019			July 1, 2021		June 25, 2020		YTD 2021 to YTD 2020		YTD 2021 to YTD 2020
Advertising operating costs	$	7.3	$	17.2	$	(9.9	)	(57.6	)%	Advertising operating costs	$	4.7	$	7.3	$	(2.6)	(35.6)	%
Network costs	4.5		6.9		(2.4		)	(34.8	)%	Network costs	3.7		4.5		(0.8)		(17.8)	%
Theater access fees and revenue share—founding members	17.7		40.7		(23.0		)	(56.5	)%
Theater access fees—founding members										Theater access fees—founding members	14.3		17.7		(3.4)		(19.2)	%
Selling and marketing costs	20.6		31.4		(10.8		)	(34.4	)%	Selling and marketing costs	16.6		20.6		(4.0)		(19.4)	%
Administrative and other costs	17.2		21.8		(4.6		)	(21.1	)%	Administrative and other costs	19.8		17.2		2.6		15.1	%
Impairment of long-lived assets	1.7		—		1.7			100.0	%	Impairment of long-lived assets	—		1.7		(1.7)		(100.0)	%
Depreciation expense	6.4		6.6		(0.2		)	(3.0	)%	Depreciation expense	5.9		6.4		(0.5)		(7.8)	%
Amortization of intangibles recorded for network theater screen leases	12.2		13.9		(1.7		)	(12.2	)%	Amortization of intangibles recorded for network theater screen leases	12.3		12.2		0.1		0.8	%
Total operating expenses	$	87.6	$	138.5	$	(50.9	)	(36.8	)%	Total operating expenses	$	77.3	$	87.6	$	(10.3)	(11.8)	%

Advertising operating costs. Advertising operating costs decreased ~~$9.9~~$2.6 million, or ~~57.6%~~35.6%, from ~~$17.2 million for the six months ended June 27, 2019 to~~ $7.3 million for the six months ended June 25, ~~2020.~~2020 to $4.7 million for the six months ended July 1, 2021. The decrease was due primarily to a ~~$9.6~~$2.0 million decrease in advertising affiliate ~~payments~~expense due to lower revenue in the six months ended July 1, 2021 as compared to the six months ended June 25, 2020 due to the ~~temporary closure of almost all the affiliate theaters within our network in response to the~~ COVID-19 Pandemic ~~from mid-March through the end of the second quarter of 2020~~ and a $0.3 million decrease in personnel related expenses ~~related~~due to the ~~Temporary Salary and Wage~~Payroll Related Cost Reductions implemented in response to the COVID-19 ~~Pandemic.~~Pandemic which were in place for the full six months ended July 1, 2021, as compared to three of the six months ended June 25, 2020.

Network costs. Network costs decreased ~~$2.4~~$0.8 million, or ~~34.8%~~17.8%, from ~~$6.9 million for the six months ended June 27, 2019 to~~ $4.5 million for the six months ended June 25, ~~2020.~~2020 to $3.7 million for the six months ended July 1, 2021. The decrease was primarily related to a ~~$1.8~~$0.5 million decrease in personnel related expenses related to the ~~Temporary Salary and Wage~~Payroll Related Cost Reductions implemented in response to the COVID-19 Pandemic ~~and a decrease~~which were in ~~performance-based compensation expense accrued following an update~~place for the full six months ended July 1, 2021, as compared to ~~the Company's projected performance against internal bonus and performance based restricted stock targets during~~three of the six months ended June 25, 2020, ~~primarily caused by the adverse impact~~and a $0.1 million decrease related to non-essential operating expenditures, including employee travel that was suspended as part of the ~~COVID-19 Pandemic~~measures taken to reduce expenses and ~~a $0.4 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~~preserve cash during the COVID-19 Pandemic.

Theater access fees and revenue share—founding members. Theater access fees and revenue share decreased ~~$23.0~~$3.4 million, or ~~56.5%~~19.2%, from ~~$40.7 million for the six months ended June 27, 2019 to~~ $17.7 million for the six months ended June 25, 2020. The decrease was primarily due to a 64.0% decrease in founding member attendance for the six months ended June 25, 2020, as compared to six months ended June 27, 2019, due to the temporary closure of almost all the theaters within our network in response to the COVID-19 Pandemic. The Company did not owe the founding members any theater access fees for the period the theaters were not displaying the Company's pre-show and the Company did not have access to the theaters. These decreases were partially offset by $1.6 million of payments in the six months ended June 25, 2020 to ~~Cinemark and Regal as compensation for post-showtime advertising in accordance with the 2019 ESA Amendments and $0.5~~$14.3 million ~~increase~~ in the ~~expense associated with the~~six months ended July 1, 2021. Theater access fees and revenue share decreased $5.6 million due to a 51.2% decrease in founding member ~~digital screens that are connected~~attendance. The decrease due to ~~the DCN (nearly 100% of our screens as of June 25, 2020), including higher quality digital cinema projectors and related equipment,~~attendance was partially offset by a $1.3 million increase due to the annual 5%contractual rate increase ~~specified~~related to the fee for post-showtime attendance and digital screens and a $0.9 million increase due to an increase in active screens for the ~~ESAs.~~six months ended July 1, 2021, as compared to the six months ended June 25, 2020.

