NCMI » Topics » Other -

This excerpt taken from the NCMI 10-Q filed May 12, 2009.

Other –

During the quarter ended April 2, 2009 and March 27, 2008, AMC, Cinemark and Regal purchased $0.4 million and $0.3 million, respectively, of NCM LLC’s advertising inventory for their own use. The value of such purchases are calculated by reference to NCM LLC’s advertising rate card and is included in advertising revenue.

Included in meetings and events operating costs is $0.1 million and $0.2 million for the quarter ended April 2, 2009 and March 27, 2008, respectively, related to purchases of movie tickets and concession products from the founding members primarily for resale to NCM LLC’s customers.

These excerpts taken from the NCMI 10-K filed Mar 6, 2009.

Other –

During the year ended January 1, 2009, the 2007 post-IPO period, the 2007 pre-IPO period and the year ended December 28, 2006, AMC, Cinemark and Regal purchased $2.3 million, $1.4 million, $0.1 million and $2.1 million, respectively, of NCM LLC’s advertising inventory for their own use. The value of such purchases are calculated by reference to NCM LLC’s advertising rate card and is included in advertising revenue with a percentage of such amounts returned by NCM LLC to the founding members as advertising circuit share during the 2007 pre-IPO period and the year ended December 28, 2006.

Included in meetings and events operating costs is $1.8 million, $3.3 million, $0.2 million and $4.1 million for the year ended January 1, 2009, the 2007 post-IPO period, the 2007 pre-IPO period and the year December 28, 2006, respectively, related to purchases of movie tickets and concession products from the founding members primarily for resale to NCM LLC’s customers.

Other –

During the year ended January 1, 2009, the 2007 post-IPO period, the 2007 pre-IPO period and the year ended December 28, 2006, AMC, Cinemark and Regal purchased $2.3 million, $1.4 million, $0.1 million and $2.1 million, respectively, of NCM LLC’s advertising inventory for their own use. The value of such purchases are calculated by reference to NCM LLC’s advertising rate card and is included in advertising revenue with a percentage of such amounts returned by NCM LLC to the founding members as advertising circuit share during the 2007 pre-IPO period and the year ended December 28, 2006.

Included in meetings and events operating costs is $1.8 million, $3.3 million, $0.2 million and $4.1 million for the year ended January 1, 2009, the 2007 post-IPO period, the 2007 pre-IPO period and the year December 28, 2006, respectively, related to purchases of movie tickets and concession products from the founding members primarily for resale to NCM LLC’s customers.

Other –

During the year ended January 1, 2009, the 2007 post-IPO period, the 2007 pre-IPO period and the year ended December 28, 2006, AMC, Cinemark and Regal purchased $2.3 million, $1.4 million, $0.1 million and $2.1 million, respectively, of NCM LLC’s advertising inventory for their own use. The value of such purchases are calculated by reference to NCM LLC’s advertising rate card and is included in advertising revenue with a percentage of such amounts returned by NCM LLC to the founding members as advertising circuit share during the 2007 pre-IPO period and the year ended December 28, 2006.

Included in meetings and events operating costs is $1.8 million, $3.3 million, $0.2 million and $4.1 million for the year ended January 1, 2009, the 2007 post-IPO period, the 2007 pre-IPO period and the year December 28, 2006, respectively, related to purchases of movie tickets and concession products from the founding members primarily for resale to NCM LLC’s customers.

This excerpt taken from the NCMI 10-Q filed Nov 7, 2008.

Other –

During the quarter ended September 25, 2008, the nine months ended September 25, 2008, the quarter ended September 27, 2007, the 2007 post-IPO period and the 2007 pre-IPO period, AMC, Cinemark and Regal purchased $0.5 million, $1.3 million, $0.4 million, $1.0 million and $0.1 million, respectively, of NCM LLC’s advertising inventory for their

 

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NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

own use. The value of such purchases is calculated by reference to NCM LLC’s advertising rate card and is included in advertising revenue with a percentage of such amounts returned by NCM LLC to the founding members as advertising circuit share during the 2007 pre-IPO period.

