SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________

(Exact name of registrant as specified in its charter)

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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ☒x No ☐

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

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

☐

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

As of ~~November 2, 2017, 78,501,468~~July 31, 2019, 78,973,707 shares of the registrant’s common stock (including unvested restricted shares), par value of $0.01 per share, were outstanding.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)

(UNAUDITED)

Item 1. Financial Statements

Current portion of notes receivable - founding members (including receivables from related parties

of $2.8 and $4.2, respectively)

Payable to founding members under tax receivable agreement (including payables to related

parties of $11.1 and $11.2, respectively)

Payable to founding members under tax receivable agreement (including payables to related

parties of $133.7 and $141.1, respectively)

Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding,

Common stock, $0.01 par value; 175,000,000 shares authorized, 77,349,628 and 76,976,398 issued

and outstanding, respectively

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In millions, except share and per share data)

(UNAUDITED)

September 28,
2017

December 29,
2016

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$
30.4

$
23.0

Short-term marketable securities

3.7

26.1

Receivables, net of allowance of $6.0 and $6.3, respectively

118.4

160.5

Prepaid expenses

4.1

3.1

Income tax receivable

0.4

2.4

Current portion of notes receivable - founding members

4.2

5.6

Other current assets

0.5

0.4

Total current assets

161.7

221.1

NON-CURRENT ASSETS:

Property and equipment, net of accumulated depreciation of $69.3 and $64.1,
   respectively

29.2

29.6

Intangible assets, net of accumulated amortization of $138.8 and $118.9, respectively

732.6

560.5

Deferred tax assets

199.0

209.1

Long-term notes receivable, net of current portion - founding members

8.3

8.3

Other investments

3.6

6.6

Long-term marketable securities

15.8

19.6

Debt issuance costs, net

1.4

1.9

Other assets

1.8

0.7

Total non-current assets

991.7

836.3

TOTAL ASSETS

$
1,153.4

$
1,057.4

LIABILITIES AND EQUITY/(DEFICIT)

CURRENT LIABILITIES:

Amounts due to founding members

$
24.0

$
42.7

Payable to founding members under tax receivable agreement

15.9

18.4

Accrued expenses

22.4

19.6

Accrued payroll and related expenses

9.7

12.2

Accounts payable

14.0

17.4

Deferred revenue

5.7

10.3

Total current liabilities

91.7

120.6

NON-CURRENT LIABILITIES:

Long-term debt, net of debt issuance costs of $9.2 and $10.7, respectively

910.8

924.3

Deferred tax liability

68.2

48.3

Income tax payable

0.4

2.0

Payable to founding members under tax receivable agreement

144.2

143.4

Total non-current liabilities

1,123.6

1,118.0

Total liabilities

1,215.3

1,238.6

COMMITMENTS AND CONTINGENCIES (NOTE 7)

EQUITY/(DEFICIT):

NCM, Inc. Stockholders’ Equity/(Deficit):

Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and
   outstanding, respectively

—

—

Common stock, $0.01 par value; 175,000,000 shares authorized, 75,230,298 and
   59,874,412 issued and outstanding, respectively

0.8

0.6

Additional paid in capital/(deficit)

(111.6
)

(207.7
)
Retained earnings (distributions in excess of earnings)

(250.5
)

(215.6
)
Total NCM, Inc. stockholders’ equity/(deficit)

(361.3
)

(422.7
)
Noncontrolling interests

299.4

241.5

Total equity/(deficit)

(61.9
)

(181.2
)
TOTAL LIABILITIES AND EQUITY/DEFICIT

$
1,153.4

$
1,057.4

Theater access fees—founding members (including fees to related parties of

$14.5, $21.5, $27.4 and $42.1, respectively)

Loss (gain) on re-measurement of the payable to founding members under the tax

receivable agreement

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~

CASH FLOWS

(In millions) (UNAUDITED)

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

the tax receivable agreement

Founding member integration and other encumbered theater payments (including

payments from related parties of $0.6 in 2019)

Founding member integration and other encumbered theater payments (including

payments from related parties of $11.5 in 2018)

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)

Accrued integration and other encumbered theater payments due from founding members (including

accrued payments due from related parties of $0.2 and $5.3, respectively)

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)

Three Months Ended

Nine Months Ended

September 28,
2017

September 29,
2016

September 28,
2017

September 29,
2016

REVENUE (including revenue from founding members of
   $6.7, $7.6, $22.7 and $22.1, respectively)

$
116.4

$
113.5

$
285.4

$
305.1

OPERATING EXPENSES:

Advertising operating costs

8.9

7.5

21.4

20.8

Network costs

3.7

4.1

11.9

12.9

Theater access fees—founding members

18.1

19.2

57.4

56.8

Selling and marketing costs

17.2

16.8

54.2

54.5

Administrative and other costs

8.8

8.6

28.6

32.9

Depreciation and amortization

9.4

8.9

28.2

26.5

Total

66.1

65.1

201.7

204.4

OPERATING INCOME

50.3

48.4

83.7

100.7

NON-OPERATING EXPENSES:

Interest on borrowings

13.1

14.3

39.4

41.2

Interest income

(0.2
)

(0.3
)

(1.0
)

(1.3
)
Accretion of interest on the discounted payable to
   founding members under tax receivable agreement

3.2

3.4

9.5

10.4

Loss on early retirement of debt

—

10.4

—

10.4

Other non-operating income

—

—

(0.1
)

—

Total

16.1

27.8

47.8

60.7

INCOME BEFORE INCOME TAXES

34.2

20.6

35.9

40.0

Income tax expense (benefit)

2.3

(1.1
)

2.6

1.3

CONSOLIDATED NET INCOME

31.9

21.7

33.3

38.7

Less: Net income attributable to
   noncontrolling interests

22.5

13.5

27.4

28.0

NET INCOME ATTRIBUTABLE TO NCM, INC.

$
9.4

$
8.2

$
5.9

$
10.7

NET INCOME PER NCM, INC. COMMON SHARE:

Basic

$
0.15

$
0.14

$
0.10

$
0.18

Diluted

$
0.15

$
0.13

$
0.10

$
0.18

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic

63,993,273

59,846,496

61,637,445

59,763,012

Diluted

64,281,581

60,878,806

62,074,577

60,479,977

Dividends declared per common share

$
0.22

$
0.22

$
0.66

$
0.66

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In millions) (UNAUDITED)~~

Nine Months Ended

September 28,
2017

September 29,
2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Consolidated net income

$
33.3

38.7

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

Deferred income tax expense

4.1

3.8

Depreciation and amortization

28.2

26.5

Non-cash share-based compensation

8.3

13.7

Accretion of interest on the discounted payable to founding members
   under tax receivable agreement

9.5

10.4

Impairment on investment

3.1

0.7

Amortization of debt issuance costs

2.0

2.0

Redemption premium paid and write-off of debt issuance costs related to
   redemption of Senior Notes due 2021

—

10.4

Reversal of tax contingency reserve

(1.7
)

(2.9
)
Other

(0.2
)

(0.1
)
Changes in operating assets and liabilities:

Receivables, net

42.1

16.0

Accounts payable and accrued expenses

(1.7
)

(7.9
)
Amounts due to founding members

(0.4
)

(0.7
)
Payment to founding members under tax receivable agreement

(17.3
)

(23.5
)
Deferred revenue

(4.6
)

5.1

Income taxes and other

(0.7
)

(1.3
)
Net cash provided by operating activities

104.0

90.9

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(7.7
)

(9.0
)
Acquisition of a business

(0.2
)

—

Purchases of marketable securities

(21.7
)

(45.0
)
Proceeds from sale and maturities of marketable securities

48.4

50.5

Purchases of intangible assets from network affiliates

(1.7
)

(1.6
)
Proceeds from notes receivable - founding members

1.4

—

Net cash provided by (used in) investing activities

18.5

(5.1
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of dividends

(42.1
)

(41.4
)
Proceeds from borrowings under the revolving credit facility

60.0

105.0

Repayments of borrowings under the revolving credit facility

(75.0
)

(168.0
)
Proceeds from issuance of Senior Notes due 2026

—

250.0

Redemption of Senior Notes due 2021

—

(207.9
)
Payment of debt issuance costs

—

(4.7
)
Founding member integration and other encumbered theater payments

6.1

1.7

Distributions to founding members

(60.1
)

(42.2
)
Proceeds from stock option exercises

0.6

0.4

Repurchase of stock for restricted stock tax withholding

(4.6
)

(4.8
)
Net cash used in financing activities

(115.1
)

(111.9
)
CHANGE IN CASH AND CASH EQUIVALENTS

7.4

(26.1
)
Cash and cash equivalents at beginning of period

23.0

31.7

Cash and cash equivalents at end of period

$
30.4

$
5.6

Nine Months Ended

September 28,
2017

September 29,
2016

Supplemental disclosure of non-cash financing and investing activity:

Purchase of an intangible asset with NCM LLC equity
$
201.8

$
21.1

Accrued distributions to founding members
$
27.2

$
25.3

Purchase of subsidiary equity with NCM, Inc. equity
$
77.8

$
—

Decrease in dividends not requiring cash in the period
$
(1.3
)

$
(0.4
)
Increase in cost and equity method investments
$
—

$
2.0

Supplemental disclosure of cash flow information:

Cash paid for interest
$
34.9

$
38.0

Cash paid for income taxes, net of refunds
$
1.5

$
0.5

NCM, Inc.

Retained

Additional

Earnings

Paid in

(Distribution

Common Stock

Capital

in Excess of

Noncontrolling

Consolidated

Shares

Amount

(Deficit)

Earnings)

Interest

Balance—December 31, 2015

$
(171.7
)

59,239,154

$
0.6

$
(221.5
)

$
(186.1
)

$
235.3

Distributions to founding members

(35.2
)

—

—

—

—

(35.2
)
NCM LLC equity issued for purchase
   of intangible asset

21.1

—

—

9.2

—

11.9

Income tax and other impacts of NCM
   LLC ownership changes

(2.8
)

—

—

(4.2
)

—

1.4

Comprehensive income, net of tax

38.7

—

—

—

10.7

28.0

Share-based compensation issued

(4.4
)

614,652

—

(4.4
)

—

—

Share-based compensation
   expense/capitalized

14.0

—

—

9.4

—

4.6

Cash dividends declared $0.66 per share

(41.0
)

—

—

—

(41.0
)

—

Balance— September 29, 2016

$
(181.3
)

59,853,806

$
0.6

$
(211.5
)

$
(216.4
)

$
246.0

Balance—December 29, 2016

$
(181.2
)

59,874,412

$
0.6

$
(207.7
)

$
(215.6
)

$
241.5

Distributions to founding members

(47.4
)

—

—

—

—

(47.4
)
NCM LLC equity issued for purchase
   of intangible asset

201.8

—

—

78.8

—

123.0

Income tax and other impacts of NCM
   LLC ownership changes

(32.2
)

—

—

16.2

—

(48.4
)
Issuance of shares

77.8

14,600,000

0.2

77.6

—

—

NCM, Inc. investment in NCM LLC

(77.8
)

—

—

(77.8
)

—

—

Comprehensive income, net of tax

33.3

—

—

—

5.9

27.4

Share-based compensation issued

(4.0
)

755,886

—

(4.0
)

—

—

Share-based compensation
   expense/capitalized

8.6

—

—

5.3

—

3.3

Cash dividends declared $0.66 per share

(40.8
)

—

—

—

(40.8
)

—

Balance—September 28, 2017

$
(61.9
)

75,230,298

$
0.8

$
(111.6
)

$
(250.5
)

$
299.4

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~~company. NCM LLC is currently owned by NCM, Inc.~~, American Multi-Cinema, Inc. and AMC ShowPlace Theatres, Inc., wholly owned subsidiaries of AMC Entertainment, Inc. (“AMC”)~~, Regal Cinemas, Inc. and Regal CineMedia ~~Holdings, LLC,~~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. AMC, Regal, Cinemark and their affiliates are referred to in this document as “founding members”.

NCM LLC operates the largest ~~digital in-theater~~cinema advertising network reaching movie audiences in North America, allowing NCM LLC to sell advertising under long-term exhibitor services agreements (“ESAs”) with the founding members (approximately 1918 years remaining as of ~~September 28, 2017)~~June 27, 2019) and certain third-party theater circuits, referred to in this document as “network affiliates” under long-term network affiliate agreements, which ~~have terms from one to twenty years.~~

expire at various dates between September 2019 and July 2031. The weighted average remaining term (based on attendance) of the ESAs and the network affiliate agreements is 15.5 years as of June 27, 2019.

As of ~~September 28, 2017,~~June 27, 2019, NCM LLC had ~~154,069,410~~159,055,115 common membership units outstanding, of which ~~75,230,298 (48.8%~~77,349,628 (48.6%) were owned by NCM, Inc., ~~27,871,862 (18.1%~~41,770,669 (26.3%) were owned by Regal, 39,737,700 (25.0%) were owned by Cinemark ~~27,574,620 (17.9%) were owned by Regal~~ and ~~23,392,630 (15.2%~~197,118 (0.1%) were owned by AMC. The membership units held by the founding members are exchangeable into NCM, Inc. common stock on a one-for-one basis.

Basis of Presentation

The Company has prepared the unaudited Condensed Consolidated Financial Statements and related notes of NCM, Inc. in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain reclassifications have been made to the prior year's financial statements to conform to the current presentation (refer to the Condensed Consolidated Statements of Income and Condensed Consolidated Statement of Cash Flows, whereby the Company presented depreciation expense and amortization expense as two separate lines and refer to the Condensed Consolidated Statements of Income, whereby the Company presented loss (gain) on retirement of debt, net as a separate line). Accordingly, 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 ~~29, 2016~~27, 2018 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 ~~29, 2016.~~

27, 2018.

In the opinion of management, all adjustments necessary to present fairly in all material respects the financial position, results of operations and cash flows for all periods presented have been made. The Company’s business is seasonal and for this and other reasons operating results for interim periods may not be indicative of the Company’s full year results or future performance. As a result of the various related party agreements discussed in Note 4—5—Related Party Transactions, the operating results as presented are not necessarily indicative of the results that might have occurred if all agreements were with non-related third parties. The Company manages its business under one 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. 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 ~~29, 2016~~27, 2018 contain a complete discussion of the Company’s significant accounting policies. Following is additional information related to the Company’s accounting policies.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Concentration of Credit Risk and Significant Customers—Bad debts are provided for using the allowance for doubtful accounts method based on historical experience and management’s evaluation of outstanding receivables at the end of the period. Receivables arewritten off when management determines amounts are uncollectible. Trade accounts receivable are uncollateralized and represent a large number of geographically dispersed debtors. The collectability risk with respect to national and regional advertising isreduced by transacting with founding members or large, national advertising agencies ~~who~~that have strong reputations in the advertising industry and clients with stable financial positions. The Company has smaller contracts with thousands of local clients that are not individually significant. As of ~~September 28, 2017~~June 27, 2019 and December ~~29, 2016,~~27, 2018, there were no advertising agency groups or individual customers through which the Company sources national advertising revenue representing more than 10% of the Company’s outstanding gross receivable balance. During the three and ~~nine~~six months ended ~~September~~June 27, 2019 and June 28, ~~2017 and September 29, 2016,~~2018, the Company had no customers that accounted for more than 10% of revenue.

Share-Based Compensation—The Company has issued stock options and restricted stock to certain employees and restricted stock units to its independent directors. The Company has not granted stock options since 2012. In ~~2016~~2018 and ~~2017,~~2019, the restricted stock grants for Company ~~officers~~management vest upon the achievement of Company performance measures and/or service conditions, while ~~non-officer~~non-management grants vest only upon the achievement of service conditions. Compensation expense of restricted stock that vests 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 expected to vest. Ultimately, the Company adjusts the expense recognized to reflect the actual vested shares following the resolution of the performance conditions. Dividends are accrued when declared on unvested restricted stock that is expected to vest and are only paid with respect to shares that actually vest. During the three ~~and nine~~ months ended ~~September~~June 27, 2019 and June 28, ~~2017~~2018 and ~~September 29, 2016, 20,204, 15,492, 1,028,322~~the six months ended June 27, 2019 and ~~909,322~~June 28, 2018, 37,699, 19,357, 549,695 and 975,596 shares of restricted stock and restricted stock units vested, respectively. During the three and nine months ended September 28, 2017 and three and nine months ended September 29, 2016, 0, 7,078, 58,450 and 30,528 stock options were exercised at a weighted average exercise price of $0, $12.86, $11.04 and $12.98 per share, respectively.

Consolidation—NCM, Inc. consolidates the accounts of NCM LLC under the provisions of ASC 810,Consolidation (“(“ASC 810”). The following table presents the changes in NCM, Inc.’s equity resulting from net income attributable to NCM, Inc. and transfers to or from noncontrolling interests (in millions):

~~(1)~~

Subsequent to the issuance of the December 29, 2016 financial statements, an error was identified to the recording of related party balances between the Company and NCM LLC. As of September 28, 2017, the Company recorded an increase of approximately $3.6 million to its additional paid in capital balance and recorded an equivalent reduction to its noncontrolling interests equity balance related to the correction of out of period errors.

During the first quarter of ~~2017,~~2019, the Company adopted Accounting Standards Update ~~2016-07,~~ ~~Investments- Equity Method~~2016-2 and ~~Joint Ventures: Simplifying~~subsequent amendments, Leases (Topic 842) (together “ASC 842”) utilizing the ~~Transition to~~Comparatives Under 840 option where only the ~~Equity Method~~current period financial statements and related disclosures are presented in accordance with the new standard. As of ~~Accounting~~ ~~(“ASU 2016-07”) on a prospective basis. ASU 2016-07 eliminates~~ the ~~requirement to apply~~adoption date of December 28, 2018 the ~~equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment. The adoption of ASU 2016-07 did not have a material impact~~Company recognized the following on the unaudited Condensed Consolidated ~~Financial Statements or notes thereto.~~

~~In the first quarter of 2017, the Company adopted Accounting Standards Update 2016-17,~~ ~~Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control~~ ~~(“ASU 2016-17”) on a retrospective basis to all periods since its adoption of Accounting Standards Update 2015-02,~~ ~~Consolidation (Topic 810): Amendments to the Consolidation Analysis~~ ~~(“ASU 2015-02”) in the first quarter of 2016. ASU 2016-17 changes the evaluation of whether a~~

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that are under common control with the reporting entity. If a reporting entity satisfies the first characteristic of a primary beneficiary (such that it is the single decision maker of a variable interest entity), the amendments require that reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a variable interest entity and, on a proportionate basis, its indirect variable interests in a variable interest entity held through related parties, including related parties that are under common control with the reporting entity. The adoption of ASU 2016-17 did not have a material impact on the Condensed Consolidated Financial Statements or notes thereto.

