National CineMedia, Inc. Annual Report 2014

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FY2014 Annual Report · National CineMedia, Inc.

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2014 ANNUAL REPORT

DEAR FELLOW STOCKHOLDER,

2014 was challenging for our Company as we navigated

unique business structure and our focus on maintaining

the expansion of online and mobile video networks and

high margins to maximize free cash flow generation.

the increased usage of new digital technologies, most

notably smartphones and DVRs. These technology

advances have accelerated the fragmentation of

programming distribution and have begun to change

media consumption patterns, forcing marketers to adjust

the allocation of their video advertising budgets.

These market pressures contributed to the significant

national advertising revenue volatility we experienced

$12.6

NCM, Inc.
DIVIDENDS PAID
(IN MILLIONS)

$81.0

$48.7

$49.2

$45.3

$34.7

$26.3

$27.5

throughout 2014 as our national advertising revenue

declined versus 2013 in each of the first three quarters

by 17%, 18%, and 31%, respectively. During Q4 2014,

2007

2008

2009

2010

2011

2012

2013

2014

however, we achieved 23% growth versus 2013 as media

With the video advertising marketplace becoming more

planners began to reallocate upfront media budgets in

competitive, we continued to aggressively pursue our

response to the changing marketplace. The success of

long-term strategy to improve our advertising product

our third year competing in the TV upfront selling process

and increase the advertising revenue of our theatre circuit

helped fuel our strong finish to the year as our upfront

partners. Our existing business continues to expand and

sales for the five-quarter period (Q4 2014 through 2015)

improve as we add new theatre circuits and upgrade

increased approximately $117 million, or 100%, compared

our distribution and inventory management technology.

with our prior upfront period (Q4 2013 through 2014).

During 2014, we added six new affiliate circuits with 264

Notwithstanding the challenges of the national advertising

marketplace, our local and regional advertising grew 8%

screens and eight million additional annual attendees and

signed a contract with another circuit with 142 screens and

seven million annual attendees that will join our network in

during 2014 compared with 2013. With our better network

market coverage, we achieved an increase in the number

early 2016.

of larger regional campaigns and the improving economy

drove increased demand from smaller businesses.

Our local and regional revenue growth only partially offset

the 12% decrease in national revenue, resulting in a 15%

decline in 2014 Adjusted OIBDA1 compared with 2013.

Despite the decline in high margin national revenue, our

Adjusted OIBDA margins1 remained stable at slightly over

50%, and we were not only able to maintain our regular

$0.22 per share quarterly dividend, we also paid a $0.50

per share special dividend that was designed to return

excess cash to our stockholders. This continued return

21,000

20,000

19,000

18,000

17,000

16,000

15,000

CINEMA NETWORK SCREENS
(AT PERIOD END)

2010

2011

2012

2013

2014

of capital to our stockholders reflects the strength of our

TOTAL

DIGITAL CONTENT NETWORK (DCN)

During 2015, we will be launching further upgrades to

I would like to thank all of our stockholders for their

our inventory management and distribution systems to

continued support, as well as our NCM team members

provide shorter ad buying and distribution lead times and

for their hard work and dedication to our Company.

begin to provide our clients with more efficient audience

targeting capabilities. We will also be increasing our

Sincerely,

investments in research and consumer demographic and

behavioral databases to provide greater insights to our

clients about how to better target movie audiences to

meet their marketing priorities.

I am very encouraged about the future prospects of our

Kurt C. Hall

business as we look ahead to 2015. Our local and regional

Chairman and Chief Executive Officer

business continues to perform very well, and in 2014

March 26, 2015

we made good progress expanding our national client

base through the addition of 48 new clients (versus 30

in 2013) across 22 different industries, and since our IPO

we expanded our client base by approximately 250% to

424 national advertisers. This client base expansion and

our successful 2014/2015 upfront campaign resulted in

commitments representing approximately 77% of our

2015 national annual advertising revenue budget as of

March 13, 2015 (versus 51% of actual 2014 results at the

same time last year), indicating that our network is being

viewed very favorably as marketers evaluate the impact

of the changing media landscape. This broader advertising

market support along with the other progress we are

making to execute our long-term strategy to improve

the quality of our premium video network and audience

targeting capabilities will continue to strengthen our value

proposition relative to other video advertising platforms.

We expect that these trends combined with the changes

in digital technologies that are negatively impacting the

effectiveness of traditional media platforms will position

us very well for video advertising market share gains

in the future.

Metrics for the periods presented are for fiscal year ends. For 2010, 2011, 2012, 2013 and 2014, see “Item 6. Selected Financial Data” and “Item 7. Management’s Discussion and

Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended January 1, 2015 included herein for additional information.

1 Adjusted OIBDA is a non-GAAP measure defined as consolidated net income plus income tax expense, interest and other non-operating costs, depreciation and amortization

expense, non-cash share based compensation costs and merger-related costs. Adjusted OIBDA margin is a non-GAAP measure defined as Adjusted OIBDA divided by total

revenue. Refer to “Item 6. Selected Financial Data” in our Annual Report on Form 10-K for the year ended January 1, 2015 included herein for the reconciliations to the closest

GAAP basis measurement.

All trademarks are the exclusive property of NCM, its affiliates, or third-party licensors

and may not be used without the prior written consent of NCM. This report may contain,

or may be deemed to contain “forward-looking statements” that reflect management’s

current expectations or beliefs regarding future events, including statements regarding

guidance and the dividend policy. By their nature, forward-looking statements involve

risks, assumptions, and uncertainties because they relate to events and depend on

circumstances that may or may not occur in the future. Although the Company believes

that the assumptions used in the forward-looking statements are reasonable, any of

these assumptions could prove to be inaccurate and, as a result, actual results could

differ materially from those expressed or implied in the forward-looking statements.

For discussion of some of the important factors that could cause the Company’s actual

results and performance to differ materially from those expressed in, or implied in the

forward-looking statements, please refer to “Item 1A. Risk Factors” in our Annual

Report on Form 10-K for the year ended January 1, 2015 included herein. The Company

undertakes no obligation to update or revise any forward-looking statements.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended January 1, 2015

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from

Commission file number: 001-33296

NATIONAL CINEMEDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

9110 East Nichols Avenue, Suite 200
Centennial, Colorado
(Address of principal executive offices)

20-5665602
(I.R.S. Employer
Identification No.)

80112-3405
(Zip Code)

Registrant’s telephone number, including area code: (303) 792-3600

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01 per share
(Title of each class)

The NASDAQ Stock Market LLC
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È

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 È No ‘

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 È No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ‘

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.
Large accelerated filer È
Non-accelerated filer ‘ (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È

Accelerated filer
Smaller reporting company ‘

‘

Based on the closing sales price on June 26, 2014, the aggregate market value of the voting and non-voting common stock held by
non-affiliates of the registrant was $978,751,279.

As of February 20, 2015, 61,937,486 shares of the registrant’s common stock (including unvested restricted stock), par value of $0.01 per
share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s definitive proxy statement to be used in connection with its Annual Meeting of Stockholders and to be
filed within 120 days of January 1, 2015 are incorporated by reference into Part III, Items 10-14, of this report on Form 10-K.

TABLE OF CONTENTS

PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . .
Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . .
Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Page

6
23
39
39
39
39

40
43
46
68
68
68
68
71

71
71

71
71
71

72
73

In this document, unless the context otherwise requires:

Certain Definitions

• “NCM, Inc.,” “the Company,” “we,” “us” or “our” refer to National CineMedia, Inc., a Delaware
corporation, and its consolidated subsidiaries National CineMedia, LLC, Acquiror Sub 1, LLC and
Acquiror Sub 2, LLC.

• “NCM LLC” refers to National CineMedia, LLC, a Delaware limited liability company, which

commenced operations on April 1, 2005, and is the current operating company for our business, which
NCM, Inc. acquired an interest in, and became a member and the sole manager of, upon completion of
our initial public offering, or “IPO,” which closed on February 13, 2007.

• “AMC” refers to AMC Entertainment Inc. and its subsidiaries, National Cinema Network, Inc., or

“NCN,” which contributed assets used in the operations of NCM LLC and formed NCM LLC in March
2005, AMC ShowPlace Theatres, Inc., which joined NCM LLC in June 2010 in connection with AMC’s
acquisition of Kerasotes ICON Theatres and American Multi-Cinema, Inc., which is a party to an ESA
with NCM LLC.

• “Cinemark” refers to Cinemark Holdings, Inc. and its subsidiaries, Cinemark Media, Inc., which joined

NCM LLC in July 2005, and Cinemark USA, Inc., which is a party to an ESA with NCM LLC.

• “Regal” refers to Regal Entertainment Group and its subsidiaries, Regal CineMedia Corporation, or

“RCM,” which contributed assets used in the operations of NCM LLC, Regal CineMedia Holdings, LLC,
which formed NCM LLC in March 2005, and Regal Cinemas, Inc., which is a party to an ESA with NCM
LLC.

• “ESAs” refers to the amended and restated exhibitor services agreements entered into by NCM LLC with
each of NCM LLC’s founding members upon completion of the IPO, which were further amended and
restated on December 26, 2013 in connection with the sale of the Fathom Events business.

• “Founding members” refers to AMC, Cinemark and Regal.

• “OIBDA” refers to consolidated net income plus income tax expense, interest and other non-operating

costs and depreciation and amortization expense.

• “Adjusted OIBDA” excludes from OIBDA non-cash share based payment costs and merger-related

administrative costs.

• “Adjusted OIBDA margin” is calculated by dividing Adjusted OIBDA by total revenue.

Cautionary Statement Regarding Forward-Looking Statements

In addition to historical information, some of the information in this Form 10-K includes “forward-looking

statements.” All statements other than statements of historical facts included in this Form 10-K, including,
without limitation, certain statements under “Business,” “Risk Factors” and “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,” “will,” “can,” “should,” “expects,” “forecast,” “project,” “intend,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of those words and other
comparable words. These forward-looking statements involve known and unknown risks and uncertainties,
assumptions and other factors, including, but not limited to, the following:

Risks Related to Our Business and Industry

• Significant declines in theatre attendance;

• competition within the overall advertising industry;

• not maintaining our technological advantage;

• national, regional and local economic conditions;

• the loss of any major content partner or advertising customer;

• our plans for developing additional revenue opportunities may not be implemented and may not be

achieved;

• failure to effectively manage or continue our growth;

• our inability to retain or replace our senior management;

• changes to relationships with NCM LLC’s founding members;

• failures or disruptions in our technology systems;

• infringement of our technology on intellectual property rights owned by others;

• the content we distribute and user information we collect and maintain through our in-theatre, online or

mobile services may expose us to liability;

• changes in regulations relating to the Internet or other areas of our online or mobile services;

• our revenue and Adjusted OIBDA fluctuate from quarter to quarter and may be unpredictable, which

could increase the volatility of our stock price;

Risks Related to Our Corporate Structure

• we are a holding company with no operations of our own, and we depend on distributions and payments

under the NCM LLC operating and management services agreements from NCM LLC to meet our
ongoing obligations and to pay cash dividends on our common stock;

• risks and uncertainties relating to our significant indebtedness and investments, including the availability
and adequacy of cash flows to meet our debt service requirements and any other indebtedness that we
may incur in the future;

• NCM LLC’s founding members or their affiliates may have interests that differ from those of us or our
public stockholders and they may be able to influence our affairs, compete with us or benefit from
corporate opportunities that might otherwise be available to us;

• future issuance of membership units or preferred stock;

• determination that NCM, Inc. or any of NCM LLC’s founding members is an investment company;

• determination that any amount of our tax benefits under the tax receivable agreement should not have

been available;

• changes in market interest rates and stock prices; and

• other factors described under “Risk Factors” or elsewhere in this Annual Report on Form 10-K.

On November 3, 2014, the Department of Justice (the “DOJ”) filed an antitrust lawsuit seeking to enjoin the
proposed merger between NCM, Inc., Screenvision and certain of their affiliates (the “DOJ Action”). Additional
risk factors related to the proposed merger and DOJ Action include the following:

• the DOJ Action has delayed, and could ultimately prevent, the consummation of the merger;

• delays in completing the merger have delayed, and could continue to delay, the benefits expected to be

achieved thereunder;

• if NCM, Inc. is unsuccessful in its defense of the merger, it may be required to make a termination

payment of $28.8 million, which could adversely impact NCM, Inc.’s stock price and would reduce NCM,
Inc.’s cash balances;

• a continued delay or failure to ultimately consummate the merger could materially and adversely affect

our future business, financial condition, results of operations and prospects;

• the pending merger, the DOJ Action and defense thereof and our current pre-merger integration planning
efforts may divert resources from our management’s day-to-day operations and ongoing efforts related to
other strategies and initiatives;

• the integration of the businesses of NCM LLC and Screenvision may be more difficult, costly or time
consuming than expected, and the merger may not result in any or all of the anticipated benefits,
including the $30 million of estimated cost synergies; and

• consummation of the merger will require the Company to incur significant additional indebtedness, which
could adversely impact our financial condition and may hinder our ability to obtain additional financing
and pursue other business and investment opportunities.

This list of factors that may affect future performance and the accuracy of forward-looking statements are

illustrative and not exhaustive. Our actual results, performance or achievements could differ materially from
those indicated in these statements as a result of additional factors as more fully discussed in the section titled
“Risk Factors,” and elsewhere in this Annual Report on Form 10-K. Given these uncertainties, readers are
cautioned not to place undue reliance on our forward-looking statements.

All subsequent written and oral forward-looking statements attributable to us or to persons acting on our

behalf are expressly qualified in their entirety by these cautionary statements. We disclaim any intention or
obligation to update publicly any forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable securities laws.

PART I

Item 1.

Business

The Company

NCM, Inc., a Delaware corporation, was organized on October 5, 2006 and began operations on

February 13, 2007 upon completion of its IPO. NCM, Inc. is a holding company that manages its consolidated
subsidiaries, including NCM LLC. NCM, Inc. has no business operations or material assets other than its cash
and ownership interest of approximately 45.8% of the common membership units in NCM LLC as of January 1,
2015. NCM LLC’s founding members, AMC, Cinemark and Regal, the three largest motion picture exhibition
companies in the U.S., held the remaining 54.2% of NCM LLC’s common membership units as of January 1,
2015. NCM, Inc.’s primary source of cash flow from operations is distributions from NCM LLC pursuant to the
NCM LLC operating agreement. NCM, Inc. also receives management fees pursuant to a management services
agreement with NCM LLC in exchange for providing specific management services to NCM LLC.

NCM LLC has long-term ESAs with NCM LLC’s founding members (over 22 years remaining as of
January 1, 2015) and multi-year agreements with certain third-party theatre circuits, referred to in this document
as “network affiliates,” which expire at various dates between October 31, 2015 and July 22, 2031. The ESAs
and network affiliate agreements grant NCM LLC exclusive rights in their theatres to sell advertising, subject to
limited exceptions.

On December 26, 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability

company owned 32% by each of the founding members and 4% by NCM LLC. Refer to “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” for further information.

On May 5, 2014, NCM, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”) to

merge with Screenvision, LLC (“Screenvision”) for $375 million, consisting of $225 million in cash and
$150 million of NCM, Inc. common stock (9,900,990 shares based on a price of $15.15 per share). The merger
consideration is subject to adjustment based upon Screenvision’s Adjusted EBITDA for the twelve months ended
April 30, 2014, which resulted in no adjustment and is subject to adjustment based upon Screenvision’s positive
working capital at closing up to a maximum of $10 million. On November 3, 2014, the DOJ filed the DOJ
Action. A trial date has been scheduled for April 13, 2015. Refer to “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” for further information.

Description of Business

Overview

NCM LLC operates the largest digital in-theatre media network in North America, through which it sells in-

theatre and online advertising and promotions. Our advertising and entertainment pre-show called “FirstLook”,
lobby entertainment network (“LEN”) and programming are distributed across our digital content network
(“DCN”) utilizing our proprietary digital content software (“DCS”).

We currently derive revenue principally from the sale of advertising to national, regional and local

businesses within several versions of FirstLook, which we distribute to theatre screens in our digital network. We
also sell advertising programming on our LEN and other forms of advertising and promotions in theatre lobbies
and across our online network and a mobile app called Movie Night Out®.

We believe that the reach, digital delivery and projection capabilities of our network provides an effective
platform for national, regional and local advertisers to reach a large, young and affluent audience on a targeted,
engaging and measurable basis. During 2014, over 700 million patrons attended movies shown in theatres in

which NCM LLC currently has exclusive cinema advertising agreements in place. A summary of the screens in
our advertising network is set forth in the table below:

Our Network
(As of January 1, 2015)

Founding Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Network Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Advertising Network

Theatres Total Screens (1) % of Total

1,233
367

1,600

16,497
3,612

20,109

82.0%
18.0%

100.0%

(1) 100% of the FirstLook pre-show is projected on digital projectors (82% digital cinema projectors and 18%
LCD projectors), and approximately 97% of the aggregate founding member and network affiliate theatre
attendance is generated by theatres connected to our DCN, with the remainder delivered on USB drives.

On-Screen Advertising

Our on-screen digital FirstLook pre-feature show consists of national, regional and local advertising, as well

as, behind the scenes “making-of” and other entertainment content provided by our content partners and other
clients. The pre-feature show generally ranges in length from 20 to 30 minutes and ends at or about the
advertised show time. We distribute several versions of FirstLook each month, including versions that include
promotional materials for our theatre partners, entertainment content and national and regional advertisements
that are targeted towards movie ratings, specific films, or groups of films related to specific film genres and local
and regional advertisements that play in specific theatre markets or geographic regions. The FirstLook pre-shows
are customized with the branding of certain of the theatre circuits in which the programming plays. Since 2010,
we have the capability to deliver three-dimensional (“3-D”) advertising campaigns within a 3-D version of the
FirstLook program prior to 3-D films.

The majority of our entertainment content segments are provided to us under exclusive multi-year
contractual arrangements with leading media, entertainment and technology companies (“content partners”).
Under the terms of the contracts, our content partners make available to us original content segments and make
commitments (generally for terms of two years) to buy a portion of our advertising inventory at a specified cost
per thousand (“CPM”). The original content produced by these content partners typically features behind-the-
scenes interviews about the “making-of” feature films, upcoming broadcasts, cable television shows, or
technology products. Our agreement with a major wireless communications company to exhibit a cell phone
courtesy public service announcement (“PSA”) expired during the second half of 2013 and was replaced by a
two-year agreement with an insurance company to exhibit a PSA, as well as, another two-year agreement signed
in early 2014 with a candy company. We also have a long-term agreement to display advertising of NCM LLC’s
founding members’ beverage supplier.

Advertising is sold on a CPM basis to national clients, while local and regional advertising is sold on a per-

screen, per-week basis. While we generally sell our national advertising units across our national network by film
rating or groups of ratings, we also have the ability to sell portions of our network by individual film or film
genre grouping. This offers national advertisers a way to target specific audience demographics at various price
points and overall cost levels, which expands the number of potential clients.

FirstLook was created in order to provide a more entertaining pre-feature program for theatre patrons and a
more targeted and effective advertising platform for our advertising clients by integrating national, regional and
local video advertising with entertainment content segments primarily provided by our content partners.

FirstLook is comprised of up to four segments, each approximately four to seven minutes in length.

Segment four, the first section of FirstLook, begins approximately 20 to 25 minutes prior to the advertised show

time and generally includes local advertising. Segment three typically begins approximately 18 minutes prior to
the advertised show time and features primarily 15 or 30-second local or regional advertisements by individual
theatres, or across an entire DMA® or geographic region. Segment two and segment one run closest to the
advertised show time and feature primarily national and regional advertisements, which are generally 30 or
60 seconds, including an advertisement at the end of segment one for the circuits’ beverage supplier. Segment
two and segment one begin approximately 13 minutes and 8 minutes, respectively, before the advertised show
time. Segment three, segment two and segment one include a two and one-half minute entertainment content
segment provided primarily by our content partners. Beginning in 2015, approximately half of our content
partners will provide two minute entertainment content segments, while the remainder will continue to provide
two and one-half minute segments. In 2016, we expect all of our content partners to provide two minute
segments. In total, this change in the content segment length to two minutes will provide an additional
90 seconds of inventory for us to sell during the FirstLook pre-show.

In 2010, we began selling 3-D advertising that runs prior to select 3-D films. The 3-D advertisements are

placed at the end of the FirstLook pre-show, after a message for patrons to put on 3-D glasses. These 3-D
advertisements provide average advertising CPMs that are higher than average two-dimensional (“2-D”) pricing
due primarily to a fewer number of 3-D advertisements and improved recall (based on third-party research)
associated with those 3-D advertisements. In order to provide a better experience, theatre patrons are prompted to
put their glasses on prior to the 3-D portion of FirstLook so they can be kept on throughout the end of the
FirstLook pre-show, during the film trailers and 3-D feature film.

As of January 1, 2015, approximately 96% of our total screens are part of our DCN, representing
approximately 97% of our total network attendance. As of January 1, 2015, 16,476, or 82%, of 20,109 total
digital screens are equipped with more powerful digital cinema projectors, with the remainder comprised of LCD
projectors. The 858 screens not connected to our DCN display national and regional advertisements on digital
projectors through the distribution of the advertising content on USB drives that are shipped to the theatres via
overnight delivery services.

The film trailers that typically run before the feature film are not part of FirstLook. Film trailers do not

begin until after the FirstLook program ends at or about the advertised show time.

We offer multiple versions of FirstLook each month that include advertising content that is appropriate for a

specific film or film rating category and branding of the specific theatre operator. This programming flexibility
provides advertisers with the ability to target specific audience demographics and gives us the ability to ensure
that the content and advertising is age-appropriate for the movie audience. We rotate the entertainment content
segments between theatres approximately every two weeks to ensure that frequent moviegoers are entertained by
fresh content segments.