Selling and marketing costs. Selling and marketing costs decreased ~~$10.8~~$4.0 million, or ~~34.4%~~19.4%, from ~~$31.4 million for the six months ended June 27, 2019 to~~ $20.6 million for the six months ended June 25, ~~2020.~~2020 to $16.6 million for the six months ended July 1, 2021. This decrease was primarily related to a ~~$7.5~~$2.3 million decrease in personnel related expenses primarily due to the Temporary Salary and Wage Reductions implemented in response to the COVID-19 Pandemic, as well as, a decrease in commission and bonus expense due to the revenue declines in the six months ended June 25, 2020, as compared to the six months ended June 27, 2019. Selling and marketing costs also decreased $2.0 million related to non-essential operating expenditures, including marketing, training, 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 and a ~~$1.4~~$1.0 million ~~due to a~~ decrease in ~~barter~~bad debt expense ~~for~~related to lower revenue in the six months ended ~~June 25, 2020,~~July 1, 2021, compared to the six months ended June ~~27, 2019.~~25, 2020. Personnel expense also decreased $1.0 million primarily related to the Payroll Related Cost Reductions implemented in response to the COVID-19 Pandemic and a decrease in commission expense driven by the revenue declines during the six months ended July 1, 2021, as compared to the six months ended June 25, 2020. These decreases were partially offset by a $0.8 million increase in expense associated with our ~~Cinema Accelerator service offering~~digital offerings due to an increase in digital revenue for the six months ended ~~June 25, 2020,~~July 1, 2021, as compared to the six months ended June ~~27, 2019.~~25, 2020.

Administrative and other costs. Administrative and other costs ~~decreased $4.6~~increased $2.6 million, or ~~21.1%~~15.1%, from ~~$21.8 million for the six months ended June 27, 2019 to~~ $17.2 million for the six months ended June 25, ~~2020. Administrative and other costs decreased~~2020 to $19.8 million for the six months ended July 1, 2021. This increase was primarily due to a ~~$3.5~~$5.4 million increase in performance-based compensation expense following the modification of certain of the Company’s performance-based equity grants, issuance of new equity grants and higher projected performance against internal bonus targets during the six months ended July 1, 2021. This increase was partially offset by a $1.6 million decrease in salary and other personnel related expenses ~~due~~related to the ~~Temporary Salary and Wage~~Payroll Related Cost Reductions ~~implemented~~ in place during the six months ended July 1, 2021 in response to the COVID-19 Pandemic, ~~and~~ a $1.5 million decrease in ~~performance-based compensation expense accrued following lower projected performance against performance based restricted stock targets~~legal and professional fees for the six months ended July 1, 2021, as ofcompared to the six months ended June 25, 2020 ~~compared~~due in part to ~~June 27, 2019. Administrative~~legal services obtained in the second quarter of 2020 related to the various implications of the COVID-19 Pandemic and ~~other costs also decreased $0.7 million due to~~ a ~~decrease in consulting services and~~ $0.3 million ~~due~~decrease related to ~~lower CEO transition costs.~~reductions in non-essential operating expenditures, including employee travel that was suspended as part of the measures taken to reduce expenses and preserve cash during the COVID-19 Pandemic.

Impairment of long-lived assets. Impairment of long-lived assets ~~increased~~decreased $1.7 million, or 100.0%, from ~~$0.0 million in the six months ended June 27, 2019 to~~ $1.7 million in the six months ended June 25, ~~2020.~~2020 to $0.0 million in the six months ended July 1, 2021. This ~~increase~~decrease in impairment expense was primarily related to the write-off of certain long-lived assets during the second quarter of 2020.

Depreciation expense. Depreciation expense decreased ~~$0.2~~$0.5 million, or ~~3.0%~~7.8%, from ~~$6.6 million for the six months ended June 27, 2019 to~~ $6.4 million for the six months ended June 25, ~~2020.~~2020 to $5.9 million in the six months ended July 1, 2021, as assets became fully depreciated.

Amortization of intangibles recorded for network theater screen leases. Amortization of intangibles recorded for network theater screen leases ~~decreased $1.7~~increased $0.1 million, or ~~12.2%~~0.8%, from ~~$13.9 million for the six months ended June 27, 2019, to~~ $12.2 million for the six months ended June 25, 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 third quarter of 2019.~~

~~Non-operating expenses.~~ ~~Total non-operating expenses decreased $1.2 million, or 4.2%, from $28.5~~$12.3 million for the six months ended ~~June 27, 2019 to~~July 1, 2021.

Non-operating expenses. Total non-operating expenses increased $3.7 million, or 13.6%, from $27.3 million for the six months ended June 25, ~~2020.~~2020 to $31.0 million for the six months ended July 1, 2021. The following table shows the changes in non-operating expense for the six months ended July 1, 2021 and June 25, 2020 ~~and June 27, 2019~~ (in millions):


	Six Months Ended						$ Change			% Change			Six Months Ended				$ Change		% Change
	June 25, 2020			June 27, 2019			YTD 2020 to YTD 2019			YTD 2020 to YTD 2019			July 1, 2021		June 25, 2020		YTD 2021 to YTD 2020		YTD 2021 to YTD 2020
Interest on borrowings	$	27.2		$	28.6		$	(1.4	)	(4.9	)%	Interest on borrowings	$	31.6	$	27.2	$	4.4	16.2	%
Interest income	(0.5		)	(1.0		)	0.5			(50.0	)%	Interest income	(0.1)		(0.5)		0.4		(80.0)	%
Loss (gain) on modification and retirement of debt, net	0.3			(0.3		)	0.6			(200.0	)%
Loss on the re-measurement of the payable to founding members under the tax receivable agreement	0.3			1.5			(1.2		)	(80.0	)%
Other non-operating income	—			(0.3		)	0.3			(100.0	)%
Loss on modification and retirement of debt, net												Loss on modification and retirement of debt, net	0.8		0.3		0.5		166.7	%
(Gain) loss on re-measurement of the payable to founding members under the tax receivable agreement												(Gain) loss on re-measurement of the payable to founding members under the tax receivable agreement	(1.4)		0.3		(1.7)		(566.7)	%
Other non-operating expense												Other non-operating expense	0.1		—		0.1		100.0	%
Total non-operating expenses	$	27.3		$	28.5		$	(1.2	)	(4.2	)%	Total non-operating expenses	$	31.0	$	27.3	$	3.7	13.6	%

