7.	Investment in National CineMedia

The Company has an investment in National CineMedia, LLC (“NCM”). NCM operates a digital in-theatre network in the U.S. for providing cinema advertising and non-film events. Upon joining NCM, the Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM provides advertising, promotion and event services to our theatres. As described further in Note 6 to the Company’s financial statements as included in its 2013 Annual Report on Form 10-K, on February 13, 2007, National CineMedia, Inc. (“NCM, Inc.”), an entity that serves as the sole manager of NCM, completed an initial public offering (“IPO”) of its common stock. In connection with the NCM Inc. initial public offering, the Company amended its operating agreement and the ESA. Following the NCM, Inc. IPO, the Company does not recognize undistributed equity in the earnings on its original NCM membership units (referred to herein as the Company’s Tranche 1 Investment) until NCM’s future net earnings, less distributions received, surpass the amount of the excess distribution. The Company recognizes equity in earnings on its Tranche 1 Investment only to the extent it receives cash distributions from NCM. The Company recognizes cash distributions it receives from NCM on its Tranche 1 Investment as a component of earnings as Distributions from NCM. The Company believes that the accounting model provided by ASC Topic 323-10-35-22 for recognition of equity investee losses in excess of an investor’s basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution.

Below is a summary of activity with NCM included in the Company’s condensed consolidated financial statements:


	Investment in NCM			Deferred Revenue			Distributions from NCM			Equity in Earnings			Other Revenue			Other Comprehensive Income			Cash Received
Balance as of January 1, 2014	$	178,853		$	(334,429	)
Receipt of common units due to annual common unit adjustment		8,216			(8,216	)	$	—		$	—		$	—		$	—		$	—
Revenues earned under ESA ⁽¹⁾		—			—			—			—			(4,611	)		—			4,611
Receipt of excess cash distributions		(5,967	)		—			(7,167	)		—			—			—			13,134
Receipt under tax receivable agreement		(2,385	)		—			(3,510	)		—			—			—			5,895
Equity in earnings		357			—			—			(357	)		—			—			—
Equity in other comprehensive income		442			—			—			—			—			(442	)		—
Amortization of deferred revenue		—			3,636			—			—			(3,636	)		—			—

Balance as of and for the period ended June 30, 2014	$	179,516		$	(339,009	)	$	(10,677	)	$	(357	)	$	(8,247	)	$	(442	)	$	23,640

⁽¹⁾	Amount includes the per patron and per digital screen theatre access fees due to the Company, net of amounts due to NCM for on-screen advertising time provided to the Company’s beverage concessionaire of approximately $5,686.

During the three months ended June 30, 2014 and 2013, the Company recorded equity in earnings (loss) of approximately $(75) and $536, respectively. During the six months ended June 30, 2014 and 2013, the Company recorded equity in earnings of approximately $357 and $1,402, respectively.

Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCM, Inc. and the Company, AMC Entertainment, Inc. (“AMC”) and Regal Entertainment Group (“Regal”), annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and theatre attendance generated by each Founding Member. As further discussed in Note 6 to the Company’s financial statements as included in its 2013 Annual Report on Form 10-K, the common units received are recorded at fair value as an increase in the Company’s investment in NCM with an offset to deferred revenue. The deferred revenue is amortized over the remaining term of the ESA. During March 2014, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company received an additional 557,631 common units of NCM, each of which is convertible into one share of NCM, Inc. common stock. The Company recorded the additional common units received at fair value with a corresponding adjustment to deferred revenue of approximately $8,216. The deferred revenue will be recognized over the remaining term of the ESA, which is approximately 22 years.

As of June 30, 2014, the Company owned a total of 24,556,136 common units of NCM, representing an ownership interest of approximately 19%.

On May 5, 2014, NCM, Inc., the sole manager of NCM, announced that it has entered into an agreement to acquire Screenvision, LLC for $375,000, consisting of cash and NCM, Inc. common stock. The transaction is subject to regulatory approval and other customary closing conditions.

Below is summary financial information for NCM for the three and six months ended June 26, 2014 and June 27, 2013.


	Three Months Ended				Six Months Ended
	June 26, 2014		June 27, 2013		June 26, 2014		June 27, 2013
Gross revenues	$	99,958	$	122,810	$	170,173	$	205,029
Operating income	$	42,131	$	57,928	$	54,898	$	79,563
Net earnings	$	26,467	$	41,153	$	23,703	$	46,778