Our goal in creating FirstLook as a branded entertainment program was to create a new “first release
window” for advertising into the marketplace, similar to the way films are released first in cinemas. To that end,
we encourage advertisers to provide us with advertisements before they are shown on other media platforms,
different versions of those advertisements, or original content that is specifically created for cinema. The several
versions of the FirstLook are produced by our internal creative staff, including pre- and post-production services
that we offer to our clients (primarily local clients), for a fee. These high quality internal production capabilities
provide the timing flexibility and cost efficiency required to produce and display the many version of our high
quality FirstLook pre-show.

The FirstLook program also includes time slots for NCM LLC’s founding member and network affiliates to
advertise various activities associated with the operations of the theatres, including concessions, online ticketing
partners, gift card and loyalty programs, special events presented by the theatre operator and vendors of services
provided to theatres, so long as such promotion is incidental to the vendor’s service or products sold in the
theatre. This time is provided by us to the theatre operator at no charge and generally includes 45 seconds within

15 minutes of show time, 15 seconds of which will be placed within 12 minutes of show time, and the remainder
placed at our discretion.

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,
we sold 60 seconds to NCM LLC’s founding members. Through 2011, this time was priced on a CPM basis,
which increased each year as specified in the ESA. Per the ESA, beginning in 2012, the CPM change equaled the
prior year annual percentage change in the advertising CPM charged by NCM LLC to unaffiliated third parties
during the last few minutes of the FirstLook pre-show, limited to the highest advertising CPM being then-
charged by NCM LLC. In December 2014, we were notified by one of our founding members that beginning in
July 2015, they will reduce their beverage advertising from 60 seconds to 30 seconds to accommodate a six-
month test of other in-theatre marketing activities by their beverage supplier. During the six-month test, we will
have the right to sell the 30 second unit to other clients. We expect this decrease to result in a reduction in
beverage revenue of approximately $2.8 million in the third and fourth quarters of 2015, however, we believe
that some or all of this revenue may be replaced through the sale of advertising to other brands who will find this
premium inventory attractive.

The arrangements with NCM LLC’s founding members relating to on-screen advertising for their beverage

concessionaires, the agreements with our content partners and the PSAs represented approximately
$132.6 million, or approximately 34%, of our total revenue for the year ended January 1, 2015.

Lobby Network and Promotions

Lobby Entertainment Network (LEN). Our LEN is a network of video screens strategically located

throughout the lobbies of all of our digitally equipped NCM LLC’s founding members’ theatres and the majority
of our network affiliate theatres. As of January 1, 2015, our LEN had 3,062 screens in 1,475 theatres connected
to our DCN. The LEN screens are strategically placed in high-traffic locations such as concession stands and film
queuing and other waiting areas. Programming on our LEN consists of an approximately 30-minute loop of
branded entertainment content segments created specifically for the lobby with advertisements running between
each segment. We have the scheduling flexibility to send different LEN programming to each theatre and the
same program is displayed simultaneously on all lobby screens within a given theatre, which we believe provides
the maximum impact for our advertisers. We sell national and local advertising on the LEN individually or
bundled with on-screen or other lobby promotions. The LEN programming includes up to two minutes for NCM
LLC’s founding members’ advertisements to promote activities associated with the operation of the theatres,
including concessions, ticketing partners, gift card and loyalty programs, special events presented by the theatre
operator and vendors of services provided to theatres, so long as such promotion is incidental to the vendor’s
service. Additionally, subject to certain limitations, the LEN programming includes up to two minutes (one
minute of which we provide to NCM LLC’s founding members at no cost and one minute of which NCM LLC’s
founding members may purchase) to promote certain non-exclusive cross-marketing relationships entered into by
the theatre operators for the purpose of increasing theatre attendance, which we call “strategic programs”.

Under the terms of the ESAs, NCM LLC’s founding members also have the right to install additional
screens in their theatre lobbies, which would not display our LEN programming, but would be used to promote
strategic programs or their theatre concessions, ticketing partners, gift card and loyalty programs, special events
presented by NCM LLC’s founding member and vendors of services provided to theatres, so long as such
promotion is incidental to the vendor’s service.

Lobby Promotions. We also sell a wide variety of advertising and promotional products in our theatre

lobbies. These products can be sold individually or bundled with on-screen or LEN advertising. Lobby
promotions typically include:

•

advertising on concession items such as beverage cups, popcorn bags and kids’ trays;

•

coupons and promotional materials, which are customizable by film and are distributed to ticket buyers
at the box office;

product sampling and display;

touch-screen display units and kiosks; and

signage throughout the lobbies, including posters, banners, counter cards, danglers, floor mats, standees
and window clings.

Under the terms of the ESAs, NCM LLC’s founding members may conduct a limited number of lobby
promotions at no charge in connection with strategic programs that promote motion pictures; however, such
activities will not reduce the lobby promotions inventory available to us.

Our ability to provide in-lobby marketing and promotional placements in conjunction with our other
marketing solutions allows us to provide integrated marketing products to advertisers with multiple interactions
with theatre patrons throughout the movie-going experience, which we believe is a competitive advantage over
other national media platforms.

Branded Entertainment Websites and Mobile Applications

We have a business website, ncm.com and two consumer facing websites, firstlookonline.com and
movienightout.com and a mobile app called Movie Night Out. In May 2014, NCM LLC signed a service
agreement with Shazam Media Services, Inc. (“Shazam”) to allow movie-goers to explore and engage with the
FirstLook pre-show content on their mobile device using the Shazam app and began to phase out the
FirstLookSync mobile app. In addition to allowing our advertising clients to engage the theatre audience by
connecting their on-screen advertisements to their smartphones, the Shazam app allows our theatre partners to
engage directly with their patrons to market online tickets, upcoming films and concession products. This unique
marketing tool will also allow our advertising clients and network affiliates to distribute coupons and other value-
added elements. Our consumer facing websites and the Shazam mobile app extend the reach of our FirstLook
pre-show to online and mobile consumers and provide an opportunity to create a unique integrated bundle of
marketing products for our clients. We also have an online advertising network through selling and marketing
relationships with several movie and entertainment related online websites and mobile app publishers. We are
developing and operating our websites and mobile app through our existing media production and technology
group and selling the advertising on our advertising network through a small digital sales group and through our
existing national and local sales organizations. As these online and mobile activities are supported primarily
through our existing staff and infrastructure, we believe that digital revenue and additional in-theatre integrated
marketing packages can be developed with limited incremental investment and operating costs. We have
employed several marketing strategies to attract patrons to our websites and promote the download and usage of
our Movie Night Out app and Shazam’s app including placing advertisements within our FirstLook pre-show. As
of January 1, 2015, our online advertising network included 33 entertainment websites (including our 100%
owned sites), with approximately 43 million unique visitors monthly. This vertically integrated online advertising
network provides advertisers the ability to target online entertainment consumers while providing publishers a
way to benefit from NCM’s sales infrastructure and the integration and bundling with NCM LLC’s in-theatre
network.

Sales and Marketing

We sell our in-theatre and online advertising products and event sponsorships through our national, local

and regional sales teams. We market our advertising products through our marketing group located primarily in
our New York City sales office.

As of January 1, 2015, we had 31 advertising sales and client development related personnel (including
management and sales support staff) within our national sales group. During 2014, approximately 34.6% of the
total compensation of the national sales staff was related to bonus or commission, which is based on achieving

certain team sales targets in order to enhance coordination and teamwork. Our national sales organization has
proven to be highly profitable and scalable as we have not added a significant number of sales personnel as our
network has expanded. Our national sales staff is located in our sales offices in New York City, Woodland Hills
(outside Los Angeles) and Chicago.

Our local and regional advertising sales staff, comprised of account directors and telesales representatives, is

located throughout the country, with each covering an average of 112 screens per representative. Their
responsibility is to sell cinema advertising to local clients as well as larger regional advertisers. During 2014,
approximately 75.8% of the compensation for local sales staff was based on an individual sales commission on
collected sales. As our network and local business grows, it may require the addition of sales personnel to cover
the new markets or screens. As of January 1, 2015, we had 179 sales personnel (including management and sales
support staff) within our local and regional sales groups, the majority of which work out of their homes located
within the markets they sell.

Over the past several years, we have increased our national and local advertising revenue by expanding our

network and the number of clients and client industries through sales outreach and several marketing tactics,
including the expansion and improvement of research provided to clients and the addition of client and business
development sales executives. We aggressively market and sell directly to clients as well as advertising agencies,
including our participation, beginning in 2012, in the television “upfront” advertising selling process, which
includes a presentation in New York City during the “TV Upfront” week to advertising agencies and clients. We
also on occasion place advertising in national trade publications, and commission third-party market research to
assist our sales team. We believe that improved research regarding cinema advertising and our network has
provided our customers with compelling statistical evidence of the superiority of our advertising products relative
to television and other traditional advertising mediums based on metrics such as brand recognition, message
recall, and likeability. In addition, based on the success of our 2014 upfront campaign whereby, going into 2015,
upfront commitments for the period October 1, 2014 through the end of 2015 increased approximately 100%
compared to the same period in the prior year, we believe that we are capturing additional market share from
traditional advertising media platforms such as broadcast and cable television, by establishing cinema advertising
as a more accountable and effective advertising medium relative to other media that has not been impacted by the
proliferation of the use of digital video recorders (“DVRs”) to record television programming. As of January 1,
2015, we had 35 personnel based primarily in New York that focus on the marketing, research and public
relations aspects of our advertising business.

Media and Creative Services

Our media and creative services department uses state of the art, proprietary and non-proprietary
technologies and practices to ensure the consistent image and sound quality of the FirstLook pre-show that is
distributed over our network, creating the highest possible cinema quality presentation for FirstLook, LEN
presentations and all of our other in-theatre marketing products. We believe the expertise of this group in
optimizing content for cinema playback within our FirstLook pre-show and our internet sites and mobile app has
been instrumental in our ability to provide a better experience for the theatre patron, to enhance our ability to
attract and retain our on-screen advertising clients and build and retain relationships with network affiliates. We
provide a full spectrum of 2-D and 3-D production and post-production services to our advertising clients on a
per contract fee basis, or as part of their advertising commitment, including audio enhancements, color correction
and noise reduction. Our expertise in cinematic production and our ability to tailor advertisements developed for
television, online or mobile to a high-definition cinema playback format facilitates the ability of national
advertisers to display content originally provided for television, online or mobile, thus optimizing their original
investment to the big-screen presentation. We also offer creative and production services to our clients (primarily
local clients), developing full sight, sound and motion high-definition advertisements from concept to
completion. This service substantially reduces the obstacles for smaller clients to invest in cinema-quality
advertising and ensures a higher quality presentation for cinema patrons. During 2014, we produced and

performed post-production services for approximately 52% of the local advertisements that played across our
networks. NCM LLC’s founding members also engage us for the production of their on-screen concession
product advertisements and policy trailers.

Technology and Other Corporate Branding

We utilize our digital media expertise, our proprietary DCS and various digital network technologies to
deliver a high quality cinema advertising pre-show to our network theatres. These technologies facilitate the
delivery of a high-quality entertainment experience and provide advertising clients a lower cost and more
programming flexibility. Moreover, our technology allows significant operational and scheduling flexibility to
our advertising clients that can target various demographic groups by location, film rating or film title and
measure advertising audience size and efficiently monitor and provide audit data of the on-screen playback.

We employ a satellite network to distribute content to our theatres. Our DCN, which is the combination of a
satellite distribution network and a terrestrial network, distributes our FirstLook content to 20,109 screens, 1,600
theatres and approximately 3.6 million seats, representing 97% of the total attendance of our advertising network
as of January 1, 2015. Approximately 82% of our network is equipped with digital cinema projectors and 18%
with LCD projectors.

The satellite technology we use provides a cost-effective means to deliver live and pre-recorded digital
content to theatres. We employ a variety of technologies that “wrap” around the satellite process to help provide
uninterrupted service to theatres. For example, our proprietary DCS has automated implementation capabilities
that allow for data files to be multicast to specific screens, theatres or groups of screens or theatres throughout
our DCN. Our digital content system operated in our network operations center (“NOC”) in our Centennial,
Colorado headquarters (near Denver), combined with in-theatre systems that are connected to the Alternative
Content Engine (“ACE”) are interfaced with our satellite provider network to dynamically control the quality,
placement, timing of playback and completeness of content within specific auditoriums. The integrated DCN
(including the DCS software) is controlled by our NOC which supports and monitors approximately 91,000
network hardware devices and approximately 562,000 maintenance alarm technology points on the LEN network
as of January 1, 2015.

Through our NOC, we have access to and can monitor and initiate repairs to the equipment in our entire
digital network of theatres. Our NOC operates 24 hours a day, seven days a week. Digital content is uploaded
from our NOC and distributed through the DCN to theatres in advance of playback. The content is delivered via
multicast technology to all theatres in our network and received by our theatre management system where it is
held until displayed in specified theatre auditoriums according to its contract terms. Each theatre auditorium has
a hardware and software architecture that controls the content to be shown in the auditoriums or over the LEN in
the theatre lobby. After the theatre management system receives digital content, confirmation of content playback
is returned via satellite to our NOC to be included in “post” reports provided to our advertising clients.

Our Competitive Strengths

We believe that our key competitive strengths include:

Superior National Advertising Network

We believe that our national advertising network delivers measurable results versus television, online and

mobile or other video advertising networks that we compete against, by allowing for targeting of marketing
messages primarily based on the film title or rating to a large, young and affluent audience, yielding a
competitive return on investment for advertisers as compared to traditional national and local media platforms.
As a result, we are able to compete effectively for marketing spending by local and national advertisers through

our relationships with a diversified group of local and national advertisers and agencies throughout the U.S. The
following are the key competitive strengths of our advertising network:

• Extensive National Market Coverage. Our contractual agreements with NCM LLC’s founding

members and network affiliates provide long-term exclusive access, subject to limited exceptions, to
the largest network of digitally equipped theatres in the U.S. and allow us to sell advertising to a large
percentage of the U.S. markets that are part of our advertising network. As of January 1, 2015:

•

our advertising network consisted of 20,109 screens that were 100% digital (16,497 operated by
NCM LLC’s founding members) located in 1,600 theatres (1,233 operated by NCM LLC’s
founding members) in 48 states and the District of Columbia;

the total annual advertising network theatre attendance was approximately 688.2 million (588.7
million from NCM LLC’s founding members), which decreased 1.6% compared to 2013. Our
network represented approximately 58% of the total U.S. theatre attendance, with some of the
most modern and highly attended theatres in the industry, as measured by screens per location and
attendance per screen;

the average screens per theatre in our network was 12.6 screens, 1.8 times the U.S. theatre
industry average, and the aggregate annual attendance per screen of theatres included in our
network during 2014 was 34,223, versus the U.S. theatre industry average attendance per indoor
screen of 32,451, using metrics reported by the National Association of Theatre Owners
(“NATO”);

our advertising network had theatres in most of the largest U.S. markets, including each of the top
25 DMAs®, 49 of the top 50 DMAs®, and 183 DMAs® in total;

approximately 73% of our screens (72% of our attendance) were located within the top 50 U.S.
DMAs® and approximately 32% of our screens (37% of our attendance) were located within the
top 10 U.S. DMAs®;

theatres within our advertising network represented approximately 70%, 68%, and 66% of the
total theatre attendance in theatres that showed national advertising in the top 10, top 25 and top
50 U.S. DMAs®, respectively and 62% for all DMAs®, providing a very attractive platform for
national advertisers who want exposure in larger markets or on a national basis; and

approximately 82% of our network screens and approximately 89% of NCM LLC’s founding
member screens were connected to higher quality digital cinema projectors that will further
improve the on-screen presentation for advertisers and allow us to display 3-D advertising in most
of our network theatres.

We plan to continue to expand our network through the addition of new network affiliates and theatres
built or acquired by our founding members and existing network affiliates. Under the terms of the
ESAs and common unit adjustment agreement with NCM LLC’s founding members and our network
affiliate agreements, all new theatres built or acquired (subject to existing advertising sales agreements)
by NCM LLC’s founding members or network affiliates will become part of our network. Since NCM
Inc.’s February 2007 IPO, NCM LLC’s founding members have added approximately 3,900 net new
screens and 39 network affiliates have been added to our network with approximately 2,700 screens.
We have also entered into the Merger Agreement, as described in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”, with Screenvision. If we are able to
complete the proposed merger, it will further expand our market coverage and impression base. This
expansion will continue to improve our geographic coverage and enhance our ability to compete with
other national advertising mediums, including television, online and mobile video advertising
platforms. Since late 2012, our founding members have acquired 109 theatres (with 1,437 screens).
These acquisitions expanded our network by 12 theatres (192 screens) as 97 theatres (with 1,245
screens) were operated by existing network affiliate theatre circuits. In addition, 14 acquired theatres

with 223 screens will join our network when their advertising agreement with a competitor expires in
November 2018. In addition, an acquisition by one of our network affiliates expanded our network by
17 theatres (144 screens) in July 2014.

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
216 million new salable national advertising impressions (assuming 14 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. The additional attendees will provide our advertising
clients a better marketing product with increased advertising impressions, improved geographic
coverage and better audience targeting capabilities that is expected to expand our and our theatre
circuit partner’s revenue, operating income and cash flow. We also believe that the continued growth of
our market coverage ubiquity and overall number of impressions will strengthen our selling proposition
and competitive positioning versus other national and local video advertising platforms, including
television, online and mobile video platforms and other out-of home advertising platforms.

• Targeted, Flexible Advertising Medium. Our digital network technology gives us flexibility to

distribute content to specific theatres or screens, geographic regions, or demographic groups based on
film title, film rating category or film genre. As a result, our clients can deliver an advertising message
to a desired demographic group of movie-goers, using high quality sight, sound and motion to specific
groups of screens across our entire national digital network. Further, with upgrades to our distribution
technology and operating processes in early 2014, we can provide distribution lead times that are
comparable to television and reduce our advertising clients’ operating costs, enabling us to respond
quickly to client requests to change advertising content.

• Access to a Highly Attractive Demographic Segment. NCM offers advertisers the ability to reach
highly coveted audience segments: young, affluent, and educated. According to Nielsen Cinema
Audience Reports for the first half of 2014, 47% of the NCM audience was between the ages of 12-34.
Further, 36% of NCM moviegoers have a household income greater than $100,000 (versus 26% of the
general population) and 38% have received a Bachelor’s degree or higher (versus 28% of the general
population) according to the 2014 Doublebase GfK MRI Study. In conclusion, NCM provides a far
more effective environment than most traditional media platforms for targeting such highly desired
demographic groups.

• Engaged Theatre Audience. We believe that cinema advertising benefits from the impact of the big

screen, high quality visual presentation, and digital surround sound presented in an engaged,
distraction-free theatre environment. Cinema advertising is one of the few advertising mediums where
the ability to skip or turn off the marketing messages is limited. According to industry studies, theatre
advertising is more effective than advertising shown on television as measured by unaided recall rates.
We believe that the impact of our on-screen advertising (representing 94% of our total advertising
revenue) presentation will be further enhanced by the new high quality digital cinema equipment that
has been installed in our network theatres.

•

Superior Audience Measurability. We receive monthly attendance information by film, by rating and
by screen for all of NCM LLC’s founding member theatres and the theatres operated by our network
affiliates, which allows us to report to clients the audience size for each showing of a film and our pre-
show. We also obtain third-party research that provides us with the percentage of the total attendance
that is in their seats at various times prior to the advertised show time. We believe that the sharing of
this information with our national clients gives us a distinct competitive advantage over traditional
media platforms that are based on significant extrapolations of a very small sample of the total
audience.

Scalable, State-of-the-Art Digital Content Distribution Technology

Our use of the combination of a satellite and terrestrial network technology, combined with the design and
functionality of our DCS and NOC infrastructure make our network efficient and scalable and allow us to target
specific audiences based primarily on film title and rating desired by our advertising clients and provide
scheduling timing flexibility that is similar to advertising on television. Our proprietary DCS provides many
distribution, scheduling, reporting and auditing features. We currently playback nearly 4 million digital content
files per day through our DCS. Our DCS also provides the ability to program advertisements from our NOC as
required by advertising clients, which shortens lead times and provides increased flexibility to change messages
or target specific audiences for our advertising clients.

As of January 1, 2015, our advertising network of 20,109 screens was 100% digital. In 2010, we began to

connect our DCN to the higher quality digital cinema projectors being installed by NCM LLC’s founding
members and network affiliates. These digital cinema projectors provide a much higher quality 2-D image and
the ability to project 3-D advertising on screens that are equipped with 3-D playback technology.

Our NOC, DCS and other network software also provide us with the capability to directly monitor
approximately 91,000 in-theatre network devices and approximately 562,000 maintenance alarm technology
points within our theatre network on a near real-time 24/7 basis as of January 1, 2015, providing high network
reliability and timely reporting as required by our advertising clients. The scalability of our NOC and distribution
technology has allowed us to increase the number of devices and alarm points with minimal additional capital
expenditures or personnel, and we expect to benefit from this scalability in the future as we add new theatres
from NCM LLC’s founding members, our existing network affiliate relationships and the addition of new
network affiliate circuits (including those resulting from the proposed Screenvision merger). In select theatres,
we have installed a device that we created to monitor sound levels in theatre auditoriums and report any
variations from pre-set standards to our NOC. This provides us with an additional value proposition for our
advertising clients versus television, online, mobile and other competing national media networks.

