ncmi-10q_20151001.htm

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

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 o

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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 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 o No x

As of November 3, 2015, 61,496,385 shares of the registrant’s common stock (including unvested restricted shares), par value of $0.01 per share, were outstanding.

	October 1, 2015			January 1, 2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	22.7		$	13.4
Short-term marketable securities		13.5			21.7
Receivables, net of allowance of $5.1 and $4.3, respectively		124.0			116.5
Prepaid expenses		3.1			3.6
Deferred tax assets		3.9			6.9
Income tax receivable		5.8			6.1
Current portion of notes receivable - founding members		4.2			4.2
Other current assets		1.0			—
Total current assets		178.2			172.4
NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $71.1 and $72.9, respectively		22.9			22.4
Intangible assets, net of accumulated amortization of $86.0 and $69.3, respectively		503.4			488.6
Deferred tax assets		222.4			227.3
Debt issuance costs, net of accumulated amortization of $19.7 and $17.8, respectively		13.6			15.5
Long-term notes receivable, net of current portion - founding members		16.6			16.6
Other investments		4.3			2.5
Long-term marketable securities		44.3			45.5
Other assets		0.5			0.6
Total non-current assets		828.0			819.0
TOTAL ASSETS	$	1,006.2		$	991.4
LIABILITIES AND EQUITY/(DEFICIT)
CURRENT LIABILITIES:
Amounts due to founding members	$	27.3		$	34.9
Payable to founding members under tax receivable agreement		28.0			19.6
Accrued expenses		22.1			19.2
Accrued payroll and related expenses		13.0			10.7
Accounts payable		13.1			13.3
Deferred revenue		8.7			8.5
Deferred tax liability		0.6			1.0
Total current liabilities		112.8			107.2
NON-CURRENT LIABILITIES:
Long-term debt		936.0			892.0
Deferred tax liability		50.0			54.2
Payable to founding members under tax receivable agreement		135.7			146.7
Total non-current liabilities		1,121.7			1,092.9
Total liabilities		1,234.5			1,200.1
COMMITMENTS AND CONTINGENCIES (NOTE 6)
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, 59,018,867 and 58,750,926 issued and outstanding, respectively		0.6			0.6
Additional paid in capital/(deficit)		(244.9	)		(261.0	)
Retained earnings (distributions in excess of earnings)		(179.1	)		(147.4	)
Accumulated other comprehensive income/(loss)		—			(0.4	)
Total NCM, Inc. stockholders’ equity/(deficit)		(423.4	)		(408.2	)
Noncontrolling interests		195.1			199.5
Total equity/(deficit)		(228.3	)		(208.7	)
TOTAL LIABILITIES AND EQUITY/DEFICIT	$	1,006.2		$	991.4

	Three Months Ended						Nine Months Ended
	October 1, 2015			September 25, 2014			October 1, 2015			September 25, 2014
REVENUE (including revenue from founding members of $6.5, $9.1, $23.2 and $28.4, respectively)	$	111.7		$	100.8		$	310.1		$	270.9
OPERATING EXPENSES:
Advertising operating costs		7.8			6.5			21.9			18.1
Network costs		4.3			4.4			13.0			13.4
Theatre access fees—founding members		17.6			17.0			54.0			52.3
Selling and marketing costs		16.9			14.7			49.9			43.8
Merger termination fee and related merger costs		-			2.0			34.3			3.7
Administrative and other costs		9.3			6.9			26.3			21.6
Depreciation and amortization		8.0			8.6			24.2			24.2
Total		63.9			60.1			223.6			177.1
OPERATING INCOME		47.8			40.7			86.5			93.8
NON-OPERATING EXPENSES:
Interest on borrowings		13.0			12.7			39.2			38.8
Interest income		(0.5	)		(0.3	)		(1.4	)		(1.2	)
Accretion of interest on the discounted payable to founding members under tax receivable agreement		3.5			3.5			10.6			10.8
Amortization of terminated derivatives		-			2.6			1.6			7.6
Other non-operating expense		0.1			0.7			0.2			0.9
Total		16.1			19.2			50.2			56.9
INCOME BEFORE INCOME TAXES		31.7			21.5			36.3			36.9
Income tax expense		4.8			2.1			6.3			4.2
CONSOLIDATED NET INCOME		26.9			19.4			30.0			32.7
Less: Net income attributable to noncontrolling interests		19.2			14.6			21.2			27.4
NET INCOME ATTRIBUTABLE TO NCM, INC.	$	7.7		$	4.8		$	8.8		$	5.3

NET INCOME PER NCM, INC. COMMON SHARE:
Basic	$	0.13		$	0.08		$	0.15		$	0.09
Diluted	$	0.13		$	0.08		$	0.15		$	0.09
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		59,014,887			58,744,395			58,959,381			58,695,073
Diluted		59,625,214			59,043,769			59,452,580			58,987,945

Dividends declared per common share	$	0.22		$	0.22		$	0.66		$	1.16

	Nine Months Ended
	October 1, 2015			September 25, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	30.0		$	32.7
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Deferred income tax expense		5.7			12.2
Depreciation and amortization		24.2			24.2
Non-cash share-based compensation		9.7			5.1
Excess tax benefit from share-based compensation		(0.1	)		0.2
Accretion of interest on the discounted payable to founding members under tax receivable agreement		10.6			10.8
Amortization of terminated derivatives		1.6			7.6
Amortization of debt issuance costs		1.9			2.1
Other		0.7			—
Changes in operating assets and liabilities:
Receivables, net		(9.2	)		23.2
Accounts payable and accrued expenses		3.9			(6.1	)
Amounts due to founding members		0.5			2.6
Payment to founding members under tax receivable agreement		(17.2	)		(25.1	)
Deferred revenue		0.2			1.6
Income taxes and other		(0.6	)		(4.2	)
Net cash provided by operating activities		61.9			86.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(8.0	)		(6.9	)
Purchases of marketable securities		(57.6	)		(99.1	)
Proceeds from sale and maturities of marketable securities		66.5			110.7
Purchases of intangible assets from network affiliates		(2.0	)		(3.0	)
Net cash (used in) provided by investing activities		(1.1	)		1.7
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends		(39.4	)		(68.1	)
Proceeds from borrowings		166.0			92.0
Repayments of borrowings		(122.0	)		(87.0	)
Payment of debt issuance costs		—			(0.7	)
Founding member integration payments		1.9			1.5
Distributions to founding members		(58.0	)		(55.7	)
Excess tax benefit from share-based compensation		0.1			(0.2	)
Proceeds from stock option exercises		1.2			0.8
Repurchase of stock for restricted stock tax withholding		(1.3	)		(1.3	)
Net cash used in financing activities		(51.5	)		(118.7	)
CHANGE IN CASH AND CASH EQUIVALENTS		9.3			(30.1	)
Cash and cash equivalents at beginning of period		13.4			54.7
Cash and cash equivalents at end of period	$	22.7		$	24.6

				NCM, Inc.
											Retained
								Additional			Earnings			Accumulated
								Paid in			(Distribution			Other
				Common Stock				Capital			in Excess of			Comprehensive			Noncontrolling
	Consolidated			Shares		Amount		(Deficit)			Earnings)			Loss			Interest
Balance—January 1, 2015	$	(208.7	)		58,750,926	$	0.6	$	(261.0	)	$	(147.4	)	$	(0.4	)	$	199.5
Distributions to founding members		(49.8	)		—		—		—			—			—			(49.8	)
NCM LLC equity issued for purchase of intangible asset		31.4			—		—		14.1			—			—			17.3
Income tax and other impacts of NCM LLC ownership changes		(1.7	)		—		—		(4.6	)		—			—			2.9
Comprehensive income, net of tax		31.3			—		—		—			8.8			0.4			22.1
Share-based compensation issued		(0.1	)		267,941		—		(0.1	)		—			—			—
Share-based compensation expense/capitalized		9.9			—		—		6.8			—			—			3.1
Excess tax benefit from share-based compensation		(0.1	)		—		—		(0.1	)		—			—			—
Cash dividends declared $0.66 per share		(40.5	)		—		—		—			(40.5	)		—			—
Balance—October 1, 2015	$	(228.3	)		59,018,867	$	0.6	$	(244.9	)	$	(179.1	)	$	(0.0	)	$	195.1

Balance—December 26, 2013	$	(146.1	)		58,519,137	$	0.6	$	(271.7	)	$	(80.0	)	$	(3.2	)	$	208.2
Distributions to founding members		(46.5	)		—		—		—			—			—			(46.5	)
NCM LLC equity returned for purchase of intangible asset		16.4			—		—		7.5			—			—			8.9
Income tax and other impacts of NCM LLC ownership changes		(0.3	)		—		—		(2.0	)		—			—			1.7
Comprehensive income, net of tax		38.9			—		—		—			5.3			2.1			31.5
Share-based compensation issued		(0.5	)		227,851		—		(0.5	)		—			—			—
Share-based compensation expense/capitalized		5.2			—		—		3.5			—			—			1.7
Excess tax benefit from share-based compensation		0.2			—		—		0.2			—			—			—
Cash dividends declared $1.16 per share		(67.5	)		—		—		—			(67.5	)		—			—
Balance—September 25, 2014	$	(200.2	)		58,746,988	$	0.6	$	(263.0	)	$	(142.2	)	$	(1.1	)	$	205.5

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 owned by NCM, Inc., American Multi-Cinema, Inc. and AMC ShowPlace Theatres, Inc. (“AMC”), wholly owned subsidiaries of AMC Entertainment, Inc., Regal Cinemas, Inc. and Regal CineMedia Holdings, LLC, wholly owned subsidiaries of Regal Entertainment Group (“Regal”) and Cinemark Media, Inc. and Cinemark USA, Inc., wholly owned subsidiaries of Cinemark Holdings, Inc. (“Cinemark”). The terms “NCM”, “the Company” or “we” shall, unless the context otherwise requires, be deemed to include the consolidated entity. AMC, Regal and Cinemark and their affiliates are referred to in this document as “founding members”. The Company operates the largest digital in-theatre network in North America, allowing NCM LLC to sell advertising (the “Services”) under long-term exhibitor services agreements (“ESAs”) with the founding members (approximately 21 years remaining as of October 1, 2015) and certain third-party theatre circuits (known as “network affiliates”) under long-term network affiliate agreements, which have terms from three to twenty years.