The ~~decrease~~increase in non-operating expense was primarily due to a ~~decrease of $1.4~~$4.4 million increase in interest on borrowings ~~due~~related to ~~a 0.66% decrease in~~ the ~~weighted average interest rate, partially offset by an~~issuance of the second tranche of the terms loans and the increase in the ~~weighted average balance~~contracted interest rate on the initial tranche of ~~debt outstanding for~~ the ~~six months ended June 25, 2020, as compared to~~term loans and the ~~six months ended June 27, 2019~~revolving credit facility and a ~~decrease of $1.2~~$0.5 million increase in the loss on modifications and retirements of debt, net resulting from the Credit Agreement Second Amendment entered into on March 8, 2021. These increases were partially offset by a $1.7 million increase in the gain on re-measurement of the payable to founding members under the ~~TRA~~Tax Receivable Agreement (“TRA”) due to a ~~smaller increase~~reduction in the payable to the founding members under the TRA following the recognition of certain deferred ~~state~~ tax ~~rate~~assets related to cancellation of debt income recognized for tax purposes in the ~~six months ended June 25, 2020 as compared to the six months ended June 27, 2019. These decreases were partially offset by a 1) $0.6 increase in the loss (gain) on modification and retirement~~first quarter of ~~debt, net primarily~~2021 related to the Credit Agreement Amendment that occurred in the second quarter of 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 $0.5 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 second quarter of 2020 as compared to the second quarter of 2019.Second Amendment.

Income Tax Benefit. Income ~~Tax Benefit increased~~tax benefit decreased from ~~income tax expense of $1.7 million for the six months ended June 27, 2019 to~~ income tax benefit of $4.6 million for the six months ended June 25, ~~2020.~~2020 to $0.0 million of income tax benefit for the six months ended July 1, 2021. The ~~increase~~decrease in income tax benefit was primarily due to the ~~decrease in pretax book income attributable~~full valuation allowance recorded against the Company’s deferred tax assets as of July 1, 2021 which reduced deferred tax expense to ~~NCM Inc. from income of $9.4~~$0.0 million for the six months ended June 27, 2019 to loss of $22.0 million for the six months ended June 25, 2020. This increase in income tax benefit was partially offset by an increase in income tax expense due to a much smaller increase in the deferred state tax rate for the six months ended June 25, 2020 as compared to the six months ended June 27, 2019.July 1, 2021.

Net Loss. Net loss increased ~~$25.3~~$24.6 million from ~~net income of $7.8 million for the six months ended June 27, 2019 to~~ net loss of $17.5 million for the six months ended June 25, ~~2020.~~2020 to $42.1 million for the six months ended July 1, 2021. The increase in net loss was due to a ~~$67.5~~$39.0 million increase in operating loss, a $4.6 million decrease in income tax benefit and a $3.7 million increase in non-operating expense, partially offset by a ~~$34.7~~$22.7 million increase in net loss attributable to noncontrolling ~~interests, a $6.3 million increase in income tax benefit and $1.2 million decrease in non-operating expenses.~~interests.

Known Trends and Uncertainties

COVID-19—As discussed within the '‘Recent Developments'’ section, due to the COVID-19 Pandemic certain theaters within the ~~Company was unable~~Company’s network remained temporarily closed during the six months ended July 1, 2021 and the Company's ability to advertise inwithin the opened theaters has been and will continue to be limited due to reduced movie schedules and patron capacities at many network theaters and ~~thus generate~~ the ~~majority~~timing and frequency of ~~its revenue, for~~new major motion picture releases as compared to prior years due to the ~~three months ended June 25, 2020 and for the remaining duration of time that the theaters are generally closed. The Company's~~COVID-19 Pandemic. Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens ~~and~~and/or revenue, and ~~were~~therefore, are not incurred ~~for three months ended June 25, 2020~~when theaters are closed and attendance-based fees will ~~not~~ be ~~incurred~~reduced for the ~~duration the theaters are closed.~~period of time that attendance is lower than historical levels.

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~~the COVID-19 Pandemic’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 June 25, 2020 have been incorporated within the Company's financial statements.

Beverage Revenue—Under the ESAs, up to 90 seconds of the ~~Noovie~~Noovie® pre-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 six months of ~~2020~~2021 and ~~2019,~~2020, 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. ~~The~~Per the ESA with AMC, the time sold to the founding member beverage supplier ~~for AMC~~ is priced equal to the greater of (1) the advertising CPM charged by NCM LLC in the previous year for the time sold to the founding member beverage supplier and (2) the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of the Noovie pre-show in the founding member’s theaters, limited to the highest advertising CPM being then-charged by NCM ~~LLC, which in 2019 decreased 0.3%. Thus, the~~LLC. The CPM on our beverage concessionaire revenue related to AMC in ~~2020 will decrease by 0.3%~~2021 did not change compared to ~~2019.~~2020. Beginning in 2020 and in accordance with the 2019 ESA Amendments, the price for the time sold to Cinemark and Regal's beverage suppliers

instead increased at a fixed rate of 2.0%. ~~The Company will not recognize any beverage revenue for the period of time that our founding members' theaters are closed due~~Founding member attendance has been and may continue to ~~the COVID-19 Pandemic. Further, attendance may~~ be lower than historical levels following the re-opening of theaters due to the COVID-19 Pandemic, which could reduce the 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 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 not displaying the Company's pre-show or when the Company does not have access to the theaters. As such, the Company did not owe these fees for the three months ended June 25, 2020 and will not owe these fees during the duration a founding member's theaters are closed in connection with the COVID-19 Pandemic.closed. The digital screen fee is calculated based upon ~~average~~ screens in use during each month. No digital screen fees ~~were incurred for the three months ended June 25, 2020 and no fees~~ will be incurred for the months where ~~no screens are~~a screen is not in use and fees ~~will~~may be reduced for months where screens are in use for only part of the month. Further, founding member 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 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~~loans and the Notes due 2026 and Notes due 2028, income tax payments, TRA payments to NCM LLC’s founding members and amount of quarterly dividends to NCM, Inc.’s common stockholders.