~~Recently Issued Accounting Pronouncements~~

~~In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB revised the effective date for this standard to annual and interim periods beginning on or after December 15, 2017, with early adoption permitted, but not earlier than the original effective date of annual and interim periods beginning after December 15, 2016, for public entities. ASU 2014-09 allows for either a full retrospective or a modified retrospective transition method. The Company expects to adopt this guidance using the modified retrospective transition method during the first quarter of 2018. The Company expects to identify the same performance obligations under ASU 2014-09 as compared with deliverables and separate units of account previously identified. ASU 2014-09 will impact the accounting for barter transactions where the Company exchanges advertising time for products and services used principally for selling and marketing activities. The Company currently recognizes revenue for these transactions at the estimated fair value of the advertising exchanged based on the fair value received for similar advertising from cash paying customers. Under the new guidance, the Company expects to recognize revenue for these transactions based upon the fair value of the products and services received, rather than the value of the advertising provided. The Company has evaluated ASU 2014-09 and does not expect the effect of adopting this guidance to be material to the unaudited Condensed Consolidated Financial Statements, however, the Company does expect additional disclosures in its notes to the unaudited Condensed Consolidated Financial Statements. The Company intends to design and implement changes to certain processes and internal controls related to its adoption of ASU 2014-09.

~~In January 2016, the FASB issued Accounting Standards Update 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~ (“ASU 2016-01”), which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in earnings (rather than reported through other comprehensive income) and updates certain presentation and disclosure requirements. The guidance is effective for reporting periods (interim and annual) beginning after December 15, 2017, for public companies and should be adopted on a prospective basis. The Company is currently evaluating the impact that adopting this guidance will have on the unaudited Condensed Consolidated Financial Statements or notes thereto.

~~In February 2016, the FASB issued Accounting Standards Update 2016-02,~~ ~~Leases (Topic 842)~~ ~~(“ASU 2016-02”). ASU 2016-02 establishes~~Balance Sheets: a right-of-use (“ROU”) ~~model that requires~~asset of $21.7 million within 'Other assets', a ~~lessee to record a ROU asset and a~~short-term lease liability onof $1.4 million within Other current liabilities', a long-term lease liability of $24.5 million within 'Other liabilities' and reversed the related deferred rent liability balance ~~sheet~~of $4.2 million for all leases with terms longer than twelve ~~months. Leases~~months related to its building operating leases. The Company elected to utilize the following practical expedients: (i) not being required to separate lease and non-lease components when accounting for the lease for all asset classes; and (ii) not accounting for short-term leases under the new standard. The Company also determined that the ESA and affiliate agreements are considered leases under ASC 842. However, the identification of the asset and determination of the period of control is dependent upon the scheduling of the showtimes by the exhibitors. As the schedules are typically not determined until one week in advance of the showtime, on average, the leases are

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

considered short term in nature, specifically less than one month. As such, no ROU assets or lease liabilities were recognized for these agreements. The issuance of NCM LLC membership units to the founding members in accordance with NCM LLC’s Common Unit Adjustment Agreement and upfront cash payments to affiliates for the contractual rights to provide services within their theaters will continue to be classified as ~~either finance or~~intangible assets. However, the amortization of these intangible assets is now considered lease expense and has been reclassified within the current period from 'Depreciation and amortization expense' to 'Amortization of intangibles recorded for network theater screen leases' on the unaudited Condensed Consolidated Statement of Income. Additionally, these upfront cash payments to affiliates and receipt of integration payments from the founding members, as defined within Note 4 - Intangible Assets, will be considered cash flows from operating ~~with classification affecting~~activities on the ~~pattern~~unaudited Condensed Consolidated Statement of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital andCash Flows when incurred as they are related to operating leases ~~existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.~~and will be reclassified from cash flows from investing and financing activities, respectively. The Company ~~is currently evaluating~~has also incorporated additional disclosures in Note 8 - Commitments and Contingencies to comply with ASC 842.

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

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

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

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements (“ASU 2016-13”), which requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted and is to be adopted on a modified retrospective basis. The Company is currently evaluating the impact that adopting this guidance will have on the unaudited Condensed Consolidated Financial Statements or notes thereto.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

In August ~~2016,~~2018, the FASB issued Accounting Standards Update ~~2016-15,~~2018-13, Fair Value Measurement (Topic 820): ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement(“ (“ASU ~~2016-15”~~2018-13”), which ~~provides guidance~~modifies the disclosure requirements on ~~how certain cash receipts and cash payments are to be presented and classified in the statement of cash flows.~~fair value measurements. ASU ~~2016-15~~2018-13 is effective for fiscal years beginning after December 15, ~~2017,~~2019, including interim periods within those fiscal years, with partial early adoption ~~permitted. A retrospective transition~~permitted for eliminated disclosures. The method ~~should be used in~~of adoption varies by the ~~application of the amendments within ASU 2016-15. If retrospective application is considered impracticable, retrospective application may be used as of the earliest date practicable.~~disclosure. The Company is currently evaluating the impact that adopting this guidance will have on the ~~Condensed Consolidated Financial Statements or notes thereto.~~

~~In November 2016, the FASB issued Accounting Standards Update 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~ (“ASU 2016-18”), which requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include restricted cash and restricted cash equivalents. If restricted cash is presented separately from cash and cash equivalents on the balance sheet, companies will have to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet. Companies will also need to disclose information about the nature of the restrictions. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect the adoption of ASU 2016-18 to have a material impact on the unaudited Condensed Consolidated Financial Statements or notes thereto.

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

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, 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 promotions in theater lobbies. In addition, the Company sells online and mobile advertising through Cinema Accelerator and NCM's digital gaming products including Noovie ARcade,Fantasy Movie League and Noovie Shuffle, which can be played on the mobile apps or at Noovie.com. The Company also has a long-term agreement to exhibit the advertising of the founding members’ beverage suppliers.

The Company makes contractual guarantees to deliver a specified number of impressions to view the customers’ advertising. If the contracted number of impressions are not delivered, the Company will run additional advertising to deliver the contracted impressions at a later date. The deferred portion of the revenue associated with undelivered impressions is referred to as a make-good provision. The Company defers the revenue associated with the make-good until the advertising airs to the theater attendance specified in the advertising contract. The make-good provision is recorded within accrued expenses in the Condensed Consolidated Balance Sheet. As of June 27, 2019 and December 27, 2018, the Company had a make-good provision of $5.7 million and $8.0 million, respectively.

The Company has certain contracts with two-year terms that are noncancelable following a specified date within the contract period. The estimated revenue expected to be recognized in the future related to these contracted performance obligations that are unsatisfied (or partially unsatisfied) as of June 27, 2019, was $47.7 million, which is expected to be recognized in 2019. Agreements with a duration less than one year are not included within this disclosure as the Company elected to use the practical expedient in ASC 606-10-50-14 for those contracts. In addition, other of the Company’s contracts longer than one year that are cancelable are not included within this disclosure.

Disaggregation of Revenue

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

The following table summarizes revenue from contracts with customers for the three and six months ended June 27, 2019 and June 28, 2018:

Deferred Revenue and Unbilled Accounts Receivable

The changes in deferred revenue for the six months ended June 27, 2019 were as follows (in millions):

As of June 27, 2019 and December 27, 2018, the Company had $14.1 million and $6.0 million in unbilled accounts receivable, respectively.

3. EARNINGS PER SHARE

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Three Months Ended

Nine Months Ended

September 28,
2017

September 29,
2016

September 28,
2017

September 29,
2016

Net income attributable to NCM, Inc. (in millions)
$
9.4

$
8.2

$
5.9

$
10.7

Weighted average shares outstanding:

Basic

63,993,273

59,846,496

61,637,445

59,763,012

Add: Dilutive effect of stock options and
restricted stock

288,308

1,032,310

437,132

716,965

Diluted

64,281,581

60,878,806

62,074,577

60,479,977

Income per NCM, Inc. share:

Basic
$
0.15

$
0.14

$
0.10

$
0.18

Diluted
$
0.15

$
0.13

$
0.10

$
0.18

The effect of ~~90,069,881, 77,320,333, 87,769,713~~81,705,487, 80,660,822, 81,263,513 and ~~76,920,803~~79,467,022 weighted average exchangeable NCM LLC common units held by the founding members for the three ~~and nine~~ months ended ~~September~~June 27, 2019 and June 28, ~~2017~~2018 and ~~September 29, 2016,~~the six months ended June 27, 2019 and June 28, 2018, respectively, have been excluded from the calculation of diluted weighted average shares and ~~earnings~~loss per NCM, Inc. share as they were ~~antidilutive.~~anti-dilutive. NCM LLC common units do not participate in dividends paid on NCM, ~~Inc’s~~Inc.’s common stock. In addition, there were ~~935,912, 11,801, 433,224~~1,969,086, 2,323,154, 2,125,728 and ~~26,387~~2,493,613 stock options and non-vested (restricted) shares for the three ~~and nine~~ months ended ~~September~~June 27, 2019 and June 28, ~~2017~~2018 and ~~September 29, 2016,~~the six months ended June 27, 2019 and June 28, 2018, respectively, excluded from the calculation as they were ~~antidilutive.~~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.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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 ~~the~~ fair market value of NCM, Inc.’s publicly traded stock as of the date on which the common membership units were issued. The NCM LLC common membership units are fully convertible into NCM, Inc.’s common stock. 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.

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

During the first quarter of ~~2017,~~2019, NCM LLC issued ~~2,351,029~~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 ~~2016~~2018 fiscal ~~year. Also during the first quarter of 2017, NCM, Inc.~~year and ~~NCM LLC entered into a binding Memorandum of Understanding (“MOU”) with AMC to effectuate aspects of~~ a final judgment (the “Final Judgment”) entered into by the Department of Justice (the “DOJ”) in connection with AMC’s acquisition of Carmike Cinemas, Inc. (“Carmike”). Pursuant to the MOU, the Company issued ~~18,425,423 NCM LLC~~ ~~common membership units to AMC in respect of the annual attendance at such Carmike theaters in accordance with the Common Unit Adjustment Agreement during the first quarter of 2017.~~ ~~AMC’s acquisition of Carmike meets the criteria for a Common Unit Adjustment because it resulted in an extraordinary attendance increase of approximately 9.5%.~~ Further, the Final Judgment required AMC to transfer advertising rights to 17 theaters from NCM LLC to another advertising provider. Pursuant to the MOU, AMC surrendered 4,657,673 NCM LLC common membership units in respect of such theaters. The 4,657,673 NCM LLC common membership units were comprised of (i) 2,850,453 NCM LLC common membership units pursuant to the adjustment for divested theaters in the Common Unit Adjustment Agreement and (ii) an additional 1,807,220 NCM LLC common membership units valued at $25.0 million ~~to compensate for NCM LLC’s lost operating income for these theaters during the 10-year term of the Final Judgment~~. To facilitate the theater transfers, during the first quarter of 2017, AMC and Regal entered into an amendment of its ESA with NCM LLC and Cinemark entered into a waiver of certain rights under its ESA. NCM LLC recorded a net intangible asset of ~~$201.8~~$7.6 million during the first quarter of ~~2017 related to these transactions.~~

2019 as a result of the Common Unit Adjustment.

During the first quarter of ~~2016,~~2018, NCM LLC issued ~~1,416,515~~2,821,710 (3,736,860 issued, net of 915,150 returned) common membership units to its founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions by the founding members to NCM LLC’s network during the ~~2015~~2017 fiscal year and NCM LLC recorded a net intangible asset of ~~$21.1~~$15.9 million during the first quarter of ~~2016~~2018 as a result of the Common Unit Adjustment.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

arrears in accordance with certain run-out provisions pursuant to the ESAs (“integration payments”). Because the Carmike Cinemas, Inc. (“Carmike”) theaters acquired by AMC are subject to an existing on-screen advertising agreement with an alternative provider, AMC will make integration payments to NCM LLC. The integration payments will continue until the earlier of (i) the date the theaters are transferred to NCM LLC’s network or (ii) the expiration of the ESA. Integration payments are calculated based upon the advertising cash flow that the Company would have generated if it had exclusive access to sell advertising in the theaters with pre-existing advertising agreements. The ESA additionally entitles NCM LLC to payments related to the 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. During the three ~~and nine~~ months ended ~~September~~June 27, 2019 and June 28, ~~2017~~2018 and ~~September 29, 2016,~~the six months ended June 27, 2019 and June 28, 2018, the Company recorded a reduction to net intangible assets of ~~$6.9~~$5.7 million, ~~$0.7~~$5.6 million, ~~$11.6~~$8.1 million and ~~$1.5~~$7.8 million, respectively, related to integration and other encumbered theater payments. These payments received from AMC related to ~~their~~its acquisitions of theaters from Carmike and Rave Cinemas and from Cinemark related primarily to ~~their~~its acquisition of theaters from Rave Cinemas. During the three ~~and nine~~ months ended ~~September~~June 27, 2019 and June 28, ~~2017~~2018 and ~~September 29, 2016,~~the six months ended June 27, 2019 and June 28, 2018, AMC and Cinemark paid a total of ~~$4.6~~$2.5 million, ~~$0.7~~$2.2 million, ~~$6.1~~$10.6 million and ~~$1.7~~$11.5 million, respectively, in integration and other encumbered theater payments (as payments are made one quarter and one month in arrears, respectively). If common membership units are issued to a founding member for newly acquired theaters that are subject to an existing on-screen advertising agreement with an alternative provider, the amortization of the intangible asset commences after the existing agreement expires and NCM LLC can utilize the theaters for all of its services.

5. RELATED PARTY TRANSACTIONS

Founding Member Transactions—In connection with NCM, Inc.’s ~~initial public offering (“IPO”),~~IPO, the Company entered into several agreements to define and regulate the relationships among NCM, Inc., NCM LLC and the founding ~~members. They include~~members which are outlined below. As AMC owns less than 5% of NCM LLC as of June 27, 2019, AMC is no longer a related party. AMC remains a party to the ~~following:~~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 Common Unit Adjustment and receive available cash distributions or allocation of earnings and losses in NCM LLC (as long as its ownership is greater than zero), TRA payments and theater access fees. Further, AMC will continue to pay beverage revenue, among other things. AMC's ownership percentage does not impact future integration payments and other encumbered theater payments owed to NCM LLC by AMC. AMC is considered a related party through the date its ownership fell below the 5% threshold (July 5, 2018) and related party transactions with AMC through this period are included within the disclosures below (specifically the first quarter and first six months of 2018).

The 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 ~~lobby entertainment network (“LEN”)~~LEN and rights to sell and display certain lobby promotions. Further, 30 to 60 seconds of advertising included in the Noovie pre-show is sold to 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. These agreements are considered leases with related parties under ASC 842.

Common Unit Adjustment Agreement. The ~~common unit adjustment agreement~~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 ~~tax receivable agreement~~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

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Nine Months Ended

Included in the Condensed Consolidated Statements of Income:

September 28,
2017

September 29,
2016

September 28,
2017

September 29,
2016

Revenue:

Beverage concessionaire revenue (included in
   advertising revenue) (1)

$
6.7

$
7.5

$
22.7

$
21.8

Advertising inventory revenue (included in
   advertising revenue) (2)

—

0.1

—

0.3

Operating expenses:

Theater access fee (3)

18.1

19.2

57.4

56.8

Purchase of movie tickets and concession products
   and rental of theater space (included in selling
   and marketing costs) (4)

0.4

0.4

1.2

1.2

Purchase of movie tickets and concession products
   and rental of theater space (included in advertising
   operating costs) (4)

—

—

0.1

—

Purchase of movie tickets and concession products
   and rental of theater space (included in
   administrative and other costs) (4)

—

—

—

0.1

Non-operating expenses:

Interest income from notes receivable (included in
   interest income) (5)

0.2

0.2

0.5

0.6

Included in the unaudited Condensed Consolidated Statements of Income: (1)

Beverage concessionaire revenue (included in advertising revenue) (2)

Theater access fee (3)

Purchase of movie tickets and concession products and rental of theater space (included in selling and marketing costs) (4)

Interest income from notes receivable (included in interest

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

(2)

For the ~~nine~~three and six months ended ~~September~~June 27, 2019 and June 28, ~~2017 and September 29, 2016,~~2018, two of the founding members purchased 60 seconds of on-screen advertising time and one founding member purchased 30 seconds (with all three founding members having a right to purchase up to 90 seconds) from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 ~~second~~seconds equivalent ~~cost per thousand (“CPM”)~~CPM rate specified by the ESA.

~~(2)~~

~~The value of such purchases is calculated by reference to NCM LLC’s advertising rate card.~~

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

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

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



	As of
Included in the unaudited Condensed Consolidated Balance Sheets:	June 27, 2019		December 27, 2018
Purchase of movie tickets and concession products (included in prepaid expenses) (1)	$	0.1	$	—
Current portion of notes receivable - related parties (1) (2)	2.8		4.2
Interest receivable on notes receivable (included in other current assets) (1) (2)	0.1		0.1
Common unit adjustments, net of amortization and integration payments (included in intangible assets) (3)	644.8		657.6
Current payable to founding members under tax receivable agreement (1)(4)	11.1		11.2
Long-term payable to founding members under tax receivable agreement (1)(4)	133.7		141.1

~~(5)~~

(1)

AMC is no longer considered a related party as of July 5, 2018, as described further above. As such, the figures as of June 27, 2019 and December 26, 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability company (AC JV, LLC) owned 32% by each of the founding members and 4% by NCM LLC. In consideration for the sale, NCM LLC received a total of $25.0 million in promissory notes from its founding members (one-third or approximately $8.3 million from each founding member). The notes bear interest at a fixed rate of 5.0% per annum, compounded annually. Interest and principal payments are due annually in six equal installments commencing on the first anniversary of the closing.

27, 2018 do not include AMC.

As of

Included in the Condensed Consolidated Balance Sheets:

September 28,
2017

December 29,
2016

Current portion of notes receivable - founding members (1)

4.2

5.6

Long-term portion of notes receivable - founding members (1)

8.3

8.3

Interest receivable on notes receivable (included in other
   current assets) (1)

0.1

0.3

Common unit adjustments, net of amortization and integration
   payments (included in intangible assets) (2)

702.2

529.9

Current payable to founding members under tax receivable
   agreement (3)

15.9

18.4

Long-term payable to founding members under tax receivable
   agreement (3)

144.2

143.4

	~~(1)~~
(2)	Refer to the discussion of notes receivable from the founding members above.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

	~~(2)~~
(3)	Refer to Note 3—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.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~(3)~~

(4)

The Company paid Cinemark and Regal $3.5 million and $6.3 million, respectively, in payments pursuant to the ~~founding members $17.3 million in the second quarter of 2017~~TRA during 2019 which was for the ~~2016~~2018 tax year. The Company paid Cinemark and Regal $4.6 million and $8.4 million, respectively, in payments pursuant to the ~~founding members $23.5 million in the first quarter of 2016, of~~TRA during 2018 which ~~$2.7 million was net operating loss carrybacks for the 2013 year and $20.8 million~~ was for the ~~2015~~2017 tax year.

Pursuant to the terms of the NCM LLC Operating Agreement in place since the completion of the Company’s IPO, NCM LLC is required to make mandatory distributions on a proportionate basis to its members of available cash, as defined in the NCM LLC Operating Agreement, on a quarterly basis in arrears. Mandatory distributions of available cash for the three and ~~nine~~six months ended ~~September~~June 27, 2019 and June 28, ~~2017 and September 29, 2016~~2018 were as follows (in millions):

Three Months Ended

Nine Months Ended

September 28,
2017

September 29,
2016

September 28,
2017

September 29,
2016

AMC

$
8.1

$
7.8

$
16.3

$
11.3

Cinemark

9.6

8.6

15.6

11.8

Regal

9.5

8.9

15.5

12.1

Total founding members

27.2

25.3

47.4

35.2

NCM, Inc.