As of October 1, 2015, NCM LLC had 130,723,361 common membership units outstanding, of which 59,018,867 (45.2%) were owned by NCM, Inc., 26,409,784 (20.2%) were owned by Regal, 25,631,046 (19.6%) were owned by Cinemark and 19,663,664 (15.0%) 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.

On May 5, 2014, NCM, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”) to merge with Screenvision, LLC (“Screenvision”). On November 3, 2014, the Department of Justice filed a lawsuit seeking to enjoin the merger. On March 16, 2015, the Company announced the termination of the Merger Agreement and the lawsuit was dismissed. After the Merger Agreement was terminated, NCM LLC reimbursed NCM, Inc. for certain expenses pursuant to an indemnification agreement among NCM LLC, NCM, Inc. and the founding members. On March 17, 2015, NCM LLC paid Screenvision an approximate $26.8 million termination payment on behalf of NCM, Inc. This payment was $2 million lower than the reverse termination fee contemplated by the Merger Agreement. During the nine months ended October 1, 2015, NCM LLC also either paid directly or reimbursed NCM, Inc. for the legal and other merger-related costs of approximately $15.0 million ($7.5 million incurred by NCM, Inc. during the year ended January 1, 2015 and approximately $7.5 million incurred by NCM LLC during the nine months ended October 1, 2015). The Company and the founding members each bore a pro rata portion of the merger termination fee and the related merger expenses based on their aggregate ownership percentages in NCM LLC.

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”). 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 January 1, 2015 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 January 1, 2015.

In the opinion of management, all adjustments (which include only normal recurring 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—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: 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.

The Company’s annual financial statements included in its Form 10-K filed for the fiscal year ended January 1, 2015 contain a complete discussion of the Company’s significant accounting policies. Following is additional information related to the Company’s accounting policies.

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 are written 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 is reduced by the fact that the majority of accounts receivable are with large, national advertising agencies 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 October 1, 2015 and January 1, 2015, 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 months ended October 1, 2015 and the three months ended September 25, 2014, there were no customers that accounted for more than 10% of revenue. During the nine months ended September 25, 2014, revenue related to advertisements of NCM LLC’s founding members’ beverage supplier accounted for 10.4% of total revenue.

Share-Based Compensation—The Company has issued stock options and restricted stock to certain employees and restricted stock units to its independent directors. In 2015 and 2014, the Company did not grant stock options. In 2015 and 2014, the restricted stock grants for Company officers vest upon the achievement of Company performance measures and/or service conditions, while non-officer 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 months ended October 1, 2015 and September 25, 2014 and the nine months ended October 1, 2015 and September 25, 2014, 4,378, 1,930, 258,839 and 253,590 shares of restricted stock and restricted stock units vested, respectively. During the three months ended October 1, 2015 and September 25, 2014 and the nine months ended October 1, 2015 and September 25, 2014, 4,135, 3,605, 94,540 and 56,052 stock options were exercised at a weighted average exercise price of $12.06, $11.54, $12.18 and $13.58 per share, respectively.

In connection with the Company’s March 2014 special cash dividend of $0.50 per share and pursuant to the antidilution adjustment terms of the Company’s Equity Incentive Plan, the exercise price and the number of shares of common stock subject to options held by option holders were adjusted to prevent dilution and restore their economic value that existed immediately before the special dividend. The antidilution adjustments made with respect to such options resulted in a decrease in the range of exercise prices from $5.35 - $24.68 per share to $5.18 - $23.90 per share and an increase in the aggregate number of shares issuable upon exercise of such options by 98,589 shares, or 3.3%, of previously outstanding options. The number of shares authorized under the Equity Incentive Plan increased by an equivalent number of shares. There were no accounting consequences for the changes made to reduce the exercise prices and increase the number of underlying options as a result of the special cash dividend because the aggregate fair values of the awards immediately before and after the modifications were the same.

Consolidation—NCM, Inc. consolidates the accounts of NCM LLC under the provisions of ASC 810, Consolidation (“ASC 810”). Under ASC 810, a managing member of a limited liability company (“LLC”) is presumed to control the LLC, unless the non-managing members have the right to dissolve the entity or remove the managing member without cause, or if the non-managing members have substantive participating rights. The non-managing members of NCM LLC do not have dissolution rights or removal rights. NCM, Inc. has evaluated the provisions of the NCM LLC membership agreement and has concluded that the various rights of the non-managing members are not substantive participation rights under ASC 810, as they do not limit NCM, Inc.’s ability to make decisions in the ordinary course of business.

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):

Income Taxes—Income taxes are accounted for under the asset and liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which differences are expected to be recovered or settled pursuant to the provisions of ASC 740, Income Taxes. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records a valuation allowance if it is deemed more likely than not that all or a portion of its deferred income tax assets will not be realized, which will be assessed on an on-going basis. In addition, income tax rules and regulations are subject to interpretation and the application of those rules and regulations require judgment by the Company and may be challenged by the taxation authorities. The Company follows ASC 740-10-25, which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. Only tax positions that meet the more likely than not recognition threshold are recognized.

In 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. This guidance will be effective for annual periods beginning after December 15, 2017 and early adoption is permitted no earlier than fiscal years beginning after December 15, 2016. The standard allows for either a full retrospective or a modified retrospective transition method. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its unaudited Condensed Consolidated Financial Statements or notes thereto, as well as, which transition method it intends to use.

In January 2015, the FASB issued Accounting Standards Update 2015-01, Income Statement Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”), which eliminates the concept of extraordinary items from GAAP. Under ASU 2015-01, reporting entities will no longer be required to assess whether an underlying event or transaction is extraordinary, however, presentation and disclosure guidance for items that are unusual in nature or occur infrequently are retained, and are expanded to include items that are both unusual in nature and infrequently occurring. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. A reporting entity may apply ASU 2015-01 prospectively. A reporting entity may also apply ASU 2015-01 retrospectively to all periods presented in the financial statements. The Company expects to adopt this accounting guidance in its first quarter of 2016 and does not expect the application of ASU 2015-01 to have a material impact in the unaudited Condensed Consolidated Financial Statements or notes thereto.

In February 2015, the FASB issued Accounting Standards Update 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 amends current consolidation guidance by modifying the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, eliminating the presumption that a general partner should consolidate a limited partnership, and affects the consolidation analysis of reporting entities that are involved with variable interest entities. ASU 2015-02 is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The Company does not expect the application of ASU 2015-02 to have a material impact in the unaudited Condensed Consolidated Financial Statements or notes thereto.

In April 2015, the FASB issued Accounting Standards Update 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which provides guidance for simplifying the presentation of debt issuance costs. ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. This guidance will be effective for fiscal years beginning after December 15, 2015, and early adoption is permitted for financial statements that have not been previously issued. The standard requires application on a retrospective basis and represents a change in accounting principle. In addition, in August 2015, Accounting Standards Update 2015-15, Interest — Imputation of Interest, was released which added SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging Issues Task Force (EITF) meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, ASU 2015-15 states the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The impact of ASU 2015-03 and ASU 2015-15 on the Company’s Consolidated Financial Statements includes a reclassification of net deferred financing costs related to the Company’s Term Loans, Senior Secured Notes and Senior Unsecured Notes to be presented in the Consolidated Balance Sheets as a direct deduction from the carrying amount of those borrowings, while net deferred financing costs related to the Company’s Revolving Credit Facility will remain an asset. As of October 1, 2015, the Company had $11.2 million of net deferred financing costs related to its Term Loans, Senior Secured Notes and Senior Unsecured Notes. The Company is currently evaluating when it will adopt this accounting guidance.

In April 2015, the FASB issued Accounting Standards Update 2015-05, “Intangibles-Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement” (“ASU 2015-05”), which provides guidance on accounting for fees paid by a customer in a cloud computing arrangement. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within that reporting period, with early adoption permitted. The Company does not expect the application of ASU 2015-05 to have a material impact in the unaudited Condensed Consolidated Financial Statements or notes thereto.

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

	Three Months Ended				Nine Months Ended
	October 1, 2015		September 25, 2014		October 1, 2015		September 25, 2014
Net income attributable to NCM, Inc. (in millions)	$	7.7	$	4.8	$	8.8	$	5.3
Weighted average shares outstanding:
Basic		59,014,887		58,744,395		58,959,381		58,695,073
Add: Dilutive effect of stock options and restricted stock		610,327		299,374		493,199		292,872
Diluted		59,625,214		59,043,769		59,452,580		58,987,945
Income per NCM, Inc. share:
Basic	$	0.13	$	0.08	$	0.15	$	0.09
Diluted	$	0.13	$	0.08	$	0.15	$	0.09

The effect of 71,704,494, 69,543,579, 71,110,836 and 69,220,792 exchangeable NCM LLC common units held by the founding members for the three months ended October 1, 2015 and September 25, 2014 and the nine months ended October 1, 2015 and September 25, 2014, respectively, have been excluded from the calculation of diluted weighted average shares and earnings per NCM, Inc. share as they were antidilutive. NCM LLC common units do not participate in NCM, Inc. dividends. In addition, there were 10,293 and 10,125, 50,021 and 97,767 stock options and non-vested (restricted) shares for the three months ended October 1, 2015 and September 25, 2014 and the nine months ended October 1, 2015 and September 25, 2014, respectively, excluded from the calculation as they were antidilutive, primarily because exercise prices were above the average market value.