Innovative, Branded Digital Pre-Feature Content

We believe that our digital entertainment and advertising pre-feature program, FirstLook, provides a high-

quality entertainment experience for patrons and an effective marketing platform for advertisers. We have
branded our pre-feature shows, FirstLook, to reinforce our goal of creating the “first release window” for
advertising into the marketplace, similar to the way that films are released first in cinemas. We partner with
leading media, entertainment and technology companies to provide more original content for the audience and
more impact for the advertiser. We have designed the FirstLook programs with separate local and national
“pods,” consistent with the placement on television networks. During 2010, we began to produce a 3-D segment
of FirstLook. We believe the ability to distribute 3-D advertisements across our national network is a unique
selling proposition versus television, online and mobile and thus will enhance our national advertising revenue
growth in the future.

Our relationships with our content partners and cell phone courtesy PSA sponsors under exclusive multi-
year contractual agreements provide high quality entertainment content that is dispersed throughout the show.
The multi-year contracts with our content partners, our cell phone courtesy PSA sponsors, and arrangements to
satisfy NCM LLC’s founding members’ on-screen marketing obligations to their beverage concessionaires
provide a significant upfront revenue commitment, accounting for approximately 34% of our total revenue for
the year ended January 1, 2015. According to customer research conducted by us and independent research
companies, the production of a higher quality branded pre-feature program improves the entertainment
experience for patrons as well as the effectiveness of the advertising message.

Integrated Marketing Products

Along with our on-screen advertising opportunities, we offer advertisers the opportunity to integrate and

reinforce their on-screen advertisements with various online and mobile marketing and in-lobby marketing.

• Our online and mobile marketing products include advertisement placement on our firstlookonline.com
and movienightout.com websites and on our Movie Night Out mobile app, and Shazam’s app, as well
as, throughout websites that are part of our online advertising network that as of January 1, 2015
includes 33 entertainment websites (including our 100% owned sites) with approximately 43 million
monthly unique visitors.

• Our in-lobby marketing programs include advertisements displayed on our LEN high-definition

television screens, posters, tickets, box office coupon handouts, popcorn bags and beverage cups and
on-site product sampling opportunities. According to a Nielsen survey of moviegoers for 2014, movie
patrons spend, on average, approximately 12 minutes in the theatre lobby (before, during and after the
last movie that they viewed in the theatre).

• Our creative personnel and our marketing team assist advertisers in creating entertaining, fully

integrated online and cinema marketing campaigns with maximum impact.

Exposing patrons to an integrated marketing campaign of online, mobile, in-lobby and on-screen advertising

creates a consistent marketing message through multiple touch points during the entire movie-going experience.
The marketing interaction for our clients begins when consumers choose a film or event online or on mobile
devices and continues through the subsequent entertainment experience in the theatre, lobbies, and through
marketing pre-shows prior to the feature film and extends beyond the theatre experience through subsequent
online/mobile interaction. We believe these multiple marketing impressions through the entire entertainment
experience allows our advertisers to extend the exposure for their brands and products and create a more
engaging “relationship” with the consumer that is not available with broadcast or cable television or traditional
display advertising.

Strong Operating Margins with Limited Capital Requirements

Our annual Adjusted OIBDA margins have been consistently strong, ranging from approximately 49% to

52% over the last five years. Refer to “Item 6. Selected Financial Data-Notes to the Selected Historical Financial
and Operating Data” for a discussion of the calculation of Adjusted OIBDA margin, which is a non-GAAP
financial measure, and the reconciliation to consolidated net income. In addition, NCM LLC’s founding members
and their Digital Cinema Integration Partners, LLC (“DCIP”) joint venture have invested substantial capital to
deploy, expand and upgrade the network equipment within their theatres including the recent deployment of the
higher quality digital cinema equipment. Due to the network equipment investments made by NCM LLC’s
founding members and network affiliates (in some cases through the DCIP digital cinema implementation joint
venture) in new and acquired theatres and the requirements in the ESAs for the founding members to make future
investments for equipment replacements, and the scalable nature of our NOC and other infrastructure, we do not
expect to make major capital investments to grow our operations as our network of theatres expands. If the
proposed Merger is completed, then we do expect additional capital investments would be required to certain
theatres within Screenvision’s network. The combination of our strong operating margins and our low capital
expenditures, ranging from approximately 2% to 3% of revenues over the last five years, has allowed us to
generate significant unlevered free cash flow (defined as operating income or loss before depreciation and
amortization expense, share-based compensation costs and merger-related administrative costs and minus capital
expenditures) before distributions to NCM LLC’s owners. For the year ended January 1, 2015, our capital
expenditures were $8.8 million, of which $1.6 million primarily related to investments in network equipment to
add new network affiliate theatres and to make improvements to our inventory management and other systems
required to efficiently run and expand our business. We believe our expected level of unlevered free cash flow
generation should provide us with the strategic and financial flexibility to pursue the further expansion of our

national theatre network, invest in other growth opportunities and continue to make dividend payments to our
stockholders.

Dividend Policy

Our dividend policy is described in “Item 5. Market for Registrant’s Common Equity, Related Stockholder

Matters and Issuer Purchases of Equity Securities—Dividend Policy”.

Our Strategy

We believe that the digital evolution of the media business, coupled with our theatre advertising network
and management competencies, will provide us with an opportunity to be a strong competitor in the national and
local advertising market place and allow us to gain share within the broader video advertising marketplace. Our
primary strategic initiatives are to:

Expand and Improve the Quality of Our Theatre Network

Expanding our Geographic Coverage and National Reach. We continue to expand the reach and geographic

coverage of our national digital network by connecting additional theatres to our network that NCM LLC’s
founding members or our network affiliates buy or build and by establishing additional network affiliate
agreements with other theatre circuits, including through the proposed merger with Screenvision. The ESAs
require that all of NCM LLC’s founding members’ new or acquired theatres be added to our network in return for
the issuance of new NCM LLC units. Our strategy is to continue to expand our theatre network through the
acquisition and new construction activities of NCM LLC’s founding members and by creating new relationships
with regionally located network affiliates with theatres in smaller markets where we do not currently have
significant (or in many cases any) market coverage. On May 5, 2014, we entered into the Merger Agreement with
Screenvision, which the DOJ has filed an antitrust lawsuit seeking to enjoin. If we are able to complete the
proposed merger, our geographic coverage and national reach would be enhanced. By increasing our advertising
reach and broadening our geographic coverage, we believe we will be better able to compete with other national
advertising platforms such as television networks and new emerging advertising platforms distributed over the
internet and on mobile devices.

Improving the Technical Quality and Content Presentation of Our Network. In 2010, we began the transition

of our production and distribution capabilities to the new digital cinema platform, including the ability to
distribute and display 3-D advertising. The industry rollout of the digital cinema equipment for feature films
began in 2010 when the DCIP financing was completed by our three NCM LLC’s founding members’ theatre
circuits. The DCIP deployment of digital cinema systems was essentially completed in our founding member
theatres during 2014. These new systems not only provide higher quality 2-D images, they also give us the
capability to provide 3-D advertising. In 2010, we launched our 3-D advertising strategy within the FirstLook
pre-show and in 2011 began to roll-out the ability to distribute 3-D advertisements digitally across our network.
We have essentially completed the rollout of the 3-D network with our founding members, and are in the process
of completing this rollout with our affiliates. As of January 1, 2015, 16,476 total screens (including network
affiliates) within our digital network were connected to digital cinema projection equipment, representing
approximately 82% of our network screens. In order to provide for the connection of the new higher quality
digital cinema equipment to our network, we agreed to an amendment of the ESAs that increased NCM LLC’s
founding member theatre access fee (and reduced certain maintenance costs as projectors were replaced) as the
digital cinema system is connected to our advertising network. In addition, we are continually upgrading our
DCS scheduling & distribution software to provide more effective targeting of advertisements toward specific
theatre audiences. We and certain of our theatre partners have also installed sound monitoring and other devices
that can capture sound levels in certain auditoriums, which enables us to monitor sound electronically from our
NOC or through communications with the circuit. This innovation provides sound level data that is measured at
the point of consumer consumption, which is a unique service we offer to our advertisers.

Upgrading Our Proposal and Inventory Management Systems and Our Ability to Better Target Specific

Theatre Audiences for Our Clients. Over the last several years we have been upgrading our proposal and
inventory management systems to provide our local, regional and national sales personnel the ability to respond
to client requests for proposals more quickly and provide sales management more timely visibility to our
inventory availability and pricing trends. In 2014, we began to enhance these existing management systems to
provide the ability to target specific theatre audiences more effectively based on certain demographic or other
criteria desired by our advertising clients.

Expand Our Advertising Client Base

National Advertising. We intend to increase our market share of U.S. advertising spending by: (i) launching

an aggressive sales, marketing and public relations strategy that highlights the positive attributes of our
marketing product compared to other national video networks, including adjacency to high quality programming,
a higher quality advertising impression that cannot be skipped and more placement certainty and transparency
than online and mobile networks, (ii) launching a national upfront marketing and sales campaign that leverages
and builds on the success of our 2014 upfront campaign, (iii) increasing our investment in obtaining theatre
patron and other data to feed our new audience targeting systems, (iv) expanding our research staff and their
capabilities to better validate our selling proposition and the return on investment for advertising clients relative
to other advertising networks and (v) creating a more robust integrated marketing product that bundles our on-
screen, lobby promotions and online and mobile platforms (see more discussion below). These strategies are
designed to expand our relationships with existing advertising clients and broaden our advertising client base in
new and existing client industries.

Over the last several years our national sales team was successful in this effort to expand our national client

base, as we added 48 clients in 2014 and 108 clients since the beginning of 2012 that were first time clients or
had not advertised with us since our IPO. These new clients added in 2014 included companies in the airline,
apparel, cable television, credit card, electronics, festival, toy, health, home audio/video equipment, insurance,
internet, movie studio, music, non-profit, personal care, pharmaceutical, prepared food, print media, restaurant,
live event, transportation and video game industries. Since 2009, we expanded our client base by approximately
93% to 424 national advertisers. Despite this growth, we believe there are still thousands of clients that currently
advertise on television, the internet or on mobile devices that do not use our network. For instance, our share of
spending by clients in the QSR, consumer package goods (“CPG”) and retailer industries, among other
industries, is relatively low compared to television, online and mobile.

Beginning in 2012, we began to participate in the television “upfront” advertising selling process, including

a presentation in New York City in early May during the “TV Upfront” week. In 2014, this upfront strategy
began to yield meaningful positive results as the increased market awareness among media buyers and clients
created during previous year’s upfront presentations raised our credibility and allowed us to gain upfront
commitments traditionally made exclusively to cable and broadcast television networks, and more recently online
and mobile networks. Our upfront national bookings for the period from October 1, 2014 through December 31,
2015 were up approximately 100% going into 2015, compared to the same five quarter period ending in
December 2014 going into 2014. This total excludes approximately $23 million that had been originally
committed by a large advertising agency, but was later eliminated from the spending commitment when the DOJ
Action was filed. Consistent with television upfront bookings, a portion of our upfront commitments after the
fourth quarter of 2014 have cancellation options associated with them that could reduce what is ultimately spent
by clients that have made upfront commitments. Due in part to the strength of our upfront bookings, we
experienced 22.9% national advertising growth in the fourth quarter of 2014, compared to the fourth quarter of
2013, and going into 2015, our national commitments for fiscal year 2015 were up approximately 74% compared
to 2014, representing 73% of our 2015 national advertising revenue budget (versus 38% of our 2014 budget). We
believe that over time, these upfront selling tactics that allow us to bundle several flights throughout the year will
help to increase our share of video advertising spending by increasing the number of clients and client industries
that buy our network and stabilize month-to-month and quarter-to-quarter CPM volatility by increasing overall
inventory utilization and balancing that utilization throughout the year.

Local and regional advertising. We intend to increase our market share of local and regional advertising

spending by: (i) aggressively marketing our local and regional advertising products, including direct marketing
campaigns to businesses within a specified radius of our network theatres. (ii) aggressively bundling theatre
lobby promotions with on-screen campaigns, (iii) continuing to add high quality local salespeople and sales
management executives to better cover the expanding number of theatres in our network, particularly those with
low inventory utilization, (iv) continuing to strengthen our regional sales team to focus exclusively on larger
regional clients, such as car dealer associations, state agencies, insurance companies, quick service restaurants, or
QSRs, casual dining, tourism, education, healthcare and retail, that operate across an entire DMA®, multiple
DMAs® or states, (v) providing access to better FirstLook inventory for our regional advertising clients,
(vi) improving proposal and inventory management systems, (vii) continuing to implement more robust training
to support our local sales directors and sales management and (viii) exploring expansion into new regional
marketplaces. Due to the relatively low percentage of local advertising inventory sold today in many of our
theatres, we believe that an opportunity exists to continue to expand our local and regional business. We have
also benefited from our efforts to reduce local salesperson attrition, providing balanced commissions and benefit
packages and training and other corporate support.

Expand Our Internet/Mobile Platform

Advertising clients are increasingly seeking new ways to create integrated marketing solutions across
multiple digital platforms. By bundling our on-screen and in-theatre promotional marketing products with online,
mobile and video playback inventory, we allow clients to benefit from a bundle of digital marketing products
focused on the entertainment consumer. Our online network is made up of 33 entertainment websites (including
our 100% owned consumer sites, firstlookonline.com and movienightout.com). Our mobile app, Movie Night Out,
is part of our mobile network, reaching more than 150 million unduplicated unique users with over one million
sessions per month as of January 1, 2015. We also operate a video network reaching approximately 43 million
unduplicated unique users per month. These three networks combined create an entertainment focused
advertising network that provides smaller entertainment website access to our national and local sales force as
well as rich media widgets and other content created by our media production group. In 2014, we entered into a
strategic marketing and selling relationship with the popular Shazam app to allow our clients to use their on-
screen advertisements to directly engage movie-goers through their smartphones.

Continue to Attract and Retain High Quality Management and Staff

Our success is very much tied to the quality of our management and staff. In order to ensure that we retain
and attract high quality personnel, we seek to maintain a culture that focuses on teamwork and personal growth,
as well as, maintain effective and transparent lines of communication. We also make meaningful investments in
internal, as well as external, training programs for our management and staff to ensure that our personnel have
the technical and sales, as well as, management skills to drive our business growth.

Intellectual Property Rights

We have been granted a perpetual, royalty-free license from NCM LLC’s founding members to use certain
proprietary software for the delivery of digital advertising and other content through our DCN to screens in the
U.S. We have made improvements to this software since the IPO date and we own those improvements
exclusively, except for improvements that were developed jointly by us and NCM LLC’s founding members.

We have secured U.S. trademark registrations for NCM, National CineMedia, NCM Media Networks, and
Movie Night Out. It is our practice to defend our trademarks and other intellectual property rights, including the
associated goodwill, from infringement by others. We are aware that other persons or entities may use names and
marks containing variations of our registered trademarks and other marks and trade names. Potentially, claims
alleging infringement of intellectual property rights, such as trademark infringement, could be brought against us
by the users of those other names and marks. If any such infringement claim were to prove successful in

preventing us from either using or prohibiting a competitor’s use of our registered trademarks or other marks or
trade names, our ability to build brand identity could be negatively impacted.

Customers

Advertising Customers. Our advertising business has a diverse customer base, consisting of national and

local advertisers. As of January 1, 2015, we had displayed advertising since 2006 with 424 national advertisers
across a wide variety of industries. During the year ended January 1, 2015, we derived 65.7% of our advertising
revenue from national clients (including advertising agencies that represent our clients), 9.7% from NCM LLC’s
founding members’ beverage agreements and 24.6% from our relationships with thousands of local advertisers
across the country (including advertising agencies that represent these clients).

Each of NCM LLC’s founding members has a relationship with a beverage concessionaire under which they
are obligated to provide on-screen advertising time as part of their agreement to purchase syrup. During 2014, we
provided 60 seconds of on-screen advertising time to NCM LLC’s founding members. The ESAs provide for
NCM LLC’s founding members to purchase this on-screen advertising time at a rate (intended to approximate a
market rate) that is provided in the ESA. During 2014, the beverage concessionaire revenue was 9.7% of our total
revenue.

Content Partners and PSAs. We have multi-year contractual relationships that provide entertainment

content segments in the FirstLook program and minimum annual advertising spending commitments with various
entertainment, media, confections and technology companies. These agreements require that the content partners
will provide non-commercial content segments that are entertaining, informative or educational in nature and will
purchase a specified dollar amount of advertising at a specified CPM over a one or two-year period with options
to renew, exercisable at the content partner’s option. We also have exclusive PSAs reminding moviegoers to
silence their cell phones and refrain from texting during feature films. During 2014, the total advertising
purchased by these content partners and PSAs represented approximately 23.7% of our total revenue.

Competition

Our advertising business competes in the estimated $170.0 billion U.S. advertising industry with many other

forms of marketing media, including television, radio, print media, internet, mobile and outdoor display
advertising. While cinema advertising represents a small portion of the advertising industry today, we believe it
is well positioned to capitalize on the shift of advertising spending away from traditional media, in particular
television, to more targeted and effective forms of digital media. As the number of online and mobile media
platforms continues to increase, the ability to achieve ubiquitous coverage of U.S. households has become an
important competitive factor. It will also be important to provide clients the ability to target narrow consumer
demographic groups and engage directly with individual consumers and to provide measurable third-party
marketing information. We believe that proliferation of online and mobile platforms and other technology such
as DVRs that enable consumers the ability to consume media (including advertising) when, where and how they
want and which provide improved data collection may increase advertisers’ demand for online and mobile
advertising platforms and could increase demand for cinema advertising where the risk of advertisements not
being viewed is reduced. Thus, our network is well positioned to benefit from several broad market trends, most
noticeably the increasing adoption of DVRs and other new digital technology that allows consumers to skip
advertisements. Cinema is one of the few media platforms where consumers cannot skip advertisements.

Through the visual quality and impact of the big screen and surround sound, we are able to display high
impact advertising impressions to our audiences. According to Nielsen Brand Effect (formerly Nielsen IAG)
Research, cinema advertising has generated ad recall of up to four times greater than the same advertising shown
on television. Given our recent network expansion and improvements in the capabilities of our digital network
technology implemented over the last few years, we are beginning to provide a broader audience and increase the

flexibility to tailor our advertising programs, providing a more entertaining consumer experience and a more
effective advertising platform for advertisers. We also believe that as online and mobile video platforms expand
with the proliferation of viewing devices, such as tablets, video programming will become more fragmented and
as our national reach expands and we create a higher quality presentation, our network will become even more
valuable to marketers.

Our advertising business also competes with many other providers of cinema advertising, which vary

substantially in size. As a large provider of cinema advertising in the U.S., we believe that we are able to
generate economies of scale, operating efficiencies and enhanced opportunities for our clients to access a national
and local audience as well as allowing us to better compete with television and other national advertising
networks. This ability to provide an attractive product to advertisers provides immediate benefits to our network
affiliates as our network affiliates are paid through agreements that pay them based upon the advertising revenue
generated in their theatres, while NCM LLC’s founding members benefit through their ownership of NCM, LLC.

Employees

We have 595 employees as of January 1, 2015. Our employees are located in our Centennial, Colorado
headquarters, in our advertising sales offices in New York, Los Angeles and Chicago, our software development
office in Minneapolis and local advertising account executives and field maintenance technicians that work
primarily from their homes throughout the U.S. None of our employees are covered by collective bargaining
agreements. We believe that we have a good relationship with our employees.

Government Regulation

Currently, we are not subject to regulations specific to the sale and distribution of cinema advertising. We
are subject to federal, state and local laws that govern businesses generally such as wage and hour and worker
compensation laws.

Available Information

We maintain a website at www.ncm.com, on which we will post free of charge our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports under
the heading “Investor Relations” located at the bottom of the page as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). We
also regularly post information about the Company on the Investor Relations page. We do not incorporate the
information on our website into this document and you should not consider any information on, or that can be
accessed through, our website as part of this document. You may read and copy any materials we file with the
SEC at the Securities and Exchange Commission Public Reference Room at 100 F. Street, N.E., Washington,
D.C. 20549. The SEC also maintains a website that contains our reports and other information at www.sec.gov.

Executive Officers of the Registrant

Shown below are the names, ages as of January 1, 2015 and current positions of our executive officers.
There are no family relationships between any of the persons listed below, or between any of such persons and
any of the directors of the Company or any persons nominated or chosen by the Company to become a director or
executive officer of the Company.

Name

Age

Position

Kurt C. Hall . . . . . . . . . . . . . . . . . . . .
Clifford E. Marks . . . . . . . . . . . . . . .
Ralph E. Hardy . . . . . . . . . . . . . . . . .
Alfonso P. Rosabal . . . . . . . . . . . . . .

President, Chief Executive Officer and Chairman
President of Sales and Marketing

55
53
63 Executive Vice President and General Counsel
44 Executive Vice President, Chief Operations Officer and Chief

David J. Oddo . . . . . . . . . . . . . . . . . .

Jeffrey T. Cabot

. . . . . . . . . . . . . . . .

Technology Officer
Senior Vice President, Finance and Interim Co-Chief Financial
Officer
Senior Vice President, Controller and Interim Co-Chief Financial
Officer

Kurt C. Hall. Mr. Hall was appointed President, Chief Executive Officer and Chairman of NCM, Inc. in
February 2007 and held those same positions with NCM LLC since its formation in March 2005. He has also
served as Chairman, President and Chief Executive Officer of NCM, Inc. since October 2006. Prior to his current
position, from May 2002 to May 2005, Mr. Hall served as Co-Chairman and Co-Chief Executive Officer of
Regal Entertainment Group and President and Chief Executive Officer of its media subsidiary Regal CineMedia
Corporation. From 1988 to 2005, Mr. Hall has held various executive positions with United Artists Theatre
Company, and its predecessor companies, including Chief Financial Officer and then Chief Executive Officer
when it became part of Regal Entertainment Group in 2002.