25.9

19.6

39.0

26.6

Total

$
53.1

$
44.9

$
86.4

$
61.8



	Three Months Ended				Six Months Ended
	June 27, 2019		June 28, 2018		June 27, 2019		June 28, 2018
AMC	$	—	$	—	$	—	$	2.2
Cinemark	7.5		8.3		10.5		11.3
Regal	7.9		8.6		11.0		11.8
Total founding members	15.4		16.9		21.5		25.3
NCM, Inc.	14.6		16.2		20.4		24.3
Total	$	30.0	$	33.1	$	41.9	$	49.6

The mandatory distributions of available cash by NCM LLC to ~~its founding members~~Regal and Cinemark for the three months ended ~~September 28, 2017~~June 27, 2019 of ~~$27.2~~$15.4 million is included in amounts due to founding members, net on the unaudited Condensed Consolidated Balance Sheets as of ~~September 28, 2017~~June 27, 2019 and will be made in the ~~fourth~~third quarter of ~~2017.~~2019. AMC’s distribution for the three months ended June 28, 2018 was split equally between Cinemark and Regal because NCM LLC used a record date of July 6, 2018 (following the sale of AMC's membership units to Cinemark and Regal) to accommodate an agreement between AMC and Cinemark and AMC and Regal. These agreements entitled AMC to half of the second quarter of 2018 available cash distribution, or approximately $2.2 million, of which Cinemark and Regal each independently paid AMC approximately $1.1 million. The mandatory distributions to NCM, Inc. are eliminated in consolidation.

Amounts due to founding members, net as of ~~September 28, 2017~~June 27, 2019 were comprised of the following (in millions):

AMC

Cinemark

Regal

Total

Theater access fees, net of beverage revenues
and encumbered theater payments

$
1.2

$
0.9

$
1.3

$
3.4

Distributions payable to founding members

8.1

9.6

9.5

27.2

Integration payments due from founding members

(6.2
)

(0.3
)

—

(6.5
)
Cost and other reimbursement

(0.1
)

—

—

(0.1
)
Total amounts due to founding members

$
3.0

$
10.2

$
10.8

$
24.0



	Cinemark			Regal		Total
Theater access fees, net of beverage revenues and other encumbered theater payments	$	1.2		$	1.6	$	2.8
Distributions payable to founding members	7.5			7.9		15.4
Integration payments due from founding members	(0.2		)	—		(0.2		)
Cost and other reimbursement	(0.1		)	—		(0.1		)
Total amounts due to founding members, net	$	8.4		$	9.5	$	17.9

Amounts due to founding members, net as of December ~~29, 2016~~27, 2018 were comprised of the following (in millions):

AMC

Cinemark

Regal

Total

Theater access fees, net of beverage revenues
and encumbered theater payments

$
1.6

$
0.9

$
1.4

$
3.9

Distributions payable to founding members

12.3

13.6

14.0

39.9

Integration payments due from founding members

(0.7
)

(0.3
)

—

(1.0
)
Cost and other reimbursement

—

(0.1
)

—

(0.1
)
Total amounts due to founding members

$
13.2

$
14.1

$
15.4

$
42.7

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Common Unit Membership Redemption~~—



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

The ~~NCM LLC Operating Agreement provides a redemption right of the~~Amounts due from founding members, ~~to exchange common membership units~~net balance as of NCM LLC for shares of the Company’s common stock on a one-for-one basis, or at the Company’s option, a cash payment equal to the market price of one share of NCM, Inc. common stock. During the third quarter of 2017, AMC exercised the redemption right of an aggregate 14.6 million common membership units for a like number of shares of NCM, Inc.’s common stock. Pursuant to ASC 810-10-45, the Company accounted for the change in its ownership interest in NCM LLC as an equity transaction whereby, the issuance of shares of NCM, Inc. common stock were offset by the purchase of NCM LLC’s (a subsidiary’s) equity withinJune 27, 2019 and December 27, 2018 per the Condensed Consolidated ~~Statement of Equity. Further, no gain or loss was recognized in the Condensed Consolidated Statements of Income.~~Balance Sheets relates to payments due from AMC ~~also exercised the redemption right of an aggregate 200,000 common membership units for~~to NCM LLC. Given that AMC ceased being a ~~like number of shares of NCM, Inc.’s common stock in December 2015. During the three months ended September 28, 2017, 12.0 million of these shares were sold and~~related party as of ~~September~~July 5, 2018, the detail of that balance has not been included within the tables above.

As of June 28, ~~2017, 2.8~~2018, AMC owned 1.0 million of these shares remained outstanding. The Company did not receive any proceeds from the sale of its common stock by AMC. The 2.8 million shares were subsequently sold on September 29, 2017. During the three and nine months ended September 28, 2017 and September 29, 2016, AMC received cash dividends of approximately $0.0 million, $0.0 million, $0.1 million and $0.1 million on its shares of NCM, Inc. common stock. During the ~~nine~~three and six months ended ~~September~~June 28, ~~2017, the Company recorded a reduction to deferred tax assets~~2018, AMC received cash dividends of ~~$2.4~~approximately $0.1 million ~~for~~and $0.3 million, respectively, on its ~~additional ownership interest in NCM LLC as a result~~shares of these redemptions to reflect the tax effective difference between the tax basis and the book basis, the majority of which will be amortized over a 15-year period for federal income tax purposes. In addition, the Company recorded a decrease of $1.1 million during the nine months ended September 28, 2017 in its long-term payable to founding members for the estimated payment 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 the Company expects to realize as a result of the deferred tax asset, which is recorded at its present value. The discount on this liability is a temporary difference that resulted in the reduction of $0.4 million to the deferred tax liability during the nine months ended September 28, 2017.

~~Memorandum of Understanding with AMC~~— Pursuant to the Final Judgment, AMC is required to divest the majority of its equity interests in NCM LLC and NCM, Inc., so that by June 20, 2019 it owns no more than 4.99% of NCM LLC’s common membership units and NCM, Inc. common stock taken together, on a fully converted basis (“NCM’s outstanding equity interests”). AMC must complete the divestiture per the following schedule: (i) on or before December 20, 2017, AMC must own no more than 15.0% of NCM’s outstanding equity interests, (ii) on or before December 20, 2018, AMC must own no more than 7.5% of NCM’s outstanding equity interests and (iii) on or before June 20, 2019, AMC must own no more than 4.99% of NCM’s outstanding equity interests. ~~Pursuant to the MOU, AMC also has agreed, among other things, subject to limited exceptions to retain~~held at least 4.5% of NCM’s outstanding equity interests during the term of the Final Judgment, subject to certain exceptions which allow for certain sell downs after the 30-month anniversary of the MOU. As of September 28, 2017, AMC that time.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~owned 15.2%~~ ~~of NCM’s outstanding equity interests.~~ AMC also agreed to reimburse the Company for its incurred and ongoing costs and expenses in connection with the Final Judgment including, but not limited to, its financial advisor and legal fees up to $1.0 million of such costs and expenses. During the nine months ended September 28, 2017, the Company ~~incurred $1.3 million of~~ these costs, of which $1.0 million was reimbursed through the “Amounts due to founding members” within the Condensed Consolidated Balance Sheets and the remaining $0.3 million is included in administrative costs within the Condensed Consolidated Income Statement.

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 $1.1 million and ~~$1.0~~$0.9 million as of ~~September 28, 2017~~June 27, 2019 and December ~~29, 2016,~~27, 2018, respectively. During the three months ended June 27, 2019 and June 28, 2018 and the six months ended June 27, 2019 and June 28, 2018, NCM LLC received cash distributions from AC JV, LLC of $0.1 million, $0.0 million, $0.1 million and $0.0 million, respectively. Equity in earnings from AC JV, LLC for the three ~~and nine~~ months ended ~~September~~June 27, 2019 and June 28, ~~2017~~2018 and ~~September 29, 2016,~~the six months ended June 27, 2019 and June 28, 2018, were ~~$0.0 million, $0.0~~$0.1 million, $0.1 million, $0.3 million and ~~$0.0~~$0.1 million, respectively, and is included in non-operating expenses in the unaudited Condensed Consolidated Statements of Income.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Related Party Affiliates~~—NCM LLC ~~has an agreement with LA Live, an affiliate~~also received fees from AC JV, LLC of The Anschutz Corporation to provide in-theater advertising. The Anschutz Corporation is a wholly-owned subsidiary of the Anschutz Company, which is the controlling stockholder of Regal. During the three and nine months ended September 28, 2017 and September 29, 2016, there was $0.1$0.0 million, $0.1 million, ~~$0.2 million and $0.2 million, respectively, included in advertising operating costs related to LA Live, and there was approximately $0.1~~$0.0 million, and $0.1 million in the three months ended June 27, 2019 and June 28, 2018 and the six months ended June 27, 2019 and June 28, 2018, respectively, related to the transition services agreement with AC JV, LLC whereby the Company provides certain corporate overhead or creative services or use of ~~accounts payable with this company as of September 28, 2017 and December 29, 2016, respectively.~~

~~Other Transactions~~—facilities in exchange for a fee. These fees received by NCM LLC ~~has~~are included as an ~~agreement with AEG Live, an affiliate~~offset to network costs in the unaudited Condensed Consolidated Statements of ~~The Anschutz Corporation, for AEG Live to showcase musical artists in NCM LLC’s~~Income. ~~Noovie~~ pre-show. During the three and nine months ended September 28, 2017 and September 29, 2016, NCM LLC recorded approximately $0.4 million, $0.5 million $1.0 million and $1.3 million, respectively, in revenue from AEG Live. As of September 28, 2017 and December 29, 2016, NCM LLC had approximately $0.1 million and $0.2 million, respectively, of accounts receivable from AEG Live.

6. BORROWINGS

The following table summarizes NCM LLC’s total outstanding debt as of ~~September 28, 2017~~June 27, 2019 and December ~~29, 2016~~27, 2018 and the significant terms of its borrowing arrangements (in millions):

Outstanding Balance as of

Borrowings

September 28,
2017

December 29,
2016

Maturity
Date

Interest
Rate

Revolving credit facility

$
—

$
15.0

November 26, 2019

(1)

Term loans

270.0

270.0

November 26, 2019

(1)

Senior secured notes due 2022

400.0

400.0

April 15, 2022

6.000%

Senior unsecured notes due 2026

250.0

250.0

August 15, 2026

5.750%

Total borrowings

$
920.0

$
935.0

Less: debt issuance costs related to term
loans and senior notes

(9.2
)

(10.7
)

Carrying value of long-term debt

$
910.8

$
924.3



	Outstanding Balance as of
Borrowings	June 27, 2019			December 27, 2018			Maturity Date	Interest Rate
Senior secured notes due 2022	$	400.0		$	400.0		April 15, 2022	6.000%
Revolving credit facility	27.0			27.0			June 20, 2023	(1)
Term loan	268.0			269.4			June 20, 2025	(1)
Senior unsecured notes due 2026	230.0			235.0			August 15, 2026	5.750%
Total borrowings	925.0			931.4
Less: debt issuance costs related to term loan and senior notes	(6.9		)	(7.8		)
Total borrowings, net	918.1			923.6
Less: current portion of debt	(2.7		)	(2.7		)
Carrying value of long-term debt	$	915.4		$	920.9


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

Senior Secured Credit Facility—On June 20, 2018, NCM LLC entered into a credit agreement to replace NCM LLC's senior secured credit facility, dated as of February 13, 2007, as amended (the “previous facility”). Consistent with the structure of the previous facility, the agreement consists of a term loan facility and a revolving credit facility. As of ~~September 28, 2017,~~June 27, 2019, NCM LLC’s senior secured credit facility consisted of a $175.0 million revolving credit facility and a ~~$270.0~~$268.0 million term loan. ~~On May 26, 2016, NCM LLC entered into an incremental amendment of its~~The obligations under the senior secured credit facility ~~whereby~~are secured by a lien on substantially all of the ~~revolving credit facility was increased by $40.0 million from $135.0 million to $175.0 million.~~assets of NCM LLC.

Revolving Credit Facility—The revolving credit facility portion of NCM LLC’s total borrowings is available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the senior secured credit facility, and a portion is available for letters of credit. As of ~~September 28, 2017,~~June 27, 2019, NCM LLC’s total availability under the $175.0 million revolving credit facility was ~~$170.2~~$143.2 million, net of $27.0 million outstanding and $4.8 million in letters of credit. The unused line fee is 0.50% per ~~annum.~~annum which is consistent with the previous facility. Borrowings under the revolvingcredit facility bear interest at NCM LLC’s option of either the LIBOR index plus an applicable margin ranging from 1.75% to 2.25% or the base rate ~~(Prime Rate or the Federal Funds Effective Rate, as defined in the senior secured credit facility)~~ plus an applicable ~~margin.~~margin ranging from 0.75% to 1.25%. The applicable margin for the revolving credit facility is determined quarterly and is subject to adjustment based upon a

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

consolidated net senior secured leverage ratio for NCM LLC (the ratio of secured funded debt less unrestricted cash and cash equivalents ~~over a non-GAAP measure~~of up to $100.0 million, divided by Adjusted EBITDA for debt purposes, defined inas 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, which is contingent upon the ~~senior secured~~refinancing of NCM LLC’s Notes due 2022 (defined below, see “Senior Secured Notes due 2022”) on or prior to October 30, 2021. If the Notes due 2022 are not refinanced on or prior to October 30, 2021, then the revolving credit ~~facility)~~facility will instead mature on December 30, 2021. The weighted-average interest rate on the revolving credit facility as of June 27, 2019 was 5.35%.

Term ~~Loans~~Loan—The interest rate on the term ~~loans~~loan is a rate chosen at NCM LLC’s option of either the LIBOR index plus ~~2.75%~~3.00% or the base rate ~~(Prime Rate or the Federal Funds Effective Rate, as defined in the senior secured credit facility)~~ plus ~~1.75%~~2.00%. The ~~weighted-average~~ interest rate on the term ~~loans~~loan as of ~~September 28, 2017~~June 27, 2019 was ~~4.0%~~5.44%. ~~Interest~~The term loan amortizes at a rate equal to 1.00% annually, to be paid in equal quarterly installments. As of June 27, 2019, NCM LLC has paid principal of $2.0 million, reducing the outstanding balance to $268.0 million. The term loan will mature on June 20, 2025 contingent upon the refinancing of the Notes due 2022 on or prior to October 30, 2021. If the Notes due 2022 are not refinanced on or prior to October 30, 2021, then the term ~~loans is currently paid monthly.~~loan will instead mature on December 30, 2021.

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 ~~which NCM LLC was in compliance as of September 28, 2017, including~~respect to the revolving credit facility, maintaining a consolidated net senior secured leverage ratio of equal to or less than ~~6.5~~4.50 times on a quarterly ~~basis.~~basis for each quarterly period in which a balance is outstanding on the revolving credit facility. In addition, ~~there are no borrower distribution restrictions~~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 ~~6.5~~5.50 times and ~~NCM LLC is in compliance with its debt covenants.~~no default or event of default has occurred and continues to occur under the senior secured credit facility. As of ~~September 28, 2017,~~June 27, 2019, NCM LLC’s consolidated net senior secured leverage ratio was ~~3.2~~3.14 times (versus the dividend payment restriction of 5.50 times and the covenant of 4.50 times) and NCM LLC's consolidated net total leverage ratio was 4.24 times (versus the covenant of ~~6.5~~6.25 times).

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Senior Secured Notes due 2022—On April 27, 2012, NCM LLC completed a private placement of $400.0 million in aggregate principal amount of 6.000% Senior Secured Notes (the “Notes due 2022”) for which the registered exchange offering was completed on November 26, 2012. The Notes due 2022 pay interest semi-annually in arrears on April 15 and October 15 of each year, which commenced on October 15, 2012. The Notes due 2022 ~~are senior secured obligations of NCM LLC, rank the same as NCM LLC’s senior secured credit facility, subject to certain exceptions, and~~ share in the same collateral that secures NCM ~~LLC’s~~LLC's obligations under the senior secured credit facility. ~~The Notes due 2022 contain certain non-maintenance covenants with which NCM LLC was in compliance as of September 28, 2017.~~

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 and will be effectively subordinated to all existing and future secured debt, including the Notes due 2022, its senior secured credit facility and any future asset backed loan facility. The Notes due 2026 will rank equally in right of payment with all of NCM LLC’s existing and future senior indebtedness, including the Notes due 2022, NCM LLC’s existing senior secured credit facility, any future asset backed loan facility, in each case, without giving effect to collateral arrangements. The Notes due 2026 will be effectively subordinated to all liabilities of any subsidiaries thatLLC. NCM LLC ~~may form or acquire in the future, unless those subsidiaries become guarantors~~repurchased and canceled a total of $5.0 million and $15.0 million of the Notes due ~~2026. NCM LLC does not currently have any subsidiaries,~~2026 during 2019 and 2018, respectively, reducing the ~~Notes due 2026 will not be guaranteed by any subsidiaries that NCM LLC may form or acquire~~principal amount to $230.0 million as of June 27, 2019. These repurchases were treated as partial debt extinguishments and resulted in the ~~future except in very limited circumstances. The Notes due 2026 contain certain non-maintenance covenants with which NCM LLC was in compliance as of September 28, 2017.~~

~~6. INCOME TAXES~~

The Company is subject to taxation in the U.S. and various states. The Company has established a contingency reserve for material, known tax exposures. The Company’s reserve reflects management’s judgment as to the resolution of the issues involved if subject to judicial review or other settlement. While the Company believes its reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a tax authority will be resolved at a financial cost that does not exceed its related reserve. With respect to the reserve, the Company’ income tax expense would include (i) any changes in tax reserves arising from material changes during the period in the facts and circumstances (i.e., new information) surrounding a tax issue and (ii) any difference from the Company’s tax position as recorded in the financial statements and the final resolutionrealization of a tax issue during the period. Such resolution could materially increase or decrease income tax expense in the unaudited Condensed Consolidated Financial Statements in future periods and could impact operating cash flows.

~~Unrecognized tax benefits represent the aggregate tax effect~~non-operating gain, net of ~~differences between tax return positions and the amounts otherwise recognized in the unaudited Condensed Consolidated Financial Statements. The total amount~~written off debt issuance costs, of ~~unrecognized tax benefits as of September 28, 2017 and December 29, 2016, was~~$0.0 million, $0.0 million, $0.3 million and ~~$1.6~~$0.0 million ~~respectively, excluding accrued interest~~during the three months ended June 27, 2019 and ~~penalties, which if recognized would affect~~June 28, 2018 and the six months ended June 27, 2019 and June 28, 2018, respectively.