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 theatre additions or dispositions during the previous year. During the first quarter of 2015 and 2014, NCM LLC issued 2,160,915 and 1,087,911 common membership units to its founding members, respectively, for the rights to exclusive access to the theatre screens and attendees added, net of dispositions by the founding members to NCM LLC’s network during the previous year. NCM LLC recorded a net intangible asset of $31.4 million and $16.4 million during the three months ended April 2, 2015 and March 27, 2014, respectively, as a result of the Common Unit Adjustments.

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 theatres, 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. If an existing on-screen advertising agreement with an alternative provider is in place with respect to any acquired theatres, the founding members may elect to receive common membership units related to those encumbered theatres in connection with the Common Unit Adjustment. If the founding members make this election, then they are required to make payments on a quarterly basis in arrears in accordance with certain run-out provisions pursuant to the ESAs (“integration payments”). During the three months ended October 1, 2015 and September 25, 2014 and the nine months ended October 1, 2015 and September 25, 2014, the Company recorded a reduction to net intangible assets of $0.7 million, $0.6 million, $1.8 million and $1.4 million respectively, related to integration payments due from AMC and Cinemark related to their acquisitions of theatres from Rave Cinemas that are encumbered by an existing on-screen advertising agreement with an alternative provider. During the three months ended October 1, 2015 and September 25, 2014 and the nine months ended October 1, 2015 and September 25, 2014, AMC and Cinemark paid a total of $0.8 million, $0.6 million, $1.9 million, and $1.5 million, respectively, in integration payments.

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. If common membership units are issued to a founding member for newly acquired theatres 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 theatres for all of its services. 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 theatres with pre-existing advertising agreements.

Founding Member Transactions—In connection with NCM, Inc.’s initial public offering (“IPO”), the Company entered into several agreements to define and regulate the relationships among NCM, Inc., NCM LLC and the founding members. They include the following:

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:	October 1, 2015		September 25, 2014		October 1, 2015		September 25, 2014
Revenue:
Beverage concessionaire revenue (included in advertising revenue) (1)	$	6.4	$	9.0	$	23.0	$	28.2
Advertising inventory revenue (included in advertising revenue) (2)		0.1		0.1		0.2		0.2
Operating expenses:
Theatre access fee (3)		17.6		17.0		54.0		52.3
Purchase of movie tickets and concession products and rental of theatre space (included in selling and marketing costs) (4)		0.4		0.2		0.9		0.7
Purchase of movie tickets and concession products and rental of theatre space (included in other administrative and other costs)		—		—		0.1		0.1
Non-operating expenses:
Interest income from notes receivable (included in interest income) (5)		0.2		0.3		0.7		0.9

On March 16, 2015, the Company announced the termination of the Merger Agreement with Screenvision. After the Merger Agreement was terminated, NCM LLC reimbursed NCM, Inc. for certain expenses pursuant to an indemnification agreement among NCM LLC, NCM, Inc. and the founding members. On March 17, 2015, NCM LLC paid Screenvision an approximate $26.8 million termination payment on behalf of NCM, Inc. This payment was $2 million lower than the reverse termination fee contemplated by the Merger Agreement. During the nine months ended October 1, 2015, NCM LLC also either paid directly or reimbursed NCM, Inc. for the legal and other merger-related costs of approximately $15.0 million ($7.5 million incurred by NCM, Inc. during the year ended January 1, 2015 and approximately $7.5 million incurred by NCM LLC during the nine months ended October 1, 2015). The Company and the founding members each bore a pro rata portion of the termination fee and the related merger expenses based on their aggregate ownership percentages in NCM LLC.

Pursuant to the terms of the NCM LLC Operating Agreement in place since the completion of the Company’s IPO, NCM LLC is required to make mandatory distributions on a proportionate basis to its members of available cash, as defined in the NCM LLC Operating Agreement, on a quarterly basis in arrears. Mandatory distributions of available cash for the three and nine months ended October 1, 2015 and September 25, 2014 were as follows (in millions):

Due to the merger termination fee and related merger expenses, the mandatory distributions of available cash by NCM LLC to its founding members and NCM, Inc. for the three months ended April 2, 2015 was calculated as negative $25.5 million ($14.0 million for the founding members and $11.5 million for NCM, Inc.). Therefore, there was no payment made in the second quarter of 2015. Under the terms of the NCM LLC Operating Agreement, this negative amount will be netted against the available cash distributions for the second quarter of 2016, which will be paid in the third quarter of 2016. Until the settlement in the third quarter of 2016, the remaining merger-related costs will be funded through borrowings on the NCM LLC revolving credit facility.

The mandatory distributions of available cash by NCM LLC to its founding members for the three months ended October 1, 2015 of $24.7 million is included in amounts due to founding members on the unaudited Condensed Consolidated Balance Sheets as of October 1, 2015 and will be made in the fourth quarter of 2015.

Amounts due to founding members as of October 1, 2015 were comprised of the following (in millions):

Amounts due to founding members as of January 1, 2015 were comprised of the following (in millions):

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 $1.4 million and $1.3 million as of October 1, 2015 and January 1, 2015, respectively. Equity in earnings from AC JV, LLC was $0.0 million, $0.0 million, $0.1 million and $0.1 million for the three months ended October 1, 2015 and September 25, 2014 and the nine months ended October 1, 2015 and September 25, 2014, respectively and is included in non-operating expenses in the unaudited Condensed Consolidated Statements of Income.

Related Party Affiliates—NCM LLC enters into network affiliate agreements with network affiliates for NCM LLC to provide in-theatre advertising at theatre locations that are owned by companies that are affiliates of certain of the founding members or directors of NCM, Inc. Related party affiliate agreements are entered into at terms that are similar to those of the Company’s other network affiliates.

NCM LLC has an agreement with LA Live, an affiliate of The Anschutz Corporation. The Anschutz Corporation is a wholly-owned subsidiary of the Anschutz Company, which is the controlling stockholder of Regal. During the three months ended October 1, 2015 and September 25, 2014 and the nine months ended October 1, 2015 and September 25, 2014, there was approximately $0.1 million, $0.0 million $0.2 million and $0.1 million, respectively, included in advertising operating costs related to LA Live, and there was approximately $0.1 million and $0.1 million of accounts payable with this company as of October 1, 2015 and January 1, 2015, respectively.

NCM LLC has an agreement with Starplex Operating L.P. (“Starplex”), an affiliate of one of NCM, Inc.’s former directors, who was a member of NCM, Inc.’s board of directors from the IPO date until his resignation during 2014. During the three and nine months ended September 25, 2014, there was approximately $0.8 million and $1.3 million included in advertising operating costs related to Starplex, and there was approximately $0.9 million of accounts payable with Starplex as of January 1, 2015. Following the director’s resignation from NCM, Inc.’s board of directors in 2014, Starplex is no longer a related party.

Other Transactions—NCM LLC has an agreement with an interactive media company to sell some of its online inventory. One of NCM, Inc.’s directors is also a director of this media company. During the three months ended October 1, 2015 and September 25, 2014 and the nine months ended October 1, 2015 and September 25, 2014, this company generated approximately $0.0 million, $0.0 million, $0.0 million and $0.1 million, respectively, in revenue for NCM LLC and there was approximately $0.3 million and $0.3 million of accounts receivable due from this company as of October 1, 2015 and January 1, 2015, respectively.

NCM LLC has an agreement with AEG Live, an affiliate of The Anschutz Corporation, for AEG Live to showcase musical artists in NCM LLC’s FirstLook preshow. During the three months ended October 1, 2015 and September 25, 2014 and the nine months ended October 1, 2015 and September 25, 2014, NCM LLC received approximately $0.3 million, $0.2 million, $1.2 million and $0.2 million, respectively, in revenue from AEG Live and as of October 1, 2015 and January 1, 2015, had $0.3 million and $0.4 million, respectively, of accounts receivable from AEG Live.

The following table summarizes NCM LLC’s total outstanding debt as of October 1, 2015 and January 1, 2015 and the significant terms of its borrowing arrangements (in millions):

Senior Secured Credit Facility—As of October 1, 2015 and January 1, 2015, NCM LLC’s senior secured credit facility consisted of a $135.0 million revolving credit facility and a $270.0 million term loan.

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 October 1, 2015, NCM LLC’s total availability under the revolving credit facility was $69.0 million. The unused line fee is 0.50% per annum. Borrowings under the revolving credit facility bear interest at NCM LLC’s option of either the LIBOR index plus an applicable margin or the base rate (Prime Rate or the Federal Funds Effective Rate, as defined in the senior secured credit facility) plus an applicable margin. The applicable margin for the revolving credit facility is determined quarterly and is subject to adjustment based upon a consolidated net senior secured leverage ratio for NCM LLC (the ratio of secured funded debt less unrestricted cash and cash equivalents, over a non-GAAP measure defined in the senior secured credit facility). The weighted-average interest rate on the outstanding balance on the revolving credit facility as of October 1, 2015 was 2.51%.

Term Loans—The interest rate on the term loans is a rate chosen at NCM LLC’s option of either the LIBOR index plus 2.75% or the base rate (Prime Rate or the Federal Funds Effective Rate, as defined in the senior secured credit facility) plus 1.75%. The weighted-average interest rate on the term loans as of October 1, 2015 was 2.95%. Interest on the term loans is currently paid monthly.

The senior secured credit facility contains a number of covenants and financial ratio requirements, with which NCM LLC was in compliance as of October 1, 2015, including maintaining a consolidated net senior secured leverage ratio of equal to or less than 6.5 times on a quarterly basis. In addition, there are no borrower distribution restrictions as long as NCM LLC’s consolidated net senior secured leverage ratio is below 6.5 times and NCM LLC is in compliance with its debt covenants. As of October 1, 2015, NCM LLC’s consolidated net senior secured leverage ratio was 3.2 times (versus the covenant of 6.5 times).