Clifford E. Marks. Mr. Marks was appointed President of Sales and Marketing of NCM, Inc. in February
2007 and held those same positions with NCM LLC since March 2005. He has been an advertising, marketing
and sales professional for 25 years. Prior to his current position, Mr. Marks served as president of sales and
marketing with Regal Entertainment Group’s media subsidiary, Regal CineMedia Corporation, from May 2002
to May 2005. Before joining Regal CineMedia, Mr. Marks was a senior vice president at ESPN/ABC Sports
where he oversaw its advertising sales organization from 1998 to May 2002.

Ralph E. Hardy. Mr. Hardy was appointed Executive Vice President and General Counsel of NCM, Inc. in

February 2007 and held those same positions with NCM LLC since March 2005. Prior to his current position,
from May 2002 to May 2005, Mr. Hardy served as Executive Vice President and General Counsel for Regal
CineMedia Corporation. From 1989 to 2002, Mr. Hardy has held various legal executive positions with United
Artists Theatre Company and its predecessors.

Alfonso P. Rosabal, Jr. Mr. Rosabal was appointed Executive Vice President, Chief Operations Officer and

Chief Technology Officer of NCM, Inc. in December 2013. Prior to this appointment, Mr. Rosabal served as
Executive Vice President and Chief Technology Officer for NCM LLC since May 2010. Prior to joining NCM
LLC, Mr. Rosabal served as Chief Technology Officer for the City of Denver from November 2007 to May 2010
where he oversaw technology operations. Mr. Rosabal has been a technology and operations executive for over
20 years and his previous experience includes positions with Nextel Communications, WPP and Ford Motor
Company subsidiaries, IBM and the Department of Defense.

David J. Oddo. Mr. Oddo was appointed Interim Co-Chief Financial Officer (principal financial officer) in

March 2013. Mr. Oddo has served as NCM LLC’s Senior Vice President, Finance since August 2013 and was
appointed Senior Vice President, Finance of NCM, Inc. in January 2014. Prior to this role, Mr. Oddo served as
Vice President, Finance of NCM LLC since January 2009. From 1991 to 2009, Mr. Oddo has held various

internal audit, accounting and finance positions with United Artists Theatre Company, Regal CineMedia
Corporation and NCM LLC.

Jeffrey T. Cabot. Mr. Cabot was appointed Interim Co-Chief Financial Officer (principal accounting officer)

in March 2013. Mr. Cabot has served as NCM LLC’s Senior Vice President, Controller since January 2012 and
was appointed Senior Vice President, Controller of NCM, Inc. in January 2014. Prior to joining NCM LLC,
Mr. Cabot served in an international accounting role at Molycorp, Inc., a rare earth and rare metals company,
from May 2011 to December 2011. From April 2008 to August 2010, Mr. Cabot served as Director of Finance
for Liberty Global Japan, the largest cable operator in Japan and a subsidiary of Liberty Global Inc.

Item 1A. Risk Factors

Ownership of the common stock of the Company involves certain risks. Holders of the Company’s securities

and prospective investors should consider carefully the following risks and other information in this document,
including our historical financial statements and related notes included herein. The risks and uncertainties
described in this document are not the only ones facing us. If any of the risks and uncertainties described in this
document actually occur, our business, financial condition and results of operations could be adversely affected
in a material way. This could cause the trading price of our common stock to decline, perhaps significantly, and
you may lose part or all of your investment.

Risks Related to Our Business and Industry

Significant declines in theatre attendance could reduce the attractiveness of cinema advertising and could
reduce our revenue

Our business is affected by the success of NCM LLC’s founding members and to a lesser extent our
network affiliates, who operate in a highly competitive industry whose attendance is reliant on the presence of
motion pictures that attract audiences. From the late 1990s through 2002, the number of movie screens and the
level of theatre attendance in the U.S. increased substantially, as movie theatres began to build larger “megaplex”
theatres that offered new amenities such as stadium seating, improved projection quality and superior sound
systems, and studios began to increase the number of motion pictures produced and increased the budgets to
market those films. From 1970 through 2014, the box office has fluctuated from year to year but has grown at a
compound annual growth rate of 4.7%. Over the last 20 years, theatre attendance has fluctuated from year to year
but on average has remained relatively flat at an aggregate annual growth rate of less than 0.1%. If future theatre
attendance declines significantly over an extended time period, one or more of NCM LLC’s founding members
or network affiliates may face financial difficulties and could be forced to sell or close theatres or reduce the
number of screens it builds or upgrades. Attendance may also decline if NCM LLC’s founding members fail to
maintain their theatres and provide amenities that consumers prefer, if they cannot compete successfully on
pricing or if studios begin to reduce their investments in feature films or reduce the investments made to market
those films. NCM LLC’s network theatre circuits also may not successfully compete for licenses to exhibit
quality films and are not assured a consistent supply of motion pictures since they do not have long-term
arrangements with major film distributors. Any of these circumstances could reduce our revenue because our
national advertising revenue, and local advertising to a lesser extent, depends on the number of theatre patrons
who view our advertising and pre-feature show.

Further, the value of our advertising business could be adversely affected by a long-term multi-year decline

in theatre attendance or even the perception by media buyers that our network is no longer relevant to their
marketing plan due to the decreases in attendance and geographic coverage. Factors that could reduce attendance
at our network theatres include the following:

•

the shortening of the “release window” between the release of major motion pictures in the theatres and
release to alternative methods for delivering movies to consumers, such as DVD or HD DVD, cable
television, internet downloads, video on demand, satellite and pay-per-view services;

•

any reduction in consumer confidence or disposable income in general that reduces the demand for
motion pictures or adversely affects the motion picture production industry; and

the success of first-run motion pictures, which depends upon the production and marketing efforts of
the major studios and the attractiveness and value proposition of the movies to consumers compared to
other forms of entertainment.

In addition, the value of our national on-screen advertising and to a lesser extent our local and regional
advertising is based on the number of theatre patrons that are in their seats and thus have the opportunity to view
the FirstLook pre-show. The number of patrons that are in a theatre seat could be adversely impacted by changes
in theatre operating policies and patron amenities, including the number and length of trailers for upcoming films
that are played prior to the start of the feature film and the offering of reserve seating, without also offering an
expanded menu. Theatre circuits are also installing new larger, more comfortable seating into theatres that have
been viewed favorably by theatre patrons. The installation of these larger seats can reduce the number of seats in
a theatre auditorium by approximately 60%. While the number of screens that currently offer certain of these
amenities is relatively small (5% to 7% of our network), should these amenities be expanded to a greater number
of screens, it could decrease the number of theatre patrons that view our FirstLook pre-show, which would
adversely impact our operating results. However, thus far, theatre circuits have been primarily completing these
theatre renovations at theatres that are at low capacity and have experienced increased attendance at the theatres
due to a better customer experience. Further, theatres offering these amenities could also increase the number of
patrons who view our FirstLook pre-show due to decreased seat availability, requiring patrons to arrive at the
theatre earlier to secure a desired seat, however, we cannot assume such occurrence would fully mitigate the
adverse impact to our operating revenue if the number of theatre patrons were to begin to decline.

The markets for advertising are competitive and we may be unable to compete successfully

The market for advertising is very competitive. Cinema advertising is a small component of video
advertising in the U.S. and thus, we must compete with established, larger and better known national and local
media platforms such as cable, broadcast and satellite television networks and other video media platforms
including those distributed on the internet and mobile networks. In addition to these video advertising platforms,
we compete to a lesser extent for advertising directly with several additional media platforms, including radio,
various local print media and billboards. We also compete with several other local and national cinema
advertising companies. We expect all of these competitors to devote significant effort to maintaining and
growing their business at our expense. We also expect existing competitors and new entrants to the advertising
business, most notably the online and mobile advertising companies, to constantly revise and improve their
business models to meet expectations of advertising clients or competing media platforms, including us. If we
cannot respond effectively to changes in the media marketplace in response to new entrants or advances by our
existing competitors, our business may be adversely affected.

If we do not maintain our technological advantage, our business could fail to grow and revenue and operating
margins could decline

Failure to successfully or cost-effectively implement upgrades to our in-theatre advertising network and

inventory control and other management systems could limit our ability to offer our clients innovative unique,
integrated and targeted marketing products, which could limit our future revenue growth. New advertising
platforms such as online and mobile networks, and traditional mediums including television networks are
beginning to use new digital technology to reach a broader audience with more targeted marketing products, and
failure by us to upgrade our technology to remain competitive could hurt our ability to compete with those
companies. Under the ESAs, the founding members, they are required to provide technology that is consistent
with that in place at the signing of the ESA. We may request that NCM LLC’s founding members upgrade the
equipment or software installed in their theatres, but we must negotiate with NCM LLC’s founding members as
to the terms of such upgrade, including cost sharing terms, if any. For instance, during 2010 we entered into an

amendment to the ESA to allow us to connect our digital network to NCM LLC’s founding members’ new digital
cinema projection systems so that we could display our advertising (including 3-D) on the higher quality
systems. As of January 1, 2015 we had 16,476 screens, or 82% of our network screens, that were connected to
digital cinema projection equipment and we expect to continue connecting to these higher quality projectors
throughout 2015. If we are not able to come to an agreement on a future upgrade request, we may elect to pay for
the upgrades requested which could result in our incurring significant capital expenditures, which could
adversely affect our results of operations. Over the last several years, we have been upgrading our proposal and
inventory control systems, and in 2014, we began to develop enhancements to these systems that will allow us to
target theatre audiences more effectively. The failure or delay in implementation of such upgrades or problems
with the integration with our other systems and software could slow or prevent the growth of our business in the
future. In addition, the failure or delay in implementation of such upgrades or problems with the integration of
our systems and software could slow or prevent the growth of our business.

Economic uncertainty or deterioration in economic conditions may adversely impact our business, operating
results or financial condition

The financial markets have experienced extreme disruption and certain parts of the world-wide economy
remains fragile. A future decline in consumer confidence in the U.S. due to future economic disruptions may lead
to decreased demand or delay in payments by our advertising customers. As a result, our results of operations and
financial condition could be adversely affected. These challenging economic conditions also may result in:

•

increased competition for fewer advertising and entertainment programming dollars;

pricing pressure that may adversely affect revenue and gross margin;

reduced credit availability and/or access to capital markets;

difficulty forecasting, budgeting and planning due to limited visibility into the spending plans of
current or prospective customers; or

customer financial difficulty and increased risk of uncollectible accounts.

Our Adjusted OIBDA is derived from high margin advertising revenue, and the reduction in spending by or
loss of a national or group of local advertisers could have a meaningful adverse effect on our business

We generated all of our Adjusted OIBDA from our high margin advertising business. A substantial portion
of our advertising revenue relates to contracts with terms of a month or less. Advertisers will not continue to do
business with us if they believe our advertising medium is ineffective or overly expensive. In addition, large
advertisers generally have set advertising budgets, most of which are focused on traditional media platforms like
television and recently online and mobile networks. Reductions in the size of advertisers’ budgets due to local or
national economic trends, a shift in spending to new advertising mediums like the internet and mobile platforms
or other factors could result in lower spending on cinema advertising. Because of the high incremental margins
on our individual advertising contracts, if we are unable to remain competitive and provide value to our
advertising clients, they may reduce their advertising purchases or stop placing advertisements with us, which on
large contracts (often over $1 million) even the loss of a small number of clients would negatively affect our
Adjusted OIBDA.

The loss of any major content partner or advertising customer could significantly reduce our revenue

We derive a significant portion of our revenue from our contracts with our content partners, PSAs and NCM
LLC’s founding members’ agreements to purchase on-screen advertising for their beverage concessionaires. We
currently have marketing relationships with nine content partners. None of these companies individually
accounted for over 10% of our total revenue during the year ended January 1, 2015. However, the agreements
with the content partners, PSAs and beverage advertising with NCM LLC’s founding members in aggregate

accounted for approximately 34%, 31% and 28% of our total revenue during the years ended January 1,
2015, December 26, 2013 and December 27, 2012, respectively. Because we derive a significant percentage of
our total revenue from a relatively small number of large companies, the loss of one or more of them as a
customer could decrease our revenue and adversely affect current and future operating results.

Our plans for developing additional revenue opportunities may not be implemented and may not be achieved

In addition to our strategy to grow our advertising business, we are also considering other potential

opportunities for revenue growth, which we describe in “Business—Our Strategy—Expand our Internet/Mobile
Platform.” The development of our online and mobile advertising network and mobile apps and the integration of
these marketing products with our core on-screen and theatre lobby production is at an early stage and is under
increasing competitive pressure from many online and mobile networks, and may not deliver future benefits that
we are expecting. Should these networks not continue to grow in importance to advertising clients and agencies,
they may not provide a way to help expand our cinema advertising business as it matures and begins to compete
with new or improved advertising platforms including online and mobile video services.

Our business and operations have experienced growth, and we may be unable to effectively manage or
continue our growth of our network and advertising inventory

We have experienced, and may continue to experience, growth in our headcount and operations (including

through the completion of the proposed Screenvision merger), which has placed, and could continue to place,
significant demands on our management and operational infrastructure. If we do not effectively manage our
growth, the quality of our services could suffer, which could negatively affect our brand and our relationships
with our current advertising clients. Additionally, we may not be able to continue to expand our network and our
advertising inventory which could negatively affect our ability to add new advertising clients. To effectively
manage this growth and continue to expand our network and inventory, we will need to continue to improve our
DCS software and our internal management systems, including our audience targeting system which we
upgraded and launched during 2014. These enhancements and improvements could require an additional
allocation of financial and management resources. If the improvements are not implemented successfully in a
timely manner, our ability to manage our limited advertising inventory, create more audience targeting
capabilities for our clients and continue our growth in the future will be impaired and we may have to make
significant additional expenditures to address these issues.

We depend upon our senior management and our business may be adversely affected if we cannot retain or
replace them

Our success depends upon the retention of our experienced senior management with specialized industry,
sales and technical knowledge and/or industry relationships. During 2013, our Chief Financial Officer resigned
and our SVP, Finance and SVP, Controller assumed Interim Co-Chief Financial Officer duties. If other critical
members of our senior management team leave, we might not be able to find qualified internal or external
replacements; accordingly, the loss of critical members of our senior management team could have a material
adverse effect on our ability to effectively pursue our business strategy and our relationships with advertisers and
content partners. We do not have key-man life insurance covering any of our employees.

Changes in the ESAs with, or lack of support by, NCM LLC’s founding members could adversely affect our
revenue, growth and profitability

The ESAs with NCM LLC’s founding members are critical to our business. The three ESAs each have an
initial term of 30 years beginning February 13, 2007 and provide us with a five-year right of first refusal, which
begins one year prior to the end of the term of the ESA on February 13, 2037. In connection with the Fathom sale
on December 26, 2013, the ESAs were modified to remove those provisions addressing the rights and obligations
related to digital programming services of the Fathom Events business unit, except for those relating to NCM

LLC’s exclusive rights to sell advertising in the founding member theatres, including the right to sell Fathom
event sponsorships. NCM LLC’s founding members’ theatres represent approximately 82.0% of the screens and
approximately 85.5% of the attendance in our network as of January 1, 2015. If any one of the ESAs was
terminated, not renewed at its expiration or found to be unenforceable, it would have a material adverse effect on
our revenue, profitability and financial condition.

The ESAs require the cooperation, investment and support of NCM LLC’s founding members, the absence

of which could adversely affect us. Pursuant to the ESAs, NCM LLC’s founding members must make
investments to replace digital network equipment within their theatres and equip newly constructed theatres with
digital network equipment. If NCM LLC’s founding members do not have adequate financial resources or
operational strength, and if they do not replace equipment or equip new theatres to maintain the level of
operating functionality that we have today, or if such equipment becomes obsolete, we may have to make
additional capital expenditures or our advertising revenue and operating margins may decline.

If the non-competition provisions of the ESAs are deemed unenforceable, NCM LLC’s founding members
could compete against us and our business could be adversely affected

With certain limited exceptions, each of the ESAs prohibits the applicable NCM LLC founding member
from engaging in any of the business activities that we provide in NCM LLC’s founding member’s theatres under
the amended ESAs, and from owning interests in other entities that compete with us. These provisions are
intended to prevent NCM LLC’s founding members from harming our business by providing cinema advertising
services directly to their theatres or by entering into agreements with third-party cinema advertising providers.
However, under state and federal law, a court may determine that a non-competition covenant is unenforceable,
in whole or in part, for reasons including, but not limited to, the court’s determination that the covenant:

•

is not necessary to protect a legitimate business interest of the party seeking enforcement;

unreasonably restrains the party against whom enforcement is sought; or

is contrary to the public interest.

Enforceability of a non-competition covenant is determined by a court based on all of the facts and
circumstances of the specific case at the time enforcement is sought. For this reason, it is not possible for us to
predict whether, or to what extent, a court would enforce the non-competition provisions contained in the ESAs.
If a court were to determine that the non-competition provisions are unenforceable, NCM LLC’s founding
members could compete directly against us or enter into an agreement with another cinema advertising provider
that competes against us. Any inability to enforce the non-competition provisions, in whole or in part could cause
our revenue to decline.

If one of NCM LLC’s founding members declared bankruptcy, the ESA with that NCM LLC founding
member may be rejected, renegotiated or deemed unenforceable

Each of NCM LLC’s founding members currently has a significant amount of indebtedness, which is below

investment grade. In 2000 and 2001, several major motion picture exhibition companies filed for bankruptcy
including United Artists, Edwards Theatres and Regal Cinemas (which are predecessor companies to Regal), and
General Cinemas and Loews Cineplex (which are predecessor companies to AMC). The industry-wide
construction of larger, more expensive megaplexes featuring stadium seating in the late 1990s that rendered
existing, smaller, sloped-floor theatres under long-term leases obsolete and unprofitable, were significant
contributing factors to these bankruptcies. If a bankruptcy case were commenced by or against an NCM LLC
founding member, it is possible that all or part of the ESA with that NCM LLC founding member could be
rejected by a trustee in the bankruptcy case pursuant to Section 365 or Section 1123 of the United States
Bankruptcy Code, or by the NCM LLC founding member, and thus not be enforceable. Alternatively, the NCM
LLC founding member could seek to renegotiate the ESA in a manner less favorable to us than the existing

agreement. Should the NCM LLC founding member seek to sell or otherwise dispose of theatres or remove
theatres from our network through bankruptcy or for other business reasons, if the acquirer did not agree to
continue to allow us to sell advertising in the acquired theatres the number of theatres in our advertising networks
would be reduced which in turn would reduce the number of advertising impressions available to us and thus
could reduce our advertising revenue.

The ESAs allow the founding members to engage in activities that might compete with certain elements of our
business, which could reduce our revenue and growth potential

The ESAs contain certain limited exceptions to our exclusive right to use the founding members’ theatres

for our advertising business. The founding members have the right to enter into a limited number of strategic
cross-marketing relationships with third-party, unaffiliated businesses for the purpose of generating increased
attendance or revenue (other than revenue from the sale of advertising). These strategic marketing relationships
can include the use of one minute on the LEN and certain types of lobby promotions and can be provided at no
cost, but only for the purpose of promoting the products or services of those businesses while at the same time
promoting the theatre circuit or the movie-going experience. The use of LEN or lobby promotions by NCM
LLC’s founding members for these advertisements and programs could result in the founding members creating
relationships with advertisers that could adversely affect our current LEN and lobby promotions advertising
revenue and profitability as well as the potential we have to grow that advertising revenue in the future. The LEN
and lobby promotions represented 4.6% of our total advertising revenue for the year ended January 1, 2015. The
founding members do not have the right to use their movie screens (including the FirstLook program or
otherwise) for promoting these cross-marketing relationships, and thus we will have the exclusive rights to
advertise on the movie screens, except for limited advertising related to theatre operations.

The founding members also have the right to install a second network of video monitors in the theatre
lobbies in excess of those required to be installed by the founding members for the LEN. This additional lobby
video network, which we refer to as NCM LLC’s founding members’ lobby network, may be used by the
founding members to promote products or services related to operating the theatres, such as concessions and
loyalty programs. The presence of NCM LLC’s founding members’ lobby network within the lobby areas could
reduce the effectiveness of our LEN, thereby reducing our current LEN advertising revenue and profitability and
adversely affecting future revenue potential associated with that marketing platform.

Our business relies heavily on our technology systems, and any failures or disruptions may materially and
adversely affect our operations

In the conduct of our business, we rely on information technology networks and systems, some of which are
managed by third parties, to process, transmit and store electronic information and manage and support a variety
of business processes and activities. The temporary or permanent loss of our computer equipment and software
systems, through cyber and other security threats, operating malfunction, software virus, human error, natural
disaster, power loss, terrorist attacks, or other catastrophic events such as the one against Sony Entertainment,
could disrupt our operations and cause a material adverse impact. These problems may arise in both internally
developed systems and the systems of third-party service providers. We devote significant resources to
maintaining a disaster recovery location separate from our operations, network security and other measures to
protect our network from unauthorized access and misuse. However, depending on the nature and scope of a
disruption, if our technology systems were to fail and we were unable to recover in a timely way through our
disaster recovery site, we would be unable to fulfill critical business functions, which could lead to a loss of
customers and could harm our reputation. Technological breakdown could also interfere with our ability to
comply with financial reporting and other regulatory requirements.