7. INCOME TAXES

Changes in the Company’s Effective Tax Rate—The Company’s effective tax rate decreased from 88.1% for the six months ended June 28, 2018 to 17.9% for the six months ended June 27, 2019 primarily due to a decrease in tax expense recorded for the change in the state effective tax rate. The ~~Company recognizes interest and penalties with respect to unrecognized tax benefits~~decrease in income tax expense was primarily due to a decrease in deferred tax expense for the unaudited Condensed Consolidated Statements of Income and records the liability in income taxes payable in the unaudited Condensed Consolidated Balance Sheets. The Company recognized $0.0 million, $0.0 million $0.0 million and $0.1 million in interest and penalties during the three and ninesix months ended ~~September 28, 2017 and September 29, 2016, respectively. The Company has accrued $0.0 million and $0.4 million for~~June 27, 2019, compared to the ~~payment of interest and penalties as of September 28, 2017 and December 29, 2016, respectively.~~

~~During the three and nine~~six months ended ~~September~~June 28, 2017, the Company reversed approximately $1.7 million of its contingency reserve ($1.3 million of unrecognized tax benefits and $0.4 million of accrued interest and penalties) because the statute of limitations expired. It is reasonably possible that the Company’s total unrecognized tax benefits will decrease by approximately $0.3 million during the next twelve months due to the expiration of certain statutes of limitations.

~~During the nine months ended September 28, 2017, the Company recorded a reduction to its deferred tax assets of approximately $35.0 million~~2018 related to the Company's remeasurement of its deferred taxes as a result of a 2018 state tax ~~effective difference between the tax basis~~law change. The Company's current blended state and ~~book basis of the intangible assets recorded for the extraordinary Common Unit Adjustment, as discussed further in Note 3 –~~ ~~Intangible Assets~~. The Company recorded a deferred tax liability of approximately $15.8 million during the nine months ended September 28, 2017 related to imputed interest on the integration payments associated with the extraordinary Common Unit Adjustment. These items also resulted in a net reduction to additional paid-in capital of approximately $50.8 million. Further, the Company’s deferred tax asset balancefederal rate is 24.5% as of ~~September~~June 27, 2019 as compared to 25.4% as of June 28, ~~2017, includes a tax basis note receivable of $27.4 million in connection with~~

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~the common membership unit redemption that occurred on September 7, 2017, as discussed further in Note 4 –~~ 2018.~~Related Party Transactions~~.

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 and in the aggregate on its financial position, results of operations or cash flows.

~~Minimum Revenue Guarantees~~

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~―As~~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 $21.2 million and short-term and long-term lease liabilities of $1.3 million and $23.9 million, respectively, on the balance sheet as of June 27, 2019 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. The Company has options on certain of these facilities to extend the lease or to terminate part or all of the leased space prior to the lease end date. Certain termination fees would be due upon exercise of the early termination options as outlined within the underlying agreements. None of these options were considered reasonably certain of exercise and thus have not been recognized as part of the ROU assets and lease liabilities. As of June 27, 2019, the Company had a weighted average remaining lease term of 10.8 years on these leases.

The Company has also entered into certain short-term leases with a term of less than one year. These leases are not included within the Company’s ROU assets or lease liabilities due to the Company’s election of the practical expedient in ASC 842-20-25-2 for short-term leases.

During the three and six months ended 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 27, 2019		June 27, 2019
Operating lease cost	$	0.8	$	1.6
Short-term lease cost	—		0.1
Variable lease cost	0.2		0.3
Total lease cost	$	1.0	$	2.0

The Company made total lease payments of $0.8 million and $1.6 million during the three and six months ended June 27, 2019. These payments are included within cash flows from operating activities within the unaudited Condensed Consolidated Statement of Cash Flows. The minimum lease payments under noncancelable operating leases as of December 27, 2018 were as follows (in millions).



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

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The future lease payments under noncancelable operating leases as of June 27, 2019 were as follows (in millions).



Year	Future Lease Payments
2019 (June 28, 2019 - December 26, 2019)	$	1.7
2020	3.3
2021	3.3
2022	3.4
2023	3.4
2024	3.5
Thereafter	18.7
Total	37.3
Less: Imputed interest on future lease payments	(12.1		)
Total lease liability as of June 27, 2019 per the Condensed Consolidated Balance Sheet	$	25.2

When measuring the ROU assets and lease liabilities recorded, the Company utilized its incremental borrowing rate in order to determine the present value of the lease payments as the leases do not provide an implicit rate. The Company used the rate of interest that it would have paid to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. As of June 27, 2019, the Company’s weighted average annual discount rate was 7.43%.

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 ~~entered into~~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 ESA and network affiliate agreements are considered leases under ASC 842 once the asset is identified and the period of control is determined upon the scheduling of the showtimes by the exhibitors, typically one week prior to the showtime. As such, the leases are considered short-term in nature, specifically less than one month. Within ASC 842, leases with terms of less than one month are exempt from the majority of the accounting and disclosure requirements, including disclosure of short-term lease expense. No ROU assets or lease liabilities were recognized for these agreements and no change to the balance sheet presentation of the intangible assets was necessary. However, the amortization of these intangible assets is considered lease expense and was therefore, reclassified in the ~~ordinary course~~current period from 'Depreciation and amortization expense' to 'Amortization of ~~business under which~~intangibles recorded for network theater screen leases' within 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. Asunaudited Condensed Consolidated Statement of September 28, 2017, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $84.3 million over the remaining terms of the network affiliate agreements. These minimum guarantees relate to various affiliate agreements ranging in term from one to twenty years, prior to any renewal periods of which some are at the option of the Company. During the nine months ended September 28, 2017 and September 29, 2016, the Company paid $0.1 million and $0.0 million, respectively, related to these minimum guarantees. For these periods, there are no other affiliate agreements with guaranteed minimums in excess of the revenue share arrangement.Income.

~~Theater Access Fee Guarantees~~—

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 ~~for~~in fiscal year ~~2017,~~2022, and the payment per digital screen and for digital cinema equipment increases annually by 5%. The theater access fee paid in the aggregate to all founding members cannot be less than 12% of NCM LLC’s aggregate advertising revenue (as defined in the ESA), or it will be adjusted upward to reach this minimum payment. As of ~~September 28, 2017~~June 27, 2019 and December ~~29, 2016,~~27, 2018, the Company had no liabilities recorded for the minimum payment, as the theater access fee was in excess of the minimum.

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 27, 2019, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $90.1 million over the remaining terms of the network affiliate agreements. These minimum guarantees relate to various affiliate agreements ranging in term from one to twenty years,

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

prior to any renewal periods of which some are at the option of the Company. Additionally, the Company accrued $0.7 million and $0.1 million related to affiliate agreements with guaranteed minimums in excess of the revenue share agreement as of June 27, 2019 and December 27, 2018, respectively.

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, ~~cost and equity method~~other investments, notes receivable and borrowings.

Long-Lived Assets, Intangible Assets, Other Investments and Notes Receivable—The Company regularly reviews long-lived assets (primarily property, plant and equipment), intangible assets, investments accounted for under the cost or equity method and notes receivable for impairment whenever 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				As of
	September 28, 2017		December 29, 2016		June 27, 2019		December 27, 2018
Investment in AC JV, LLC (1)	$	1.1	$	1.0	$	1.1	$	0.9
Other investments (2)		2.5		5.6	2.1		2.1
Total	$	3.6	$	6.6	$	3.2	$	3.0


(1)	Refer to Note 4—5—Related Party Transactions. This investment is accounted for utilizing the equity method.

(2)

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

During the three ~~and nine~~ months ended ~~September~~June 27, 2019 and June 28, ~~2017~~2018 and ~~September 29, 2016,~~the six months ended June 27, 2019 and June 28, 2018, the Company recorded ~~other-than-temporary~~ impairment charges of $0.0 million, ~~$0.7~~$0.0 million, ~~$3.1~~$0.0 million and ~~$0.7~~$0.4 million, respectively, on certain of its investments due to a significant deterioration in the business prospects of the investee or new information regarding the fair value of the investee, ~~in the nine months ended September 28, 2017. These impairment charges~~which brought the ~~investments to a~~total remaining ~~fair value of $0.1 million. The fair~~ value of the ~~other~~respective impaired investments ~~has not been estimated~~to $0.0 million as of ~~September~~June 27, 2019 and June 28, ~~2017 and December 29, 2016~~2018. As of June 27, 2019, no other observable price changes or impairments have been recorded as ~~there were no~~a result of the Company’s qualitative assessment of identified events or changes in the circumstances ~~that had a significant adverse effect on~~of the ~~fair value of those investments and it is not practicable to do so because the equity securities are not in publicly traded companies.~~remaining investments. The investment in AC JV, LLC was initially valued using comparative market multiples. The other investments were recorded based upon the fair value of the services provided in exchange for the investment. As the inputs to the determination of fair value are based upon non-identical assets and use significant unobservable inputs, they have been classified as Level 3 in the fair value hierarchy.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

As of ~~September 28, 2017~~June 27, 2019 and December ~~29, 2016,~~27, 2018, the Company had notes receivable totaling ~~$12.5~~$4.2 million and ~~$13.9~~$5.6 million, respectively, from its founding members related to the sale of Fathom Events, as described in Note 4—5—Related Party Transactions. These notes were initially valued using comparative market multiples. There were no identified events or changes in circumstances that had a significant adverse effect on the fair value of the notes receivable. The notes are classified as Level 3 in the fair value hierarchy as the inputs to the determination of fair value are based upon non-identical assets and use significant unobservable inputs.

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

	As of September 28, 2017				As of December 29, 2016
	Carrying Value		Fair Value (1)		Carrying Value		Fair Value (1)
Term loans	$	270.0	$	269.6	$	270.0	$	272.7
									As of June 27, 2019				As of December 27, 2018
									Carrying Value		Fair Value (1)		Carrying Value		Fair Value (1)
Term loan									$	268.0	$	267.3	$	269.4	$	261.2
Notes due 2022		400.0		409.5		400.0		414.5	400.0		405.0		400.0		401.8
Notes due 2026		250.0		233.8		250.0		256.7	230.0		218.5		235.0		211.0


(1)	~~The Company has estimated the fair value on an average of at least two non-binding broker quotes and the Company’s analysis.~~ If the Company were to measure the borrowings in the above table at fair value on the balance sheet they would be classified as Level 2. 2 based upon the inputs utilized.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

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

Fair Value Measurements at Reporting Date Using

Fair Value as of
September 28,
2017

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)

$
22.3

$
22.3

$
—

$
—

Short-term marketable securities (2)

3.7

2.0

1.7

—

Long-term marketable securities (2)

15.8

13.7

2.1

—

Total assets

$
41.8

$
38.0

$
3.8

$
—



			Fair Value Measurements at Reporting Date Using
	Fair Value as of June 27, 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)	$	34.3	$	16.3	$	18.0	$	—
Short-term marketable securities (2)	11.2		—		11.2		—
Long-term marketable securities (2)	7.7		—		7.7		—
Total assets	$	53.2	$	16.3	$	36.9	$	—



			Fair Value Measurements at Reporting Date Using
	Fair Value as of December 27, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
ASSETS:
Cash equivalents (1)	$	18.2	$	11.2	$	7.0	$	—
Short-term marketable securities (2)	24.0		—		24.0		—
Long-term marketable securities (2)	10.2		—		10.2		—
Total assets	$	52.4	$	11.2	$	41.2	$	—

Fair Value Measurements at Reporting Date Using

Fair Value as of
December 29,
2016

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)

$
5.3

$
0.3

$
5.0

$
—

Short-term marketable securities (2)

26.1

5.2

20.9

—

Long-term marketable securities (2)

19.6

17.3

2.3

—

Total assets

$
51.0

$
22.8

$
28.2

$
—


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

(2)

Short-Term and Long-Term Marketable Securities—The carrying amount and fair value of the marketable securities are equivalent since the Company accounts for these instruments at fair value. The Company’s government agency bonds, commercial paper and certificates of deposit are valued using third party broker quotes. The value of the Company’s government agency bonds is derived from quoted market information. The inputs in the valuation are ~~generally~~ classified as Level 1 ~~given the~~if there is an active market for these securities; however, if an active market does not exist, the inputs are recorded at a lower level in the fair value hierarchy. The value of commercial paper and certificates of deposit is derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy. For the three and nine months ended September 28, 2017 and September 29, 2016, 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 other comprehensive income. Original cost of short-term marketable securities is based on the specific identification method. As of September 28, 2017 and December 29, 2016, there was an inconsequential amount of gross unrealized losses related to individual securities of $1.4 million that had been in a continuous loss position for 12 months or longer.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

inputs are recorded at a lower level in the fair value hierarchy. The value of commercial paper and certificates of deposit is derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy. For the three and six months ended June 27, 2019 and June 28, 2018, there was an inconsequential amount of net realized gains (losses) recognized in interest income and an inconsequential amount of net unrealized holding gains (losses) included in interest income. Original cost of short-term marketable securities is based on the specific identification method. As of June 27, 2019 and December 27, 2018, there was an inconsequential amount and $0.2 million, respectively, of gross unrealized losses related to individual securities of $9.9 million and $11.8 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 ~~September 28, 2017~~June 27, 2019 and December ~~29, 2016~~27, 2018 were as follows:

As of September 28, 2017

Amortized Cost
Basis
(in millions)

Aggregate Fair
Value
(in millions)

Maturities (1)
(in years)

MARKETABLE SECURITIES:

Short-term U.S. government treasury bonds

$
1.2

$
1.2

0.1

Short-term U.S. government agency bonds

0.8

0.8

0.9

Short-term certificates of deposit

1.7

1.7

0.2

Total short-term marketable securities

3.7

3.7

Long-term municipal bonds

1.9

1.9

2.4

Long-term U.S. government agency bonds

11.9

11.8

2.5

Long-term financial certificates of deposit:

2.1

2.1

2.0

Total long-term marketable securities

15.9

15.8

Total marketable securities

$
19.6

$
19.5



	As of June 27, 2019
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:
Short-term U.S. government treasury bonds	$	0.3	$	0.2	0.1
Short-term U.S. government agency bonds	5.5		5.5		0.5
Short-term commercial paper:
Utility	2.0		2.0		0.1
Short-term municipal bonds	0.9		0.9		0.9
Short-term certificates of deposit	2.6		2.6		0.3
Total short-term marketable securities	11.3		11.2

Long-term municipal bonds	0.3		0.3		1.2
Long-term U.S. government agency bonds	4.8		4.8		2.5
Long-term certificates of deposit	2.6		2.6		2.6
Total long-term marketable securities	7.7		7.7
Total marketable securities	$	19.0	$	18.9



	As of December 27, 2018
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:
Short-term U.S. government agency bonds	$	3.9	$	3.9	0.5
Short-term U.S. government treasury bonds	0.3		0.3		0.5
Short-term certificates of deposit	3.6		3.6		0.6
Short-term municipal bonds	0.5		0.5		0.1
Short-term commercial paper:
Financial	3.8		3.8		0.1
Industrial	12.0		11.9		0.1
Total short-term marketable securities	24.1		24.0

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

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

As of December 29, 2016

Amortized Cost
Basis
(in millions)

Aggregate Fair
Value
(in millions)

Maturities (1)
(in years)

MARKETABLE SECURITIES:

Short-term U.S. government treasury bonds

$
1.2

$
1.2

0.8

Short-term municipal bonds

2.9

2.9

0.6

Short-term U.S. government agency bonds

1.0

1.0

0.5

Short-term commercial paper

13.0

13.0

0.1

Short-term certificates of deposit:

Financial

7.7

7.7

0.6

Industrial

0.3

0.3

0.9

Total short-term marketable securities

26.1

26.1

Long-term municipal bonds

1.9

1.8

2.7

Long-term U.S. government agency bonds

15.6

15.5

3.5

Long-term certificates of deposit

2.2

2.3

2.6

Total long-term marketable securities

19.7

19.6

Total marketable securities

$
45.8

$
45.7


(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.

10. SUBSEQUENT ~~EVENT~~

EVENTS

The Company appointed Thomas F. Lesinski as Chief Executive Officer ("CEO") of the Company effective as of August 2, 2019. In connection with his appointment as CEO, Mr. Lesinski resigned from the Company's Board of Directors as Chairman, member of the Audit Committee and as the independent director designated by Cinemark. The Board of Directors subsequently appointed Mr. Lesinski as a member of the Board of Directors in his role as CEO. The Board of Directors also appointed Mark B. Segall to serve as Chairman of the Board of Directors.

On ~~November 3, 2017,~~August 5, 2019, the Company declared a cash dividend of ~~$0.22~~$0.17 per share (approximately ~~$16.8~~$13.1 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 ~~November 16, 2017~~August 15, 2019 to be paid on ~~December 1, 2017.~~

On October 20, 2017, AMC exercised its redemption right of an aggregate 1.0 million common membership units for a like number of shares of NCM, Inc.’s common stock which increased the Company’s ownership to 49.5%.

August 30, 2019.

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

Some of the information in this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”,~~Operations,” 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” contained below and in our annual report on Form 10-K for the Company’s fiscal year ended December ~~29, 2016.~~27, 2018. 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 ~~29, 2016.~~27, 2018. In the following discussion and analysis, the term net income refers to net income attributable to NCM, Inc.

Overview

We are America's Movie Network. As the #1 weekend network for Millennials (age 18-34) in the U.S., we are the connector between brands and movie audiences. We currently derive revenue principally from the sale of advertising to national, regional and local businesses in Noovie, our cinema advertising and entertainment pre-show seen on movie screens across the U.S. 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 Accelerator and our other digital ~~product to reach entertainment audiences beyond~~gaming products including Noovie ARcade, Fantasy Movie League and Noovie Shuffle which can be played on the ~~theater.~~mobile apps or at Noovie.com. As of June 27, 2019, over 3.0 million movie goers have downloaded our mobile apps. We have long-term ESAs (approximately 1918 years remaining as of ~~September 28, 2017)~~June 27, 2019) with the founding members and multi-year agreements with our network affiliates, which expire at various dates between ~~March 5, 2018~~September 2019 and July ~~22,~~ 2031. The weighted average remaining term (based on attendance) of the ESAs and the network affiliate agreements is ~~17.1~~15.5 years as of ~~September 28, 2017.~~June 27, 2019. The ESAs and network affiliate agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions. Our Noovie pre-show and LEN programming are distributed predominantly via satellite through our proprietary DCN. Approximately 98% of the aggregate founding member and network affiliate theater attendance is generated by theaters connected to our DCN (the remaining screens receive advertisements on USB drives) and 100% of the Noovie pre-show is projected on digital projectors ~~(91%~~(95% digital cinema projectors and 9%5% LCD projectors) as of ~~September 28, 2017.~~

June 27, 2019.

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 ~~officers~~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, ~~OIBDA,~~ 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 ~~local and~~ regional advertising pricing (CPM), local ~~and regional~~ 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 ~~including~~plus integration payments and other encumbered theater payments), cash balances and revolving credit facility availability to ensure financial debt covenant compliance and that there is adequate cash availability to fund our working capital needs and debt obligations and current and future dividends declared by our Board of Directors.

Financial results, including the metrics outlined above, are presented to the Board of Directors on a monthly basis.

Our operating results may be affected by a variety of internal and external factors and trends described more fully in the section entitled “Risk Factors” below and in our Form 10-K filed with the SEC on February ~~24, 2017~~22, 2019 for our fiscal year ended December ~~29, 2016.~~

27, 2018.