As ~~a result of~~discussed within the ‘Recent Developments’ section, due to the COVID-19 Pandemic, ~~discussed~~certain theaters within the ~~'Recent Developments' section above, we cannot generate revenue, other~~Company’s network remained temporarily closed during the six months ended July 1, 2021 and the Company's ability to advertise within the reopened theaters has been and may continue to be limited due to lower than ~~revenue associated with our digital service offerings, while~~historical levels of attendance due in part to reduced movie schedules and patron capacities at many network theaters and the ~~theaters within our network are temporarily closed. With~~timing and frequency of major motion picture releases as compared to prior years due to the ~~exception of collecting accounts receivable balances outstanding as of March 26, 2020, the~~COVID-19 Pandemic. The Company ~~has~~will have limited cash receipts until ~~after the theaters reopen.~~attendance levels normalize and advertising revenue increases. Further, once ~~theaters re-open,~~the above conditions are met there will be a lag between when revenue is generated ~~at those theaters~~ and when the Company ultimately collects the associated accounts receivable balance. The Company also had reduced cash payments during the period when theaters within the ~~theaters are~~Company's network were closed or attendance levels were low as expenses related to theater attendance ~~are~~

were either not incurred or incurred at lower levels (i.e. theater access fees, Platinum Spot revenue share and network affiliate revenue share payments). As 97.0% of the theaters within our network were open as of July 1, 2021, the screen-based portion of these expenses is expected to return to historical levels during the third quarter of 2021 and the attendance-based portion of these expenses is expected to increase as attendance increases following the upcoming releases of many major motion pictures. The Company also implemented ~~a number of~~the following cost-saving measures in order to preserve cash at the start of the COVID-19 Pandemic, and those measures remain in place as ~~further outlined within~~of the ~~'Recent Developments' section above.~~ filing date:

•During the six months ended July 1, 2021, 45%-75% of our current employee base continued to be furloughed or had salary reductions of up to 50%. Further, since the start of the COVID-19 Pandemic our total headcount has been reduced by over 30% from pre-COVID-19 Pandemic headcount levels.

•Temporarily reduced cash compensation of the Company's Board of Directors by 20% and offered the option for the Board to receive the cash retainers for the first, second and third quarter in equivalent value of the Company’s common stock in lieu of cash;

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

•Temporarily suspended the 401K employee match program;

•Terminated or deferred certain non-essential capital expenditures;

•Strategically worked with our vendors, and 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 for the first three quarters of 2020 and to $0.05 for the fourth quarter of 2020 and first and second quarters of 2021 from $0.19 per share in the fourth quarter of 2019. When compared to the first quarter of 2020 this results in a cash savings of $10.8 million in the second quarter of 2021 and cash savings of $52.4 million for NCM, Inc. since the beginning of the pandemic; and

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

Due to the future market uncertainties and in order to provide additional liquidity while revenue levels build and accounts receivable balances are collected, the Board of Directors of NCM, Inc. and required NCM LLC founding members approved the material terms of a $20 million unsecured revolving loan agreement between NCM Inc. and NCM LLC. Borrowings by NCM LLC will be available from October 1, 2021 through March 31, 2022. The final definitive loan agreement will be approved by the Audit Committee of NCM, Inc. and is expected to be completed in the third quarter of 2021. Once entered into, this revolving loan facility will provide NCM LLC with short-term working capital loans as NCM LLC rebuilds its advertising revenue base and collects related accounts receivable and will provide additional cushion with respect to the NCM LLC debt covenants.

In March 2020, we drew down an additional $110.0 million on our revolving credit ~~facility. Further, as of~~facility and in March ~~26, 2020,~~2021 we ~~had approximately $112.3~~received $43.0 million of trade accounts receivable outstanding from customers, of which we have collected approximately $89.7 million as of June 25, 2020, increasing our cash and marketable securities balance to $249.9 million as of June 25, 2020 ($168.1 million at NCM LLC) and reducing trade accounts receivable to $25.3 million.in proceeds under incremental term loans that mature on December 20, 2024. The ~~$168.1~~$98.2 million of cash at NCM LLC as of July 1, 2021 will be used to fund operations during the period of expected reduced cash flows. Cash at NCM, Inc. ~~cannot be used to fund operations at NCM LLC and~~ 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. ~~Further, from the approximate $25.3 million of trade accounts receivable outstanding from customers as of June 25, 2020, we have collected approximately $12.0 million as of July 31, 2020.~~

In accordance with the Credit Agreement ~~Amendment~~amendment entered into ~~in order to obtain a waiver of~~ on April 30, 2020 (“the ~~financial covenants~~Credit Agreement First Amendment”) and the Credit Agreement Second Amendment, for the period beginning in the second quarter of 2020 through the ~~second~~date that NCM LLC delivers a compliance certificate for the third quarter of ~~2021,~~2022, NCM LLC must maintain a ~~total~~minimum liquidity balance of $55.0 million consisting of a combination of unrestricted cash on hand and availability under NCM LLC's revolving credit facility. ~~Management believes that cash on hand following~~As of July 1, 2021, NCM LLC was in compliance with the ~~additional draw down on the revolving credit facility and collection~~requirements of the ~~accounts receivable balance,~~Credit Agreement, as well as future funds generated from NCM LLC’s operations once theaters re-open should be sufficient to fund working capital requirements, NCM LLC’s debt service requirements and capital expenditures through at least the next twelve months.amended.