Our business, services, or technology may infringe on intellectual property rights owned by others, which may
interfere with our ability to provide services or expose us to increased liability or expense

Intellectual property rights of our business include the copyrights, trademarks, trade secrets and patents of

our in-theatre, online, and mobile services, including the websites we operate at ncm.com, movienightout.com
and firstlookonline.com and the features, our mobile app Movie Night Out®, and the functionality, content, and
software we make available through those websites and app. We rely on our own intellectual property rights as
well as intellectual property rights obtained from third parties to conduct our business and provide our in-theatre,
online, and mobile services. We may discover that our business or the technology we use to provide our in-
theatre, online, or mobile services infringes patent, copyright, or other intellectual property rights owned by
others. In addition, our competitors or others may claim rights in patents, copyrights, or other intellectual
property rights that will prevent, limit or interfere with our ability to provide our in-theatre, online, or mobile
services either in the U.S. or in international markets. Further, the laws of certain foreign countries may not
protect our intellectual property rights to the same extent as do the laws of the U.S.

The content we distribute through our in-theatre, online or mobile services may expose us to liability

Our in-theatre, online, and mobile services facilitate the distribution of content. This content includes
advertising-related content, as well as, movie and television content, music and other media, much of which is
obtained from third parties. Our websites also include features enabling users to upload or add their own content
to the websites and modify certain content on the websites. As a distributor of content, we face potential liability
for negligence, copyright, patent or trademark infringement, or other claims based on the content that we
distribute. We or entities that we license content from may not be adequately insured or indemnified to cover
claims of these types or liability that may be imposed on us.

The user information we collect and maintain through our online and mobile services may expose us to
liability

In order to take advantage of some of the online and mobile services we provide users are required to

establish an account on one of our websites. As a result, we will collect and maintain user information about
those users. We also collect and maintain user information about users who view certain advertising displayed
through our online and mobile services. Our collection and use of information regarding users of our online and
mobile services could result in legal liability. For example, the failure, or perceived failure, to comply with
federal, state or international privacy or consumer protection-related laws or regulations or our posted privacy
policies could result in actions against us by governmental entities or others.

Changes in regulations relating to the Internet or other areas of our online or mobile services may result in
the need to alter our business practices or incur greater operating expenses

A number of regulations, including those referenced below, may impact our business as a result of our
online or mobile services. The Digital Millennium Copyright Act has provisions that limit, but do not necessarily
eliminate, liability for posting, or linking to third-party websites that include materials that infringe copyrights or
other rights. Portions of the Communications Decency Act are intended to provide statutory protections to online
service providers who distribute third-party content. The Child Online Protection Act and the Children’s Online
Privacy Protection Act restrict the distribution of materials considered harmful to children and impose additional
restrictions on the ability of online services to collect information from minors. Additionally, there is an
increasing awareness and concern regarding privacy interests, which may result in new or amended regulations.
The costs of compliance with these regulations, and other regulations relating to our online and mobile services
or other areas of our business, may be significant. The manner in which these and other regulations may be
interpreted or enforced may subject us to potential liability, which in turn could have an adverse effect on our
business, results of operations, or financial condition. Changes to these and other regulations may impose
additional burdens on us or otherwise adversely affect our business and financial results because of, for example,

increased costs relating to legal compliance, defense against adverse claims or damages, or the reduction or
elimination of features, functionality or content from our online or mobile services. Likewise, any failure on our
part to comply with these and other regulations may subject us to additional liabilities.

Our revenue and Adjusted OIBDA fluctuate from quarter to quarter and may be unpredictable, which could
increase the volatility of our stock price

A weak advertising market or the shift in spending of a major client from one quarter to another, the poor
performance of films released in a given quarter, a disruption in the release schedule of films or changes in the
television scatter market could significantly affect quarter-to-quarter results or even affect results for the entire
fiscal year. Because our results may vary from quarter to quarter and may be unpredictable, our financial results
for one quarter cannot necessarily be compared to another quarter and may not be indicative of our financial
performance in subsequent quarters. These variations in our financial results could contribute to volatility in our
stock price.

Risks Related to Our Corporate Structure

We are a holding company with no operations of our own, and we depend on distributions and payments
under the NCM LLC operating and management services agreements from NCM LLC to meet our ongoing
obligations and to pay cash dividends on our common stock

We are a holding company with no operations of our own and have no independent ability to generate cash
flow other than interest income on cash balances. Consequently, our ability to obtain operating funds primarily
depends upon distributions from NCM LLC. The distribution of cash flows and other transfers of funds by NCM
LLC to us are subject to statutory and contractual restrictions based upon NCM LLC’s financial performance,
including NCM LLC’s compliance with the covenants in its senior secured credit facility and indentures, and the
NCM LLC operating agreement. The NCM LLC senior secured credit facility and indentures limit NCM LLC’s
ability to distribute cash to its members, including us, based upon certain leverage tests, with exceptions for,
among other things, payment of our income taxes and a management fee to NCM, Inc. pursuant to the terms of
the management services agreement (incorporated in the ESA). Refer to the information provided under Note 10
to the audited Consolidated Financial Statements included elsewhere in this document for leverage discussion.
The declaration of future dividends on our common stock, will be at the discretion of our Board of Directors and
will depend upon many factors, including NCM LLC’s results of operations, financial condition, earnings, capital
requirements, limitations in our debt agreements and legal requirements. Once the NCM, Inc. cash balances and
investments are extinguished, we will be unable to pay dividends to our stockholders or pay other expenses
outside the ordinary course of business if NCM LLC fails to comply with these covenants and is unable to
distribute cash to us quarterly.

Pursuant to the management services agreement between us and NCM LLC, NCM LLC makes payments to
us to fund our day-to-day operating expenses, such as payroll. However, if NCM LLC has insufficient cash flow
to make the payments pursuant to the management services agreement, we may be unable to cover these
expenses.

As a member of NCM LLC, we incur income taxes on our proportionate share of any net taxable income of
NCM LLC. We have structured the NCM LLC senior secured credit facility and indentures to allow NCM LLC
to distribute cash to its members (including us and NCM LLC’s founding members) in amounts sufficient to
cover their tax liabilities and management fees, if any. To the extent that NCM LLC has insufficient cash flow to
make such payments, it could have a material adverse effect on our business, financial condition, results of
operations or prospects.

NCM LLC’s substantial debt obligations could impair our financial condition or prevent us from achieving
our business goals

NCM LLC is party to substantial debt obligations. The senior secured credit facility and indentures contain

restrictive covenants that limit NCM LLC’s ability to take specified actions and prescribe minimum financial
maintenance requirements that NCM LLC must meet. Because NCM LLC is our only operating subsidiary,
complying with these restrictions may prevent NCM LLC from taking actions that we believe would help us to
grow our business. For example, NCM LLC may be unable to make acquisitions, investments or capital
expenditures as a result of such covenants. Moreover, if NCM LLC violates those restrictive covenants or fails to
meet the minimum financial requirements, it would be in default, which could, in turn, result in defaults under
other obligations of NCM LLC. Any such defaults could materially impair our financial condition and liquidity.
For further information, refer to Note 10 to the audited Consolidated Financial Statements included elsewhere in
this document.

If NCM LLC is unable to meet its debt service obligations, it could be forced to restructure or refinance the

obligations, seek additional equity financing or sell assets. We may be unable to restructure or refinance these
obligations, obtain additional equity financing or sell assets on satisfactory terms or at all. In addition, NCM
LLC’s indebtedness could have other negative consequences for us, including without limitation:

•

limiting NCM LLC’s ability to obtain financing in the future;

requiring much of NCM LLC’s cash flow to be dedicated to interest obligations and making it
unavailable for other purposes, including payments to its members (including NCM, Inc.);

limiting NCM LLC’s liquidity and operational flexibility in changing economic, business and
competitive conditions which could require NCM LLC to consider deferring planned capital
expenditures, reducing discretionary spending, selling assets, restructuring existing debt or deferring
acquisitions or other strategic opportunities; and

• making NCM LLC more vulnerable to an increase in interest rates, a downturn in our operating

performance or decline in general economic conditions.

Despite NCM LLC’s current levels of debt, it or NCM, Inc. may still incur substantially more debt, including
secured debt, which would increase the risks associated with NCM LLC’s level of debt

The agreements relating to NCM LLC’s debt, including the Senior Unsecured Notes, Senior Secured Notes

and the senior secured credit facility, limit but do not prohibit NCM LLC’s ability to incur additional debt, and
do not place any restrictions on NCM, Inc.’s ability to incur debt. Accordingly, NCM, Inc. or NCM LLC could
incur additional debt in the future, including additional debt under the senior secured credit facility, additional
senior or senior subordinated notes and additional secured debt. If new debt is added to current debt levels, the
related risks that we now face, including those described above under “—NCM LLC’s substantial debt
obligations could impair our financial condition or prevent us from achieving our business goals,” could
intensify.

NCM LLC’s founding members or their affiliates may have interests that differ from those of our public
stockholders and they may be able to influence our affairs

So long as an NCM LLC founding member beneficially owns at least 5% of NCM LLC’s issued and
outstanding common membership units, approval of at least 90% of the directors then in office (provided that if
the board has less than ten directors, then the approval of at least 80% of the directors then in office) will be
required before we may take any of the following actions or we, in our capacity as manager of NCM LLC, may
authorize NCM LLC to take any of the following actions:

•

assign, transfer, sell or pledge all or a portion of the membership units of NCM LLC beneficially
owned by NCM, Inc.;

•

acquire, dispose, lease or license assets with an aggregate value exceeding 20% of the fair market value
of the business of NCM LLC operating as a going concern;

• merge, reorganize, recapitalize, reclassify, consolidate, dissolve, liquidate or enter into a similar

transaction;

•

incur any funded indebtedness or repay, before due, any funded indebtedness with a fixed term in an
aggregate amount in excess of $15.0 million per year;

issue, grant or sell shares of NCM, Inc. common stock, preferred stock or rights with respect to
common or preferred stock, or NCM LLC membership units or rights with respect to membership
units, except under specified circumstances;

amend, modify, restate or repeal any provision of NCM, Inc.’s certificate of incorporation or bylaws or
the NCM LLC operating agreement;

enter into, modify or terminate certain material contracts not in the ordinary course of business as
defined under applicable securities laws;

except as specifically set forth in the NCM LLC operating agreement, declare, set aside or pay any
redemption of, or dividends with respect to membership interests;

amend any material terms or provisions (as defined in the NASDAQ rules) of NCM, Inc.’s equity
incentive plan or enter into any new equity incentive compensation plan;

• make any change in the current business purpose of NCM, Inc. to serve solely as the manager of NCM
LLC or any change in the current business purpose of NCM LLC to provide the services as set forth in
the ESAs; and

•

approve any actions relating to NCM LLC that could reasonably be expected to have a material adverse
tax effect on NCM LLC’s founding members.

Pursuant to a director designation agreement, so long as an NCM LLC founding member owns at least 5%
of NCM LLC’s issued and outstanding common membership units, such NCM LLC founding member will have
the right to designate a total of two nominees to our ten-member board of directors who will be voted upon by
our stockholders. One such designee by each NCM LLC founding member must meet the independence
requirements of the stock exchange on which our common stock is listed. If, at any time, any NCM LLC
founding member owns less than 5% of NCM LLC’s then issued and outstanding common membership units,
then such NCM LLC founding member shall cease to have any rights of designation.

If any director designee to our board designated by NCM LLC’s founding members is not appointed to our

board, nominated by us or elected by our stockholders, as applicable, then each of NCM LLC’s founding
members (so long as such NCM LLC founding member continues to own 5% of NCM LLC’s issued and
outstanding common membership units) will be entitled to approve specified actions of NCM LLC.

For purposes of calculating the 5% ownership threshold for the supermajority director approval rights and

director designation agreement provisions discussed above, shares of our common stock held by a founding
member and received upon redemption of NCM LLC common membership units will be counted toward the
threshold. Common membership units issued to NCM, Inc. in connection with the redemption of common
membership units by an NMC LLC founding member will be excluded, so long as such NCM LLC founding
member continues to hold the common stock acquired through such redemption or such NCM LLC founding
member has disposed of such shares of common stock to another NCM LLC founding member. Shares of our
common stock otherwise acquired by NCM LLC’s founding members will also be excluded, unless such shares
of common stock were transferred by one NCM LLC founding member to another and were originally received
by the transferring NCM LLC founding member upon redemption of NCM LLC common membership units.

Under these circumstances, our corporate governance documents will allow NCM LLC’s founding members

and their affiliates to exercise a greater degree of influence in the operation of our business and that of NCM
LLC and the management of our affairs and those of NCM LLC than is typically available to stockholders of a
publicly-traded company. Even if NCM LLC’s founding members or their affiliates own a minority economic
interest (but not less than 5%) in NCM LLC, they may be able to continue exerting such degree of influence over
us and NCM LLC.

Different interests among NCM LLC’s founding members or between NCM LLC’s founding members and us
could prevent us from achieving our business goals

For the foreseeable future, we expect that our board of directors will include directors and executive officers

of NCM LLC’s founding members and other directors who may have commercial or other relationships with
NCM LLC’s founding members. The majority of NCM LLC’s outstanding membership interests also are owned
by NCM LLC’s founding members. NCM LLC’s founding members compete with each other in the operation of
their respective businesses and could have individual business interests that may conflict with those of the other
founding members. Their differing interests could make it difficult for us to pursue strategic initiatives that
require consensus among NCM LLC’s founding members.

In addition, the structural relationship we have with NCM LLC’s founding members could create conflicts

of interest among NCM LLC’s founding members, or between NCM LLC’s founding members and us, in a
number of areas relating to our past and ongoing relationships. There is not any formal dispute resolution
procedure in place to resolve conflicts between us and an NCM LLC founding member or between NCM LLC
founding members. We may not be able to resolve any potential conflicts between us and an NCM LLC founding
member and, even if we do, the resolution may be less favorable to us than if we were negotiating with an
unaffiliated party.

The corporate opportunity provisions in our certificate of incorporation could enable NCM LLC’s founding
members to benefit from corporate opportunities that might otherwise be available to us

Our certificate of incorporation contains provisions related to corporate opportunities that may be of interest
to both NCM LLC’s founding members and us. It provides that if a corporate opportunity is offered to us, NCM
LLC or one or more of the officers, directors or stockholders (both direct and indirect) of NCM, Inc. or a member
of NCM LLC that relates to the provision of services to motion picture theatres, use of theatres for any purpose,
sale of advertising and promotional services in and around theatres and any other business related to the motion
picture theatre business (except services as provided in the ESAs as from time to time amended and except as
may be offered to one of our officers in his capacity as an officer), no such person shall be liable to us or any of
our stockholders (or any affiliate thereof) for breach of any fiduciary or other duty by reason of the fact that such
person pursues or acquires such business opportunity, directs such business opportunity to another person or fails
to present such business opportunity, or information regarding such business opportunity, to us. This provision
applies even if the business opportunity is one that we might reasonably be deemed to have pursued or had the
ability or desire to pursue if granted the opportunity to do so.

In addition, our certificate of incorporation and the NCM LLC operating agreement expressly provide that
NCM LLC’s founding members may have other business interests and may engage in any other businesses not
specifically prohibited by the terms of the certificate of incorporation, including the exclusivity provisions of the
ESAs. The parent companies of NCM LLC’s founding members are not bound by the ESAs and therefore could
develop new media platforms that could compete for advertising dollars with our services. Further, we may also
compete with NCM LLC’s founding members or their affiliates in the area of employee recruiting and retention.
These potential conflicts of interest could have a material adverse effect on our business, financial condition,
results of operations or prospects if attractive corporate opportunities are allocated by NCM LLC’s founding
members to themselves or their other affiliates or we lose key personnel to them.

The agreements between us and NCM LLC’s founding members were made in the context of an affiliated
relationship and may contain different terms than comparable agreements with unaffiliated third parties

The ESAs and the other contractual agreements that we have with NCM LLC’s founding members were
originally negotiated in the context of an affiliated relationship in which representatives of NCM LLC’s founding
members and their affiliates comprised our entire board of directors. As a result, the financial provisions and the
other terms of these agreements, such as covenants, contractual obligations on our part and on the part of NCM
LLC’s founding members and termination and default provisions may be less favorable to us than terms that we
might have obtained in negotiations with unaffiliated third parties in similar circumstances.

Our certificate of incorporation and bylaws contain anti-takeover protections that may discourage or prevent
strategic transactions, including a takeover of our company, even if such a transaction would be beneficial to
our stockholders

Provisions contained in our certificate of incorporation and bylaws, the NCM LLC operating agreement,

provisions of the Delaware General Corporation Law (“DGCL”), could delay or prevent a third party from
entering into a strategic transaction with us, even if such a transaction would benefit our stockholders. For
example, our certificate of incorporation and bylaws:

•

establish supermajority approval requirements by our directors before our board may take certain
actions;

authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to
increase the number of outstanding shares, making a takeover more difficult and expensive;

establish a classified board of directors;

allow removal of directors only for cause;

prohibit stockholder action by written consent;

do not permit cumulative voting in the election of directors, which would otherwise allow less than a
majority of stockholders to elect director candidates; and

provide that NCM LLC’s founding members will be able to exercise a greater degree of influence over
the operations of NCM LLC, which may discourage other nominations to our board of directors, if any
director nominee designated by NCM LLC’s founding members is not elected by our stockholders.

These restrictions could keep us from pursuing relationships with strategic partners and from raising
additional capital, which could impede our ability to expand our business and strengthen our competitive
position. These restrictions could also limit stockholder value by impeding a sale of us or NCM LLC.

Any future issuance of membership units by NCM LLC and subsequent redemption of such units for common
stock could dilute the voting power of our existing common stockholders and adversely affect the market value
of our common stock

The common unit adjustment agreement and the ESAs provide that we will issue common membership units

of NCM LLC to account for changes in the number of theatre screens NCM LLC’s founding members operate
and which are made part of our advertising network. Historically, each of NCM LLC’s founding members has
increased the number of screens it operates. If this trend continues, NCM LLC may issue additional common
membership units to NCM LLC’s founding members to reflect their increase in net screen count. Each common
membership unit may be redeemed in exchange for, at our option, shares of our common stock on a one-for-one
basis or a cash payment equal to the market price of one share of our common stock. If a significant number of
common membership units were issued to NCM LLC’s founding members, NCM LLC’s founding members
elected to redeem such units, and we elected to issue common stock rather than cash upon redemption, the voting
power of our common stockholders could be diluted. Other than the maximum number of authorized shares of

common stock in our certificate of incorporation, there is no limit on the number of shares of our common stock
that we may issue upon redemption of an NCM LLC founding member’s common membership units in NCM
LLC. For further information, refer to Note 5 to the audited Consolidated Financial Statements included
elsewhere in this document.

Our future issuance of preferred stock could dilute the voting power of our common stockholders and
adversely affect the market value of our common stock

The future issuance of shares of preferred stock with voting rights may adversely affect the voting power of
the holders of our other classes of voting stock, either by diluting the voting power of our other classes of voting
stock if they vote together as a single class, or by giving the holders of any such preferred stock the right to block
an action on which they have a separate class vote even if the action were approved by the holders of our other
classes of voting stock.

The future issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences

or other economic terms favorable to the holders of preferred stock could adversely affect the market price for
our common stock by making an investment in the common stock less attractive. For example, investors in the
common stock may not wish to purchase common stock at a price above the conversion price of a series of
convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase
common stock at the lower conversion price causing economic dilution to the holders of common stock.

If we or NCM LLC’s founding members are determined to be an investment company, we would become
subject to burdensome regulatory requirements and our business activities could be restricted

We do not believe that we are an “investment company” under the Investment Company Act of 1940, as

amended. As sole manager of NCM LLC, we control NCM LLC, and our interest in NCM LLC is not an
“investment security” as that term is used in the Investment Company Act of 1940. If we were to stop
participating in the management of NCM LLC, our interest in NCM LLC could be deemed an “investment
security” for purposes of the Investment Company Act of 1940. Generally, a company is an “investment
company” if it owns investment securities having a value exceeding 40% of the value of its total assets
(excluding U.S. government securities and cash items). Our sole material asset is our equity interest in NCM
LLC. A determination that such asset was an investment security could result in our being considered an
investment company under the Investment Company Act of 1940. As a result, we would become subject to
registration and other burdensome requirements of the Investment Company Act. In addition, the requirements of
the Investment Company Act of 1940 could restrict our business activities, including our ability to issue
securities.

We and NCM LLC intend to conduct our operations so that we are not deemed an investment company

under the Investment Company Act. However, if anything were to occur that would cause us to be deemed an
investment company, we would become subject to restrictions imposed by the Investment Company Act of 1940.
These restrictions, including limitations on our capital structure and our ability to enter into transactions with our
affiliates, could make it impractical for us to continue our business as currently conducted and could have a
material adverse effect on our financial performance and operations.

We also rely on representations of NCM LLC’s founding members that they are not investment companies
under the Investment Company Act. If any NCM LLC founding member were deemed an investment company,
the restrictions placed upon that NCM LLC founding member might inhibit its ability to fulfill its obligations
under its ESA or restrict NCM LLC’s ability to borrow funds.

Our tax receivable agreement with NCM LLC’s founding members is expected to reduce the amount of overall
cash flow that would otherwise be available to us and will increase our potential exposure to the financial
condition of NCM LLC’s founding members

Our initial public offering and related transactions have the effect of reducing the amounts NCM, Inc. would

otherwise pay in the future to various tax authorities as a result of an increase in its proportionate share of tax
basis in NCM LLC’s tangible and intangible assets. We have agreed in our tax receivable agreement with NCM
LLC’s founding members to pay to NCM LLC’s founding members 90% of the amount by which NCM, Inc.’s
tax payments to various tax authorities are reduced as a result of the increase in tax basis. After paying these
reduced amounts to tax authorities, if it is determined as a result of an income tax audit or examination that any
amount of NCM, Inc.’s claimed tax benefits should not have been available, NCM, Inc. may be required to pay
additional taxes and possibly penalties and interest to one or more tax authorities. If this were to occur and if one
or more of NCM LLC’s founding members was insolvent or bankrupt or otherwise unable to make payment
under its indemnification obligation under the tax receivable agreement, then NCM, Inc.’s financial condition
could be negatively impacted.