Senior Unsecured Notes due 2021—On July 5, 2011, NCM LLC completed a private placement of $200.0 million in aggregate principal amount of 7.875% Senior Unsecured Notes (“Senior Unsecured Notes”) for which the registered exchange offering was completed on September 22, 2011. The Senior Unsecured Notes pay interest semi-annually in arrears on January 15 and July 15 of each year, which commenced January 15, 2012. The notes are subordinated to all existing and future secured debt, including indebtedness under NCM LLC’s existing senior secured credit facility and the Senior Secured Notes defined below. The Senior Unsecured Notes contain certain non-maintenance covenants with which NCM LLC was in compliance as of October 1, 2015.

Senior Secured Notes due 2022—On July 27, 2012, NCM LLC completed a private placement of $400.0 million in aggregate principal amount of 6.00% Senior Secured Notes (the “Senior Secured Notes”) for which the registered exchange offering was completed on November 26, 2012. The Senior Secured Notes pay interest semi-annually in arrears on April 15 and October 15 of each year, which commenced October 15, 2012. The Senior Secured Notes 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 obligations under the senior secured credit facility. The Senior Secured Notes contain certain non-maintenance covenants with which NCM LLC was in compliance as of October 1, 2015.

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 on its financial position, results of operations or cash flows.

Minimum Revenue Guarantees―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 theatre 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. The amount and term varies for each network affiliate, but terms range from three to twenty years, prior to any renewal periods of which some are at the option of the Company. As of October 1, 2015, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $37.5 million over the remaining terms of the network affiliate agreements, which calculation does not include any potential future extensions. As of October 1, 2015 and January 1, 2015, the Company had an inconsequential amount of liabilities recorded for these obligations.

Income Taxes―The Company is subject to taxation in the U.S. and various states. As of October 1, 2015 and January 1, 2015, there was no material liability or expense for the periods then ended recorded for payment of interest and penalties associated with uncertain tax positions or material unrecognized tax positions and the Company’s unrecognized tax benefits were not material.

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 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 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 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.

The fair value of the investments has not been estimated as of October 1, 2015 and January 1, 2015 as there were no identified events or changes in the circumstances that had a significant adverse effect on the fair value of the investments and it is not practicable to do so because the equity securities are not in publicly traded companies. As the inputs to the determination of fair value are based upon non-identical assets and use significant unobservable inputs, they have been classified as Level 3 in the fair value hierarchy.

As of October 1, 2015 and January 1, 2015, the Company had notes receivable totaling $20.8 million and $20.8 million, respectively, from its founding members related to the sale of Fathom Events, as described in Note 4—Related Party Transactions. These notes were 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):

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

The amortized cost basis, aggregate fair value and maturities of the marketable securities the Company held as of October 1, 2015 and January 1, 2015 were as follows:

	As of October 1, 2015
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:
Short-term municipal bonds	$	10.0	$	10.0		0.4
Short-term certificates of deposit		3.5		3.5		0.7
Total short-term marketable securities		13.5		13.5

Long-term U.S. government treasury bonds		1.2		1.2		2.1
Long-term municipal bonds		2.3		2.3		1.7
Long-term U.S. government agency bonds		31.0		31.1		3.1
Long-term certificates of deposit:
Financial		9.4		9.4		2.2
Industrial		0.3		0.3		2.1
Total long-term marketable securities		44.2		44.3
Total marketable securities	$	57.7	$	57.8

	As of January 1, 2015
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:
Short-term municipal bonds	$	9.4	$	9.5		0.5
Short-term commercial paper:
Financial		3.4		3.4		—
Industrial		3.3		3.3		0.1
Utility		3.0		3.0		0.2
Short-term certificates of deposit		2.5		2.5		0.6
Total short-term marketable securities		21.6		21.7

Long-term U.S. government treasury bonds		5.1		5.1		2.7
Long-term municipal bonds		0.3		0.3		1.4
Long-term U.S. government agency bonds		36.1		36.1		3.3
Long-term certificates of deposit		4.0		4.0		3.1
Total long-term marketable securities		45.5		45.5
Total marketable securities	$	67.1	$	67.2

During 2012, NCM LLC terminated interest rate swap agreements that were used to hedge its interest rate risk associated with its term loan. Following the termination of the swap agreements, the variable interest rate on NCM LLC’s $270.0 million term loan is unhedged and as of October 1, 2015 and January 1, 2015, the Company did not have any outstanding derivative assets or liabilities. A portion of the breakage fees paid to terminate the swap agreements was for swaps in which the underlying debt remained outstanding. The balance in AOCI related to these swaps was fixed and was amortized into earnings over the remaining period during which interest payments were hedged, or February 13, 2015. The Company considered the guidance in ASC 815, Derivatives and Hedging which states that amounts in AOCI shall be reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. As of October 1, 2015, there were no amounts outstanding related to these discontinued cash flow hedges.

The changes in AOCI by component for the nine months ended October 1, 2015 and September 25, 2014 were as follows (in millions):

On November 6, 2015, the Company declared a cash dividend of $0.22 per share (approximately $13.0 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 20, 2015 to be paid on December 4, 2015.

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

Some of the information in this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, 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 in our annual report on Form 10-K for the Company’s fiscal year ended January 1, 2015. 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 January 1, 2015. In the following discussion and analysis, the term net income refers to net income attributable to NCM, Inc.

NCM LLC operates the largest digital in-theatre video advertising network in North America, through which it distributes national and local advertising that the Company has sold on theatre screens and video monitors in theatre lobbies. NCM LLC also sells theatre lobby promotions and online and mobile advertising that are displayed on its and other company websites and mobile sites and apps. Our revenue is principally derived from advertising distributed to NCM LLC’s founding member theatres in accordance with long-term ESAs (approximately 21 years remaining as of October 1, 2015) and to network affiliates in accordance with multi-year agreements, which expire at various dates through July 2031. The weighted average remaining term (based on attendance) of the ESAs and the network affiliate agreements is 19.2 years as of October 1, 2015. The ESAs with the founding members and network affiliate agreements grant NCM LLC exclusive rights in their theatres to sell advertising, subject to limited exceptions. Our advertising FirstLook pre-show and LEN programming are distributed predominantly via satellite through our proprietary DCN. Approximately 98% of the aggregate founding member and network affiliate theatre attendance is generated by theatres connected to our DCN (the remaining 622 screens receive advertisements on USB drives) and 100% of the FirstLook pre-show is projected on digital projectors (88% digital cinema projectors and 12% LCD projectors).

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 twice per quarter with officers, managers and staff 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 many operating metrics including changes in revenue, OIBDA, Adjusted OIBDA and Adjusted OIBDA margin, as defined and discussed in “Non-GAAP Financial Measures” below, as some of our primary measurement metrics. In addition, we monitor our monthly advertising performance measurements, including advertising inventory utilization, national advertising pricing (CPM), local/regional advertising rate per screen per week, local/regional and total advertising revenue per attendee, as well as, our free cash flow, dividend coverage ratio, financial leverage and cash balances and revolving credit facility availability to ensure 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.

On May 5, 2014, NCM, Inc. entered into the Merger Agreement to merge with Screenvision. On November 3, 2014, the Department of Justice filed a lawsuit seeking to enjoin the merger. On March 16, 2015, the Company announced the termination of the Merger Agreement and the lawsuit was dismissed. After the Merger Agreement was terminated, NCM LLC reimbursed NCM, Inc. for certain expenses pursuant to an indemnification agreement among NCM LLC, NCM, Inc. and the founding members. On March 17, 2015, NCM LLC paid Screenvision an approximate $26.8 million termination payment on behalf of NCM, Inc. This payment was $2 million lower than the reverse termination fee contemplated by the Merger Agreement. During the nine months ended October 1, 2015, NCM LLC also either paid directly or reimbursed NCM, Inc. for the legal and other merger-related costs of approximately $15.0 million ($7.5 million incurred by NCM, Inc. during the year ended January 1, 2015 and approximately $7.5 million incurred by NCM LLC during the nine months ended October 1, 2015). The Company and the founding members each bore a pro rata portion of the termination fee and the related merger expenses based on their aggregate ownership percentages in NCM LLC.

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” in our Form 10-K filed with the SEC on February 27, 2015 for the Company’s fiscal year ended January 1, 2015 and Item 1A of this Form 10-Q.

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

	Three Months Ended						Nine Months Ended						% Change
	Oct. 1, 2015			Sept. 25, 2014			Oct. 1, 2015			Sept. 25, 2014			Q3 2015 to Q3 2014			YTD 2015 to YTD 2014
Revenue	$	111.7		$	100.8		$	310.1		$	270.9			10.8	%		14.5	%
Operating expenses:
Advertising		41.7			38.5			124.2			114.5			8.3	%		8.5	%
Network, administrative and unallocated costs		22.2			19.6			65.1			58.9			13.3	%		10.5	%
Merger termination fee and related merger costs (1)		—			2.0			34.3			3.7			(100.0	%)	NM
Total		63.9			60.1			223.6			177.1			6.3	%		26.3	%
Operating income		47.8			40.7			86.5			93.8			17.4	%		(7.8	%)
Non-operating expenses		16.1			19.2			50.2			56.9			(16.1	%)		(11.8	%)
Income tax expense		4.8			2.1			6.3			4.2			128.6	%		50.0	%
Net income attributable to noncontrolling interests		19.2			14.6			21.2			27.4			31.5	%		(22.6	%)
Net income attributable to NCM, Inc.	$	7.7		$	4.8		$	8.8		$	5.3			60.4	%		66.0	%

Net income per NCM, Inc. basic share	$	0.13		$	0.08		$	0.15		$	0.09			62.5	%		66.7	%
Net income per NCM, Inc. diluted share	$	0.13		$	0.08		$	0.15		$	0.09			62.5	%		66.7	%

Adjusted OIBDA	$	59.6		$	52.2		$	154.7		$	126.8			14.2	%		22.0	%
Adjusted OIBDA margin		53.4	%		51.8	%		49.9	%		46.8	%		1.6	%		3.1	%
Total theatre attendance (in millions) (2)		164.1			163.5			517.3			505.4			0.4	%		2.4	%

Operating Income Before Depreciation and Amortization (“OIBDA”), Adjusted OIBDA and Adjusted OIBDA margin are not financial measures calculated in accordance with GAAP in the U.S. OIBDA represents consolidated net income plus income tax expense, interest and other costs and depreciation and amortization expense. Adjusted OIBDA excludes from OIBDA non-cash share based payment costs and the merger termination fee and related merger costs. Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. These non-GAAP financial measures are used by management 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 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, non-cash share based compensation programs, levels of mergers and acquisitions, interest rates or 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 share based payment costs or costs associated with the Screenvision merger. OIBDA or Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as indicators of operating performance, nor should they be considered in isolation of, or as substitutes for financial measures prepared in accordance with GAAP. The Company believes that consolidated net income is the most directly comparable GAAP financial measure to OIBDA. Because not all companies use identical calculations, these non-GAAP presentations may not be comparable to other similarly titled measures of other companies, or calculations in the Company’s debt agreement.