Included in meetings and events operating costs is $0.5 million, $1.6 million, $1.7 million, $2.7 million and $0.2 million for the quarter ended September 25, 2008, the nine months ended September 25, 2008, the quarter ended September 27, 2007, the 2007 post-IPO period and the 2007 pre-IPO period, respectively, related to purchases of movie tickets and concession products from the founding members primarily for resale to NCM LLC’s customers.

During the quarter ended September 25, 2008, the nine months ended September 25, 2008, the quarter ended September 27, 2007, the 2007 post-IPO period and the 2007 pre-IPO period, severance expense and the related capital contribution recognized for amounts under the Regal Unit Option Plan were $0.1 million, $0.4 million, $0.3 million, $1.3 million and $0.4 million, respectively. As this severance plan provides for payments over future periods that are contingent upon continued employment with the Company, the cost of the severance plan is being recorded as an expense over the remaining required service periods. As the payments under the plan are being funded by Regal, Regal is credited with a capital contribution at NCM LLC equal to this severance plan expense. The Company records the expense as a separate line item in the statements of operations. The amount recorded is not allocated to advertising operating costs, network costs, selling and marketing costs and administrative costs because the recorded expense is associated with the past performance of Regal’s common stock market value rather than current period performance.

This excerpt taken from the NCMI 10-Q filed Aug 7, 2008.

Other –

During the quarter ended June 26, 2008, the six months ended June 26, 2008, the quarter ended June 28, 2007, the 2007 post-IPO period and the 2007 pre-IPO period, AMC, Cinemark and Regal purchased $0.5 million, $0.8 million, $0.4 million, $0.6 million and $0.1 million, respectively, of NCM LLC’s advertising inventory for their own use. The value of such purchases is calculated by reference to NCM LLC’s advertising rate card and is included in advertising revenue with a percentage of such amounts returned by NCM LLC to the founding members as advertising circuit share during the 2007 pre-IPO period.

Included in media and events operating costs is $1.0 million, $1.2 million, $0.8 million, $1.0 million and $0.2 million for the quarter ended June 26, 2008, the six months ended June 26, 2008, the quarter ended June 28, 2007, the 2007 post-IPO period and the 2007 pre-IPO period, respectively, related to purchases of movie tickets and concession products from the founding members primarily for resale to NCM LLC’s customers.

During the quarter ended June 26, 2008, the six months ended June 26, 2008, the quarter ended June 28, 2007, the 2007 post-IPO period and the 2007 pre-IPO period, severance expense and the related capital contribution recognized for amounts under the Regal Unit Option Plan were $0.1 million, $0.3 million, $0.5 million, $1.0 million and $0.4 million, respectively. As this severance plan provides for payments over future periods that are contingent upon continued employment with the Company, the cost of the severance plan is being recorded as an expense over the remaining required service periods. As the payments under the plan are being funded by Regal, Regal is credited with a capital contribution at NCM LLC equal to this severance plan expense. The Company records the expense as a separate line item in the statements of operations. The amount recorded is not allocated to advertising operating costs, network costs, selling and marketing costs and administrative costs because the recorded expense is associated with the past performance of Regal’s common stock market value rather than current period performance.

This excerpt taken from the NCMI 10-Q filed May 8, 2008.

Other –

During the quarter ended March 27, 2008, the 2007 post-IPO period and the 2007 pre-IPO period, AMC, Cinemark and Regal purchased $0.3 million, $0.2 million and $0.1 million, respectively, of NCM LLC’s advertising inventory for their own use. The value of such purchases are calculated by reference to NCM LLC’s advertising rate card and is included in advertising revenue with a percentage of such amounts returned by NCM LLC to the founding members as advertising circuit share during the 2007 pre-IPO period.