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


	As of						$ Change		$ Change
	July 1, 2021		December 31, 2020		June 25, 2020		Q2 2021 to YE 2020		Q2 2021 to Q2 2020
Cash, cash equivalents and marketable securities (1)	$	149.0	$	181.8	$	249.9	$	(32.8)	$	(100.9)
NCM LLC revolver availability (2)	5.6		4.4		4.4		1.2		1.2
Total liquidity	$	154.6	$	186.2	$	254.3	$	(31.6)	$	(99.7)

_________________________

(1)

As of $ Change $ Change
June 25, 2020 December 26, 2019 June 27, 2019 Q2 2020 to YE 2019 Q2 2020 to Q2 2019
Cash, cash equivalents and marketable securities (1)
$ 249.9
$ 80.9
$ 61.7
$ 169.0
$ 188.2
NCM LLC revolver availability (2)
4.4
132.4
143.2
(128.0 ) (138.8 )
Total liquidity $ 254.3
$ 213.3
$ 204.9
$ 41.0
$ 49.4

~~_________________________~~Included in cash, cash equivalents and marketable securities as of July 1, 2021, December 31, 2020 and June 25, 2020, was $98.2 million, $123.9 million and $168.1 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.


~~(1)~~	Included in cash, cash equivalents and marketable securities as of June 25, 2020, December 26, 2019 and June 27, 2019, was $168.1 million, $11.4 million and $4.6 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 June 25, 2020, December 26, 2019 and June 27, 2019. As of June 25, 2020, December 26, 2019 and June 27, 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 $27.0 million, respectively, and net letters of credit of $3.6 million, $3.6 million and $4.8 million, respectively.

(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 July 1, 2021, December 31, 2020 and June 25, 2020. As of July 1, 2021, December 31, 2020 and June 25, 2020, 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, $167.0 million and $167.0 million, respectively, and net letters of credit of $2.4million, $3.6 million and $3.6 million, respectively.

As of ~~June 25, 2020,~~July 1, 2021, the weighted average remaining maturity of our debt was ~~6.0~~4.9 years. As of ~~June 25, 2020,~~July 1, 2021, approximately ~~59%~~57% of our total borrowings bear interest at fixed rates. The remaining ~~41%~~43% 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.

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

Six Months Ended
June 25, 2020 June 27, 2019
Operating cash flow $ 107.4
$ 59.3
Investing cash flow $ 15.5
$ 10.6
Financing cash flow $ 66.6
$ (68.5 )

•

~~Operating Activities.~~ The $48.1 million increase in cash provided by operating activities for the six months ended June 25, 2020, compared to the six months ended June 27, 2019 was primarily due to a $122.3 million larger decrease in the accounts receivable balance during the six months ended June 25, 2020, as compared to the six months ended June 27, 2019, related to the collection of the accounts receivable balance and a decrease in


	Six Months Ended
	July 1, 2021		June 25, 2020
Operating cash flow	$	(61.6)	$	107.4
Investing cash flow	$	(2.9)	$	15.5
Financing cash flow	$	31.6	$	66.6

~~revenue described above and~~•Operating Activities. The $169.0 million increase in cash used in operating activities for the six months ended July 1, 2021, compared to the six months ended June 25, 2020 was primarily due to a ~~$13.9~~$142.9 million decrease in accounts receivable collections during the ~~payment~~six months ended July 1, 2021, as compared to the six months ended June 25, 2020, a $47.3 million increase in consolidated net loss and a $9.6 million decrease in founding ~~members under the TRA~~member integration and other encumbered theater payments. These decreases were due to the postponement of the original due date for the Company's U.S. federal income tax return to July 15, 2020 from April 15, 2020. These increases in cash provided by operating activities were partially offset by 1) a $60.0 million decrease in consolidated net income due the temporary closure of ~~almost all~~ the theaters within our network in response to the COVID-19 Pandemic 2)resulting in significantly decreased revenue and negative Adjusted OIBDA, from which integration payments are calculated. These decreased cash inflows were partially offset by a ~~$9.0~~$18.9 million ~~larger~~ decrease in accounts payable and accrued expenses payments due in part to the cash preservation actions taken by the Company to mitigate the impact of the COVID-19 Pandemic and an $8.5 million increase in amounts due to founding members for the six months ended July 1, 2021, as compared to the six months ended June 25, 2020 due to the increase in theater access fees, net of beverage discussed above.

•Investing Activities. The $18.4 million increase in cash used in investing activities for the six months ended July 1, 2021, compared to the six months ended June 25, 2020 was primarily due to a $20.7 million decrease in proceeds from the sale of marketable securities, net of purchases. This decrease was partially offset by a $2.3 million decrease in purchases of property and equipment in 2021, compared to 2020 due to the cash preservation actions taken by the Company to mitigate the impact of the COVID-19 Pandemic.

•Financing Activities. The $35.0 million decrease in cash provided by financing activities for the six months ended July 1, 2021, compared to the six months ended June 25, 2020 was primarily due to a $128.0 million decrease in proceeds from the revolving credit facility, net of repayments, and a $5.5 million increase in the payment of debt issuance costs related to Credit Agreement Second Amendment executed in the first quarter of 2021. These decreases were partially offset by a $50.0 million increase in the issuance of term loans, a $36.8 million decrease in distributions to founding members in the six months ended July 1, 2021, compared to the six months ended June 25, 2020, and a $12.2 million decrease in dividends paid related to the decrease in the dividend amounts declared from $0.26 per share during the six months ended June 25, 2020 ~~as compared~~ to $0.10 per share during the six months ended June 27, 2019, related to the decrease in operating expenses for the corresponding periods as described above, 3) a $7.3 million decrease in deferred income tax expense and the loss on re-measurement of the payable to founding members under the TRA primarily due to the Company recognizing an income tax benefit in the six months ended June 25, 2020 driven by the Company's consolidated net loss for the period, 4) a $6.9 million decrease in the amounts due to founding members, 5) a $3.3 million decrease in deferred revenue and 6) a $2.5 million decrease in non-cash share-bared compensation expense primarily related to a decrease in performance-based compensation expense accrued following lower projected performance against performance based restricted stock targets as of June 25, 2020, compared to June 27, 2019.