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

	Three Months Ended						Nine Months Ended
	Oct. 1, 2015			Sept. 25, 2014			Oct. 1, 2015			Sept. 25, 2014
Consolidated net income	$	26.9		$	19.4		$	30.0		$	32.7
Income tax expense		4.8			2.1			6.3			4.2
Interest and other non-operating costs		16.1			19.2			50.2			56.9
Depreciation and amortization		8.0			8.6			24.2			24.2
OIBDA	$	55.8		$	49.3		$	110.7		$	118.0
Share-based compensation costs (1)		3.8			0.9			9.7			5.1
Merger termination fee and related merger costs (2)		-			2.0			34.3			3.7
Adjusted OIBDA	$	59.6		$	52.2		$	154.7		$	126.8
Total revenue	$	111.7		$	100.8		$	310.1		$	270.9
Adjusted OIBDA margin		53.4	%		51.8	%		49.9	%		46.8	%

The Company has also presented total operating expenses before the merger termination fee and related merger costs within its results of operations section below which is not a financial measure calculated in accordance with GAAP in the United States. Operating expenses before the merger termination fee and related merger costs represent operating costs less costs associated with the terminated Screenvision merger. This non-GAAP financial measure is used to provide readers a comparison of our 2015 results to our 2014 results without including the impact of the nonrecurring merger termination fee and related merger costs. The Company believes this is an important supplemental measure because it eliminates these nonrecurring costs to highlight trends in its ongoing business that may not otherwise be apparent when relying solely on GAAP financial measures. Operating expenses before the merger termination fee and related merger costs should not be regarded as an alternative to operating expenses or as an indicator of operating performance, nor should it be considered in isolation of, or as a substitute for financial measures prepared in accordance with GAAP. The Company believes that total operating expenses is the most directly comparable GAAP financial measure.

The results of operations data for the three and nine months ended October 1, 2015 and September 25, 2014 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.

Revenue. Total revenue increased 10.8%, from $100.8 million for the three months ended September 25, 2014 to $111.7 million for the three months ended October 1, 2015. The following is a summary of revenue by category (in millions):

The following table shows data on theatre attendance and revenue per attendee for the three months ended October 1, 2015 and September 25, 2014:

National advertising revenue. The $16.9 million, or 26.9%, increase in national advertising revenue (excluding beverage revenue from NCM LLC’s founding members) was due primarily to a 18.4% increase in impressions sold (net of make-good reserve) in the third quarter of 2015, compared to the third quarter of 2014 and a 12.4% increase in national advertising CPMs (excluding beverage) in the third quarter of 2015, compared to the third quarter of 2014. The increase in impressions sold (net of make-good reserve) was driven by an increase in national inventory utilization, which rose from 125.3% for the third quarter of 2014 to 145.8% for the third quarter of 2015, due to an expansion of our client base and increased spending by certain existing clients, related in part to the success of our strategy to compete in the national television upfront marketplace and changes in television viewing habits related to greater DVR usage and the expansion of new online and mobile video networks. 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 pre-show, which can be expanded, should market demand dictate. The increase in national advertising CPMs relates primarily to strong scatter market demand combined with limited inventory availability due to our successful upfront sales campaign last year.

Local advertising revenue. The $3.4 million, or 11.8% decrease in local advertising revenue was driven by a 6.9% decrease in total contract volume and a 5.4% decrease in average contract value, compared to the third quarter of 2014. The decrease in total contract volume and average contract value was driven by an increase in the number of unfilled local sales positions and a reduction in larger regional contracts (those greater than $100,000) during the third quarter of 2015 compared to the third quarter of 2014. The increase in unfilled local sales positions was related to a delay in hiring during the Screenvision merger regulatory review to provide openings for Screenvision sales personnel upon consummation of the merger. As of the end of the third quarter of 2015, the majority of the unfilled positions had been filled. The fewer number of larger regional contracts was also due to a shift in the timing of client commitments to other quarters within 2015 and a few larger regional clients that increased their budgets and bought our network nationally.

Founding member beverage revenue. The $2.6 million, or 28.9%, decrease in national advertising revenue from NCM LLC’s founding members’ beverage concessionaire agreements was due to a 14.4% decrease in beverage revenue CPMs and a 0.3% decrease in founding member attendance in the third quarter of 2015, compared to the third quarter of 2014. The 2015 beverage revenue CPM is based on the change in CPM during segment one of the FirstLook pre-show from 2013 to 2014, which decreased 14.4%. This revenue also decreased by $1.3 million due to one of NCM LLC’s founding members reducing the length of the beverage advertising unit from 60 seconds to 30 seconds during the third quarter of 2015 to accommodate a test of other in-theatre marketing activities by their beverage supplier.

Operating expenses. Total operating expenses increased 6.3%, from $60.1 million for the three months ended September 25, 2014 to $63.9 million for the three months ended October 1, 2015. The following table shows the changes in operating expense for the three months ended October 1, 2015 and September 25, 2014 (in millions):

	Three Months Ended				$ Change			% Change
	October 1, 2015		September 25, 2014		Q3 2015 to Q3 2014			Q3 2015 to Q3 2014
Advertising operating costs	$	7.8	$	6.5	$	1.3			20.0	%
Network costs		4.3		4.4		(0.1	)		(2.3	%)
Theatre access fees—founding members		17.6		17.0		0.6			3.5	%
Selling and marketing costs		16.9		14.7		2.2			15.0	%
Administrative and other costs		9.3		6.9		2.4			34.8	%
Depreciation and amortization		8.0		8.6		(0.6	)		(7.0	%)
Total operating expenses before the merger termination fee and related merger costs		63.9		58.1		5.8			10.0	%
Merger termination fee and related merger costs		-		2.0		(2.0	)	NM
Total operating expenses	$	63.9	$	60.1	$	3.8			6.3	%

Advertising operating costs. Advertising operating costs increased $1.3 million, or 20.0%, from $6.5 million for the third quarter of 2014 to $7.8 million for the third quarter of 2015. This increase was primarily the result of a $1.0 million increase in affiliate advertising payments. The increase in affiliate advertising payments was driven by higher national advertising revenue and a 4.0% or 142 screen increase in the number of average affiliate screens for the third quarter of 2015, compared to the third quarter of 2014, partially offset by lower local advertising revenue.

Network costs. Network costs decreased $0.1 million, or 2.3%, from $4.4 million for the third quarter of 2014 to $4.3 million for the third quarter of 2015.

Theatre access fees—founding members. Theatre access fees increased $0.6 million, or 3.5%, from $17.0 million for the third quarter of 2014 to $17.6 million for the third quarter of 2015. The increase was due to an increase in the fee associated with the number of digital screens that are connected to the DCN, including higher quality digital cinema projectors and related equipment. The fees for digital screens and equipment increased $0.4 million related to an annual 5% rate increase specified in the ESAs and $0.2 million from an increase in the number of founding member screens equipped with the higher quality digital cinema equipment.

Selling and marketing costs. Selling and marketing costs increased $2.2 million, or 15.0%, from $14.7 million for the third quarter of 2014 to $16.9 million for the third quarter of 2015. This increase was primarily due to an increase of $1.3 million in personnel related expenses due primarily to higher non-cash share-based compensation expense and higher bonus expense, both primarily related to better performance against targets compared to 2014, which was partially offset by lower commission expense related to lower local advertising revenue during the period. Selling and marketing costs also increased due to an increase of $0.4 million in certain marketing and research expenses and an increase of $0.4 million in non-cash barter expense related to timing of barter transactions.

Administrative and other costs. Administrative and other costs increased $2.4 million, or 34.8%, from $6.9 million for the third quarter of 2014 to $9.3 million for the third quarter of 2015 due primarily to a $2.2 million increase in personnel related expenses primarily from a $1.6 million increase in non-cash share-based compensation expense and a $0.9 million increase in bonus expense, both primarily related to better performance against targets compared to 2014.

Depreciation and amortization. Depreciation and amortization expense decreased $0.6 million, or 7.0%, from $8.6 million for the third quarter of 2014 to $8.0 million for the third quarter of 2015. The decrease was due to lower depreciation expense related to an increase in assets that are fully depreciated, partially offset by amortization expense related to the 2015 NCM LLC founding member common unit adjustment and amortization of intangible assets related to new affiliate agreements.

Merger termination fee and related merger costs. The merger termination fee and related merger costs decreased $2.0 million, or 100%, from $2.0 million for the third quarter of 2014, compared to $0 for the third quarter of 2015, as the merger with Screenvision was terminated during the first quarter of 2015.

Non-operating expenses. Total non-operating expenses decreased $3.1 million, or 16.1%, from $19.2 million for the three months ended September 25, 2014 to $16.1 million for the three months ended October 1, 2015. The following table shows the changes in non-operating expense for the three months ended October 1, 2015 and September 25, 2014 (in millions):

The decrease in non-operating expense was due primarily to a $2.6 million decrease in the amortization of terminated derivatives as the amortization period ended in February 2015 and a decrease in other non-operating expense of $0.6 million.