Included in media and events operating costs is $0.2 million, $0.2 million and $0.2 million for the quarter ended March 27, 2008, the 2007 post-IPO period and the 2007 pre-IPO period, respectively, related to purchases of movie tickets and concession products from the founding members primarily for resale to NCM LLC’s customers.

During the quarter ended March 27, 2008, the 2007 post-IPO period and the 2007 pre-IPO period, severance expense and the related capital contribution recognized for amounts under the Regal Unit Option Plan were $0.2 million, $0.5 million and $0.4 million, respectively. As this severance plan provides for payments over future periods that are contingent upon continued employment with the Company, the cost of the severance plan is being recorded as an expense over the remaining required service periods. As the payments under the plan are being funded by Regal, Regal is credited with a capital contribution at NCM LLC equal to this severance plan expense. The Company records the expense as a separate line item in the statements of operations. The amount recorded is not allocated to advertising operating costs, network costs, selling and marketing costs and administrative costs because the recorded expense is associated with the past performance of Regal’s common stock market value rather than current period performance.

NCM LLC and IdeaCast entered into a shared services agreement which allows for cross-marketing and certain services to be provided between the companies at rates which will be determined on an arms length basis. The services provided by IdeaCast for the quarter ended March 27, 2008 and the 2007 post-IPO period were not material to NCM.

 

3. BORROWINGS

The outstanding balance under the revolving credit facility at March 27, 2008 was $49.0 million. As of March 27, 2008, the effective rate on the term loan was 6.22% (the interest rate swap hedged $550.0 million of the $725.0 million term loan at a fixed interest rate of 6.734% while the unhedged portion was at an interest rate of 4.62%) and the weighted-average interest rate on the revolver was 4.68%. Commencing with the third fiscal quarter in fiscal year 2008, the applicable margin for the revolving credit facility will be determined quarterly and will be subject to adjustment based upon a consolidated net senior secured leverage ratio for NCM LLC and its subsidiaries (defined in the NCM LLC credit agreement as the ratio of secured funded debt less unrestricted cash and cash equivalents, over adjusted EBITDA, as defined). The senior secured credit facility also contains a number of covenants and financial ratio requirements, with which the Company was in compliance at March 27, 2008.

 

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NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

4. COMMITMENTS AND CONTINGENCIES

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 adverse effect on its financial position or results of operations.

 

5. INTANGIBLE ASSETS

Effective as of March 26, 2008, NCM LLC issued 2,544,949 common membership units to its founding members in exchange for the rights to exclusive access to net new theatres and attendees added by the founding members to NCM LLC’s network in accordance with the annual common unit adjustment provisions of the Common Unit Adjustment Agreement dated as of February 13, 2007, by and among NCM Inc., NCM LLC, AMC, Cinemark and Regal. As a result, NCM LLC recorded an intangible asset at fair value of $58.5 million in the first quarter 2008 based on the fair value of the NCM, Inc. common stock in which NCM LLC units are convertible by the founding members.

Pursuant to SFAS No. 142, Goodwill and Other Intangible Assets, the intangible asset has a finite useful life and the Company will begin to amortize the asset in the second quarter 2008 over the remaining useful life. We estimate amortization expense will be approximately $2.0 million for each of the five succeeding fiscal years.

 

6. SUBSEQUENT EVENT

On April 29, 2008, the Company declared a cash dividend of $0.15 per share (approximately $6.3 million) on each share of the Company’s common stock (including outstanding restricted stock) to stockholders of record on May 21, 2008 to be paid on June 4, 2008.