•

~~Investing Activities.~~ The $4.9 million increase in cash provided by investing activities for the six months ended June 25, 2020, compared to the six months ended June 27, 2019 was primarily due to a $4.7 million increase in proceeds from the sale of marketable securities, net of purchases and a $1.6 million decrease in purchases of property and equipment for the six months ended June 25, 2020, compared to the six months ended June 27, 2019 driven by the Company's measures to preserve cash in response to the COVID-19 Pandemic, partially offset by a $1.4 million decrease in proceeds from the founding member notes receivable.July 1, 2021.

•

~~Financing Activities.~~ The $135.1 million increase in cash provided by financing activities for the six months ended June 25, 2020, compared to the six months ended June 27, 2019 was primarily due to a $128.0 million increase in proceeds from our revolving credit facility, net of repayments 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 $6.2 million decrease in dividends paid related to the a decrease in the dividend amount declared from $0.17 in the second quarter of 2019 to $0.07 in the second quarter of 2020, and the absence of a $4.6 million repurchase of the retired Notes due 2026 that occurred in the first quarter of 2019. These increases were partially offset by a $2.8 million increase in distributions to founding members in the six months ended June 25, 2020, compared to the six months ended June 27, 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 ~~June 25, 2020~~July 1, 2021 were ~~$81.8~~$50.8 million (excluding $98.2 million of cash held by 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 and received net proceeds of $43.0 million from incremental terms loans in March 2021 in order to supplement the decrease in cash provided by operating activities during the period during which a portion or all of our network theaters are closed. The ~~$168.1~~$98.2 million of cash at NCM LLC will be used to fund operations during the period of expected reduced cash flows. Cash at NCM, Inc. ~~cannot be used to fund operations of NCM LLC and~~ 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. Further, as of June 25, 2020, we had approximately $25.3 million of trade accounts receivable from customers, of which we have collected approximately $12.0 million as of July 31, 2020. Management believes that cash on hand following the additional draw down on the revolving credit facility, collection of the $25.3 million trade accounts receivable balance at June 25, 2020, as well as future funds generated from NCM LLC’s operations once theaters re-open should be sufficient to fund working capital requirements, NCM LLC’s debt service requirements and capital expenditures through at least the next twelve months.

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, 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. As of June 25, 2020, NCM LLC was in compliance with the requirements of the Credit Agreement Amendment.~~

Cash flows generated by NCM LLC’s distributions to NCM, Inc. and the founding members will be impacted by the temporary closure of our network theaters 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~~September 29, 2022 or longer if NCM LLC is not in compliance with the ~~limitations instituted by~~following limitations: (i) no default or event of default under the Credit Agreement ~~Amendment.~~has occurred and is continuing; (ii) the senior secured financial covenant leverage ratio is equal to or less than 4.00 to 1.00; and (iii) the aggregate principal amount of all outstanding revolving loans under the Credit Agreement is $39.0 million or less. 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 ~~June 25, 2020~~July 1, 2021 was calculated as approximately negative ~~$30.0~~$39.2 million, of which ~~approximately $14.4 million was with~~ NCM, Inc.'s share is approximately negative $18.9 million. The available cash distribution to the members of NCM LLC for the six months ended July 1, 2021 was calculated as approximately negative $70.1 million, of which NCM, Inc.'s share is approximately negative $33.8 million. Further there was $85.9 million of negative available cash generated during 2020. Pursuant to the NCM LLC Operating Agreement and the Credit Agreement ~~Amendment,~~amendments, there will be no available cash distributions made for the third quarter of 2021. Negative available cash

distributions for the first and second quarter of ~~2020. These second quarter of 2020~~2021 and the negative available cash ~~distributions~~from 2020 are expected to be netted in accordance with the NCM LLC Operating Agreement against ~~any~~future positive available cash ~~distribution related to~~distributions after the ~~second quarter of 2021, to be paid in~~Extended Covenant Waiver Holiday, contingent upon the ~~third quarter of 2021, if the Company is in~~Company's compliance with the covenants outlined within the Credit Agreement Second Amendment ~~requirements noted above~~defined within Note 6—Borrowings and ~~sufficient positive available cash is generated.~~in accordance with the NCM LLC Operating Agreement.

NCM, Inc. expects to use its cash balances and cash received from future available cash distributions (as allowed for under the Amended Credit Agreement) to fund income taxes, ~~payments~~pay associated with the TRA with the founding members, ~~including~~fund the ~~TRA payment of $12.8 million made on July 15, 2020,~~unsecured revolving loan to NCM LLC, and pay current and future dividends as declared by the Board of Directors, including a dividend declared on August ~~3, 2020~~9, 2021 of ~~$0.07~~$0.05 per share (approximately ~~$5.5~~$4.1 million) on each share of the Company’s common stock (not including outstanding restricted stock) to stockholders of record on August ~~17, 2020~~23, 2021 to be paid on ~~August 31, 2020.~~September 6, 2021. These items should be sufficient to fund payments associated with the TRA with the founding members, income taxes and its quarterly dividend for the foreseeable future at the discretion of the Board of Directors. 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 substantially all its free cash 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 ~~temporary theater closures for the~~ COVID-19 Pandemic, ~~and~~ restrictions under the NCM LLC Credit ~~Agreement.~~Agreement and the current availability and funding of the unsecured revolving loan agreement between NCM Inc. and NCM LLC.

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—Critical Accounting Policies” contained in our annual report on Form 10-K filed for the fiscal year ended December ~~26, 2019~~31, 2020 and incorporated by reference herein. As of ~~June 25, 2020,~~July 1, 2021, there were no significant changes in those critical accounting ~~policies except for the change in allowance for doubtful accounts upon the adoption of ASC 326 in the first quarter of 2020 and discussed further within Note 1—The Company, to the unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.~~policies.