The substantial number of shares that are eligible for sale could cause the market price for our common stock
to decline or make it difficult for us to sell equity securities in the future

We cannot predict the effect, if any, that market sales of shares of common stock by NCM LLC’s founding
members will have on the market price of our common stock from time to time. Sales of substantial amounts of
shares of our common stock in the public market, or the perception that those sales will occur, could cause the
market price of our common stock to decline or make future offerings of our equity securities more difficult. If
we are unable to sell equity securities at times and prices that we deem appropriate, we may be unable to fund
growth. The founding members may receive up to 69,543,579 shares of common stock upon redemption of their
outstanding common membership units of NCM LLC. The resale of these shares of common stock has been
registered as required by the terms of the registration rights agreement between NCM Inc. and the NCM LLC
founding members. Additionally, once options and restricted stock held by our employees become vested and/or
exercisable, as applicable, to the extent that they are not held by one of our affiliates, the shares acquired upon
vesting or exercise are freely tradable. Refer to Note 11 the audited Consolidated Financial Statements included
elsewhere in this document.

Risks Related to the Proposed Screenvision Merger

On May 5, 2014, NCM, Inc. entered into the Merger Agreement, as described in Item 1. Business in this
Form 10-K. On November 3, 2014, the DOJ Action was filed seeking to enjoin the proposed merger between
NCM, Inc. and Screenvision. A trial date has been scheduled for April 13, 2015.

The DOJ Action has delayed, and could ultimately prevent, the consummation of the merger.

The filing of the DOJ Action has delayed, and, if the Company and Screenvision are unsuccessful in
defending against or settling the DOJ Action, could ultimately prevent, the consummation of the merger. There
can be no assurance that we will be successful in defending against or settling the DOJ Action or that the merger
will be consummated by any particular time, if at all.

In addition, even if the Company enters into a settlement with respect to the DOJ Action, there can be no

assurance that we will not be required to agree to terms, conditions, requirements, limitations, costs or
restrictions that could further delay completion of the merger, impose additional material costs on or limit the
revenues of the combined company, or limit some of the synergies and other benefits we presently anticipate to
realize following the merger. We cannot provide any assurance that any such terms, conditions, requirements,
limitations, costs or restrictions will not result in a material delay in, or the abandonment of, the merger.

Delays in completing the merger have delayed, and could continue to delay, the benefits expected to be
achieved thereunder.

The need to satisfy conditions and obtain consents, clearances and approvals for the merger, as well as, the
pendency of the DOJ Action, have delayed, and could continue to delay, the consummation of the merger for a
significant period of time or prevent it from occurring. Even if ultimately consummated, the delay in the
consummation of the merger could cause, delay or limit the realization of the synergies and other benefits that
the parties anticipated had the merger been successfully completed within its originally expected time frame
during the fourth quarter of 2014.

If we are unsuccessful in our defense of the merger or the Merger Agreement terminates, we may be required
to make a termination payment of $28.8 million, which could adversely impact NCM, Inc.’s stock price and
would adversely impact NCM, Inc.’s liquidity and financial condition.

The Merger Agreement contains certain termination rights, including the right of either party to terminate

the Merger Agreement upon the material breach of covenants or representations by the other or if the conditions
to the merger have not been satisfied by May 5, 2015 or, at the election of either party, 90 days thereafter.
Furthermore, if the Company is unsuccessful in its defense of the merger with the DOJ, Screenvision may have
the right to terminate the Merger Agreement and, upon termination, we may be required to pay Screenvision a
termination fee of approximately $28.8 million. NCM LLC will bear a pro rata portion of this fee based on the
aggregate ownership percentages of the founding member theatre circuits in NCM LLC. The payment of such fee
could have an adverse impact on our liquidity and financial condition. In addition, if the Merger Agreement is
terminated, we may suffer other negative consequences, including incurring substantial expenses and costs
related to the merger, whether or not it is consummated, including legal, accounting and advisory fees (we have
incurred approximately $7.5 million in 2014). Also, failure to consummate the merger may result in negative
market reactions, and may have an adverse impact on NCM, Inc.’s stock price and future financial results.

A continued delay or a failure to ultimately consummate the merger could materially and adversely affect our
future business, financial condition, results of operations and prospects.

If the merger is further delayed or is not completed, our ongoing business may be materially and adversely

affected, and we will be subject to several risks, including the following:

• we may be required to pay a termination fee of approximately $28.8 million under certain

circumstances provided in the Merger Agreement;

•

prior to any termination of the Merger Agreement, we are restricted by the terms of the Merger
Agreement, which may cause us to forego otherwise attractive business opportunities;

• we will be required to pay substantial out-of-pocket costs relating to the merger, whether or not it is
consummated, such as legal, defense, accounting, and financial adviser fees (we have incurred
approximately $7.5 million in 2014); and

•

our management will have focused its attention on preparing for and defending the merger instead of
on pursuing other opportunities that could have been beneficial to us.

If the merger is not completed or is further delayed, there can be no assurance that these risks will not

materialize and will not materially and adversely affect NCM, Inc.’s business, financial condition, results of
operations and prospects.

The pending merger, the DOJ Action and our current pre-merger integration planning efforts may divert resources
from our management’s day-to-day operations and ongoing efforts related to other strategies and initiatives.

The pending merger, the DOJ Action and our current pre-merger integration planning efforts may divert our
management’s attention from day-to-day business operations and the execution and pursuit of strategic plans and
initiatives. The diversion of management attention from ongoing business operations and strategic efforts could
result in performance shortfalls, which could adversely impact NCM, Inc.’s business and operations.

The integration of the businesses of NCM LLC and Screenvision may be more difficult, costly or time
consuming than expected, and the merger may not result in any or all of the anticipated benefits, including
cost synergies.

Although under no obligation to do so, following the merger, we may contribute the Screenvision business

to NCM LLC. The success of combining Screenvision’s business with NCM LLC, including the realization of
the anticipated benefits, will depend, in part, on the ability of the combined company to successfully integrate the
two businesses. Failure to effectively integrate the businesses could adversely impact the expected benefits of the
merger, including cost synergies stemming from overlapping sales, operating and general and administrative
functions that the Company has estimated could aggregate $30 million per year and the increase in revenue
related to the improvement in our advertising product and competitive positioning of NCM, Inc. within the
broader video advertising marketplace. The integration of two large independent companies will be complex, and
we will be required to devote significant management attention and incur substantial costs to integrate NCM
LLC’s and Screenvision’s business practices, policies, cultures and operations. The integration process could also
result in the loss of key employees, and the disruption of each company’s ongoing businesses, which could
materially impact the combined company’s future financial results.

Furthermore, we may encounter additional challenges, difficulties and costs, including those related to,

without limitation, managing a larger combined company; consolidating corporate and administrative
infrastructures and eliminating overlapping operations; retaining our existing advertisers and customers;
unanticipated issues in integrating our networks and information technology, communications and other systems;
and unforeseen and unexpected liabilities related to the merger or Screenvision’s business. Delays encountered in
the integration could adversely impact the business, financial condition and operations of the combined company.

Consummation of the merger will require the Company to incur significant additional indebtedness, which
could adversely impact our financial condition and may hinder our ability to obtain additional financing and
pursue other business and investment opportunities.

As described in Note 10—Borrowings, in contemplation of the merger with Screenvision, we entered into a

Commitment and Engagement Letter (the “Commitment Letter”) for a $250 million term loan with certain
existing NCM LLC revolving credit facility lenders to finance the $225 million portion of the merger
consideration that will be paid in cash, along with fees and expenses incurred in connection with the term loan
and the merger. Incurrence of additional indebtedness could have negative consequences, including increasing
our vulnerability to adverse economic and industry conditions, and limiting our ability to obtain additional
financing and implement and pursue strategic initiatives and opportunities. Additionally, if we do not achieve the
expected benefits and cost savings from the merger with Screenvision, or if the financial performance of NCM,
Inc., as the combined company, does not meet current expectations, then our ability to service the debt may be
adversely impacted. NCM LLC’s credit ratings may also be impacted as a result of the incurrence of additional
acquisition-related indebtedness. The trial date for the DOJ Action has been scheduled for April 13, 2015. The
Commitment Letter and certain NCM LLC senior secured credit facility amendments expire on April 1, 2015.
We are working with the merger financing bank group to extend the merger financing commitments to
accommodate the litigation process.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Information with respect to our corporate headquarters and regional offices is presented below as of
January 1, 2015. We own no material real property. We believe that all of our present facilities are adequate for
our current needs and that additional space is available for future expansion on acceptable terms.

Location

Centennial, CO (1)
Chicago, IL (2)
New York, NY (3)
Woodland Hills, CA (4)
Minneapolis, MN (5)
Newport Beach, CA (6)

Facility

Headquarters (including the NOC)
Advertising Sales Office
Advertising Sales Office
Advertising Sales Office
Software Development Office
Regional Advertising Sales Office

(1) This facility is leased through June 30, 2021.
(2) This facility is leased through September 30, 2017.
(3) This facility is leased through April 30, 2017.
(4) This facility is leased through November 30, 2019.
(5) This facility is leased through March 31, 2015.
(6) This facility is leased through April 30, 2016.

Item 3. Legal Proceedings

Size

82,721 sq. ft.
3,971 sq. ft.
17,498 sq. ft.
6,062 sq. ft.
5,926 sq. ft.
1,417 sq. ft.

On November 3, 2014, the DOJ filed, in the U.S. district court for the Southern District of New York, the
DOJ Action seeking to enjoin the proposed merger between NCM, Inc. and Screenvision. The DOJ claims that
the proposed merger would eliminate competition in the market for pre-show services and eliminate competition
between the Company and Screenvision for advertisers. A trial date has been scheduled for April 13, 2015 for the
DOJ Action.

In addition, we are sometimes involved in legal proceedings arising in the ordinary course of business. We

are not aware of any other litigation currently pending that would have a material adverse effect on our operating
results or financial condition.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

Our common stock, $0.01 par value, has traded on The NASDAQ Global Market under the symbol “NCMI”

since February 8, 2007 (our IPO closed on February 13, 2007). There were 211 stockholders of record as of
February 20, 2015 (does not include beneficial holders of shares held in “street name”). The following table sets
forth the historical high and low sales prices per share for our common stock as reported on The NASDAQ
Global Market for the fiscal periods indicated.

First Quarter (December 27, 2013—March 27, 2014)
Second Quarter (March 28, 2014—June 26, 2014)
Third Quarter (June 27, 2014—September 25, 2014)
Fourth Quarter (September 26, 2014—January 1, 2015)

First Quarter (December 28, 2012—March 28, 2013)
Second Quarter (March 29, 2013—June 27, 2013)
Third Quarter (June 28, 2013—September 26, 2013)
Fourth Quarter (September 27, 2013—December 26, 2013)

Fiscal 2014

High

Low

$20.20
$17.46
$17.77
$16.07

$13.94
$14.54
$13.81
$11.70

Fiscal 2013

High

Low

$15.93
$19.00
$19.16
$20.22

$13.38
$14.01
$16.77
$16.97

Declared
Dividend

$0.72
$0.22
$0.22
$0.22

Declared
Dividend

$0.22
$0.22
$0.22
$0.22

Dividend Policy

We intend to distribute over time a substantial portion of our free cash flow (distributions from NCM LLC
less income taxes and payments under the tax receivable agreement with NCM LLC’s founding members) in the
form of dividends to our stockholders. The declaration, payment, timing and amount of any future dividends
payable will be at the sole discretion of our board of directors who will take into account general economic and
business conditions, our financial condition, our available cash, our current and anticipated cash needs, and any
other factors that the board considers relevant. Under Delaware law, dividends may be payable only out of
surplus, which is our total assets minus total liabilities less the par value of our common stock, or, if we have no
surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal
year.

Use of Proceeds from Sale of Registered Securities

None.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Share Repurchase Program

None.

Issuer Purchases of Equity Securities

The table below provides information about shares delivered to the Company from restricted stock held by

Company employees upon vesting for the purpose of funding the recipient’s tax withholding obligations.

Period

(a)
Total
Number
of Shares
Purchased

88
September 26, 2014 through October 23, 2014 . . . . . . . . . . . . . . . . . .
October 24, 2014 through November 27, 2014 . . . . . . . . . . . . . . . . . .
597
November 28, 2014 through January 1, 2015 . . . . . . . . . . . . . . . . . . . —

(d)
Maximum
Number (or
Approximate
Dollar
Value) of
Shares that
may yet be
Purchased
under the
Plans or
Programs

N/A
N/A
N/A

—
—
—

(b)
Average
Price
Paid Per
Share

14.29
15.59
N/A

Equity Compensation Plan

Refer to “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters” for information regarding securities authorized for issuance under our equity compensation
plans which is incorporated in this Item by this reference.

Stock Performance Graph

The following graph compares the cumulative total stockholder return on the common stock of the
Company (including dividends paid) for the period January 1, 2009 through January 1, 2015 with the Russell
2000 Index and the Dow Jones US Media TSM.

The comparisons in the graph below are based upon historical data and are not indicative of, or intended to

forecast, future performance of our common stock.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among National CineMedia Inc, the Russell 2000 Index,
and the Dow Jones US Media TSM Index

$350

$300

$250

$200

$150

$100

$50

$0
12/31/09

12/30/10

12/29/11

12/27/12

12/26/13

1/1/15

National CineMedia Inc

Russell 2000

Dow Jones US Media TSM

*$100 invested on 12/31/09 in stock or 12/31/09 in index, including reinvestment of
dividends.
Indexes calculated on month-end basis.

National CineMedia Inc
Russell 2000
Dow Jones US Media TSM

Dec. 31,
2009

Dec. 30,
2010

Dec. 29,
2011

Dec. 27,
2012

Dec. 26,
2013

Jan. 1,
2015

100.00
100.00
100.00

125.46
127.84
126.06

79.85
122.22
134.79

99.75
139.44
181.07

148.64
196.08
271.02

116.91
205.95
304.39

Item 6. Selected Financial Data

Selected Historical Financial and Operating Data

The following table sets forth our historical selected financial and operating data for the periods indicated.
The selected financial and operating data should be read in conjunction with the other information contained in
this document, including “Business,” “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”, the audited historical Consolidated Financial Statements and the notes thereto included
elsewhere in this document, and historical audited Consolidated Financial Statements, which have not been
included in this document.

The results of operations data for the years ended January 1, 2015, December 26, 2013 and December 27,

2012 and the balance sheet data as of January 1, 2015 and December 26, 2013 are derived from the audited
Consolidated Financial Statements of NCM, Inc. included elsewhere in this document. The results of operations
data for the years ended December 29, 2011 and December 30, 2010 and the balance sheet data as of
December 27, 2012, December 29, 2011 and December 30, 2010 are derived from the audited Consolidated
Financial Statements of NCM, Inc. (not presented herein).

Results of Operations Data
($ in millions, except per share data)

REVENUE:

Years Ended

Jan. 1,
2015

Dec. 26,
2013

Dec. 27,
2012

Dec. 29,
2011

Dec. 30,
2010

Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fathom Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$394.0
—

$426.3
36.5

$409.5
39.3

$386.2
49.2

$379.5
48.0

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

394.0

462.8

448.8

435.4

427.5

OPERATING EXPENSES:

Advertising operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fathom Events operating costs . . . . . . . . . . . . . . . . . . . . . . . . .
Network costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theatre access fees—founding members . . . . . . . . . . . . . . . . .
Selling and marketing costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger- related administrative costs . . . . . . . . . . . . . . . . . . . .
Other administrative and other costs . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NON-OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . .

INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Equity loss from investments, net

26.4
—
18.3
70.6
57.6
7.5
29.5
32.4

242.3

151.7
76.2

75.5
9.9
—

29.0
25.5
19.4
69.4
61.5
—
29.4
26.6

260.8

202.0
52.0

150.0
20.2
—

31.3
29.0
19.8
64.5
60.5
—
31.5
20.4

257.0

191.8
99.8

92.0
26.7
—

24.6
34.1
18.6
55.4
59.8
—
30.4
18.8

241.7

193.7
73.7

120.0
19.4
—

21.7
32.4
20.0
52.6
57.9
—
34.5
17.8

236.9

190.6
64.0

126.6
16.8
0.7

CONSOLIDATED NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Net income attributable to noncontrolling interests . . . .

65.6
$ 52.2

129.8
$ 88.6

65.3
$ 51.9

100.6
$ 69.1

109.1
$ 79.9

NET INCOME ATTRIBUTABLE TO NCM, Inc.

. . . . . . . . . . . . .

$ 13.4

$ 41.2

$ 13.4

$ 31.5

$ 29.2

EARNINGS PER NCM, INC. COMMON SHARE:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.23
$ 0.23

$ 0.74
$ 0.73

$ 0.25
$ 0.24

$ 0.58
$ 0.58

$ 0.63
$ 0.62

Other Financial and Operating Data
(in millions, except cash dividend declared per common share and
screen data)

OIBDA (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted OIBDA (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted OIBDA margin (1) . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividend declared per common share . . . . . . . . . . . . .
Founding member screens at period end (2) (6)
. . . . . . . . .
Total screens at period end (3) (6) . . . . . . . . . . . . . . . . . . . .
DCN screens at period end (4) (6) . . . . . . . . . . . . . . . . . . . .
Total attendance for period (5) (6)
. . . . . . . . . . . . . . . . . . .

Years Ended

Jan. 1,
2015

Dec. 26,
2013

Dec. 27,
2012

Dec. 29,
2011

Dec. 30,
2010

$ 184.1
$ 199.3

$ 228.6
$ 234.5

$ 212.2
$ 221.2

$ 212.5
$ 224.3

$ 208.4
$ 222.4

50.6% 50.7% 49.3% 51.5% 52.0%
$
8.8
$ 1.38
16,497
20,109
19,251
688.2

$ 10.6
$ 0.88
16,562
19,878
19,854
699.2

$ 10.4
$ 0.88
15,528
19,359
18,491
690.4

$ 13.7
$ 0.84
15,265
18,670
17,698
636.8

$ 10.4
$ 0.72
14,997
17,302
16,003
637.4

Balance Sheet Data (in millions)

Cash, cash equivalents and marketable securities (7) . . . . .
Receivables, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity/(deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . .

Jan. 1,
2015

Dec. 26,
2013

$ 80.6
116.5
22.4
991.4
892.0
(208.7)
991.4

$ 126.0
120.4
25.6
1,067.3
890.0
(146.1)
1,067.3

As of

Dec. 27,
2012

$ 106.6
98.5
25.7
810.5
879.0
(356.4)
810.5

Dec. 29,
2011

Dec. 30,
2010

$ 98.1
98.6
24.6
820.2
794.0
(346.8)
820.2

$ 82.9
100.7
19.8
854.5
775.0
(318.4)
854.5

Notes to the Selected Historical Financial and Operating Data

(1) 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
merger-related 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 proposed 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.

OIBDA and Adjusted OIBDA do not reflect integration payments as integration payments are recorded as a
reduction to intangible assets. Integration payments received are added to Adjusted OIBDA to determine our
compliance with financial covenants under our senior secured credit facility and included in available cash
distributions to NCM LLC’s founding members. During the years ended January 1, 2015, December 26,
2013, December 27, 2012, December 29, 2011 and December 30, 2010, the Company recorded integration
payments of $2.2 million, $2.8 million, $0 million, $1.9 million, and $3.9 million, respectively, from NCM
LLC’s founding members.

(2) Represents the total number of screens within NCM LLC’s advertising network operated by NCM
LLC’s founding members. Excludes screens associated with certain Cinemark Rave and AMC Rave theatres
for all periods presented.

(3) Represents the total screens within NCM LLC’s advertising network.

(4) Represents the total number of screens that are connected to our DCN.

(5) Represents the total attendance within NCM LLC’s advertising network.

(6) Excludes Consolidated Theatres for all periods prior to June 2011 and certain Cinemark Rave and AMC
Rave theatres for all periods presented.

(7) Includes short-term and long-term marketable securities.

The following table reconciles consolidated net income to OIBDA and Adjusted OIBDA for the periods

presented (dollars in millions):

Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Equity loss from investments, net
Interest and other non-operating costs . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OIBDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation costs (1)
. . . . . . . . . . . . . . . . . . . . . . . .
Merger-related administrative costs (2) . . . . . . . . . . . . . . . . . . . . . .

Years Ended

Jan. 1,
2015

Dec. 26,
2013

Dec. 27,
2012

Dec. 29,
2011

Dec. 30,
2010

$ 65.6
9.9
—
76.2
32.4

$184.1
7.7
7.5

$129.8
20.2
—
52.0
26.6

$228.6
5.9
—

$ 65.3
26.7
—
99.8
20.4

$212.2
9.0
—

$100.6
19.4
—
73.7
18.8

$212.5
11.8
—

$109.1
16.8
0.7
64.0
17.8

$208.4
14.0
—

Adjusted OIBDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$199.3

$234.5

$221.2

$224.3

$222.4

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted OIBDA margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$394.0

$462.8

$448.8

$435.4

$427.5

50.6% 50.7% 49.3% 51.5% 52.0%

(1) Share-based payments costs are included in network operations, selling and marketing and administrative

expense in the accompanying audited Consolidated Financial Statements.