Net income. Net income increased $2.9 million from $4.8 million for the three months ended September 25, 2014 to $7.7 million for the three months ended October 1, 2015. The increase in net income was due to an increase in operating income of $7.1 million and a decrease of $3.1 million in non-operating expense, as described above, partially offset by a $4.6 million increase in income attributable to noncontrolling interests and an increase in income tax expense of $2.7 million due primarily to higher net income before taxes in the period.

Revenue. Total revenue increased 14.5%, from $270.9 million for the nine months ended September 25, 2014 to $310.1 million for the nine months ended October 1, 2015. The following is a summary of revenue by category (in millions):

The following table shows data on theatre attendance and revenue per attendee for the nine months ended October 1, 2015 and September 25, 2014:

National advertising revenue. The $45.9 million, or 26.4%, increase in national advertising revenue (excluding beverage revenue from NCM LLC’s founding members) was due primarily to a 23.8% increase in impressions sold (net of make-good reserve) in the nine months ended October 1, 2015, compared to the nine months ended September 25, 2014 and a 5.6% increase in national advertising CPMs (excluding beverage) in the nine months ended October 1, 2015, compared to the nine months ended September 25, 2014. The increase in impressions sold (net of make-good reserve) was driven by an increase in national inventory utilization from 107.3% for the nine months ended September 25, 2014 to 127.0% for the nine months ended October 1, 2015, due to an expansion of our client base and increased spending by certain existing clients, related in part to the success of our strategy to compete in the national television upfront marketplace and changes in television viewing habits related to greater DVR usage and the expansion of new online and mobile video networks. 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 pre-show, which can be expanded, should market demand dictate. This increase in impressions sold (net of make-good reserve) was also driven by an increase in our network theatre attendance of 2.4% related to an overall increase in cinema industry attendance resulting from a stronger film release schedule and the addition of new network affiliates discussed below in “Known Trends and Uncertainties”. The increase in CPMs relates primarily to strong scatter market demand combined with limited inventory availability due to our successful upfront sales campaign last year.

Local advertising revenue. The $1.5 million, or 2.2%, decrease in local advertising revenue was driven by a 5.3% decrease in total contract volume, partially offset by an increase in average contract value of 3.3%, compared to the nine months ended September 25, 2014. The decrease in total contract volume was driven by an increase in the number of unfilled local sales positions and a reduction in larger regional contracts (those greater than $100,000) and smaller local contracts (those less than $10,000) during the third quarter of 2015 compared to the third quarter of 2014. The increase in unfilled local sales positions was related to a delay in hiring during the Screenvision merger regulatory review to provide openings for Screenvision sales personnel upon consummation of the merger. As of the end of the third quarter of 2015, the majority of the unfilled positions had been filled. The fewer number of larger regional contracts was also due to a few larger regional clients that increased their budgets and bought our network nationally. The increase in average contract value was driven by an increase in the average value of contracts under $100,000.

Founding member beverage revenue. The $5.2 million, or 18.4%, decrease in national advertising revenue from NCM LLC’s founding members’ beverage concessionaire agreements was due to a 14.4% decrease in beverage revenue CPMs, partially offset by an increase of 0.7% in founding member attendance in the nine months ended October 1, 2015, compared to the nine months ended September 25, 2014. The 2015 beverage revenue CPM is based on the change in CPM during segment one of the FirstLook pre-show from 2013 to 2014, which decreased 14.4%. The increase in founding member attendance was primarily related to an overall increase in cinema industry attendance resulting from a stronger film release schedule. This revenue also decreased by $1.3 million due to one of NCM LLC’s founding members reducing the length of the beverage advertising unit from 60 seconds to 30 seconds during the third quarter of 2015 to accommodate a test of other in-theatre marketing activities by their beverage supplier.

Operating expenses. Total operating expenses increased 26.3%, from $177.1 million for the nine months ended September 25, 2014 to $223.6 million for the nine months ended October 1, 2015 due primarily to the Screenvision merger termination fee and related merger costs. The following table shows the changes in operating expense for the nine months ended October 1, 2015 and September 25, 2014 (in millions):

	Nine Months Ended				$ Change			% Change
	October 1, 2015		September 25, 2014		YTD 2015 to YTD 2014			YTD 2015 to YTD 2014
Advertising operating costs	$	21.9	$	18.1	$	3.8			21.0	%
Network costs		13.0		13.4		(0.4	)		(3.0	%)
Theatre access fees—founding members		54.0		52.3		1.7			3.3	%
Selling and marketing costs		49.9		43.8		6.1			13.9	%
Administrative and other costs		26.3		21.6		4.7			21.8	%
Depreciation and amortization		24.2		24.2		-			0.0	%
Total operating expenses before the merger termination fee and related merger costs		189.3		173.4		15.9			9.2	%
Merger termination fee and related merger costs		34.3		3.7		30.6		NM
Total operating expenses	$	223.6	$	177.1	$	46.5			26.3	%

Advertising operating costs. Advertising operating costs increased $3.8 million, or 21.0%, from $18.1 million for the nine months ended September 25, 2014 to $21.9 million for the nine months ended October 1, 2015. This increase was primarily the result of a $3.1 million increase in affiliate advertising payments and an increase of $0.2 million in personnel related expenses. The increase in affiliate advertising payments was driven by higher national advertising revenue and a 6.1% or 210 screen increase in the number of average affiliate screens for the nine months ended October 1, 2015, compared to the nine months ended September 25, 2014, partially offset by lower local advertising revenue.

Network costs. Network costs decreased $0.4 million, or 3.0%, from $13.4 million for the nine months ended September 25, 2014 to $13.0 million for the nine months ended October 1, 2015 due primarily to a decrease of $0.5 million in personnel related expenses.

Theatre access fees—founding members. Theatre access fees increased $1.7 million, or 3.3%, from $52.3 million for the nine months ended September 25, 2014 to $54.0 million for the nine months ended October 1, 2015. The increase was due to a $1.4 million increase in theatre access fees due to an increase in the fee associated with the number of digital screens that are connected to the DCN, including higher quality digital cinema projectors and related equipment and a $0.3 million increase related to a 0.7% increase in founding member attendance during the nine months ended October 1, 2015 compared to the nine months ended September 25, 2014. The fees for digital screens and equipment increased $1.0 million related to an annual 5% rate increase specified in the ESAs and $0.4 million from an increase in the number of founding member screens equipped with the higher quality digital cinema equipment.

Selling and marketing costs. Selling and marketing costs increased $6.1 million, or 13.9%, from $43.8 million for the nine months ended September 25, 2014 to $49.9 million for the nine months ended October 1, 2015. This increase was primarily due to an increase of $3.8 million in personnel related expenses due primarily to $2.1 million of higher non-cash share-based compensation expense and $0.6 million in higher bonus expense, both primarily related to better performance against targets compared to 2014. Selling and marketing costs also increased due to an increase of $0.7 million in certain marketing and research expenses and an increase of $1.0 million in non-cash barter expense related to timing of barter transactions.

Administrative and other costs. Administrative and other costs increased $4.7 million, or 21.8%, from $21.6 million for the nine months ended September 25, 2014 to $26.3 million for the nine months ended October 1, 2015 due primarily to a $4.2 million increase in personnel related expenses due primarily to a $2.6 million increase in non-cash share-based compensation expense and an increase in bonus expense of $1.1 million, both primarily related to better performance against targets compared to 2014, as well as, an increase in salaries and related payroll tax and benefit costs of $0.5 million related to a more fully staffed workforce in 2015. Administrative and other costs also increased due to approximately $0.4 million in higher legal and professional expenses during the nine months ended October 1, 2015 compared to the nine months ended September 25, 2014.

Depreciation and amortization. Depreciation and amortization expense remained consistent at $24.2 million for the nine months ended September 25, 2014 and the nine months ended October 1, 2015.

Merger termination fee and related merger costs. The merger termination fee and related merger costs were $34.3 million for the nine months ended October 1, 2015 due to the merger termination payment of approximately $26.8 million and approximately $7.5 million in primarily legal, accounting, advisory and other professional fees associated with the terminated Screenvision merger.

Non-operating expenses. Total non-operating expenses decreased 11.8%, from $56.9 million for the nine months ended September 25, 2014 to $50.2 million for the nine months ended October 1, 2015. The following table shows the changes in non-operating expense for the nine months ended October 1, 2015 and September 25, 2014 (in millions):

The decrease in non-operating expense was due primarily to a $6.0 million decrease in the amortization of terminated derivatives as the amortization period ended in February 2015 and a decrease of $0.7 million in other non-operating expense.

Net income. Net income increased $3.5 million from $5.3 million for the nine months ended September 25, 2014 to $8.8 million for the nine months ended October 1, 2015. The increase in net income was primarily due to a decrease of $6.7 million in non-operating expense, as described above and a $6.2 million decrease in income attributable to noncontrolling interests, partially offset by a decrease in operating income of $7.3 million (due primarily to an increase of $30.6 million of the merger termination fee and related merger costs), as described further above and an increase in income tax expense of $2.1 million due primarily to higher net income before taxes in the period.

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

Changes in the current macro-economic environment and changes in the national, regional and local advertising markets, including increased competition related to the expansion of online and mobile advertising platforms, present uncertainties that could impact our results of operations, including the timing and amount of spending from our advertising clients. The impact to our business associated with these issues could be mitigated somewhat over time due to factors including the increase in salable advertising impressions and better geographic coverage related to the expansion of our network, diversification and growth of our advertising client base and improvements in the technical quality of our network and upgrades to our inventory management and audience targeting systems, the development of which has recently been accelerated. We could also benefit from the effectiveness of cinema advertising relative to other advertising mediums as consumer viewing habits shift to smaller less effective mobile devices and television ratings and effectiveness as a marketing platform declines due to the time-shifting of programming and related ad-skipping associated with the increasing use of DVRs by consumers. The impact of these consumer and media market trends appear to have helped increase the level of upfront national advertising bookings that were up approximately 100% going into 2015 (for the period from October 1, 2014 through December 31, 2015). Our recent upfront national advertising campaign was also a success with bookings for the period October 1, 2015 through December 31, 2016 currently up approximately 13% compared to the same five-quarter period last year, while television upfront bookings were reported to be down compared to the previous year. Consistent with last year, we are currently expecting to begin 2016 with national advertising commitments that represent approximately 70%-75% of our 2016 national advertising revenue target. While we could have booked additional upfront advertising commitments, given the strong CPM environment that we have experienced in the 2015 scatter marketplace, we believe that limiting the level of upfront commitments and scatter commitments booked between now and the end of 2015 to approximately 70%-75% of our national advertising revenue target will create the most attractive pricing environment for us in 2016. Consistent with the television industry upfront booking practices, a portion of our upfront commitments have cancellation options that could reduce what is ultimately spent by clients that have made upfront commitments.