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 ~~OIBDA~~ and Adjusted OIBDA (dollars in millions, except share and margin data):


													% Change																		% Change
	Q3 2017			Q3 2016			YTD 2017			YTD 2016			Q3 2017 to Q3 2016			YTD 2017 to YTD 2016			Q2 2019			Q2 2018			YTD 2019			YTD 2018			Q2 2019 to Q2 2018		YTD 2019 to YTD 2018
Revenue	$	116.4		$	113.5		$	285.4		$	305.1			2.6	%		(6.5	%)	$	110.2		$	113.7		$	187.1		$	193.9		(3.1	)%	(3.5	)%
Operating expenses:
Advertising		43.3			42.6			130.8			129.2			1.6	%		1.2	%	47.3			46.6			86.5			89.2			1.5	%	(3.0	)%
Network, administrative and unallocated costs		22.8			22.5			70.9			75.2			1.3	%		(5.7	%)	25.2			26.9			52.0			53.5			(6.3	)%	(2.8	)%
Total operating expenses		66.1			65.1			201.7			204.4			1.5	%		(1.3	%)	72.5			73.5			138.5			142.7			(1.4	)%	(2.9	)%
Operating income		50.3			48.4			83.7			100.7			3.9	%		(16.9	%)	37.7			40.2			48.6			51.2			(6.2	)%	(5.1	)%
Non-operating expenses		16.1			27.8			47.8			60.7			(42.1	%)		(21.3	%)	14.4			7.2			28.5			20.6			100.0	%	38.3	%
Income tax expense		2.3			(1.1	)		2.6			1.3		NM				100.0	%	2.3			16.0			1.7			17.0			(85.6	)%	(90.0	)%
Net income attributable to noncontrolling interests		22.5			13.5			27.4			28.0			66.7	%		(2.1	%)	12.1			12.8			10.6			11.3			(5.5	)%	(6.2	)%
Net income attributable to NCM, Inc.	$	9.4		$	8.2		$	5.9		$	10.7			14.6	%		(44.9	%)	$	8.9		$	4.2		$	7.8		$	2.3		111.9	%	NM

Net income per NCM, Inc. basic share	$	0.15		$	0.14		$	0.10		$	0.18			7.1	%		(44.4	%)	$	0.11		$	0.05		$	0.10		$	0.03		120.0	%	NM
Net income per NCM, Inc. diluted share	$	0.15		$	0.13		$	0.10		$	0.18			15.4	%		(44.4	%)	$	0.11		$	0.05		$	0.10		$	0.03		120.0	%	NM

OIBDA	$	59.7		$	57.3		$	111.9		$	127.2			4.2	%		(12.0	%)
Adjusted OIBDA	$	62.6		$	60.9		$	122.5		$	144.3			2.8	%		(15.1	%)	$	50.2		$	52.3		$	72.3		$	75.6		(4.0	)%	(4.4	)%
Adjusted OIBDA margin		53.8	%		53.7	%		42.9	%		47.3	%		0.1	%		(4.4	%)	45.6		%	46.0		%	38.6		%	39.0		%	(0.4	)%	(0.4	)%
Total theater attendance (in millions) (1)		150.6			179.6			492.1			524.1			(16.1	%)		(6.1	%)	185.3			194.1			334.0			371.1			(4.5	)%	(10.0	)%

_________________________

(1)

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

Refer to Note 4 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document.

Non-GAAP Financial Measures

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

Amortization expense (1)

Amortization of intangibles recorded for network theater screen leases (1)

Share-based compensation costs (2)

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 27, 2019 was as follows.

Lost affiliates, net of new affiliates (1)

~~(3)~~

~~Early lease termination expense represents an expense recorded upon~~Represents the ~~early termination~~loss of ~~the lease~~one of our ~~corporate headquarters because the early termination payment made~~affiliates that did not renew its contract resulting in a reduction of 244 affiliate screens to our network, offset by the ~~Company was reimbursed by~~addition of one new affiliate which added 4 new screens to our network during the ~~landlord of the new building.~~

six months ended June 27, 2019.

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

Basis of Presentation

The results of operations data for the three ~~and nine~~ months ended ~~September 28, 2017 (third~~June 27, 2019 (second quarter of ~~2017)~~2019) and ~~September 29, 2016 (third~~June 28, 2018 (second quarter of ~~2016)~~2018) and the six months ended June 27, 2019 and June 28, 2018 was derived from the unaudited Condensed Consolidated Financial Statements and accounting records of NCM, Inc. and should be read in conjunction with the notes thereto.

Results of Operations

~~Third~~

Second Quarter of ~~2017~~2019 and ~~Third~~Second Quarter of ~~2016~~

2018

Revenue.Total revenue ~~increased 2.6%~~decreased 3.1%, from ~~$113.5~~$113.7 million for the ~~third~~second quarter of ~~2016~~2018 to ~~$116.4~~$110.2 million for the ~~third~~second quarter of ~~2017.~~2019. The following is a summary of revenue by category (in millions):

$ Change

% Change

Q3 2017

Q3 2016

Q3 2017 to
Q3 2016

Q3 2017 to
Q3 2016

National advertising revenue

$
84.5

$
82.3

$
2.2

2.7
%
Local and regional advertising revenue

25.2

23.7

1.5

6.3
%
Founding member advertising revenue from
beverage concessionaire agreements

6.7

7.5

(0.8
)

(10.7
%)
Total revenue

$
116.4

$
113.5

$
2.9

2.6
%



					$ Change			% Change
	Q2 2019		Q2 2018		Q2 2019 to Q2 2018			Q2 2019 to Q2 2018
National advertising revenue	$	77.6	$	78.8	$	(1.2	)	(1.5	)%
Local advertising revenue	17.7		18.1		(0.4		)	(2.2	)%
Regional advertising revenue	6.7		8.2		(1.5		)	(18.3	)%
Founding member advertising revenue from beverage concessionaire agreements	8.2		8.6		(0.4		)	(4.7	)%
Total revenue	$	110.2	$	113.7	$	(3.5	)	(3.1	)%

The following table shows data on theater attendance and revenue per attendee for the ~~third~~second quarter of ~~2017~~2019 and the ~~third~~second quarter of ~~2016:~~

2018:


					% Change							% Change
	Q3 2017		Q3 2016		Q3 2017 to Q3 2016			Q2 2019		Q2 2018		Q2 2019 to Q2 2018
National advertising revenue per attendee	$	0.561	$	0.458		22.5	%	$	0.419	$	0.406	3.2	%
Local and regional advertising revenue per attendee	$	0.167	$	0.132		26.5	%
Local advertising revenue per attendee								$	0.096	$	0.093	3.2	%
Regional advertising revenue per attendee								$	0.036	$	0.042	(14.3	)%
Total advertising revenue (excluding founding member beverage revenue) per attendee	$	0.728	$	0.590		23.4	%	$	0.550	$	0.541	1.7	%
Total advertising revenue per attendee	$	0.773	$	0.632		22.3	%	$	0.595	$	0.586	1.5	%
Total theater attendance (in millions) (1)		150.6		179.6		(16.1	%)	185.3		194.1		(4.5	)%

________________________________________________________


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

Local advertising revenue. The $0.4 million, or 2.2%, decrease in ~~national~~local advertising ~~CPMs (excluding beverage)~~revenue was primarily due to a 7.7% decrease in the ~~third~~volume of local contracts and a 2.1% decrease in the average contract value for the second quarter of ~~2017,~~2019, compared to the ~~third~~second quarter of ~~2016, was due~~2018, driven by a reduction in the local sales force following a realignment of sales territories in late 2018. These decreases in local advertising revenue were partially offset by an increase in local digital sales revenue in the second quarter of 2019, compared to ~~lower CPMs on scatter revenue, and to a lesser extent on revenue from upfront advertisers, year over year.~~the second quarter of 2018.

~~Local and regional~~Regional advertising revenue. The $1.5 million, or ~~6.3%~~18.3%, ~~increase~~decrease in ~~local and~~ regional advertising revenue was primarily due to ~~an increase~~a $1.0 million shift in ~~revenue from contracts over $100,000, driven primarily by higher advertising~~spend within the automotive category from regional advertising in the second quarter of 2018, to national advertising in the second quarter of 2019 and a ~~$0.6 million increase~~decrease in ~~online and mobile revenue during the third quarter of 2017, compared to the third quarter of 2016. These increases in local and~~ regional ~~advertising revenue were partially offset by lower revenue on contracts less than $100,000 in the third quarter of 2017, compared to the third quarter of 2016.~~

digital sales revenue.

Founding member beverage revenue. The ~~$0.8~~$0.4 million, or ~~10.7%~~4.7%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to ~~an 18.1%~~a 3.8% decrease in founding member attendance, partially offset by a ~~10.2%~~0.7% increase in beverage revenue CPMs, in the ~~third~~second quarter of ~~2017,~~2019, compared to the ~~third~~second quarter of ~~2016.~~2018. The ~~2017~~2019 beverage revenue CPM is based on the change in CPM during segment one of our pre-show from ~~2015~~2017 to ~~2016,~~2018, which increased ~~10.2%~~0.7%.

Operating expenses. Total operating expenses ~~increased~~decreased $1.0 million, or ~~1.5%~~1.4%, from ~~$65.1~~$73.5 million for the ~~third~~second quarter of ~~2016~~2018 to ~~$66.1~~$72.5 million for the ~~third~~second quarter of ~~2017.~~2019. The following table shows the changes in operating expense for the ~~third~~second quarter of ~~2017~~2019 and the ~~third~~second quarter of ~~2016~~2018 (in millions):

$ Change

% Change

Q3 2017

Q3 2016

Q3 2017 to
Q3 2016

Q3 2017 to
Q3 2016

Advertising operating costs

$
8.9

$
7.5

$
1.4

18.7
%
Network costs

3.7

4.1

(0.4
)

(9.8
%)
Theater access fees—founding members

18.1

19.2

(1.1
)

(5.7
%)
Selling and marketing costs

17.2

16.8

0.4

2.4
%
Administrative and other costs

8.8

8.6

0.2

2.3
%
Depreciation and amortization

9.4

8.9

0.5

5.6
%
Total operating expenses

$
66.1

$
65.1

$
1.0

1.5
%

Amortization of intangibles recorded for

network theater screen leases

Advertising operating costs. Advertising operating costs increased ~~$1.4~~$0.7 million, or ~~18.7%~~7.6%, from ~~$7.5~~$9.2 million for the ~~third~~second quarter of ~~2016~~2018 to ~~$8.9~~$9.9 million for the ~~third~~second quarter of ~~2017. This~~2019. The increase was primarily ~~due~~related to a ~~$1.2~~$0.4 million increase in affiliate advertising payments ~~related to higher revenue during the third quarter of 2017, compared to the third quarter of 2016 and~~driven by a ~~14.6%~~1.0%, or ~~500~~42 screen, increase in the number of average affiliate screens ~~for~~as of the ~~third~~second quarter of ~~2017,~~2019, compared to the ~~third~~second quarter of ~~2016.~~

~~Network costs.~~ ~~Network costs decreased $0.4~~2018, and an increase in the guaranteed minimums owed to affiliates of $0.3 million ~~or 9.8%, from $4.1 million for~~during the ~~third~~second quarter of ~~2016~~2019, compared to ~~$3.7 million for~~ the ~~third~~second quarter of ~~2017. This decrease was primarily~~2018. Advertising operating costs also increased due to a $0.2 million ~~decrease~~increase in ~~personnel related expenses due primarily to a lower bonus expense (related to lower performance against internal targets) in~~production costs associated with the ~~third~~Noovie pre-show.

Network costs. Network costs increased $0.1 million, or 3.0%, from $3.3 million for the second quarter of ~~2017 compared~~2018 to $3.4 million for the ~~third~~second quarter of ~~2016.~~

2019.

Theater access fees—founding members. Theater access fees ~~decreased $1.1~~increased $0.1 million, or ~~5.7%~~0.5%, from ~~$19.2~~$21.5 million ~~for~~in the ~~third~~second quarter of ~~2016~~2018 to ~~$18.1~~$21.6 million ~~for~~in the ~~third~~second quarter of ~~2017.~~2019. The ~~decrease was due to a $1.3 million decrease in the~~ expense associated with founding member attendance decreased $0.5 million due a 3.8% decrease in attendance at founding members’ theaters, which was partially offset by a ~~$0.2~~$0.4 million increase in the expense associated with the founding member digital screens that are connected to the DCN (nearly 100% of our screens as of June 27, 2019), including higher quality digital cinema projectors and related ~~equipment. The $1.3 million decrease in the theater access fee expense based upon attendance decreased $2.2 million~~equipment, due to a 18.1% decrease in founding member attendance, partially offset by $0.9 million increase due to a contractual 8% rate increase this year (the payment per patron rate increase occurs every five years with this increase taking place in 2017). The $0.2 million increase in digital screen fee expense increased primarily due to anthe annual 5% rate increase specified in the ESAs.

Administrative and other costs. Administrative and other costs ~~increased $0.2~~decreased $1.7 million, or ~~2.3%~~13.3%, from ~~$8.6~~$12.8 million in the ~~third~~second quarter of ~~2016~~2018 to ~~$8.8~~$11.1 million in the ~~third~~second quarter of ~~2017~~2019. Administrative and other costs decreased primarily due ~~primarily~~ to ~~$0.2 million~~a decrease in legal and professional ~~fees associated with the Final Judgement~~expense of $1.0 million related to ~~AMC’s acquisition~~the negotiation of ~~Carmike that were above~~ the ~~reimbursement limit in~~settlement agreement with a large shareholder during the ~~MOU.~~

~~Depreciation~~second quarter of 2018 and ~~amortization.~~ ~~Depreciation and amortization expense increased~~a $0.5 million ~~or 5.6%, from $8.9 million for the third quarter of 2016 to $9.4 million for the third quarter of 2017~~decrease in personnel related expenses primarily due to an increase in ~~depreciation expense~~capitalized personnel costs driven by ~~more software~~the nature of the work being performed by our information technology department and a decrease in salary and bonus expense at NCM, Inc. due to the absence of CEO personnel related expenses in the second quarter of 2019, compared to the second quarter of 2018. These administrative and other costs were partially offset by a $0.3 million increase in consulting expenses and a $0.1 million increase in CEO transition fees incurred in the second quarter of 2019, compared to the second quarter of 2018.

Depreciation expense. Depreciation expense increased $0.3 million, or 10.0%, from $3.0 million for the second quarter of 2018 to $3.3 million for the second quarter of 2019, primarily due to new fixed assets being placed into service ~~during~~in 2019, compared to 2018.

Amortization expense and Amortization of intangibles recorded for network theater screen leases. Amortization of our ESA and affiliate intangibles was at $7.0 million for the ~~period.~~

second quarter of 2018, consistent with the $7.0 million of amortization of intangibles recorded for network theater screen leases for the second quarter of 2019. Following the adoption of ASC 842, as discussed within Note 1 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document, amortization of the ESA and affiliate intangible balances is considered a form of lease expense and has been reclassified from amortization expense to amortization of intangibles recorded for network theater screen leases as of the adoption date, December 28, 2018. The Company adopted ASC 842 prospectively and thus, prior period balances remain within amortization expense.

Non-operating expenses.Total non-operating expenses ~~decreased $11.7~~increased $7.2 million, or ~~42.1%~~100.0%, from ~~$27.8~~$7.2 million for the ~~third~~second quarter of ~~2016~~2018 to ~~$16.1~~$14.4 million for the ~~third~~second quarter of ~~2017.~~2019. The following table shows the changes in non-operating expense for the ~~third~~second quarter of ~~2017~~2019 and the ~~third~~second quarter of ~~2016~~2018 (in millions):

Loss (gain) on the re-measurement of the payable

to founding members under the tax receivable

The ~~decrease~~increase in non-operating expense was due primarily to a $8.5 million increase in the loss on the re-measurement of the payable to founding members under the tax receivable agreement primarily due to a change in the deferred tax rate related to the Colorado sales sourcing change, partially offset by the absence of a ~~$10.4~~$1.2 million loss on ~~early retirement~~the extinguishment of debt ~~recorded~~related to the refinancing of the senior secured credit facility in the ~~third~~second quarter of ~~2016~~2018.

Income Tax Expense. Income tax expense decreased $13.7 million from $16.0 million for the second quarter of 2018, to $2.3 million for the second quarter 2019. The decrease in income tax expense was primarily due to a decrease in deferred tax expense in the second quarter of 2019, compared to the second quarter of 2018 related to the Company's remeasurement of its deferred tax assets as a result of a 2018 state tax law change. The remaining decrease was primarily due to lower income before income taxes for the ~~redemption of senior unsecured notes and a $1.2 million decrease in interest on borrowings primarily related to a one-month period between the issuance of and redemption of notes during the third~~second quarter of ~~2016, whereby interest was paid on both notes for one month in~~2019, compared to the ~~third~~second quarter of ~~2016.~~

2018.

Net Income. Net income increased ~~$1.2~~$4.7 million from ~~$8.2~~$4.2 million for the ~~third~~second quarter of ~~2016~~2018 to ~~$9.4~~$8.9 million for the ~~third~~second quarter of ~~2017.~~2019. The increase in net income was due to a $13.7 million decrease in ~~non-operating expenses of $11.7 million,~~income tax expense, as ~~discussed~~described above, and a ~~$1.9~~$0.7 million ~~increase in operating income, partially offset by a $9.0 million increase~~decrease in net income attributable to noncontrolling ~~interests related~~interests. These increases to ~~higher consolidated~~ net income ~~and~~were partially offset by a ~~$3.4~~$7.2 million increase in ~~income tax expense related to higher taxable income~~non-operating expenses, as described above, and a $2.5 million decrease in operating income related as described above for the ~~tax benefit realized~~second quarter ~~over quarter due~~of 2019, compared to the ~~reversals~~second quarter of ~~the reserve for uncertain tax positions.~~2018.

~~Nine Months Ended September~~

Six months ended June 27, 2019 and June 28, ~~2017 and September 29, 2016~~

~~Revenue~~2018

.Revenue. Total revenue decreased ~~6.5%~~3.5%, from ~~$305.1~~$193.9 million for the ~~nine~~six months ended ~~September 29, 2016~~June 28, 2018 to ~~$285.4~~$187.1 million for the ~~nine~~six months ended ~~September 28, 2017.~~June 27, 2019. The following is a summary of revenue by category (in millions):

Nine Months Ended

$ Change

% Change

September 28,
2017

September 29,
2016

YTD 2017 to
YTD 2016

YTD 2017 to
YTD 2016

National advertising revenue

$
194.9

$
215.5

$
(20.6
)

(9.6
%)
Local and regional advertising revenue

67.8

67.8

—

0.0
%
Founding member advertising revenue from
beverage concessionaire agreements

22.7

21.8

0.9

4.1
%
Total revenue

$
285.4

$
305.1

$
(19.7
)

(6.5
%)

The following table shows data on ~~theatre~~theater attendance and revenue per attendee for the ~~nine~~six months ended ~~September~~June 27, 2019 and June 28, ~~2017 and September 29, 2016:~~

2018:

Total theater attendance (in millions) (1)


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

National advertising revenue. The ~~$20.6~~$2.0 million, or ~~9.6%~~1.5%, decrease in national advertising revenue (excluding beverage revenue from ~~NCM LLC’s~~the founding members) was due primarily to ~~an 8.5%~~a 2.2% decrease in national advertising CPMs (excluding beverage) and a ~~5.3%~~1.4% decrease in impressions sold in the first nine months of 2017, compared to the first nine months of 2016, partially offset by a $4.0 million, or 12.9%, increase in online, mobile and other revenue not included in the inventory measured by impressions sold or CPMs.sold. The decrease in national advertising CPMs ~~was due primarily~~(excluding beverage) in the six months ended June 27, 2019, compared to ~~lower CPMs on revenue from upfront advertisers, including content partners, year over year. The decrease in national advertising impressions sold~~the six months ended June 28, 2018, was ~~primarily~~ due to lower ~~content partner spending and~~ demand in the scatter market, ~~for the first nine months of 2017, compared~~which is inventory not included within an upfront or content partner commitment sold closer to the ~~first nine months of 2016. However, national inventory utilization remained almost consistent, with~~advertisement air date typically at higher CPMs. The decrease in impressions was primarily related to a ~~slight increase from 112.9% in the first nine months of 2016 to 113.9% in the first nine months of 2017, on a 6.1%~~10.0% decrease in network ~~attendance.~~attendance, partially offset by an increase in national advertising utilization from 98.5% in the six months ended June 28, 2018 to 107.8% in the six months ended June 27, 2019. Inventory utilization is calculated as utilized impressions divided by total advertising impressions, which is based on eleven 30-second salable national advertising units in our Noovie pre-show, which can be expanded, should market demand dictate.