(2) Merger-related costs represent legal, accounting, advisory and other professional fees associated with the

proposed merger with Screenvision and are included in administrative expense in the accompanying audited
Consolidated Financial Statements.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

As discussed in Part 1, some of the information in this Annual Report on Form 10-K 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-K, 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. The following discussion and analysis should
be read in conjunction with our historical financial statements and the related notes thereto included elsewhere
in this document. In the following discussion and analysis, the term net income refers to net income attributable
to NCM, Inc.

Overview

NCM LLC operates the largest digital in-theatre media network in North America, through which it sells in-

theatre and online advertising and promotions. Our revenue is principally derived from the sale of advertising
through long-term ESAs with NCM LLC’s founding members (over 22 years remaining as of January 1, 2015)
and multi-year agreements with network affiliates, which expire at various dates between October 31, 2015 and
July 22, 2031. 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 97% of the aggregate founding member and network affiliate theatre attendance is generated by
theatres connected to our DCN (858 screens receive advertisements on USB drives) and 100% of the FirstLook
pre-show is projected on digital projectors (82% digital cinema projectors and 18% 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 OIBDA, Adjusted
OIBDA and Adjusted OIBDA margin, as defined and discussed in “Item 6. Selected Financial Data—Notes to
the Selected Historical Financial and Operating Data”, as some of our primary measurement metrics. In addition,
we monitor our monthly advertising performance measurements, including advertising inventory utilization,
advertising pricing (CPM), local and total advertising revenue per attendee, as well as, our free cash flow and
related 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. 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.”

Recent Transactions

On December 26, 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability
company (AC JV, LLC) owned 32% by each of the founding members and 4% by NCM LLC. The Fathom
Events business focused on the marketing and distribution of live and pre-recorded entertainment programming
to theatre operators to provide additional programs to augment their feature film schedule. In consideration for
the sale, NCM LLC received a total of $25.0 million in promissory notes from its founding members (one-third
from each founding member). The notes bear interest at a fixed rate of 5.0% per annum, compounded annually.
Interest and principal payments are due annually in six equal installments commencing on the first anniversary of
the closing. In connection with the sale, NCM LLC entered into a transition services agreement to provide certain
corporate overhead services for a fee and reimbursement for the use of facilities and certain services including
creative, technical event management and event management for AC JV, LLC for nine months following closing
(which ended September 25, 2014). In addition, NCM LLC entered into a services agreement with a term
coinciding with the digital programming ESAs, which grants AC JV, LLC advertising on-screen and on our LEN
and a pre-feature program prior to Fathom events reasonably consistent with what was previously dedicated to
Fathom. In addition, the services agreement provides that we will assist with event sponsorship sales in return for
a share of the sponsorship revenue. NCM LLC has also agreed to provide creative and media production services
for the same fee available to the founding members related to the marketing of their core theatrical business.

On May 5, 2014, NCM, Inc. entered into the Merger Agreement to merge with Screenvision for $375

Following the merger, NCM, Inc. will evaluate whether to contribute the Screenvision assets to NCM LLC.

Although it is under no obligation to do so, upon approval of NCM, Inc.’s Board of Directors and the founding
members, NCM, Inc. may contribute Screenvision assets and NCM, Inc. debt to NCM LLC in exchange for
9,900,990 NCM LLC membership units. NCM, Inc. has secured a commitment from a group of financial
institutions for a $250 million term loan to finance the $225 million portion of the merger consideration that will
be paid in cash, along with fees and expenses incurred in connection with the term loan and the merger. In
addition, NCM LLC amended its senior secured credit facility to allow for the contribution of the Screenvision
assets and NCM, Inc. debt to NCM LLC following the closing of the Merger. The Commitment Letter and

certain NCM LLC senior secured credit facility amendments expire on April 1, 2015. We are working with the
merger financing bank group to extend the merger financing commitments to accommodate the litigation
process.

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 this Form 10-K.

Summary Historical and Operating Data

You should read this information in conjunction with the other information contained in this document, and

our audited historical financial statements and the notes thereto included elsewhere in this document.

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

margin data). Refer to “Item 6. Selected Financial Data—Notes to the Selected Historical Financial and
Operating Data” for a discussion of the calculation of Adjusted OIBDA and reconciliation to consolidated net
income.

Years Ended

% Change

Jan. 1,
2015

Dec. 26,
2013

Dec. 27,
2012

2013 to 2014

2012 to 2013

Revenue:

Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fathom Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$394.0
—

$426.3
36.5

$409.5
39.3

(7.6%)
(100.0%)

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fathom Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Network, administrative and unallocated costs . . . . . .
Merger-related administrative costs (1) . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . .

394.0

462.8

448.8

(14.9%)

154.6
—
80.2
7.5

242.3

151.7
76.2
9.9
52.2

157.4
30.0
73.4
—

260.8

202.0
52.0
20.2
88.6

152.3
34.0
70.7
—

257.0

191.8
99.8
26.7
51.9

(1.8%)
(100.0%)
9.3%
100.0%

(7.1%)

(24.9%)
46.5%
(51.0%)
(41.1%)

4.1%
(7.1%)

3.1%

3.3%
(11.8%)
3.8%
0.0%

1.5%

5.3%
(47.9%)
(24.3%)
70.7%

Net income attributable to NCM, Inc.

. . . . . . . . . . . . .

$ 13.4

$ 41.2

$ 13.4

(67.5%)

207.5%

Net income per NCM, Inc. basic share . . . . . . . . . . . . . . . .
Net income per NCM, Inc. diluted share . . . . . . . . . . . . . . .
Adjusted OIBDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted OIBDA margin . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total theatre attendance (in millions) (2)(3) . . . . . . . . . . . .

$ 0.23
$ 0.23
$199.3

$ 0.74
$ 0.73
$234.5

$ 0.25
$ 0.24
$221.2

50.6% 50.7% 49.3%
688.2

690.4

699.2

(68.9%)
(68.5%)
(15.0%)
(0.1%)
(1.6%)

196.0%
204.2%
6.0%
1.4%
1.3%

(1) Merger-related costs represent legal, accounting, advisory and other professional fees associated with the

proposed merger with Screenvision and are included in administrative expense in the accompanying audited
Consolidated Financial Statements.

(2) Represents the total attendance within NCM LLC’s advertising network.
(3) Excludes screens and attendance associated with certain AMC Rave and Cinemark Rave theatres for all

periods presented.

Basis of Presentation

Prior to the completion of the IPO, NCM LLC was wholly-owned by its founding members. In connection
with the offering, NCM, Inc. purchased newly issued common membership units from NCM LLC and common
membership units from NCM LLC’s founding members, and became a member of and the sole manager of NCM
LLC. We entered into several agreements to effect the reorganization and the financing transaction and certain
amendments were made to the existing ESAs to govern the relationships among NCM LLC and NCM LLC’s
founding members after the completion of these transactions.

The results of operations data discussed herein were derived from the audited Consolidated Financial
Statements and accounting records of NCM, Inc. and should be read in conjunction with the notes thereto.

We have a 52-week or 53-week fiscal year ending on the first Thursday after December 25. Fiscal year 2014
contained 53 weeks. Fiscal years 2013 and 2012 contained 52 weeks. Our 2015 fiscal year will contain 52 weeks.
Throughout this document, we refer to our fiscal years as set forth below:

Fiscal Year Ended

January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 26, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 27, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reference
in this
Document

2014
2013
2012

Results of Operations

Years Ended January 1, 2015 and December 26, 2013

Revenue. Total revenue decreased $68.8 million, or 14.9%, from $462.8 million for the year ended

December 26, 2013 to $394.0 million for the year ended January 1, 2015 due to a $32.3 million, or 7.6%,
decrease in advertising revenue and $36.5 million decrease in Fathom Events revenue due to the sale of this part
of our business at the end of 2013. The following is a summary of revenue by category (in millions):

Years Ended

January 1,
2015

December 26,
2013

$ Change
2013 to 2014

% Change
2013 to 2014

National advertising revenue . . . . . . . . . . . . . . . . . . . . . . . . . .
Local and regional advertising revenue . . . . . . . . . . . . . . . . . .
Founding member advertising revenue from beverage

concessionaire agreements . . . . . . . . . . . . . . . . . . . . . . . . . .

Total advertising revenue . . . . . . . . . . . . . . . . . . . . . . . . .

Fathom Consumer revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fathom Business revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Fathom Events revenue . . . . . . . . . . . . . . . . . . . . .

$258.8
96.8

38.4

394.0

—
—

—

$295.0
89.9

$(36.2)
6.9

(12.3%)
7.7%

41.4

426.3

34.4
2.1

36.5

(3.0)

(32.3)

(34.4)
(2.1)

(36.5)

(7.2%)

(7.6%)

(100.0%)
(100.0%)

(100.0%)

(14.9%)

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$394.0

$462.8

$(68.8)

The following table shows data on revenue per attendee for the years ended January 1, 2015 and December 26,
2013:

Years Ended

January 1,
2015

December 26,
2013

% Change
2013 to 2014

National advertising revenue per attendee . . . . . . . . . . . . . . . . . . . . . . . . . .
Local and regional advertising revenue per attendee . . . . . . . . . . . . . . . . . .
Total advertising revenue (excluding founding member beverage revenue)
per attendee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total advertising revenue per attendee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total theatre attendance (in millions) (1) (2) . . . . . . . . . . . . . . . . . . . . . . . .

$0.376
$0.141

$0.517
$0.573
688.2

$0.422
$0.129

$0.550
$0.610
699.2

(10.9%)
9.3%

(6.0%)
(6.1%)
(1.6%)

(1) Represents the total attendance within NCM LLC’s advertising network.
(2) Excludes screens and attendance associated with certain AMC Rave and Cinemark Rave theatres for all

periods presented.

National advertising revenue. The $36.2 million, or 12.3%, decrease in national advertising revenue
(excluding beverage revenue from NCM LLC’s founding members) was driven by a 16.4% decrease in
national advertising CPMs (excluding beverage revenue) due primarily to a soft television scatter
marketplace, the increase in competition from other national video networks, including online and mobile
advertising platforms, and the implementation of more aggressive seasonal and volume pricing strategies
that contributed to the expansion of our client mix to new client industries that traditionally buy their
television and other advertising at lower CPMs. National advertising revenue also decreased due to a decline
in revenue by our content partners and scatter spending by our previous cell phone PSA client, which
decreased $5.1 million and $12.6 million, respectively, compared to 2013. The decline in national
advertising revenue (excluding beverage revenue) was partially offset by an increase in utilized impressions
of 4.0% in 2014 compared to 2013. Our national inventory utilization rose from 109.3% for the year ended
December 26, 2013 to 115.7% for the year ended January 1, 2015, primarily due to an overall expansion of
our client base and the success of the October 1, 2014 through December 31, 2015 upfront selling campaign
that positively impacted the fourth quarter of 2014. The number of advertising impressions decreased due to
a 1.6% year-over-year decrease in theatre attendance, resulting from a weaker film release schedule
compared to 2013, partially offset by an additional week in our 53-week year, compared to a 52-week year
in 2013. Inventory utilization is calculated based on eleven 30-second salable national advertising units in
our pre-show, which can be expanded, should market demand dictate.

Local and regional advertising revenue. The $6.9 million, or 7.7%, increase in local and regional advertising
revenue was driven by an increase in local advertising contract volume of 7.9%, partially offset by a slight
decrease in the average contract value of 0.3% for the year ended January 1, 2015, compared to the year
ended December 26, 2013. The increase in contract volume was driven primarily by the higher number of
larger regional contracts (greater than $250,000), which grew 64% due to the improving economy that
benefited smaller businesses that make smaller advertising commitments and the continued expansion of the
number of theatres in our network. While the number of our largest contracts grew (those over $250,000),
the number of contracts between $50,000 and $250,000 declined 6.8%.

Founding member beverage revenue. The $3.0 million, or 7.2%, decrease in national advertising revenue
from NCM LLC’s founding members’ beverage concessionaire agreements was due to a 5.8% decrease in
beverage revenue CPMs and a 1.6% decrease in founding member attendance for the year ended January 1,
2015, compared to the year ended December 26, 2013. The 2014 beverage revenue CPM is based on the
change in CPM of segment one of the FirstLook pre-show from 2012 to 2013, which decreased 5.8%.

Fathom Events revenue. Fathom Events revenue was zero for the year ended January 1, 2015 from $36.5
million for the year ended December 26, 2013 due to the sale of this portion of our business on
December 26, 2013.

Operating expenses. Total operating expenses decreased $18.5 million, or 7.1%, from $260.8 million for the

year ended December 26, 2013 to $242.3 million for the year ended January 1, 2015. The following table shows
the changes in operating expense for the year ended January 1, 2015 and December 26, 2013 (in millions):

Years Ended

January 1,
2015

December 26,
2013

$ Change
2013 to 2014

% Change
2013 to 2014

Advertising operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fathom Events operating costs . . . . . . . . . . . . . . . . . . . . . . . .
Network costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theatre access fees—founding members . . . . . . . . . . . . . . . .
Selling and marketing costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger- related administrative costs . . . . . . . . . . . . . . . . . . . .
Administrative and other costs . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .

$ 26.4
—
18.3
70.6
57.6
7.5
29.5
32.4

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . .

$242.3

$ 29.0
25.5
19.4
69.4
61.5
—
29.4
26.6

$260.8

$ (2.6)
(25.5)
(1.1)
1.2
(3.9)
7.5
0.1
5.8

$(18.5)

(9.0%)
(100.0%)
(5.7%)
1.7%
(6.3%)
100.0%
0.3%
21.8%

(7.1%)

Advertising operating costs. Advertising operating costs decreased $2.6 million, or 9.0%, from $29.0
million for the year ended December 26, 2013 to $26.4 million for the year ended January 1, 2015. This
decrease was primarily the result of a $1.0 million decrease in affiliate advertising payments, a $0.8 million
decrease in on-screen production costs and a $0.5 million decrease in lobby production supplies, partially
offset by the impact of an additional week in 2014. The decrease in affiliate advertising payments was
driven by lower total advertising revenue and a 0.5% decrease in the number of average affiliate screens for
the year ended January 1, 2015, compared to the year ended December 26, 2013 due primarily to
acquisitions by NCM LLC’s founding members of network affiliates in 2013. Lobby production supplies
and on-screen production costs decreased due to lower revenue during the period.

Fathom Events operating costs. Fathom Events operating costs were zero for the year ended January 1, 2015
from $25.5 million for the year ended December 26, 2013 due to the sale of this portion of our business on
December 26, 2013.

Network costs. Network costs decreased $1.1 million, or 5.7%, from $19.4 million for the year ended
December 26, 2013 to $18.3 million for the year ended January 1, 2015. The decrease was primarily due to
a decrease in personnel expense of $0.3 million due primarily to lower bonus expense and related taxes
(related to lower performance against internal targets) and lower benefit costs due to lower insurance claims
under our self-insured plan, as well as, a decrease of $0.2 million for reimbursement of AC JV, LLC
transition costs and a decrease of $0.3 million in equipment rental and network maintenance costs, partially
offset by the impact of an additional week in 2014.

Theatre access fees—founding members. Theatre access fees increased $1.2 million, or 1.7%, from $69.4
million for the year ended December 26, 2013 to $70.6 million for the year ended January 1, 2015. The
increase was due to a $2.0 million increase in theatre access fees due to an increase in the number of digital
screens (connected to DCN), including higher quality digital cinema projectors and related equipment,
partially offset by a $0.8 million decrease related to the 1.6% decrease in founding member attendance in
2014 compared to 2013. The fees for digital screens and equipment increased $1.2 million related to an
annual 5% rate increase specified in the ESAs and $0.8 million from an increase of 2.5% in the average
number of founding member digital screens and an increase of 3.8% in the average number of founding
member theatres equipped with the higher quality digital cinema equipment year-over-year. The increases in
digital screens and theatres with digital cinema equipment were due primarily to acquisitions by the
founding members.

Selling and marketing costs. Selling and marketing costs decreased $3.9 million, or 6.3%, from $61.5
million for the year ended December 26, 2013 to $57.6 million for the year ended January 1, 2015. This
decrease was primarily due to a decrease in bad debt expense of $2.2 million as actual advertising accounts
receivable write-offs were lower than estimated, a decrease of $1.6 million in non-cash barter expense

related to timing of barter transactions and a decrease of $0.6 million in certain discretionary marketing
expenses. These decreases to selling and marketing costs were partially offset by an increase of $0.3 million
in personnel expense due primarily to higher share-based compensation expense and local commissions,
partially offset by lower salaries, bonuses and related taxes (related to lower performance against internal
targets) and lower benefit costs.

Merger-related administrative costs. Merger-related administrative costs were $7.5 million for the year
ended January 1, 2015 due primarily to legal and accounting fees associated with the proposed Screenvision
merger.

Administrative and other costs. Other administrative and other costs increased $0.1 million, or 0.3%, from
$29.4 million for the year ended December 26, 2013 to $29.5 million for the year ended January 1, 2015 due
primarily to a $0.9 million increase in personnel expense due primarily to lower capitalized labor, higher
share-based compensation expense and the impact of an additional week in 2014, partially offset by lower
bonus expense and related taxes (related to lower performance against internal targets) and lower benefit
costs, partially offset by a decrease in legal and professional fees of approximately $0.5 million.

Depreciation and amortization. Depreciation and amortization expense increased $5.8 million, or 21.8%,
from $26.6 million for the year ended December 26, 2013 to $32.4 million for the year ended January 1,
2015. The increase was primarily due to higher amortization of intangible assets related to new affiliate
agreements and NCM LLC founding member common unit adjustments, primarily related to founding
member theatre acquisitions and the impact of an additional week in 2014.

Non-operating expenses. Total non-operating expenses increased $24.2 million, or 46.5%, from $52.0
million for the year ended December 26, 2013 to $76.2 million for the year ended January 1, 2015. The following
table shows the changes in non-operating expense for the years ended January 1, 2015 and December 26, 2013
(in millions):

Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of interest on the discounted payable to founding

members under tax receivable agreement . . . . . . . . . . . . . .
Amortization of terminated derivatives . . . . . . . . . . . . . . . . . .
Impairment on investment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of Fathom Events—founding members . . . . . . .
Other non-operating expense . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended

January 1,
2015

December 26,
2013

$ Change
2013 to 2014

% Change
2013 to 2014

$52.6
(1.8)

$ 51.6
(0.4)

$ 1.0
(1.4)

1.9%
350.0%

14.6
10.0
—
—
0.8

13.9
10.3
0.8
(25.4)
1.2

0.7
(0.3)
(0.8)
25.4
(0.4)

5.0%
(2.9%)
(100.0%)
(100.0%)
(33.3%)

46.5%

Total non-operating expenses . . . . . . . . . . . . . . . . . . . . .

$76.2

$ 52.0

$24.2

The increase in non-operating expense was due primarily to the absence of the gain recorded in 2013 of
$25.4 million, net of direct expenses, related to the sale of our Fathom Events business on December 26, 2013. In
addition, interest on borrowings increased $1.0 million due to an additional week in our 53-week year, compared
to a 52-week year in 2013. Interest due to NCM LLC’s founding members under the tax receivable agreement
increased $0.7 million due primarily to changes in tax rates and NCM LLC ownership rates period over period.
The increase in non-operating expense was partially offset by an increase in interest income of $1.4 million due
primarily to interest accrued on the notes receivable from NCM LLC’s founding members from the sale of
Fathom Events and the absence of a $0.8 million impairment of an investment recorded in 2013.

Net income. Net income decreased $27.8 million from $41.2 million for the year ended December 26, 2013

to $13.4 million for the year ended January 1, 2015. The decrease in net income was due to a decrease in
operating income of $50.3 million that was due primarily to the decrease in our national advertising revenue and

was negatively impacted by the sale of the Fathom Events business and $7.5 million of merger-related expenses,
and an increase of $24.2 million in non-operating expense, as described further above, partially offset by a $36.4
million decrease in income attributable to noncontrolling interests and a decrease in income tax expense of $10.3
million, due primarily to lower net income before taxes in the period.

Years Ended December 26, 2013 and December 27, 2012

Revenue. Total revenue for the year ended December 26, 2013 increased $14.0 million, or 3.1%, to $462.8
million, compared to $448.8 million for the 2012 period. The following is a summary of revenue by category (in
millions).

Years Ended

December 26,
2013

December 27,
2012

$ Change
2012 to 2013

% Change
2012 to 2013

National advertising revenue . . . . . . . . . . . . . . . . . . . . . . . .
Local and regional advertising revenue . . . . . . . . . . . . . . . .
Founding member advertising revenue from beverage

concessionaire agreements . . . . . . . . . . . . . . . . . . . . . . . .

Total advertising revenue . . . . . . . . . . . . . . . . . . . . . . .

Fathom Consumer revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Fathom Business revenue . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Fathom Events revenue . . . . . . . . . . . . . . . . . . .

$295.0
89.9

$288.7
81.1

$ 6.3
8.8

41.4

426.3

34.4
2.1

36.5

39.7

409.5

34.2
5.1

39.3

1.7

16.8

0.2
(3.0)

(2.8)

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$462.8

$448.8

$14.0

2.2%
10.9%

4.3%

4.1%

0.6%
(58.8%)

(7.1%)

3.1%

The following table shows data on revenue per attendee for the years ended December 26, 2013 and

December 27, 2012 (in millions):

Years Ended

December 26,
2013

December 27,
2012

% Change
2012 to 2013

National advertising revenue per attendee . . . . . . . . . . . . . . . . . . . . . . . .
Local and regional advertising revenue per attendee . . . . . . . . . . . . . . . .
Total advertising revenue (excluding founding member beverage

revenue) per attendee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total advertising revenue per attendee . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total theatre attendance (in millions) (1) (2) . . . . . . . . . . . . . . . . . . . . . .