During 2014 and thus far in 2015, we have entered into agreements with seven new affiliate theatre circuits with 406 screens. In total, these affiliate additions are expected to add approximately 15 million new attendees on a full-year pro-forma basis, which we expect will result in approximately 231 million new salable national advertising impressions (assuming 15 national advertising units of 30 seconds each). One of these affiliates, with 142 screens and approximately 7 million attendees, will become a part of our network in January 2016. We expect this expansion of our network and additional attendees will provide our advertising clients with a better marketing product with increased reach (more advertising impressions) and improved geographic coverage. During 2016, we also plan to offer our advertising clients better audience targeting capabilities that are expected to assist with our strategy to expand our client base and increase our revenue, operating income and cash flow and our revenue sharing payments to our network affiliates. Our future revenue growth could also be positively impacted by the expansion of our advertising network through the new construction and merger and acquisition activities of NCM LLC’s founding members and network affiliates. We also believe that the continued growth of our market coverage ubiquity and overall number of impressions will also strengthen our selling proposition and competitive positioning versus other national, regional and local video advertising platforms, including television, online and mobile video platforms and other out of home video advertising platforms.

In 2013 and 2014, we experienced a decline of 7.6% and 16.4%, respectively, in national advertising CPMs (excluding beverage revenue) compared to the prior period due primarily to the increased competition from other national video networks, including online and mobile advertising platforms, television networks and other out-of-home video networks and the implementation of more aggressive seasonal and volume pricing strategies that contributed to the expansion of our inventory utilization related to the addition of new client categories that traditionally buy their television advertising at lower CPMs. After the resetting of our pricing over the last few years to be more attractive to a broader number of potential clients and reflect seasonal marketplace supply and demand characteristics, during the first nine months of 2015, we experienced an increase of 5.6% in national advertising CPMs (excluding beverage revenue) as a result of a 12.4% increase in CPMs during the third quarter of 2015, a 10.6% increase in CPMs during the second quarter of 2015 and an 11.1% decline in CPMs during the first quarter of 2015. This volatility in quarterly national CPMs combined with an increase in national inventory utilization reflects the success of our upfront inventory packaging strategy that created multi-flight campaigns for clients that were priced based on expected lower market demand in the first quarter of 2015 as compared to the rest of the year. As a result of this new packaging strategy and more dynamic scatter pricing that is responsive to week-to-week market demand and inventory availability, we expect our national advertising CPMs (excluding beverage) to continue to be higher during higher market demand periods and lower during periods of lower market demand where we have greater amounts of unsold inventory.

Under the ESAs, up to 90 seconds of the FirstLook program can be sold to NCM LLC’s founding members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements. During 2014 and in the first six months of 2015, we sold 60 seconds to NCM LLC’s founding members. In December 2014, we were notified by one of our founding members that beginning in July 2015, they would reduce their beverage advertising from 60 seconds to 30 seconds to accommodate other in-theatre marketing activities by their beverage supplier. We have the right to sell the 30 second unit to other clients. This contributed to a decrease in beverage revenue of $1.3 million during the three months ended October 1, 2015, and we expect a similar impact during the fourth quarter of 2015. We expect that most of this revenue will be replaced through the sale of national advertising to other brands. The other founding members have signed long-term contracts with their beverage suppliers that require 60 seconds of beverage advertising, although such commitments could change in the future. Should the amount of time acquired 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, beginning in 2012, 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 the FirstLook pre-show, limited to the highest advertising CPM being then-charged by NCM LLC. Due to a 14.4% decline in segment one CPMs in 2014, the CPM on our beverage concessionaire revenue declined during the first nine months of 2015 by 14.4% and the CPMs for the remainder of 2015 will decline by an equivalent percentage. The expected higher CPMs for 2015 are expected to increase the CPM on our beverage concessionaire revenue during 2016.

In consideration for NCM LLC’s access to NCM LLC’s founding members’ theatre attendees for on-screen advertising and use of lobbies and other space within NCM LLC’s founding members’ theatres for the LEN and lobby promotions, NCM LLC’s founding members receive a monthly theatre access fee under the ESAs. The theatre access fee is composed of a fixed payment per patron and a fixed payment per digital screen (connected to the DCN). The payment per theatre patron increases by 8% every five years, with the first such increase taking effect for fiscal year 2012, and the payment per digital screen increases annually by 5%. The theatre 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. Pursuant to ESAs, beginning on October 1, 2010 the theatre 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 October 1, 2015, 94.8% of our founding member network screens were showing advertising on digital cinema projectors, and thus the future impact on the theatre access fee related to additional digital cinema installations within existing founding member theatres will be minimal.

During 2015, we reduced the length of our content partner entertainment programming segments from two and one-half minutes to two minutes in content partner agreements representing about 50% of our FirstLook pre-show impressions. During 2016, the remainder of our content partner agreements will provide for two minute entertainment content segments. The reduction in the length of our FirstLook content partner entertainment segments from two and one-half minutes to two minutes will provide two additional 30-second national units and one additional local or regional advertising unit for us to sell across approximately 50% of our network impressions in 2015 and 100% in 2016. This additional salable national, local and regional FirstLook pre-show inventory could allow us to increase our future advertising revenue provided that there is adequate market demand.

During 2014, 2013 and 2012, we amended our senior secured credit facility to extend the maturity, expand the revolver availability and reduce the interest rate spreads. In 2012 and 2011, we issued new Senior Unsecured Notes and Senior Secured Notes primarily to refinance outstanding bank debt. As a result of these financing transactions, we extended the average maturities of our debt by over six years. The weighted average remaining maturity is 5.5 years as of October 1, 2015. As of October 1, 2015, approximately 64% of our total borrowings bear interest at fixed rates. The remaining 36% 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. 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.

Due primarily to the decrease in our national advertising revenue in 2014, 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 certain cash items) was less than our regular dividend payment in 2014 ($0.88 per share). The $4.7 million deficit was funded by NCM, Inc.’s cash and marketable securities balances. As of October 1, 2015, these balances totaled $80.5 million. We anticipate that over time our revenue growth will result in cash flow available for dividends in excess of our regular dividend payments. However, should there be any continued quarterly deficits, we believe that our cash and marketable securities balances could continue to fund deficits similar to 2014 for the foreseeable future. Our Board of Directors will evaluate the potential for continued deficits as one of the factors when declaring dividends in the future.

Our short-term marketable securities balance decreased $8.2 million, from $21.7 million as of January 1, 2015 to $13.5 million as of October 1, 2015 and our long-term marketable securities balance decreased by $1.2 million, from $45.5 million as of January 1, 2015 to $44.3 million as of October 1, 2015. The decrease in short-term and long-term marketable securities was primarily a timing difference due to the Company converting securities into cash to be used for its seasonal cash needs to fund its working capital, dividend payments and payments associated with the tax receivable agreement with NCM LLC’s founding members.

As described within Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview”, on March 16, 2015, the Company announced the termination of the Merger Agreement with Screenvision. We do not expect to incur additional material expenses related to the terminated merger.

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 theatre additions or dispositions during the previous year. During the first quarter of 2015 and 2014, NCM LLC issued 2,160,915 and 1,087,911 common membership units to its founding members, respectively, for the rights to exclusive access to the theatre screens and attendees added, net of dispositions by the founding members to NCM LLC’s network during the previous year. NCM LLC recorded a net intangible asset of $31.4 million and $16.4 million during the first quarter of 2015 and 2014, respectively, as a result of the Common Unit Adjustments.

Overall, NCM, Inc.’s ownership in NCM LLC decreased to 45.2% as of October 1, 2015 compared to 45.8% at January 1, 2015 due primarily to the common unit adjustment described above, which has proportionally increased net income attributable to noncontrolling interests and decreased net income attributable to NCM, Inc.

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 and Senior Unsecured Notes, income tax payments, tax receivable agreement payments to NCM LLC’s founding members and amount of quarterly dividends to NCM, Inc.’s common stockholders (including special dividends).

The $58.8 million decrease in liquidity as of October 1, 2015, compared to September 25, 2014, was due primarily to the funding of the merger termination fee of $26.8 million during the first three months of 2015 and related merger costs of approximately $15.0 million ($7.5 million incurred by NCM, Inc. during the year ended January 1, 2015 and approximately $7.5 million incurred by NCM LLC during the nine months ended October 1, 2015). The decrease in liquidity was also a result of the maturity of $14.0 million of the revolving credit facility in December 2014, for which NCM LLC paid the balance in full, thus decreasing the capacity under the revolving credit facility to $135.0 million from $149.0 million. Pursuant to the NCM LLC Operating Agreement, the $25.5 million negative available cash distribution calculation for the first quarter of 2015 will be netted against the available cash distributions for the second quarter of 2016 (to be paid in the third quarter of 2016). At that time, these remaining merger costs that had been funded by our revolving credit facility will be effectively repaid and our borrowing capacity under our revolving credit facility and overall liquidity will increase by approximately $25.5 million.