Local ~~and regional~~ advertising revenue. ~~Local~~ The $1.1 million, or 3.5%, decrease in local advertising revenue was primarily due to a 10.2% decrease in the volume of local contracts driven by a reduction in headcount following a realignment of sales territories in late 2018 and due to the timing of several large contracts shifting into the second half of 2019 from the second quarter of 2019, partially offset by an increase in local digital sales revenue and a 2.3% increase in the average contract value driven by contracts under $100,000 in the six months ended June 27, 2019, compared to the six months ended June 28, 2018.

Regional advertising revenue. The $2.0 million, or 16.5%, decrease in regional advertising revenue ~~remained constant at $67.8 million for the first nine months of 2017 and 2016,~~was primarily due to ~~an increase~~both a reduction in ~~revenue from contracts over $100,000, driven primarily by higher sales within the automotive industry~~spend and a ~~$1.5~~$1.0 million ~~increase in online and mobile revenue~~shift from regional advertising to national advertising within our automotive category during the first ~~nine~~six months of ~~2017,~~2018, compared to the first ~~nine~~six months of 2016. These increases in local and regional advertising revenue were offset by an equivalent decrease in the amount of contracts less than $100,000 in the first nine months of 2017, compared to the first nine months of 2016.

2019.

Founding member beverage revenue. The ~~$0.9~~$1.7 million, or ~~4.1%~~10.2%, ~~increase~~decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due ~~primarily~~ to a ~~10.2%~~9.6% decrease in founding member attendance, partially offset by a 0.7% increase in beverage revenue CPMs, ~~partially offset by an 8.0% decrease in founding member attendance~~ in the ~~first nine~~six months ~~of 2017,~~ended June 27, 2019, compared to the ~~first nine~~six months ~~of 2016.~~ended June 28, 2018. The ~~2017~~2019 beverage revenue CPM is based on the change in CPM during segment one of our pre-show from ~~2015~~2017 to ~~2016,~~2018, which increased ~~10.2%~~0.7%.

Operating expenses.Total operating expenses decreased ~~$2.7~~$4.2 million, or ~~1.3%~~2.9%, from ~~$204.4~~$142.7 million for the ~~nine~~six months ended ~~September 29, 2016~~June 28, 2018 to ~~$201.7~~$138.5 million for the ~~nine~~six months ended ~~September 28, 2017.~~June 27, 2019. The following table shows the changes in operating expense for the ~~nine~~six months ended ~~September~~June 27, 2019 and June 28, ~~2017 and September 29, 2016~~2018 (in millions):

Nine Months Ended

$ Change

% Change

September 28,
2017

September 29,
2016

YTD 2017 to
YTD 2016

YTD 2017 to
YTD 2016

Advertising operating costs

$
21.4

$
20.8

$
0.6

2.9
%
Network costs

11.9

12.9

(1.0
)

(7.8
%)
Theater access fees—founding members

57.4

56.8

0.6

1.1
%
Selling and marketing costs

54.2

54.5

(0.3
)

(0.6
%)
Administrative and other costs

28.6

32.9

(4.3
)

(13.1
%)
Depreciation and amortization

28.2

26.5

1.7

6.4
%
Total operating expenses

$
201.7

$
204.4

$
(2.7
)

(1.3
%)

Advertising operating costs. Advertising operating costs increased ~~$0.6~~$1.0 million, or ~~2.9%~~6.2%, from ~~$20.8~~$16.2 million for the ~~first nine~~six months ~~of 2016~~ended June 28, 2018 to ~~$21.4~~$17.2 million for the ~~first nine~~six months ~~of 2017. This~~ended June 27, 2019. The increase was primarily ~~the result of~~related to a ~~$1.0~~$0.6 million increase in affiliate advertising payments ~~and a $0.6 million increase in personnel related expenses. The~~

~~increase in affiliate advertising payments was primarily~~ driven by a ~~10.7%~~3.6%, or ~~367~~148 screen, increase in the number of average affiliate ~~screens for~~screen count as of the six months ended June 27, 2019, compared to the six months ended June 28, 2018, and an increase in the guaranteed minimums owed to affiliates of $0.6 million during the first ~~nine~~six months of ~~2017,~~2019, compared to the first ~~nine~~six months of 2016. The increase in personnel related expenses were primarily related to higher salary expense in the first nine months of 2017, compared to the first nine months of 2016. These increases in advertising2018. Advertising operating costs ~~were partially offset by a $1.0 million decrease in production costs related to lower revenue in the first nine months of 2017, compared to the first nine months of 2016.~~

~~Network costs.~~ ~~Network costs decreased $1.0 million, or 7.8%, from $12.9 million for the first nine months of 2016 to $11.9 million compared to the first nine months of 2017. This decrease was primarily related~~also increased due to a ~~$0.5~~$0.2 million ~~decrease~~increase in personnel related expenses due to ~~lower~~higher salaries from certain personnel moving from sales and ~~bonus expense (related~~marketing roles to ~~lower performance against internal targets) and a $0.2~~advertising operations roles.

Network costs. Network costs increased $0.1 million, ~~decrease in network maintenance costs related~~or 1.5%, from $6.8 million for the six months ended June 28, 2018 to ~~our DCN in~~$6.9 million for the ~~first nine~~six months ~~of 2017, compared to the first nine months of 2016.~~

ended June 27, 2019.

Theater access fees—founding members. Theater access fees ~~increased $0.6~~decreased $1.4 million, or ~~1.1%~~3.3%, from ~~$56.8~~$42.1 million in the six months ended June 28, 2018 to $40.7 million for the ~~first nine~~six months ~~of 2016 to $57.4~~ended June 27, 2019. The expense associated with founding member attendance decreased $2.4 million ~~for the first nine months of 2017. The increase~~due a 9.6% decrease in attendance at founding members’ theaters, which was ~~due to~~partially offset by a ~~$0.8~~$0.9 million increase in the expense associated with the founding member digital screens that are connected to the DCN (nearly 100% of our screens as of June 27, 2019), including higher quality digital cinema projectors and related equipment, ~~partially offset by a $0.2 million decrease in the expense associated with founding member attendance in the first nine months of 2017, compared~~due to the ~~first nine months of 2016. The $0.8 million increase in digital screen fee expense increased primarily due to an~~ annual 5% rate increase specified in the ESAs. The $0.2 million decrease in the theater access fee expense based upon attendance decreased $2.9 million due to an 8.0% decrease in founding member attendance, partially offset by an increase of $2.7 million due to a contractual 8% rate increase (the payment per patron rate increase occurs every five years with this increase taking place in 2017).

Selling and marketing costs. Selling and marketing costs decreased ~~$0.3~~$1.3 million, or ~~0.6%~~4.0%, from ~~$54.5~~$32.7 million for the ~~first nine~~six months ended ~~2016~~June 28, 2018 to ~~$54.2~~$31.4 million for the ~~first nine~~six months ended ~~2017.~~June 27, 2019. This decrease was primarily due to a ~~$1.8~~$2.3 million decrease in personnel related expenses which was the result of lower salaries and commissions due ~~primarily~~ to ~~lower commission based expense~~a reduction in sales force in late 2018 and lower non-cash share-based compensation expense ~~(related~~due to ~~lower revenue and lower performance against internal targets) and~~ a ~~$1.0 million~~ decrease in the volume of awards granted in 2019, compared to 2018. The decrease was also due to a $0.4 million non-cash ~~barter expense related to the nature and timing of these expenses~~impairment charge realized in the ~~first nine~~six months of 2017, compared to the first nine months of 2016. These decreases in selling and marketing costs were partially offset by a $2.4 million increase in non-cash impairment expense recorded during the first nine months of 2017, compared to the first nine months of 2016,ended June 28, 2018, related to investments obtained in prior years in exchange for advertising ~~services.~~

services, and no such expense in the six months ended June 27, 2019. These decreases were partially offset by an increase in expenses related to sales meetings, including related travel expenses, due to the timing of meetings, an increase in company advertising expense associated with online and social media platforms, and an increase in online publisher expense related to higher digital revenue in the six months ended June 27, 2019, compared to the six months ended June 28, 2018.

Administrative and other costs. Administrative and other costs decreased ~~$4.3~~$3.6 million, or ~~13.1%~~14.2%, from ~~$32.9~~$25.4 million for the ~~first nine~~six months ~~of 2016~~ended June 28, 2018 to ~~$28.6~~$21.8 million for the ~~first nine~~six months ~~of 2017 due~~ended June 27, 2019. This decrease was primarily related to 1) a $3.0 million decrease in ~~CEO transition~~personnel related expenses driven by 1) a $1.3 million increase in capitalized personnel costs ~~because~~driven by the nature of ~~severance expense that occurred during~~ the ~~first nine months of 2016, and~~work being performed by our information technology department 2) ~~$2.3~~a $1.1 million ofdecrease in non-cash share-based compensation expense related to a decrease in the ~~modification~~volume of awards granted in 2019, compared to 2018, and 3) a $0.9 million decrease in salary and bonus expense at NCM, Inc. due to the ~~former CEO’s equity awards that occurred~~absence of a CEO during the ~~first nine~~six months ~~of 2016. In addition, personnel related expenses decreased approximately $1.4 million during the first nine months of 2017,~~ended June 27, 2019, compared to the ~~first nine~~six months ~~of 2016~~ended June 28, 2018. Administrative and other costs also decreased due to ~~lower bonus expense~~a $2.0 million decrease in legal and ~~non-cash share-based compensation (related~~professional services primarily related to ~~lower performance against internal targets).~~a $1.2 million decrease in legal and professional fees related to the negotiation of the settlement agreement with a large shareholder that occurred in the second quarter of 2018. These decreases toin administrative and other costs were partially offset by a ~~$1.8~~$0.6 million ~~early lease termination charge for our corporate headquarters (the payment of which was reimbursed by~~increase in consulting services and a $0.3 million increase in CEO transition fees related to costs incurred in the ~~new landlord).~~

six months ended June 27, 2019.

Depreciation ~~and amortization.~~expense. Depreciation ~~and amortization~~ expense increased ~~$1.7~~$0.7 million, or ~~6.4%~~11.9%, from ~~$26.5~~$5.9 million for the ~~first nine~~six months ~~of 2016~~ended June 28, 2018 to ~~$28.2~~$6.6 million for the ~~first nine~~six months ended June 27, 2019, primarily due to new fixed assets being placed into service in 2019, compared to 2018.

Amortization expense and Amortization of ~~2017.~~intangibles recorded for network theater screen leases. Amortization of the ESA and affiliate intangibles was $13.9 million for the six months ended June 27, 2019 up from the $13.6 million of amortization expense for the six months ended June 28, 2018. Following the adoption of ASC 842, as discussed within Note 1 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document, amortization of the ESA and affiliate intangible balances is considered a form of lease expense and has been reclassified from amortization expense to amortization of intangibles recorded for network theater screen leases as of the adoption date, December 28, 2018. The Company adopted ASC 842 prospectively and thus, prior period balances remain within amortization expense. The $0.3 million increase was due to an increase in ~~depreciation expense primarily from more software being placed into service.~~

the underlying intangible asset balances following our annual common unit adjustment.

Nine Months Ended

$ Change

% Change

September 28,
2017

September 29,
2016

YTD 2017 to
YTD 2016

YTD 2017 to
YTD 2016

Interest on borrowings

$
39.4

$
41.2

$
(1.8
)

(4.4
%)
Interest income

(1.0
)

(1.3
)

0.3

(23.1
%)
Accretion of interest on the discounted payable to founding members under tax receivable agreement

9.5

10.4

(0.9
)

(8.7
%)
Loss on early retirement of debt

—

10.4

(10.4
)

(100.0
%)
Other non-operating expense

(0.1
)

—

(0.1
)

(100.0
%)
Total non-operating expenses

$
47.8

$
60.7

$
(12.9
)

(21.3
%)

The ~~decrease~~increase in non-operating expense was due primarily to a $9.3 million increase in the loss on the re-measurement of the payable to founding members under the tax receivable agreement in 2018 primarily due to a change in the deferred tax rate related to a change in Colorado tax law regarding sales sourcing and a $0.7 million increase in interest on borrowings due to a 0.26% increase in the weighted average interest on borrowings driven by an increase in the LIBOR rate on our term loan for the six months ended June 27, 2019, compared to the six months ended June 28, 2018. These increases were partially offset by a $1.5 million increase related to the gain (loss) on early retirement of our debt, due primarily to the absence of a ~~$10.4~~$1.2 million loss on ~~early retirement~~the extinguishment of debt ~~recorded~~related to the refinancing of the senior secured credit facility in the ~~first nine~~second quarter of 2018.

Income Tax Expense. Income tax expense decreased $15.3 million from $17.0 million for the six months ended June 28, 2018 to $1.7 million for the six months ended June 27, 2019. The decrease in income tax expense was primarily due to a decrease in deferred tax expense for the six months ended June 27, 2019, compared to the six months ended June 28, 2018 related to the Company's remeasurement of ~~2016~~its deferred taxes as a result of ~~the redemption of senior unsecured notes and~~ a ~~$1.8 million~~2018 state tax law change. The remaining decrease ~~in interest on borrowings~~was primarily ~~related~~due to a ~~one-month period between~~lower income before income taxes for the ~~issuance of and redemption of notes during~~six months ended June 27, 2019, compared to the ~~third quarter of 2016, whereby interest was paid on both notes for one month in the third quarter of 2016.~~

six months ended June 28, 2018.

Net Income. Net income ~~decreased $4.8~~increased $5.5 million from ~~$10.7~~$2.3 million for the ~~first nine~~six months ~~of 2016~~ended June 28, 2018 to ~~$5.9~~$7.8 million for the ~~first nine~~six months ~~of 2017.~~ended June 27, 2019. The ~~decrease~~increase in net income was due to a ~~$17.0~~$15.3 million decrease ~~in operating income related to lower revenue as outlined above and a $1.3 million increase~~ in income tax expense, related to a decrease in the tax benefit realized period over period due to the reversals of the reserve for uncertain tax positions, partially offset by a $12.9 million decrease in non-operating expenses, as described ~~further~~ above, and a ~~$0.6~~$0.7 million decrease in net income attributable to noncontrolling ~~interests related~~interests. These increases to ~~lower~~ net ~~income.~~income were partially offset by an $7.9 million increase in non-operating expenses, as described above, and a $2.6 million decrease in operating income, as described above, for the six months ended June 27, 2019, compared to the six months ended June 28, 2018.

Known Trends and Uncertainties

~~Trends and Uncertainties Related to our Business, Industry and Corporate Structure~~

~~Our Marketplace—~~Changes in the current macro-economic environment and changes in the national, regional and local advertising markets present uncertainties that could impact our results of operations, including the timing and amount of spending from our advertising clients as expenditures from advertisers tend to be cyclical, reflecting overall economic conditions, as well as our clients’ budgeting and buying patterns. In the current environment, it is difficult to know if these changes are short-term or temporary in nature or are long-term trends and changes. These changes include increased competition related to the expansion of online and mobile advertising platforms as well as fluctuations from quarter to quarter of the demand from national and local advertisers. Further, we could negatively be impacted by factors that could reduce the viewership of our ~~Noovie~~ pre-show, such as the expansion of reserved seating (utilized in approximately 41.2% of our network as of October 3, 2017), online ticketing, an increase in the number and length of trailers for upcoming films, increased dwell time of patrons in exhibitor lobbies before showtime and lower network attendance, which could result from shortening of release windows, more alternative methods of delivering movies to consumers, lower consumer confidence and disposable income and a decline in the motion picture box office. These factors may affect the attractiveness of our offerings to advertisers. If pre-show viewership declines significantly, we will be required to provide additional advertising time (makegoods) to national advertisers to reach agreed-on audience delivery thresholds. National advertising sales and rates also are dependent on the methodology used to measure audience impressions. If a change is made to this methodology that reflects fewer audience impressions available during the pre-show, this would adversely affect our revenues and results of operations. The impact to our business associated with these issues could be mitigated over time due to factors including the increase in salable advertising impressions, better geographic coverage related to the expansion of our network, diversification and growth of our advertising client base, improvements in ~~Noovie~~ pre-show engagement and upgrades to our inventory management and data management systems. We could also benefit if the effectiveness of cinema advertising improves relative to other advertising mediums.

We continue to participate in the television upfront advertising selling process and believe that over time, a shift toward more upfront commitments would allow us to bundle several client flights throughout the year in an effort to stabilize month-to-month and quarter-to-quarter volatility. Consistent with the television industry upfront booking practices, a portion of our upfront commitments have cancellation options or options to reduce the amount that advertisers may purchase and we would need to rely on the scatter market to replace those commitments. In addition, advertising sold through our upfront commitments may be placed throughout the period very irregularly which may affect our overall sales; for example, if a substantial portion of advertising from our upfront commitments is scheduled for peak periods of advertising demand, we will have fewer peak period advertising slots available for sale into the higher priced scatter market. Volatility in scatter market demand could cause our financial results to vary period to period.

~~Our Network—The change in the number of screens in our network by the founding members and network affiliates during the first nine months of 2017 was as follows.~~

Number of screens

Founding Members

Network Affiliates

Total

Balance as of December 29, 2016

17,022

3,526

20,548

New affiliates (1)

—

475

475

AMC screen transfers (2)

(318
)

—

(318
)
Openings, net of closures

6

(50
)

(44
)
Balance as of September 28, 2017

16,710

3,951

20,661

~~(1)~~

~~Represents five new affiliates added to our network during the first nine months of 2017.~~

~~(2)~~

~~Refer to~~ ~~Memorandum of Understanding with AMC~~ ~~below for further information.~~

Thus far in 2017, we have also contracted with two more new network affiliates for 77 screens that will be added to our network later in 2017 and early 2018. We believe that adding screens and attendees to our network will provide our advertising clients with a better marketing product with increased reach and improved geographic coverage. We have begun to offer our advertising clients better audience targeting capabilities and more robust campaign data analytics that we believe will provide a better product offering and should expand our overall national client base. We also believe that the continued growth of our market coverage could strengthen our selling proposition and competitive positioning against other national, regional and local video advertising platforms, including television, online and mobile video platforms and other out of home video advertising platforms.