On April 29, 2008, NCM LLC, IdeaCast, the IdeaCast lender and certain of its stockholders agreed to a financial restructuring of IdeaCast. Among other things, the restructuring resulted in an increase in the loan commitment from $20.7 million to $25.0 million, $12.5 million of which will be convertible into common stock of IdeaCast at a stated amount per share (“Conversion Price”); reduction of the rate at which the preferred stock held by NCM LLC can be converted into common stock at the Conversion Rate; the lender being granted an option to “put,” or require NCM LLC to purchase, up to $10 million of the funded convertible debt at the Conversion Rate, at par, on or after December 31, 2010 through March 31, 2011; NCM LLC being granted an option to “call”, or require the lender to assign to NCM LLC up to $10 million of funded convertible debt at the Conversion Rate, at par, at any time before the “put” is exercised in whole and an amendment to the number of common shares and option price of the preexisting NCM Option to acquire IdeaCast common stock. The conversion of NCM’s convertible preferred stock, call (or put by the lender) of the convertible preferred stock and exercise of the NCM Option would result in NCM LLC’s ownership interest in IdeaCast increasing to 80% (on a fully diluted basis). The Company is evaluating the impact of this transaction on its consolidated financial statements, which we do not believe will be material.

On April 30, 2008 Regal delivered notice to NCM pursuant to Section 2 (a) of the Common Unit Adjustment Agreement in connection with the closing of its acquisition of Consolidated Theatres. The acquired theatres are Encumbered Theatres and as such Regal intends to make Exclusivity Run-Out Payments pursuant to Section 4.08(b) and Schedule 1 of the Exhibitor Services Agreement, dated as of February 13, 2007, by and between NCM LLC and Regal. The Company is collecting the necessary data to determine the impact of this transaction on its consolidated financial statements.

* * * * * *

 

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Item 1A. Unaudited Pro Forma Financial Information

You should read this unaudited pro forma condensed consolidated financial information together with the other information contained in this document, as well as information contained in our Form 10-K filed with the SEC on March 7, 2008 for the fiscal year ended December 27, 2007, including “Business-Corporate History,” “Business-Reorganization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and with our audited historical financial statements and the notes thereto included elsewhere in this document along with the information contained in our definitive Proxy Statement filed with the SEC on March 28, 2008. This discussion contains forward-looking statements that are subject to known and unknown risks and uncertainties. Actual results and the timing of events may differ significantly from those expressed or implied in such forward-looking statements due to a number of factors, including those set forth in the section entitled “Risk Factors” in our Form 10-K and elsewhere in this document.

The summary unaudited pro forma condensed consolidated statements of operations for the quarter ended March 29, 2007 shown below present the consolidated results of operations of NCM, Inc. assuming the IPO, reorganization and senior secured credit facility transactions discussed in detail in our Form 10-K filed with the SEC on March 7, 2008 for the fiscal year ended December 27, 2007 had been completed and the material changes to contractual arrangements, which occurred in connection with the completion of the IPO and related transactions described had become effective as of December 28, 2006. The pro forma adjustments are based on available information and upon assumptions that management believes are reasonable in order to reflect, on a pro forma basis, the impact of the historical adjustments listed below and the transaction adjustments listed below on our operating results. The pro forma statements of operations do not include the full impact of additional administrative costs of a public company. The adjustments as set forth below are described in detail in the notes to the unaudited pro forma condensed consolidated statements of operations and principally include the matters set forth below.

The contractual adjustments include adjustments to reflect the terms of the amended and restated ESAs entered into in connection with the completion of the IPO, which are included herein due to the significant business and financial differences from the previous contractual arrangements with our founding members and which will have ongoing material significance to our results of operations, as compared to our pre-IPO historical results of operations.

The unaudited pro forma condensed consolidated financial information is included for informational purposes only and does not purport to reflect the results of operations or financial position of NCM, Inc. and NCM LLC that would have occurred had they operated as separate, independent companies during the periods presented. The historical results of operations of the Company have been significantly impacted by related party transactions, as discussed more fully in the audited historical financial statements included in our Form 10-K filed with the SEC on March 7, 2008 for the fiscal year ended December 27, 2007, and the future operating results of NCM, Inc. will also be impacted by related party transactions. Historical and pro forma results of operations are not necessarily indicative of what would have occurred had all transactions occurred with unrelated parties. Also, the pro forma condensed consolidated financial information should not be relied upon as being indicative of NCM, Inc. or NCM LLC’s results of operations had the contractual adjustments and the transaction adjustments been completed on December 28, 2006. The unaudited pro forma condensed consolidated financial information also does not project the results of operations or financial position for any future period or date.