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 ~~26, 2019~~31, 2020 and incorporated by reference herein. There were no material changes to our contractual obligations during the six months ended ~~June 25, 2020.~~July 1, 2021.

~~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. Historically, both advertising expenditures and theater attendance 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 2017, 2018 and 2019.~~

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter
FY 2017 16.9 % 22.8 % 27.3 % 33.0 %
FY 2018 18.2 % 25.8 % 24.9 % 31.1 %
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 2026 and the Notes due 2028 are at fixed rates, and therefore are not subject to market risk. As of ~~June 25, 2020,~~July 1, 2021, the only interest rate risk that we are exposed to is related to our $175.0 million revolving credit facility and our term ~~loan.~~loans. A 100-basis point fluctuation in market interest rates underlying our term ~~loan~~loans and revolving credit facility would have the effect of increasing or decreasing our cash interest

expense by approximately ~~$4.3~~$4.8 million for an annual period on the $167.0 million revolving credit balance, $261.9 million term loan and ~~$265.3~~$49.9 million incremental term loan outstanding as of ~~June 25, 2020.~~July 1, 2021.

In response to the COVID-19 Pandemic, the government lowered the Federal Reserve interest rate leading to historically low interest rates as of ~~June 25, 2020~~July 1, 2021 that has had the effect of reducing the Company's interest rate risk. If interest rates increase, this will increase 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 and financial officer), as appropriate, to allow timely decisions regarding required disclosure.

Management, with the participation of the Chief Executive 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 ~~June 25, 2020,~~July 1, 2021, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s Chief Executive Officer concluded that the Company’s disclosure controls and procedures as of ~~June 25, 2020~~July 1, 2021 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 ~~June 25, 2020~~July 1, 2021 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

~~Excluding the risk factors outlined below, there~~There have been no material changes from risk factors as previously disclosed in our annual report on Form 10-K filed with the SEC on ~~February 20, 2020~~March 8, 2021 for the fiscal year ended December ~~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,~~31, 2020.

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 our founding members and network affiliates, which has and could continue to materially affect our operations and results of operations.

Pandemics or disease outbreaks such as the novel coronavirus (COVID-19 virus) have and are continuing to disrupt our business and 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 precautionary restrictions on travel, public gatherings and other events. In response to these restrictions, each of our founding members announced that their theaters would be temporarily closed to address this pandemic and by the beginning of April all of our network affiliate’s theaters had also temporarily closed. As of June 25, 2020, almost all of the theaters within our network remained close and we were unable to advertise in the theaters that opened. Certain of our founding members have announced that they do not expect to open the majority of their theaters until later in 2020, and some of our other affiliates have indicated that they have opened and will either continue, or begin, to open theaters as legal restrictions ease. However, we cannot predict when all of our theaters will reopen, what type of restrictions may be in place once theaters reopen, when large audiences will feel comfortable returning to movie theaters or if theaters will eventually need to close again in connection with further social distancing guidelines.

Several major motion picture releases were delayed until later in 2020 or 2021 and a few studios shortened the “release window” between the release of motion pictures in theaters and an alternative delivery method or released motion pictures directly to alternative delivery methods bypassing the theater entirely. The COVID-19 Pandemic has also adversely affected film production and may adversely affect the pipeline of feature films available in the short or long term.

In response to the COVID-19 Pandemic, we implemented a number of cost-saving measures, including furloughing approximately 30% of our staff and reducing the pay of the remaining employees by up to 50%, suspending non-essential operating expenditures, including marketing, employee travel, implementing a hiring freeze, suspending the Company’s 401k employee match program, terminating or deferring certain non-essential capital expenditures, strategically working with our landlords, vendors and other business partners to manage costs, and implementing an active cash management process.

The impact, extent and duration of the government-imposed restrictions on travel, public gatherings, other events and business generally, as well as the overall effect of the COVID-19 virus is currently unknown but has had and is continuing to have a material adverse impact on our 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 an economic slowdown and consumers may be hesitant to return to theaters. We cannot predict when the effects of the COVID-19 Pandemic will subside when theaters will reopen and patrons are comfortable attending, or when our business will return to normal levels. The longer and more severe the pandemic, including repeat or cyclical outbreaks or increases in rates of infection such as the one we are currently experiencing, the more severe the adverse effects will be on our business, liquidity, financial conditions and/or results of operations. Significant impacts on our business caused by the COVID-19 Pandemic and other pandemics include and are likely to continue to include among others:

decreased attendance in 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 alternative forms of entertainment;

~~advertisers’ perception of cinema advertising may change based on future attendance, shortened theatrical windows, and 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 COVID-19 Pandemic;~~

advertisers may be unwilling to enter into upfront advertising arrangements with us or commit to allocate budgets to cinema advertising due to uncertainty regarding the opening of cinemas and the availability of other advertising options;

~~the bankruptcy or restructuring of our founding members or other network affiliates in which the agreement with that party may be rejected, renegotiated or deemed unenforceable;~~

~~an inability to collect accounts receivable from small business advertisers that have been temporarily or permanently closed;~~

~~reductions and delays associated with planned operating and capital expenditures;~~

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

~~potential impairment charges;~~

our ability to implement business continuity plans in a fast-moving emergency, which 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. Even if measures are not implemented and a virus or other disease does not spread significantly, the perceived risk of infection or health risk may adversely affect our business, liquidity, financial condition and results of operations.

Additionally, although we have sought certain benefits under the CARES ACT and are reviewing and intend to seek any other available benefits that would positively impact the Company under the CARES Act and associated regulations and any other government action, we cannot predict the manner in which such benefits will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all. Government or third-party program administrators may impose additional conditions and restrictions on our operations or may otherwise provide less relief than we expect. Our response to the COVID-19 Pandemic, including accessing potential benefits from the CARES Act, has required our management team to devote extensive resources and is likely to continue to do so in the near future, which may negatively affect our ability to implement our business plan and respond to opportunities.