~~Memorandum of Understanding with AMC—During the first quarter of 2017, NCM, Inc. and NCM LLC entered into a binding MOU with AMC to effectuate aspects of~~ the Final Judgment entered into by the DOJ in connection with AMC’s acquisition of Carmike. Pursuant to the MOU, AMC received NCM LLC common membership units in respect of the annual attendance at such Carmike theaters in accordance with the Common Unit Adjustment Agreement during the first quarter of 2017. Since these theaters are subject to an existing on-screen advertising agreement with an alternative provider, AMC will make integration payments to us reflecting the estimated advertising cash flow that we would have generated if we had exclusive access to sell advertising in those theaters. The integration payments will continue until the earlier of (i) the date the theaters are transferred to our network or (ii) the expiration of the ESA. Integration payments are calculated based upon the advertising cash flow that the Company would have generated if it had exclusive access to sell advertising in the theaters with pre-existing advertising agreements and fluctuate based on earnings and Adjusted OIBDA. The ESA additionally entitles 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. During the three and nine months ended September 28, 2017 and September 29, 2016, the Company recorded a reduction to net intangible assets of $6.9 million, $0.7 million, $11.6 million and $1.5 million, respectively, related to integration and other encumbered theater payments. During the three and nine months ended September 28, 2017 and September 29, 2016, AMC and Cinemark paid a total of $4.6~~million, $0.7 million, $6.1million and $1.7 million, respectively.~~

~~Further, during the first quarter of 2017,~~ AMC transferred 17 theaters (318 screens) to another advertising provider in accordance with the Final Judgment, for which AMC surrendered NCM LLC common membership units during the first quarter of 2017. At the end of the 10-year term of the Final Judgment, these theaters will revert back to us. Also, in April 2017, AMC completed a sale of five theaters on our network pursuant to the Final Judgment. AMC will surrender NCM LLC common unit membership units to NCM LLC for these divestures pursuant to the Common Unit Adjustment Agreement at the next Adjustment Date. These 22 transferred and sold theaters represent approximately 1.3% of our total theater network as of September 28, 2017. The Common Unit Adjustments are discussed further within ~~Trends Related to Ownership in NCM LLC~~ ~~below.~~

Lastly, AMC also agreed to reimburse us for our incurred and ongoing costs and expenses in connection with the Final Judgment including, but not limited to, our financial advisor and legal fees up to $1.0 million of such costs and expenses. During the first nine months of 2017, we incurred $1.3million of these costs, of which $1.0 million was recorded as a reduction to “Amounts due to founding members” within the Condensed Consolidated Balance Sheets and the remaining $0.3 million is included within administrative costs within the Condensed Consolidated Income Statement.

~~Utilization and Pricing~~— We have experienced volatility in our pricing (CPMs) over the years, with annual national CPM increases (decreases) ranging from (16.4%) to 9.6% over the last four years. In the first nine months of 2017, we experienced a decline of 8.5%, in national advertising CPMs (excluding beverage revenue) compared to the first nine months of 2016. This volatility in pricing can be driven by increased competition from other national video networks, including online and mobile advertising platforms, television networks and other out-of-home video networks and seasonal marketplace supply and demand characteristics. Volatility in pricing is also caused by changes in our customer mix period to period due to the variation in CPMs charged to each customer. We have also experienced volatility in our utilization over the years, with annual national inventory utilization ranging from 109.3% to 128.3% over the last four years. We experience even more substantial volatility quarter-to-quarter. This volatility in utilization can be driven by the loss or addition of one or more significant national contracts, whereby the timing and amount of these national contracts can be based upon the advertising budgets of our customers, product launches, the financial performance of our customers or other industry or macro-economic factors. We expect our CPMs and utilization to continue to be impacted period to period based upon the factors described above.

Beverage Revenue—Under the ESAs, up to 90 seconds of theNooviepre-show program can be sold to the founding members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements. For the first ~~nine~~three and six months of ~~2017~~2019 and ~~2016,~~2018, 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 ~~acquired~~required as part of these beverage concessionaire agreements decline, ~~with the other founding members,~~ this premium time will be available for sale to other clients. Per the ESAs, the time sold to the founding member beverage supplier is priced equal to the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of theNooviepre-show, limited to the highest advertising CPM being then-charged by NCM LLC. Due to a ~~10.2%~~0.7% increase in segment one CPMs in ~~2017,~~2018, the CPM on our beverage concessionaire revenue increased during the first ~~quarter~~three and six months of ~~2017~~2019 by ~~10.2%~~0.7% and the remainder of ~~2017~~2019 will increase by an equivalent percentage.

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 ~~this~~the next increase occurring ~~for~~in fiscal year ~~2017 and~~2022. Pursuant to the ESAs, the payment per digital screen increases annually by 5%. Pursuant to the ESAs, the theater access fee paid to the members of NCM LLC included an additional fee for access to the higher quality digital cinema systems. This additional fee will continue to increase as additional screens are equipped with the new digital cinema equipment and the fee increases annually by 5%. As of September 28, 2017, 97% of our founding member network screens were showing advertising on digital cinema projectors, and thus the future impact on the theater access fee related to additional digital cinema installations within existing founding member theaters is expected to be minimal. The theater access fee paid in the aggregate to all founding members cannot be less than 12% of NCM LLC’s aggregate advertising revenue (as defined in the ESA), or it will be adjusted upward to reach this minimum payment. As of September 28, 2017 and December 29, 2016~~, we had no liabilities recorded~~ ~~for the minimum payment, as the theater access fee was in excess of the minimum.~~

~~Trends and Uncertainties Related to Liquidity and Financial Performance~~

~~Debt~~—During the past several years, we amended our senior secured credit facility to extend the maturity, expand the revolver availability and reduce the interest rate spreads. In August 2016, we completed a private placement of $250.0 million in aggregate principal amount of 5.750% Senior Unsecured Notes due in 2026. A portion of the proceeds were used to redeem our $200.0 million 7.875% Senior Unsecured Notes due in 2021. The remaining proceeds, after the payment of fees and the redemption premium were used to pay down the balance on our revolving credit facility. As a result of these financing transactions on our revolving credit facility and senior notes, we extended the average maturities of our debt and as of September 28, 2017 the weighted average remaining maturity was 5.0 years. As of September 28, 2017, approximately 71% of our total borrowings bear interest at fixed rates. The remaining 29% 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 the interest paid on our borrowings.

The senior secured credit facility contains a number of covenants and financial ratio requirements, with which NCM LLC was in compliance at September 28, 2017, including a consolidated net senior secured leverage ratio as of September 28, 2017 of 3.2versus a covenant of 6.5 times for each quarterly period. For purposes of calculating the net consolidated senior secured leverage ratio (senior secured debt divided by Adjusted OIBDA), Adjusted OIBDA includes integration payments by the founding members. NCM LLC is permitted to make quarterly dividend payments and other payments based on leverage ratios for NCM LLC and its subsidiary so long as no default or event of default has occurred and continues to occur. The quarterly dividend payments and other distributions are made if the consolidated net senior secured leverage ratio is less than or equal to 6.5 times. Refer to Note 5—~~Borrowings~~ ~~to the unaudited Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for more information regarding the Company’s borrowings.~~

~~Dividends~~— At times our cash flow available for the payment of dividends (NCM LLC’s Adjusted OIBDA, less capital expenditures, interest expense, distributions to NCM LLC’s founding members, income taxes, tax receivable agreement payments to NCM LLC’s founding members and plus integration payments and certain other cash items) has been less than our regular dividend payment. Any deficit has been funded by NCM, Inc.’s cash and marketable securities balances. We expect that such deficits may occur in the future depending on factors such as future operating performance and the number of shares of NCM, Inc. common stock outstanding. We expect to fund any future deficits with NCM, Inc.’s cash and marketable securities balances. As of September 28, 2017, these cash and marketable securities balances totaled $47.3million (excluding NCM LLC). We intend to pay a regular quarterly dividend for the foreseeable future at the discretion of the Board of Directors consistent with our intention to distribute over time a substantial portion of our free cash flow. The declaration, payment, timing and amount of any future dividends payable will be at the sole discretion of the Board of Directors who will take into account general economic and advertising market business conditions, the Company’s financial condition, available cash, current and anticipated cash needs, and any other factors that the Board of Directors considers relevant. While it is the intention of the Company to continue our practice of distributing a high proportion of our free cash flow, actual results, ongoing reinvestment in our network and product offerings, as well as, prudent capital management may reduce such distributable free cash flow in future periods. As a result, the Board of Directors continues to review these factors to determine a sustainable distribution rate which balances our operating and strategic needs with those of our lenders and stockholders.

~~Trends Related to Ownership in NCM LLC~~

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

~~During the first quarter of 2017, the following Common Unit Adjustments occurred:~~

~~Annual Common Unit Adjustment for 2016 Fiscal Year~~—During the first quarter of 2017, NCM LLC issued approximately 2.4 million 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 2016 fiscal year.

~~Extraordinary Common Unit Adjustment for AMC’s Acquisition of Carmike~~—Pursuant to the MOU, NCM LLC issued approximately 18.4 million NCM LLC common membership units to AMC in respect of the annual attendance at Carmike theaters in accordance with the Common Unit Adjustment Agreement. AMC’s acquisition of Carmike meets the criteria for a Common Unit Adjustment for this acquisition because it resulted in an extraordinary attendance increase of approximately 9.5%.

~~Surrendered Units for AMC Screen Transfers~~—The Final Judgment required AMC to transfer advertising rights to 17 theaters from NCM LLC to another advertising provider. Pursuant to the MOU, AMC surrendered approximately 4.7 million NCM LLC common membership units in respect of such theaters. The 4.7 million NCM LLC common membership units were comprised of (i) approximately 2.9 million NCM LLC common membership units pursuant to the adjustment for divested theaters in the Common Unit Adjustment Agreement and (ii) approximately 1.8 million NCM LLC common membership units valued at $25.0 million ~~to compensate for lost operating income for these theaters during the 10-year term of the Final Judgment~~.

During the third quarter of 2017, AMC exercised the redemption right of an aggregate 14.6 million common membership units for the like number of shares of NCM, Inc.’s common stock. The Company accounted for the change in its ownership interest in NCM LLC as an equity transaction and no gain or loss was recognized in the Condensed Consolidated Statements of Income.

Overall, NCM, Inc.’s ownership in NCM LLC increased to 48.8% as of September 28, 2017 compared to 43.7% at December 29, 2016 due primarily to AMC’s redemption of units for shares of NCM, Inc.’s common stock, partially offset by the common unit adjustments described above, which has proportionally increased net income attributable to NCM, Inc. and decreased net income attributable to noncontrolling interests.

~~AMC Mandatory Ownership Divestitures—Pursuant to the Final Judgment,~~ AMC is required to divest the majority of its equity interests in NCM LLC and NCM, Inc., so that by June 20, 2019 it owns no more than 4.99% of NCM LLC’s common membership units and NCM, Inc. common stock, taken together, on a fully converted basis (“NCM’s outstanding equity interests”). AMC must complete the divestiture per the following schedule: (i) on or before December 20, 2017, AMC must own no more than 15.0% of NCM’s outstanding equity interests, (ii) on or before December 20, 2018, AMC must own no more than 7.5% of NCM’s outstanding equity interests and (iii) on or before June 20, 2019, AMC must own no more than 4.99% of NCM’s outstanding equity interests. Pursuant to the MOU, AMC also has agreed, among other things, subject to limited exceptions to retain at least 4.5% of NCM’s outstanding equity interests during the term of the Final Judgment, subject to certain exceptions which allow for certain sell downs after the 30-month anniversary of the MOU. As of September 28, 2017, AMC owned 17.0% of NCM’s outstanding equity interests. On September 29, 2017, AMC sold 2.8 million shares of NCM, Inc. common stock and as of September 29, 2017 AMC owned 15.2% of NCM’s outstanding equity interests. When AMC redeems its common membership units for NCM, Inc. common stock, NCM, Inc.’s ownership would increase proportionally and the number of shares outstanding of NCM, Inc. common stock would increase, which would also result in greater dividend payments by NCM, Inc. The increase in NCM, Inc.’s ownership would also result in higher available cash payments to NCM, Inc. (and lower available cash payments to AMC).

Financial Condition and Liquidity

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

stockholders.

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


	As of						$ Change			$ Change			As of						$ Change			$ Change
	September 28, 2017		December 29, 2016		September 29, 2016		Q3 2017 to YE 2016			Q3 2017 to Q3 2016			June 27, 2019		December 27, 2018		June 28, 2018		Q2 2019 to YE 2018			Q2 2019 to Q2 2018
Cash, cash equivalents and marketable securities (1)	$	49.9	$	68.7	$	54.0	$	(18.8	)	$	(4.1	)	$	61.7	$	75.6	$	65.6	$	(13.9	)	$	(3.9	)
NCM LLC revolver availability (2)		170.2		158.8		170.8		11.4			(0.6	)	143.2		143.2		140.0		—			3.2
Total liquidity	$	220.1	$	227.5	$	224.8	$	(7.4	)	$	(4.7	)	$	204.9	$	218.8	$	205.6	$	(13.9	)	$	(0.7	)

_________________________

~~(2)~~

(2)

The revolving credit facility portion of NCM LLC’s total borrowings is available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the senior secured credit facility, and a portion is available for letters of credit. NCM LLC’s total capacity under the revolving credit facility was $175.0 million as of ~~September~~June 27, 2019, December 27, 2018 and June 28, ~~2017, December 29, 2016 and September 29, 2016.~~2018. As of ~~September~~June 27, 2019, December 27, 2018 and June 28, ~~2017, December 29, 2016 and September 29, 2016,~~2018, the amount available under the NCM LLC revolving credit facility in the table above, was net of amount outstanding under the revolving credit facility of $27.0 million, $27.0 million and $30.2 million, respectively, and net letters of credit of $4.8 million ~~$1.2 million and $1.2 million, respectively.~~

in each respective period.

As of June 27, 2019, the weighted average remaining maturity of our debt was 4.8 years. As of June 27, 2019, approximately 68% of our total borrowings bear interest at fixed rates. The remaining 32% 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 and used cash as follows (in millions):

Nine Months Ended

September 28,
2017

September 29,
2016

Operating cash flow

$
104.0

$
90.9

Investing cash flow

$
18.5

$
(5.1
)
Financing cash flow

$
(115.1
)

$
(111.9
)



	Six Months Ended
	June 27, 2019			June 28, 2018
Operating cash flow	$	59.3		$	66.2
Investing cash flow	10.6			(9.1		)
Financing cash flow	(68.5		)	(52.9		)

Operating Activities. The ~~$13.1~~$6.9 million decrease in cash provided by operating activities for the six months ended June 27, 2019 compared to the six months ended June 28, 2018 was due primarily to 1) a decrease in the change in accounts receivable of $9.8 million related to timing of collections in the first six months of 2019, compared to the first six months of 2018, 2) a $5.6 million decrease in deferred income tax expense net of the decrease in the re-measurement of the payable to founding members under the TRA driven by a change in the Company's deferred rate due to a change in Colorado tax law regarding sales sourcing and 3) a $2.1 million decrease in non-cash share-based compensation expense related to the lower volume of awards for the six months ended June 27, 2019, compared to the six month ended June 28, 2018. These decreases were partially offset by an $10.6 million increase in cash provided by operating activities ~~for the nine months ended September 28, 2017, compared~~due to the ~~nine months ended September 29, 2016 was due primarily to an increase~~reclassification in the ~~change in accounts receivable~~current period of ~~$26.1 million related to higher collections during the nine months ended September 28, 2017, compared~~founding member integration and other encumbered theater payments from cash flows from financing activities upon adoption of ASC 842, as further discussed within Note 1 to the ~~nine months ended September 29, 2016, and a $6.2 million decrease~~unaudited Condensed Consolidated Financial Statements included elsewhere in ~~payments to founding members under the tax receivable agreement, partially offset by a $17.0 million decrease in operating income, as discussed above.~~this document.

Investing Activities.The ~~$23.6~~$19.7 million increase in cash provided by investing activities for the ~~nine~~six months ended ~~September 28, 2017,~~June 27, 2019, compared to the ~~nine~~six months ended ~~September 29, 2016~~June 28, 2018 was due primarily to ~~lower purchases~~higher proceeds from the sale and maturity of marketable securities, net of ~~proceeds,~~purchases, of ~~approximately $21.2~~$17.9 million, and a $1.4 million ~~higher~~increase in the proceeds from ~~founding member~~the notes receivable ~~due~~from the founding members for the six months of June 27, 2019, compared to ~~timing of payments.~~the six months ended June 28, 2018.

Financing Activities. The ~~$3.2~~$15.6 million increase in cash used in financing activities ~~for~~during the ~~nine~~six months ended ~~September 28, 2017,~~June 27, 2019, compared to the ~~nine~~six months ended ~~September 29, 2016~~June 28, 2018 was due primarily to ~~$37.4~~a $24.2 million ofdecrease in proceeds from ~~the issuance of the Senior Notes due 2026,~~borrowings, net of repayments, and an $11.5 million decrease in cash inflows from financing activities due to the ~~redemption of the Senior Notes due 2021~~reclassification in the ~~first nine months~~current period of ~~2016~~founding member integration and other encumbered theater payments from cash flows from financing activities upon adoption of ASC 842, as further discussed within Note 1 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document. These increases were partially offset by a ~~$17.9~~$12.1 million ~~increase~~decrease in distributions to founding members, ~~partially offset by $48.0~~period over period, and a decrease of $6.3 million in the payment of ~~higher repayments, net~~debt issuance costs related to the refinancing of ~~proceeds, under our revolving~~the senior secured credit facility ~~and a $4.4 million increase in integration payments and other encumbered theater payments related to founding member encumbered theater acquisitions~~ in the ~~first nine months~~second quarter of ~~2017, compared to the first nine months of 2016.~~2018.

Sources of Capital and Capital Requirements.

NCM, Inc.’s primary source of liquidity and capital resources is the quarterly available cash distributions from NCM LLC as well as its existing cash balances and marketable securities, which as of ~~September 28, 2017~~June 27, 2019 were ~~$47.3~~$57.1 million (excluding NCM LLC). NCM LLC’s primary sources of liquidity and capital resources are its cash provided by operating activities, availability under its revolving credit facility and cash on hand.