 

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This excerpt taken from the NCMI 10-Q filed Nov 9, 2007.

Other –

During the quarter ended September 27, 2007, the 2007 post-IPO period, the 2007 pre-IPO period, the quarter ended September 28, 2006 and the nine months ended September 28, 2006, AMC and Regal purchased $0.4 million, $1.0 million, $0.1 million, $0.5 million and $1.5 million, respectively, of NCM LLC’s advertising inventory for their own use. The value of such purchases are calculated by reference to NCM LLC’s advertising rate card and is included in advertising revenue with a percentage of such amounts returned by NCM LLC to the founding members as advertising circuit share during the 2007 pre-IPO period, and quarter and nine month periods ended September 28, 2006.

Included in media and events operating costs is $1.7 million, $2.7 million, $0.2 million, $0.5 million and $1.7 million for the quarter ended September 27, 2007, the 2007 post-IPO period, the 2007 pre-IPO period, the quarter ended September 28, 2006 and the nine months ended September 28, 2006, respectively, related to purchases of movie tickets and concession products from the founding members primarily for resale to NCM LLC’s customers.

During the quarter ended September 27, 2007, the 2007 post-IPO period, the 2007 pre-IPO period, the quarter ended September 28, 2006 and the nine months ended September 28, 2006, severance expense and the related capital contribution recognized for amounts under the Regal option plan were $0.3 million, $1.3 million, $0.4 million, $0.7 million and $3.4 million, respectively. As this severance plan provides for payments over future periods that are contingent upon continued employment with the Company, the cost of the severance plan is being recorded as an expense over the remaining required service periods. As the payments under the plan are being funded by Regal, Regal is credited with a capital contribution equal to this severance plan expense.

 

10. BORROWINGS
This excerpt taken from the NCMI 10-Q filed May 14, 2007.

Other –

During the 2007 post-IPO period, the 2007 pre-IPO period and the quarter ended March 30, 2006, AMC and Regal purchased $0.2 million, $0.1 million and $0.5 million, respectively, of NCM LLC’s advertising inventory for their own use. The value of such purchases are calculated by reference to NCM LLC’s advertising rate card and is included in advertising revenue with a percentage of such amounts returned by NCM LLC to the founding members as advertising circuit share during the 2007 pre-IPO period and quarter ended March 30, 2006.

Included in media and events operating costs is $0.2 million, $0.2 million and $0.2 million for the 2007 post-IPO period, the 2007 pre-IPO period and the quarter ended March 30, 2006, respectively, related to purchases of movie tickets and concession products from the founding members primarily for resale to NCM LLC’s customers.

During the 2007 post-IPO period, the 2007 pre-IPO period and the quarter ended March 30, 2006, severance expense and the related capital contribution recognized for the Regal Unit Option Plan were $0.5 million, $0.4 million and $1.9 million, respectively. As this severance plan provides for payments over future periods that are contingent upon continued employment with the Company, the cost of the severance plan is being recorded as an expense over the remaining required service periods. As the payments under the plan are being funded by Regal, Regal is credited with a capital contribution equal to this severance plan expense.

 

9. BORROWINGS
This excerpt taken from the NCMI 10-K filed Mar 28, 2007.

Other

Subsequent to the completion of the offering, we expect administrative costs to increase by approximately $2.5 to $3.0 million per year compared to expenses incurred as a private company. These incremental costs include regulatory filing and compliance costs, salaries and benefits costs for additional staffing, additional insurance costs and costs of investor relations.

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