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 October 1, 2015 were $80.5 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, and capital expenditure and other investing requirements, 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 on borrowings under our revolving credit agreement and to a lesser extent theatre 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 and NCM, Inc.). The available cash distribution to the members of NCM LLC for the three months ended April 2, 2015 was calculated as negative $25.5 million ($11.5 million with NCM, Inc.) due to the merger termination fee and related merger costs. Pursuant to the NCM LLC Operating Agreement, there was no distribution made in the second quarter of 2015 and the negative amount will be netted against available cash distributions for the second quarter of 2016, which will be paid in the third quarter of 2016. The available cash distribution to the members of NCM LLC for the three months ended October 1, 2015 (which will be made during the fourth quarter of 2015) was approximately $45.1 million, of which approximately $20.4 million will be 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 with NCM LLC’s founding members and current and future dividends as declared by the Board of Directors, including a dividend declared on November 6, 2015 of $0.22 per share (approximately $13.0 million) on each share of the Company’s common stock (not including outstanding restricted stock) to stockholders of record on November 20, 2015 to be paid on December 4, 2015. Distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund the above listed items for the foreseeable future at the discretion of the Board of Directors dependent on anticipated cash needs, overall financial condition, future prospects for earnings, available cash and cash flows, as well as other relevant factors.

We expect to make $13.0 million to $15.0 million of capital expenditures in fiscal 2015. This increase of $2.0 million to $3.0 million from our initial estimates is primarily related to an acceleration of the development of our management systems, including upgrades to our digital content software distribution and content management software and our proposal, inventory and audience targeting management systems. Our total capital expenditure projections also include investments in reporting systems, server and storage upgrades, software licensing, our internet site and network equipment related to currently contracted network affiliate theatres.

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 January 1, 2015 and incorporated by reference herein. As of October 1, 2015, there were no significant changes in those critical accounting policies.

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

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.

For a discussion of related party transactions, see the information provided under Note 4—Related Party Transactions to the unaudited Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.

Our operating lease obligations, which primarily include office leases, are not reflected on our balance sheet. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual and Other Obligations” contained in our annual report on Form 10-K for the fiscal year ended January 1, 2015 and incorporated by reference herein. We do not believe these arrangements are material to our current or future financial condition, results of operations, liquidity, capital resources or capital expenditures.

There were no material changes to our contractual obligations during the three months ended October 1, 2015.

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 theatre attendance tend to be higher during the second, third, and fourth fiscal quarters. Advertising revenue is primarily correlated with new product releases, advertising client marketing priorities and economic cycles and to a lesser extent theatre attendance levels. 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 theatre industry attendance levels. 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 2011, 2012, 2013 and 2014.

The following table reflects the quarterly percentage of total advertising revenue for the fiscal years ended 2010, 2011, 2012 and 2013.

The primary market risk to which we are exposed is interest rate risk. The Senior Unsecured Notes and the Senior Secured Notes are at fixed rates, and therefore are not subject to market risk. As of October 1, 2015, the only interest rate risk that we are exposed to is related to our $135.0 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 $3.4 million for an annual period on the $66.0 million revolving credit balance and $270.0 million term loan outstanding as of October 1, 2015. 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 January 1, 2015 and incorporated by reference herein.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the SEC under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified by the Commission’s rules and forms, and that information is accumulated and communicated to our management, including the Chief Executive Officer (principal executive officer) and Senior Vice President, Finance and Interim Co-Chief Financial Officer (principal financial officer) as appropriate to allow timely decisions regarding required disclosure. As of October 1, 2015, our management evaluated, with the participation of the Chief Executive Officer and Senior Vice President, Finance and Interim Co-Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures as of October 1, 2015 were effective.

There have been no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended October 1, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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

There have been no material changes from risk factors as previously disclosed in our annual report on Form 10-K filed with the SEC on February 27, 2015 for the fiscal year ended January 1, 2015. However, on March 16, 2015, the Company announced the termination of the Merger Agreement, as described in Note 1 – The Company to the unaudited Condensed Consolidated Financial Statements in this Form 10-Q and the Company believes the merger-related risk factors in the Form 10-K are no longer applicable.

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

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

Large accelerated filer	x		Accelerated filer	o

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

		Page

	PART I

Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Income	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income	5
	Unaudited Condensed Consolidated Statements of Cash Flows	6
	Unaudited Condensed Consolidated Statements of Equity/(Deficit)	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38

	PART II

Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	39

Signatures		40

	Three Months Ended				% Change
	October 1, 2015		September 25, 2014		Q3 2015 to Q3 2014
National advertising revenue per attendee	$	0.486	$	0.385		26.2	%
Local advertising revenue per attendee	$	0.155	$	0.177		(12.4	%)
Total advertising revenue (excluding founding member beverage revenue) per attendee	$	0.642	$	0.561		14.4	%
Total advertising revenue per attendee	$	0.681	$	0.617		10.4	%
Total theatre attendance (in millions) (1)		164.1		163.5		0.4	%

	Nine Months Ended				% Change
	October 1, 2015		September 25, 2014		YTD 2015 to YTD 2014
National advertising revenue per attendee	$	0.425	$	0.344		23.5	%
Local advertising revenue per attendee	$	0.130	$	0.136		(4.4	%)
Total advertising revenue (excluding founding member beverage revenue) per attendee	$	0.555	$	0.480		15.6	%
Total advertising revenue per attendee	$	0.599	$	0.536		11.8	%
Total theatre attendance (in millions) (1)		517.3		505.4		2.4	%

	As of						$ Change			$ Change
	October 1, 2015		January 1, 2015		September 25, 2014		Q3 2015 to YE 2014			Q3 2015 to Q3 2014
Cash, cash equivalents and marketable securities (1)	$	80.5	$	80.6	$	84.3	$	(0.1	)	$	(3.8	)
Revolver availability (2)		69.0		113.0		124.0		(44.0	)		(55.0	)
Total liquidity	$	149.5	$	193.6	$	208.3	$	(44.1	)	$	(58.8	)

	Nine Months Ended
	October 1, 2015			September 25, 2014
Net income attributable to NCM, Inc.	$	8.8		$	5.3
NCM LLC equity issued for purchase of intangible asset		14.1			7.5
Income tax and other impacts of subsidiary ownership changes		(4.6	)		(2.0	)
Change from net income attributable to NCM, Inc. and transfers from noncontrolling interests	$	18.3		$	10.8

	As of
Included in the Condensed Consolidated Balance Sheets:	October 1, 2015		January 1, 2015
Purchase of movie tickets and concession products (included in Prepaid expenses) (1)	$	0.2	$	—
Current portion of notes receivable - founding members (2)		4.2		4.2
Long-term portion of notes receivable - founding members (2)		16.6		16.6
Interest receivable on notes receivable (included in other current assets) (2)		0.7		—
Common unit adjustments and integration payments, net of amortization (included in intangible assets) (3)		472.7		458.3
Current payable to founding members under tax receivable agreement (4)		28.0		19.6
Long-term payable to founding members under tax receivable agreement (4)		135.7		146.7

	AMC			Cinemark			Regal		Total
Theatre access fees, net of beverage revenues	$	1.2		$	0.9		$	1.2	$	3.3
Cost and other reimbursement		(0.5	)		(0.3	)		0.1		(0.7	)
Distributions payable to founding members		6.8			8.8			9.1		24.7
Total amounts due to founding members	$	7.5		$	9.4		$	10.4	$	27.3

	Outstanding Balance as of
Borrowings	October 1, 2015		January 1, 2015		Maturity Date	Interest Rate
Revolving Credit Facility	$	66.0	$	22.0	November 26, 2019	(1)
Term Loans		270.0		270.0	November 26, 2019	(1)
Senior Unsecured Notes		200.0		200.0	July 15, 2021		7.875%
Senior Secured Notes		400.0		400.0	April 15, 2022		6.000%
Total	$	936.0	$	892.0

	As of October 1, 2015				As of January 1, 2015
	Carrying Value		Fair Value (1)		Carrying Value		Fair Value (1)
Term Loans	$	270.0	$	268.9	$	270.0	$	257.9
Senior Unsecured Notes		200.0		207.5		200.0		210.8
Senior Secured Notes		400.0		405.3		400.0		400.8

			Fair Value Measurements at Reporting Date Using
	As of October 1, 2015		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)	$	2.5	$	2.5	$	—	$	—
Short-term marketable securities (2)		13.5		10.0		3.5		—
Long-term marketable securities (2)		44.3		34.6		9.7		—
Total assets	$	60.3	$	47.1	$	13.2	$	—

			Fair Value Measurements at Reporting Date Using
	As of January 1, 2015		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)	$	2.5	$	2.5	$	—	$	—
Short-term marketable securities (2)		21.7		9.5		12.2		—
Long-term marketable securities (2)		45.5		41.5		4.0		—
Total assets	$	69.7	$	53.5	$	16.2	$	—

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
FY 2011		16.3%		26.2%		31.2%		26.3%
FY 2012		17.6%		24.5%		32.1%		25.8%
FY 2013		17.8%		26.5%		29.2%		26.5%
FY 2014		17.8%		25.4%		25.6%		31.2%

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
July 3, 2015 through July 30, 2015	1,015		$15.41		—		N/A
July 31, 2015 through September 3, 2015	515		$15.29		—		N/A
September 4, 2015 through October 1, 2015	154		$13.25		_		N/A

Exhibit	Reference	Description

31.1	*	Rule 13a-14(a) Certification of Chief Executive Officer.
31.2	*	Rule 13a-14(a) Certification of Principal Financial Officer.
32.1	**	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2	**	Certification of Principal 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 9, 2015	/s/ Kurt C. Hall
		Kurt C. Hall
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	November 9, 2015	/s/ David J. Oddo
		David J. Oddo
		Senior Vice President, Finance and Interim Co-Chief Financial Officer (Principal Financial Officer)

Date:	November 9, 2015	/s/ Jeffrey T. Cabot
		Jeffrey T. Cabot
		Senior Vice President, Controller and Interim Co-Chief Financial Officer (Principal Accounting Officer)