Management believes that future funds generated from NCM LLC’s operations and cash on hand should be sufficient to fund working capital requirements, NCM LLC’s debt service requirements, opportunistic debt repurchases, and capital ~~expenditure and other investing requirements,~~expenditures, through the next twelve months. Cash flows generated by NCM LLC’s distributions to NCM, Inc. and the founding members can be impacted by the seasonality of advertising sales, ~~stock option exercises,~~ interest and repayments on borrowings under our ~~revolving~~ credit ~~agreement~~agreements and to a lesser extent theater attendance. 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, quarterly to its members ~~(NCM LLC’s founding members~~(Regal, Cinemark, AMC and NCM, Inc.). The available cash distribution to the members of NCM LLC for the ~~nine~~three months ended ~~September 28, 2017~~June 27, 2019 was approximately ~~$86.4~~$30.0 million, of which approximately ~~$39.0~~$14.6 million was distributed to NCM, Inc. NCM, Inc. expects to use cash received from future available cash distributions and its cash balances to fund income taxes, payments associated with the ~~tax receivable agreement~~TRA with the founding members, and current and future dividends as declared by the Board of Directors, including a dividend declared on ~~November 3, 2017~~August 5, 2019 of ~~$0.22~~$0.17 per share (approximately ~~$16.8~~$13.1 million) on each share of the Company’s common stock (not including outstanding restricted stock) to stockholders of record on ~~November 16, 2017~~August 15, 2019 to be paid on ~~December 1, 2017.~~August 30, 2019. NCM LLC will also continue to evaluate discretionary use of cash based on future expected leverage levels, NCM LLC investment opportunities and NCM, Inc. dividend policy. Distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund payments associated with the ~~tax receivable agreement~~TRA with NCM LLC’s founding members, income taxes and regular dividends for the foreseeable future at the discretion of the Board of Directors. The declaration, payment, timing and ~~amount~~a

mount of any future dividends payable will be at the sole discretion of the Board of Directors who will take into account general economic and advertising market business conditions, ~~the Company’s~~NCM, Inc.’s financial condition, available cash, current and anticipated cash needs, and any other factors that the Board of Directors considers relevant.

The Company intends to pay a regular quarterly dividend for the foreseeable future at the discretion of the Board of Directors consistent with the Company’s intention to distribute over time a substantial portion of its free cash flow.

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 ~~29, 2016~~27, 2018 and incorporated by reference herein. As of ~~September 28, 2017,~~June 27, 2019, there were no significant changes in those critical accounting ~~policies.~~

policies except for the change in leases upon the adoption of ASC 842 in the first quarter of 2019 and discussed further within Note 8—Commitments and Contingencies, to the unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

Recent Accounting Pronouncements

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

Related Party Transactions

For a discussion of related party transactions, see the information provided under Note 4—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

~~Our operating lease obligations, which primarily include office leases,~~

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

Contractual and Other Obligations

Our revenue and operating results are seasonal in nature, coinciding with the timing of marketing expenditures by our advertising clients and to a lesser extent the attendance patterns within the film exhibition industry. Both advertising expenditures and theater attendance tend 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 ~~lower theater industry attendance levels.~~increased inventory availability in competitive advertising mediums. 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 ~~2014, 2015~~2016, 2017 and ~~2016.~~

2018.

The primary market risk to which we are exposed is interest rate risk. The Notes due 2022 and the Notes due 2026 are at fixed rates, and therefore are not subject to market risk. As of ~~September 28, 2017,~~June 27, 2019, the only interest rate risk that we are exposed to is related to our $175.0 million revolving credit facility and our ~~$270.0 million~~ term loan. A 100-basis point fluctuation in market interest rates underlying our term loan and revolving credit facility would have the effect of increasing or decreasing our cash interest expense by approximately ~~$2.7~~$3.0 million for an annual period on the ~~$270.0~~$27.0 million revolving credit balance and $268.0 million term loan outstanding as of ~~September 28, 2017.~~June 27, 2019. For a discussion of market risks, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” contained in our annual report on Form 10-K for the fiscal year ended December ~~29, 2016~~27, 2018 and incorporated by reference herein.

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 ~~by us~~ in the Company's reports ~~that we file or submit to the SEC~~filed under the Exchange Act, ~~as amended,~~ is recorded, processed, summarized and reported within the time periods specified by the ~~Commission’s~~SEC’s rules and forms, and that such information is accumulated and communicated to ~~our~~ management, including the Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), as appropriate, to allow timely decisions regarding required disclosure. ~~As of September 28, 2017, our management evaluated,~~

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange ~~Act.~~Act as of June 27, 2019, the end of the period covered by this Quarterly Report on Form 10-Q. Based on ~~that~~such evaluation, the Company’s ~~management~~Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of ~~September 28, 2017~~June 27, 2019 were effective.

~~There~~

There were no changes ~~in the Company’s~~to our internal ~~controls~~control over financial reporting that occurred during the quarter ended ~~September 28, 2017~~June 27, 2019 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal ~~controls~~control over financial reporting.

~~Delaware~~		~~20-5665602~~

Delaware	20-5665602
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

~~9110 East Nichols Avenue, Suite 200~~ ~~Centennial, Colorado~~		~~80112-3405~~

6300 S. Syracuse Way, Suite 300 Centennial, Colorado	80111
(Address of Principal Executive Offices)	(Zip Code)



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)



Large accelerated filer	☒ ☐		Accelerated filer	☐ x

Non-accelerated filer	☐	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐

			Emerging growth company	☐

				~~Page~~

		Page

	PART I
��
Item 1.	Financial Statements		1
	Unaudited Condensed Consolidated Balance Sheets		1
	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income		2
	Unaudited Condensed Consolidated Statements of Cash Flows		3
	Unaudited Condensed Consolidated Statements of Equity/(Deficit)		5
	Notes to Unaudited Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21 22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		34 33
Item 4.	Controls and Procedures		35 33

	PART II

Item 1.	Legal Proceedings		35 33
Item 1A.	Risk Factors		35 33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36 33
Item 3.	Defaults Upon Senior Securities		36 33
Item 4.	Mine Safety Disclosures		36 33
Item 5.	Other Information		36 33
Item 6.	Exhibits		36 35

Signatures			37 36



	June 27, 2019			December 27, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	42.8		$	41.4
Short-term marketable securities	11.2			24.0
Receivables, net of allowance of $6.0 and $6.0, respectively	124.9			149.9
Income tax receivable	0.1			0.3
Amounts due from founding members, net	3.1			5.8
Current portion of notes receivable - founding members (including receivables from related parties of $2.8 and $4.2, respectively)	4.2			5.6
Prepaid expenses and other current assets	4.7			3.9
Total current assets	191.0			230.9
NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $66.7 and $62.5, respectively	32.4			33.6
Intangible assets, net of accumulated amortization of $186.2 and $172.7, respectively	669.6			684.5
Deferred tax assets, net of valuation allowance of $77.5 and $80.1, respectively	172.4			173.9
Other investments	3.2			3.0
Long-term marketable securities	7.7			10.2
Debt issuance costs, net	4.5			5.0
Other assets	23.2			0.7
Total non-current assets	913.0			910.9
TOTAL ASSETS	$	1,104.0		$	1,141.8
LIABILITIES AND EQUITY/(DEFICIT)
CURRENT LIABILITIES:
Amounts due to founding members, net	$	17.9		$	30.0
Payable to founding members under tax receivable agreement (including payables to related parties of $11.1 and $11.2, respectively)	15.3			15.5
Accrued expenses	18.2			21.7
Accrued payroll and related expenses	9.6			15.3
Accounts payable	15.5			18.0
Deferred revenue	10.7			7.3
Short-term debt	2.7			2.7
Other current liabilities	1.3			—
Total current liabilities	91.2			110.5
NON-CURRENT LIABILITIES:
Long-term debt, net of debt issuance costs of $6.9 and $7.8, respectively	915.4			920.9
Payable to founding members under tax receivable agreement (including payables to related parties of $133.7 and $141.1, respectively)	184.0			195.6
Other liabilities	23.9			4.0
Total non-current liabilities	1,123.3			1,120.5
Total liabilities	1,214.5			1,231.0
COMMITMENTS AND CONTINGENCIES (NOTE 8)
EQUITY/(DEFICIT):
NCM, Inc. Stockholders’ Equity/(Deficit):
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding, respectively	—			—
Common stock, $0.01 par value; 175,000,000 shares authorized, 77,349,628 and 76,976,398 issued and outstanding, respectively	0.8			0.8
Additional paid in capital/(deficit)	(211.9		)	(215.2		)
Retained earnings (distributions in excess of earnings)	(172.6		)	(153.6		)
Total NCM, Inc. stockholders’ equity/(deficit)	(383.7		)	(368.0		)
Noncontrolling interests	273.2			278.8
Total equity/(deficit)	(110.5		)	(89.2		)
TOTAL LIABILITIES AND EQUITY/(DEFICIT)	$	1,104.0		$	1,141.8

	Three Months Ended						Nine Months Ended
	September 28, 2017			September 29, 2016			September 28, 2017			September 29, 2016
REVENUE (including revenue from founding members of $6.7, $7.6, $22.7 and $22.1, respectively)	$	116.4		$	113.5		$	285.4		$	305.1
OPERATING EXPENSES:
Advertising operating costs		8.9			7.5			21.4			20.8
Network costs		3.7			4.1			11.9			12.9
Theater access fees—founding members		18.1			19.2			57.4			56.8
Selling and marketing costs		17.2			16.8			54.2			54.5
Administrative and other costs		8.8			8.6			28.6			32.9
Depreciation and amortization		9.4			8.9			28.2			26.5
Total		66.1			65.1			201.7			204.4
OPERATING INCOME		50.3			48.4			83.7			100.7
NON-OPERATING EXPENSES:
Interest on borrowings		13.1		14.3				39.4			41.2
Interest income		(0.2	)		(0.3	)		(1.0	)		(1.3	)
Accretion of interest on the discounted payable to founding members under tax receivable agreement		3.2			3.4			9.5			10.4
Loss on early retirement of debt		—			10.4			—			10.4
Other non-operating income		—			—			(0.1	)		—
Total		16.1			27.8			47.8			60.7
INCOME BEFORE INCOME TAXES		34.2			20.6			35.9			40.0
Income tax expense (benefit)		2.3			(1.1	)		2.6			1.3
CONSOLIDATED NET INCOME		31.9			21.7			33.3			38.7
Less: Net income attributable to noncontrolling interests		22.5			13.5			27.4			28.0
NET INCOME ATTRIBUTABLE TO NCM, INC.	$	9.4		$	8.2		$	5.9		$	10.7

NET INCOME PER NCM, INC. COMMON SHARE:
Basic	$	0.15		$	0.14		$	0.10		$	0.18
Diluted	$	0.15		$	0.13		$	0.10		$	0.18
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		63,993,273			59,846,496			61,637,445			59,763,012
Diluted		64,281,581			60,878,806			62,074,577			60,479,977

Dividends declared per common share	$	0.22		$	0.22		$	0.66		$	0.66



				Three Months Ended
							Additional Paid in Capital (Deficit)			Retained Earnings (Distribution in Excess of Earnings)			Noncontrolling Interest
				Common Stock
	Consolidated			Shares	Amount
Balance—March 29, 2018	$	(84.4	)	76,904,155	$	0.8	$	(229.3	)	$	(145.6	)	$	289.7
Distributions to founding members	(17.0		)	—	—		—			—			(17.0		)
Income tax and other impacts of NCM LLC ownership changes	0.6			—	—		0.6			—			—
Comprehensive income, net of tax	17.0			—	—		—			4.2			12.8
Share-based compensation issued	—			11,377	—		—			—			—
Share-based compensation expense/capitalized	2.2			—	—		1.6			—			0.6
Cash dividends declared $0.17 per share	(13.5		)	—	—		—			(13.5		)	—
Balance—June 28, 2018	$	(95.1	)	76,915,532	$	0.8	$	(227.1	)	$	(154.9	)	$	286.1

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 expense/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

				NCM, Inc.
											Retained
								Additional			Earnings
								Paid in			(Distribution
				Common Stock				Capital			in Excess of			Noncontrolling
	Consolidated			Shares		Amount		(Deficit)			Earnings)			Interest
Balance—December 31, 2015	$	(171.7	)		59,239,154	$	0.6	$	(221.5	)	$	(186.1	)	$	235.3
Distributions to founding members		(35.2	)		—		—		—			—			(35.2	)
NCM LLC equity issued for purchase of intangible asset		21.1			—		—		9.2			—			11.9
Income tax and other impacts of NCM LLC ownership changes		(2.8	)		—		—		(4.2	)		—			1.4
Comprehensive income, net of tax		38.7			—		—		—			10.7			28.0
Share-based compensation issued		(4.4	)		614,652		—		(4.4	)		—			—
Share-based compensation expense/capitalized		14.0			—		—		9.4			—			4.6
Cash dividends declared $0.66 per share		(41.0	)		—		—		—			(41.0	)		—
Balance— September 29, 2016	$	(181.3	)		59,853,806	$	0.6	$	(211.5	)	$	(216.4	)	$	246.0

Balance—December 29, 2016	$	(181.2	)		59,874,412	$	0.6	$	(207.7	)	$	(215.6	)	$	241.5
Distributions to founding members		(47.4	)		—		—		—			—			(47.4	)
NCM LLC equity issued for purchase of intangible asset		201.8			—		—		78.8			—			123.0
Income tax and other impacts of NCM LLC ownership changes		(32.2	)		—		—		16.2			—			(48.4	)
Issuance of shares		77.8			14,600,000		0.2		77.6			—			—
NCM, Inc. investment in NCM LLC		(77.8	)		—		—		(77.8	)		—			—
Comprehensive income, net of tax		33.3			—		—		—			5.9			27.4
Share-based compensation issued		(4.0	)		755,886		—		(4.0	)		—			—
Share-based compensation expense/capitalized		8.6			—		—		5.3			—			3.3
Cash dividends declared $0.66 per share		(40.8	)		—		—		—			(40.8	)		—
Balance—September 28, 2017	$	(61.9	)		75,230,298	$	0.8	$	(111.6	)	$	(250.5	)	$	299.4



	Six Months Ended
	June 27, 2019
Balance at beginning of period	$	(7.3	)
Performance obligations satisfied	7.3
New contract liabilities	(10.7		)
Balance at end of period	$	(10.7	)

	Three Months Ended				Nine Months Ended
Included in the Condensed Consolidated Statements of Income:	September 28, 2017		September 29, 2016		September 28, 2017		September 29, 2016
Revenue:
Beverage concessionaire revenue (included in advertising revenue) (1)	$	6.7	$	7.5	$	22.7	$	21.8
Advertising inventory revenue (included in advertising revenue) (2)		—		0.1		—		0.3
Operating expenses:
Theater access fee (3)		18.1		19.2		57.4		56.8
Purchase of movie tickets and concession products and rental of theater space (included in selling and marketing costs) (4)		0.4		0.4		1.2		1.2
Purchase of movie tickets and concession products and rental of theater space (included in advertising operating costs) (4)		—		—		0.1		—
Purchase of movie tickets and concession products and rental of theater space (included in administrative and other costs) (4)		—		—		—		0.1
Non-operating expenses:
Interest income from notes receivable (included in interest income) (5)		0.2		0.2		0.5		0.6

	As of
Included in the Condensed Consolidated Balance Sheets:	September 28, 2017		December 29, 2016
Current portion of notes receivable - founding members (1)		4.2		5.6
Long-term portion of notes receivable - founding members (1)		8.3		8.3
Interest receivable on notes receivable (included in other current assets) (1)		0.1		0.3
Common unit adjustments, net of amortization and integration payments (included in intangible assets) (2)		702.2		529.9
Current payable to founding members under tax receivable agreement (3)		15.9		18.4
Long-term payable to founding members under tax receivable agreement (3)		144.2		143.4

			Fair Value Measurements at Reporting Date Using
	Fair Value as of September 28, 2017		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)	$	22.3	$	22.3	$	—	$	—
Short-term marketable securities (2)		3.7		2.0		1.7		—
Long-term marketable securities (2)		15.8		13.7		2.1		—
Total assets	$	41.8	$	38.0	$	3.8	$	—

			Fair Value Measurements at Reporting Date Using
	Fair Value as of December 29, 2016		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)	$	5.3	$	0.3	$	5.0	$	—
Short-term marketable securities (2)		26.1		5.2		20.9		—
Long-term marketable securities (2)		19.6		17.3		2.3		—
Total assets	$	51.0	$	22.8	$	28.2	$	—

	As of September 28, 2017
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:
Short-term U.S. government treasury bonds	$	1.2	$	1.2		0.1
Short-term U.S. government agency bonds		0.8		0.8		0.9
Short-term certificates of deposit		1.7		1.7		0.2
Total short-term marketable securities		3.7		3.7

Long-term municipal bonds		1.9		1.9		2.4
Long-term U.S. government agency bonds		11.9		11.8		2.5
Long-term financial certificates of deposit:		2.1		2.1		2.0
Total long-term marketable securities		15.9		15.8
Total marketable securities	$	19.6	$	19.5

	As of December 29, 2016
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:
Short-term U.S. government treasury bonds	$	1.2	$	1.2		0.8
Short-term municipal bonds		2.9		2.9		0.6
Short-term U.S. government agency bonds		1.0		1.0		0.5
Short-term commercial paper		13.0		13.0		0.1
Short-term certificates of deposit:
Financial		7.7		7.7		0.6
Industrial		0.3		0.3		0.9
Total short-term marketable securities		26.1		26.1

Long-term municipal bonds		1.9		1.8		2.7
Long-term U.S. government agency bonds		15.6		15.5		3.5
Long-term certificates of deposit		2.2		2.3		2.6
Total long-term marketable securities		19.7		19.6
Total marketable securities	$	45.8	$	45.7


(2)	Share-based compensation costs are included in network operations, selling and marketing and administrative expense ~~(YTD 2016 includes $2.3 million of expense associated with modifying the former CEO’s equity awards in the first nine months of 2016)~~ in the accompanying unaudited Condensed Consolidated Financial Statements.



	Number of screens
	Founding Members	Network Affiliates		Total
Balance as of December 27, 2018	16,768	4,404		21,172
Lost affiliates, net of new affiliates (1)	—	(240	)	(240	)
Openings, net of closures	81	32		113
Balance as of June 27, 2019	16,849	4,196		21,045

	~~(2)~~
(1)	~~Chief Executive Officer transition costs represent severance, consulting and other costs.~~

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
FY 2014		17.8%		25.4%		25.6%		31.2%
FY 2015		17.2%		27.2%		25.0%		30.6%
FY 2016		17.0%		25.8%		25.4%		31.8%



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

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs
June 30, 2017 through July 27, 2017		985	$	7.53		—	N/A
July 28, 2017 through August 31 2017		3,527	$	6.98		—	N/A
September 1, 2017 through September 28, 2017		—	$	—		—	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 29, 2019 through April 25, 2019	5,908	$	7.09	—	N/A
April 26, 2019 through May 23, 2019	1,134	$	7.02	—	N/A
May 24, 2019 through June 27, 2019	—	$	—	—	N/A

~~Exhibit~~			~~Reference~~	~~Description~~

~~31.1~~ Exhibit	* Reference	Description

31.1	*	Rule 13a-14(a) Certification of Chief Executive Officer.
31.2	*	Rule 13a-14(a) Certification of Chief Financial Officer.
32.1	**	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2	**	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS	*	XBRL Instance Document
101.SCH	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document



		NATIONAL CINEMEDIA, INC.
		(Registrant)

Date:	~~November 7, 2017~~ August 5, 2019	/s/ ~~Andrew J. England~~ Thomas F. Lesinski
		~~Andrew J. England~~ Thomas F. Lesinski
		Chief Executive Officer and Director
		(Principal Executive Officer)

~~Date:~~
	~~November 7, 2017~~
Date:	August 5, 2019	/s/ Katherine L. Scherping
		Katherine L. Scherping
		Chief Financial Officer (Principal Financial and Accounting Officer)