To the extent the COVID-19 Pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in the “Risk Factors” section of our annual report on Form 10-K for the fiscal year ended December 26, 2019 and Form 10-Q filed with the SEC on May 5, 2020 the three months ended March 26, 2020, including but not limited to those relating to NCM LLC’s high level of indebtedness, the risks associated with the loss of major content partners or advertising clients, and reductions in spending on advertising.

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
April 2, 2021 through April 29,2021	3,711	$	4.52	—	N/A
April 30, 2021 through May 27, 2021	60,540	$	4.27	—	N/A
May 28, 2021 through July 1, 2021	—	$	—	—	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
March 27, 2020through April 23, 2020 —
$ —
—
N/A
April 24, 2020 through May 21, 2020 6,688
$ 3.14
—
N/A
May 22, 2020 through June 25, 2020 —
$ —
—
N/A

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

10.1	(1)	Amendment No. 2 to the Employment Agreement with Scott Felenstein
10.2	(2)	Transition, Separation and Release of Claims Agreement dated June 9, 2021, by and between National CineMedia, Inc. and Clifford E. Marks
10.3	(3)	Consulting Agreement, dated June 9, 2021, by and between National CineMedia, Inc. and CMarksCo, LLC
10.4	(4)	Amended and Restated Employment Agreement, dated June 9, 2021, by and between National CineMedia, Inc. and Scott Felenstein
31.1	*	Rule 13a-14(a) Certification of Chief Executive Officer and Interim PFO.
32.1	**	Certification of Chief Executive Officer and Interim PFO Pursuant to 18 U.S.C. Section 1350.
101.SCH	*	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 101)

Exhibit Reference Description

10.1 (1)
Amendment No. 1 to the Employment Agreement, dated as of April 30, 2020, by and between National CineMedia, Inc. and Scott Felenstein.
10.2 (2)
National CineMedia, Inc. 2020 Omnibus Plan.
10.3 (3)
Amendment No. 1 to the Credit Agreement, dated as of April 30, 2020, by and among National CineMedia, LLC, each lender party thereto, and JPMorgan Chase Bank, N.A., as administrative agent.
10.4 *
Amendment No. 1 to the Consulting Agreement, dated as of December 18, 2019, by and between National CineMedia, Inc. and Katherine L. Scherping.
10.5 *
Form of 2020 Stock Option Agreement. +
10.6 *
Form of 2020 Restricted Stock Unit Agreement (Time Based). +
10.7 *
Form of 2020 Restricted Stock Unit Agreement (Director). +
31.1 *
Rule 13a-14(a) Certification of Chief Executive Officer and Interim PFO.
32.1 **
Certification of Chief Executive Officer and Interim PFO Pursuant to 18 U.S.C. Section 1350.
101.SCH * 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 101)

__________________________________



*		Filed herewith.
**		Furnished herewith.
+(1)		~~Management contract.~~
~~(1)~~	Incorporated by reference to ~~Exhibit 10.1 to the Registrant's Current Report on for 8-K (File No. 001-33296) filed on May 1, 2020.~~
~~(2)~~	~~Incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on for 8-K (File No. 001-33296) filed on May 1, 2020.~~
~~(3)~~	~~Incorporated by reference to Exhibit~~Exhibits 10.1 to the Company’s current report on Form 8-K (File No. 001-33296) filed on May ~~5, 2020.~~6, 2021.
(2)		Incorporated by reference to Exhibits 10.1 to the Company’s current report on Form 8-K (File No. 001-33296) filed on June 10, 2021.
(3)		Incorporated by reference to Exhibits 10.2 to the Company’s current report on Form 8-K (File No. 001-33296) filed on June 10, 2021.
(4)		Incorporated by reference to Exhibits 10.3 to the Company’s current report on Form 8-K (File No. 001-33296) filed on June 10, 2021.

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:	August ~~3, 2020~~9, 2021	/s/ Thomas F. Lesinski
		Thomas F. Lesinski
		Chief Executive Officer and Director
		(Principal Executive Officer and Interim Principal Financial Officer)

4337



		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	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2321
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3834
Item 4.	Controls and Procedures	3835

	PART II

Item 1.	Legal Proceedings	3935
Item 1A.	Risk Factors	3935
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4035
Item 3.	Defaults Upon Senior Securities	4135
Item 4.	Mine Safety Disclosures	4135
Item 5.	Other Information	4136
Item 6.	Exhibits	4236

Signatures		4337



	As of
	June 25, 2020		December 26, 2019
Investment in AC JV, LLC (1)	$	0.9	$	0.9
Other investments	0.1		0.1
Total	$	1.0	$	1.0



	As of June 25, 2020				As of December 26, 2019
	Carrying Value		Fair Value (1)		Carrying Value		Fair Value (1)
Term loans	$	265.3	$	220.2	$	266.6	$	266.9
Notes due 2026	230.0		162.3		230.0		226.2
Notes due 2028	400.0		329.4		400.0		426.7



			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	$	—
Short-term marketable securities (2)	17.5		—		17.5		—
Long-term marketable securities (2)	7.5		—		7.5		—
Total assets	$	53.8	$	16.8	$	37.0	$	—



	As of June 25, 2020
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:
Short-term municipal bonds	$	0.3	$	0.3	0.1
Short-term certificates of deposit	1.2		1.2		0.4
Total short-term marketable securities	1.5		1.5

Long-term U.S. government agency bonds	1.0		1.0		3.7
Long-term certificates of deposit	2.0		2.0		3.3
Total long-term marketable securities	3.0		3.0
Total marketable securities	$	4.5	$	4.5



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