$0.422
$0.129

$0.550
$0.610
699.2

$0.418
$0.117

$0.536
$0.593
690.4

1.0%
10.3%

2.6%
2.9%
1.3%

(1) Represents the total attendance within NCM LLC’s advertising network.
(2) Excludes screens and attendance associated with certain AMC Rave and Cinemark Rave theatres for all

periods presented.

National advertising revenue. The $6.3 million, or 2.2%, increase in national advertising revenue (excluding
beverage revenue from NCM LLC’s founding members) was due primarily to an increase in national inventory
utilization which rose from 98.8% in 2012 to 109.3% in 2013 on network attendance growth of 1.3%.
Inventory utilization is calculated based on eleven 30-second salable national advertising units in our pre-show,
which can be expanded, should market demand dictate. Revenue and utilization increased primarily due to
content partner revenue increasing 17.3% to $84.0 million in 2013, compared to $71.6 million in 2012
primarily due to several content partners spending over their annual contractual commitment in 2013. In
addition, online and mobile advertising revenue increased $0.8 million, or 16.4%, from $5.0 million in 2012 to
$5.8 million in 2013. The increases to national advertising revenue were partially offset by a 7.6% decrease in
national advertising CPMs (excluding beverage revenue) due primarily to the expansion of our client mix to
new client industries, more aggressive pricing strategies and increased competition.

Local and regional advertising revenue. The $8.8 million, or 10.9%, increase in local and regional
advertising revenue was driven by an increase in local advertising contract volume of 9.7% and an increase
in the average contract value of 1.1% in 2013, compared to 2012. The increase in contract volume was
driven by an increase in sales to smaller local clients. The average dollar value of our local advertising
contracts under $100,000 increased 6.2% and the number of contracts under $100,000 increased 9.8%, with
contracts between $50,000 and $100,000 driving the increase with growth of 41.7% in the number of
contracts in 2013. The increase in smaller contracts was driven in part by a 2.4% increase in the number of
average network screens in 2013, compared to 2012 and an improving economic outlook in many of the
local markets that we serve. Sales to larger (>$100,000) regional contracts remained consistent period over
period.

Founding member beverage revenue. The $1.7 million, or 4.3%, increase in national advertising revenue
from NCM LLC’s founding members’ beverage concessionaire agreements was due primarily to a 3.7%
increase in founding member attendance in 2013, compared to 2012. The increase in founding member
attendance related primarily to the acquisition of 109 theatres (with 1,437 screens) by NCM LLC’s founding
members late in 2012 and in 2013. These acquisitions expanded our network by 12 theatres (with 192
screens) as 97 theatres (with 1,245 screens) were operated by existing network affiliate theatre circuits.

Fathom Events revenue. Fathom Events revenue, which is comprised of Fathom Consumer revenue and
Fathom Business revenue, decreased $2.8 million, or 7.1%, from $39.3 million in 2012 to $36.5 million in
2013. The decrease was primarily due to a decrease in Fathom Business revenue of $3.0 million as this
business was wound-down in the early part of 2012 and thus we only executed business meeting events on a
periodic basis as requested by long-term Fathom clients or NCM LLC’s founding members. Fathom
Consumer revenue remained consistent increasing $0.2 million, or 0.6%, year-over-year despite the number
of events decreasing by 17, or 18.9%, from 90 in 2012 to 73 in 2013. The events held in 2013 generated
23.6% higher average revenue than those in 2012 due to our focus on higher quality events.

Operating expenses. Total operating expenses for the year ended December 26, 2013 were $260.8 million,

an increase of 1.5%, from $257.0 million for the 2012 period. The following table shows operating expense
breakout for the years ended December 26, 2013 and December 27, 2012 (in millions):

Years Ended

December 26,
2013

December 27,
2012

$ Change
2012 to 2013

% Change
2012 to 2013

Advertising operating costs . . . . . . . . . . . . . . . . . . . . . . . . .
Fathom Events operating costs . . . . . . . . . . . . . . . . . . . . . .
Network costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theatre access fees—founding members . . . . . . . . . . . . . .
Selling and marketing costs . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative and other costs . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . .

$ 29.0
25.5
19.4
69.4
61.5
29.4
26.6

$260.8

$ 31.3
29.0
19.8
64.5
60.5
31.5
20.4

$257.0

$(2.3)
(3.5)
(0.4)
4.9
1.0
(2.1)
6.2

$ 3.8

(7.3%)
(12.1%)
(2.0%)
7.6%
1.7%
(6.7%)
30.4%

1.5%

Advertising operating costs. Advertising operating costs decreased $2.3 million, or 7.3%, from $31.3
million for the year ended December 27, 2012 to $29.0 million for the year ended December 26, 2013. This
decrease was primarily the result of a $2.9 million decrease in affiliate advertising payments. The decrease
in affiliate advertising payments was driven by an 8.0% decrease in the number of average affiliate screens
in 2013, compared to 2012. The decrease in affiliate screens is due to the acquisition of certain affiliate
screens by NCM LLC’s founding members, partially offset by the addition of new affiliate screens to our
network by existing affiliates and the addition of six new affiliate circuits during 2013.

Fathom Events operating costs. Fathom Events operating costs decreased $3.5 million, or 12.1%, from
$29.0 million for the year ended December 27, 2012 to $25.5 million for the year ended December 26, 2013.
The decrease was primarily due to a decrease in costs associated with the Fathom Consumer Events division

of $1.9 million due to lower programming costs as a percentage of event revenue and fewer events in 2013,
compared to 2012. In addition, costs associated with the Fathom Business Events division declined $1.6
million in 2013 compared to 2012 as this division was wound-down in the first quarter of 2012.

Network costs. Network costs decreased $0.4 million, or 2.0%, from $19.8 million for the year ended
December 27, 2012 to $19.4 million for the year ended December 26, 2013. The decrease was primarily due
to a decrease of $0.4 million in share-based compensation expense.

Theatre access fees—founding members. Theatre access fees increased $4.9 million, or 7.6%, from $64.5
million for the year ended December 27, 2012 to $69.4 million for the year ended December 26, 2013.
Approximately $3.3 million of the increase was from an increase in fees for digital screens and equipment
and the remaining $1.6 million of the increase was due to the 3.7% increase in founding member attendance
in 2013, compared to 2012. The fees for digital screens and equipment increased due to an annual 5% rate
increase specified in the ESAs and a higher number of NCM LLC’s founding member theatres equipped
with the higher quality digital cinema equipment year-over-year. As of December 26, 2013, the number of
founding member theatres equipped with digital cinema projectors as a percentage of the total founding
member network was 86%, compared to 84% as of December 27, 2012 and as of December 26, 2013, 96%
of our network screens were showing advertising on digital projectors.

Selling and marketing costs. Selling and marketing costs increased $1.0 million, or 1.7%, from $60.5
million for the year ended December 27, 2012 to $61.5 million for the year ended December 26, 2013. This
increase was primarily due to an increase of $1.7 million in non-cash barter expense partially offset by a
decrease of $0.8 million in personnel costs due primarily to lower salaries and lower share-based
compensation expense.

Administrative and other costs. Administrative and other costs decreased $2.1 million, or 6.7%, from $31.5
million for the year ended December 27, 2012 to $29.4 million for the year ended December 26, 2013. The
decrease was primarily due to $1.5 million decrease in personnel costs due primarily to lower share-based
compensation expense and a decrease of $0.5 million in legal and professional expenses due to a one-time
fee paid in 2012 to consultants that assisted us with the restructuring of the Fathom Events business.

Depreciation and amortization. Depreciation and amortization expense increased $6.2 million, or 30.4%,
from 20.4 million for the year ended December 27, 2012 to $26.6 million for the year ended December 26,
2013. The increase was due to higher amortization of intangible assets related to new affiliate agreements
and NCM LLC founding member common unit adjustments, as well as, an increase in depreciation expense
resulting from greater average property, plant and equipment balances year-over-year related primarily to
equipment installed into new network affiliate theatres.

Non-operating expenses. Total non-operating expenses for the year ended December 26, 2013 were $52.0
million, a decrease of 47.9%, from $99.8 million for the 2012 period due primarily to the $25.4 million gain on
the sale of the Fathom Events business and loss on terminations of interest rate swap agreements in 2012. The
following table shows the non-operating expense breakout for the years ended December 26, 2013 and
December 27, 2012 (in millions):

Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of interest on the discounted payable to

founding members under tax receivable agreement

. . . .
Change in derivative fair value . . . . . . . . . . . . . . . . . . . . . .
Amortization of terminated derivatives . . . . . . . . . . . . . . . .
Impairment on investment . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on swap terminations . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of Fathom Events—founding members . . . . .
Other non-operating expense . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended

December 26,
2013

December 27,
2012

$ Change
2012 to 2013

% Change
2012 to 2013

$ 51.6
(0.4)

$56.7
(0.4)

$ (5.1)
—

(9.0%)
0.0%

13.9
—
10.3
0.8
—
(25.4)
1.2

10.0
(3.0)
4.0
—
26.7
—
5.8

3.9
3.0
6.3
0.8
(26.7)
(25.4)
(4.6)

39.0%
100.0%
157.5%
100.0%
(100.0%)
100.0%
(79.3%)

(47.9%)

Total non-operating expenses . . . . . . . . . . . . . . . . . . .

$ 52.0

$99.8

$(47.8)

Interest on borrowings decreased $5.1 million due primarily to lower average interest rates in 2013,

compared to 2012, as a result of the Company’s debt refinancings in 2012 and 2013. Interest due to NCM LLC’s
founding members under the tax receivable agreement increased $3.9 million due to changes in tax rates and
NCM LLC ownership rates period over period. In connection with the termination of interest rate swaps during
2012, the Company recorded a loss in 2012 of $26.7 million, recorded higher amortization on terminated
derivatives of $6.3 million in 2013 and no longer recorded changes in derivative fair value, all of which
decreased non-operating expenses by $17.4 million in 2013, compared to 2012. In 2013, we recorded a gain of
$25.4 million, net of direct expenses, for the sale of our Fathom Events business on December 26, 2013. During
2013, we also recorded an impairment charge on a cost method investment of $0.8 million and had lower other
non-operating expense primarily due to a decrease in write-offs of debt issuance costs during 2013.

Net income. Net income increased $27.8 million, or 207.5 %, from $13.4 million for the year ended
December 27, 2012 to $41.2 million for the year ended December 26, 2013. The increase in net income was
driven by a decrease in non-operating expenses of $47.8 million, an increase in operating income of $10.2
million, as described further above, and a decrease in tax expense of $6.5 million due primarily to the reversal of
a valuation allowance on a capital loss carryforward that the Company now expects to utilize because of capital
gains associated with the sale of the Fathom Events business. These increases to net income were partially offset
by a $36.7 million increase in income attributable to noncontrolling interests due to higher NCM LLC net
income.

Known Trends and Uncertainties

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

Changes in the current macro-economic environment and changes in the national and local and regional

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, growth in our advertising client base and
improvements in the technical quality of our network and upgrades to our inventory management and audience

targeting systems that are in process. 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 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 favorably impacted our upfront national bookings that were up approximately 100% going
into 2015, for the period from October 1, 2014 through December 31, 2015, compared to the same five quarter
period ending in December 2014 going into 2014. This total excludes approximately $23 million that had been
originally committed by a large advertising agency, but was later eliminated from the spending commitment
when the merger with Screenvision was challenged by the DOJ. Consistent with television upfront bookings, a
portion of our upfront commitments after the fourth quarter of 2014 have cancellation options associated with
them that could reduce what is ultimately spent by clients that have made upfront commitments. Due in part to
the strength of our upfront bookings, we experienced 22.9% national advertising growth in the fourth quarter of
2014, compared to the fourth quarter of 2013, and going into 2015, our national commitments for fiscal year
2015 were up approximately 74% compared to 2014 at the same time, representing 73% of our 2015 national
advertising revenue budget (versus 38% of our 2014 budget).

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 216 million new salable national
advertising impressions (assuming 14 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 these additional attendees to provide our advertising clients a better marketing product with increased
advertising impressions, improved geographic coverage and better audience targeting capabilities that is expected
to expand our and our theatre circuit partner’s revenue, operating income and cash flow. Our future revenue
growth could also be positively impacted by the expansion of our advertising network, including the proposed
merger with Screenvision. We also believe that the continued growth of our market coverage ubiquity and overall
number of impressions will strengthen our selling proposition and competitive positioning versus other national
and local video advertising platforms, including television, online and mobile video platforms and other out-of
home advertising platforms.

In 2014, we experienced a decline of 16.4%, compared to 2013, in national advertising CPMs (excluding

beverage revenue) due primarily to the increased competition from other national video networks, including
online and mobile advertising platforms and the implementation of more aggressive seasonal and volume pricing
strategies that contributed to the expansion of our client mix to new client industries that traditionally buy their
television and other advertising at lower CPMs. However, national advertising CPMs (excluding beverage) began
to stabilize in the fourth quarter of 2014 and we do expect them to continue to stabilize for the fiscal year 2015
due primarily to the greater upfront demand.

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,
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 will reduce their beverage advertising from 60 seconds to
30 seconds to accommodate a six-month test of other in-theatre marketing activities by their beverage supplier.
During the six-month test, we will have the right to sell the 30 second unit to other clients. We expect this
decrease to result in a reduction in beverage revenue of approximately $2.8 million in the third and fourth
quarters of 2015, however, we believe that some or all of this revenue may be replaced through the sale of
advertising to other brands who will find this premium inventory attractive. The other founding members have
just 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 annual percentage change in 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 our lower segment
one CPMs in 2014, the CPM on our beverage concessionaire revenue will decrease 14.4% in 2015.

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 January 1, 2015, 89% of our founding member network screens were showing advertising on digital
cinema projectors.

On May 5, 2014, we entered into the Merger Agreement to merge with Screenvision as described in
Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The
merger consideration is subject to adjustment based upon Screenvision’s Adjusted EBITDA for the twelve
months ended April 30, 2014, which resulted in no adjustment and is subject to adjustment based upon
Screenvision’s positive working capital at closing up to a maximum of $10 million. On November 3, 2014, the
DOJ filed the DOJ Action. A trial date has been scheduled for April 13, 2015. If prior to May 5, 2015 (or 90 days
thereafter if extended by the Company or Screenvision), certain conditions to the merger are not fulfilled, the
merger is prohibited by law or a final non-appealable government order, or if we materially breach our
representations or covenants such that the closing conditions in the Merger Agreement cannot be satisfied,
Screenvision may be able to terminate the Merger Agreement and, upon termination, we may be required to pay
a termination fee of approximately $28.8 million. NCM LLC would indemnify NCM, Inc. and bear a pro rata
portion of this fee based upon NCM, Inc.’s ownership percentage in NCM LLC, with NCM LLC’s founding
members bearing the remainder of the fee in accordance with their ownership percentage in NCM LLC. Further,
NCM LLC would indemnify NCM, Inc. for the merger-related administrative costs incurred related to the
Merger and bear a pro rata portion of this fee based upon NCM, Inc.’s ownership percentage in NCM LLC, with
NCM LLC’s founding members bearing the remainder of the costs in accordance with their ownership
percentage in NCM LLC. If Screenvision or its affiliates materially breach their representations or covenants
such that the closing conditions in the Merger Agreement cannot be satisfied, they will be required to pay us a
termination fee of $10 million, and if Screenvision is subsequently sold within one year of the termination, an
additional amount equal to the amount by which the sale proceeds are greater than $385 million will be paid to us
up to a maximum of $28.8 million (including the $10 million). If the merger is not completed and we are
required to pay the termination fee, our future financial results would be adversely affected. The Commitment
Letter and certain NCM LLC senior secured credit facility amendments expire on April 1, 2015. We are working
with the merger financing bank group to extend the merger financing commitments to accommodate the
litigation process.

Trends and Uncertainties Related to Liquidity and Financial Performance

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 transactions,
we extended the average maturities of our debt by over six years. As of January 1, 2015, the average remaining
maturity of our debt is 6.4 years. As of January 1, 2015, approximately 67% of our total borrowings bear interest

at fixed rates. The remaining 33% of our borrowings bear interest at variable rates and as such, our net income
and earnings per share could fluctuate with interest rate fluctuations related to our borrowings. Refer to Note 10
to the audited Consolidated Financial Statements included elsewhere in this document.

During the year ended January 1, 2015, we paid regular quarterly cash dividends of $0.88 per share on each

share of the Company’s common stock and we paid a special dividend of $0.50 per share on each share of the
Company’s common stock. These dividend payments totaled $81.0 million during 2014. 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 only 91.0% of our regular dividend payment in 2014 ($0.88 per share). This deficit of $4.7
million for 2014 was funded by NCM, Inc.’s cash and marketable securities balances, which as of January 1,
2015 were $70.4 million. While we anticipate over time that our revenue growth will result in cash flow available
for dividends in excess of our regular dividend payments and 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 continued deficits as one of the factors when declaring dividends in the future.

Our short-term marketable securities balance decreased from $71.3 million as of December 26, 2013 to

$21.7 as of January 1, 2015. The increase was due primarily to the Company purchasing more marketable
securities with original maturities greater than three months, such that they are now classified as short-term
marketable securities rather than cash equivalents. The Company purchased investments with longer maturities in
order to increase its rate of return. As investments mature in 2015, the Company expects to continue to purchase
securities with longer maturities in order to achieve higher rates of return. Our total cash, cash equivalents and
short and long-term marketable securities balance as of January 1, 2015 was $80.6 million, compared to $126.0
million at December 26, 2013.

Our effective tax rate for the years ended January 1, 2015, December 26, 2013 and December 27, 2012 was

43.3%, 33.0% and 67.2%, respectively. Our tax rate is affected by recurring items and the relative amount of
income that NCM, Inc. earns in various state and local jurisdictions. Our tax rate is also impacted by discrete
items that may occur in any year. The increase in tax rate for the year ended January 1, 2015 is primarily due to
the absence of a reversal of a capital loss valuation allowance recorded in 2013 and greater NCM LLC income
taxes. The decrease in tax rate for the year ended December 26, 2013 is primarily due to the reversal of a
valuation allowance on a capital loss carryforward. The increase in tax rate for the year ended December 27,
2012 was primarily due an adjustment to the measurement of our long-term payable to our founding member
liability’s expected net realized tax benefit which included approximately $9.6 million attributable to prior
periods. As of January 1, 2015, we have federal and state net operating loss carryforwards of approximately $8.4
million and $28.6 million, respectively, which we expect to be able to utilize prior to their expiration if taxable
income is consistent with periods prior to our 2014 fiscal year. Refer to Note 7 to the audited Consolidated
Financial Statements included elsewhere in this document.

Trends Related to Ownership in NCM LLC

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
2014, NCM LLC issued 1,087,911 common membership units to its founding members for the rights to exclusive
access to net new theatre screens and attendees added by the founding members to NCM LLC’s network during
2013. Of these units, 432,646 related to theatre acquisitions and 655,265 related to new theatres constructed, net
of closures. NCM LLC recorded a net intangible asset of approximately $16.4 million during the first quarter of
2014 as a result of the annual Common Unit Adjustment. The common unit adjustment for the first quarter of
2014 was lower than the adjustment for the first quarter of 2013 primarily due to the fact that the founding
members opened fewer net new theatres while two of the founding members made large acquisitions that

exceeded the two percent of attendance threshold requiring NCM LLC to make special common unit adjustments
in 2013 rather than include the common unit issuance in the annual common unit adjustment.

Overall, NCM Inc.’s ownership in NCM LLC decreased to 45.8% as of January 1, 2015 compared to 46.1%

at December 26, 2013 due primarily to the annual common unit adjustment described above, which has
proportionally increased net income attributable to noncontrolling interests and decreased net income attributable
to NCM, Inc.

Financial Condition and Liquidity

Liquidity

Our cash balances can fluctuate due to the seasonality of our business and related timing of collections of

accounts receivable balances and operating expenditure payments, as well as, available cash payments (as
defined in the NCM LLC Operating Agreement) to NCM LLC’s founding members, interest or principal
payments on our term loan and the Senior Secured Notes 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).

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

Years Ended

$ Change

January 1,
2015

December 26,
2013

December 27,
2012

2013 to 2014

2012 to 2013

Cash, cash equivalents and marketable

securities (1) . . . . . . . . . . . . . . . . . . . . . . . . .
Revolver availability (2) . . . . . . . . . . . . . . . . . .

$ 80.6
113.0

Total liquidity . . . . . . . . . . . . . . . . . . . . . .

$193.6

$126.0
104.0

$230.0

$106.6
110.0

$216.6

$(45.4)
9.0

$(36.4)

$19.4
(6.0)

$13.4

(1)

Included in cash and cash equivalents as of January 1, 2015, December 26, 2013 and December 27, 2012
there was $10.2 million, $13.3 million and $10.4 million of cash held by NCM LLC which is not available
to satisfy NCM, Inc.’s dividend payments and other NCM, Inc. obligations.

(2) The revolving credit facility portion of NCM LLC’s total borrowings is available, subject to certain

conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other
transactions permitted under the senior secured credit facility, and a portion is available for letters of credit.
NCM LLC’s total availability under the revolving credit facility is $135.0 million.

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

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

Operating cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 117.9
$
(3.5)
$(155.7)

$ 153.1
$ (55.9)
$(114.9)

$ 81.6
$(19.4)
$(55.7)

Cash Flows—Years Ended January 1, 2015 and December 26, 2013

Operating Activities. The $35.2 million decrease in cash provided by operating activities for the year ended

January 1, 2015 versus the year ended December 26, 2013 was due primarily to the $38.2 million decrease in
consolidated net income (not including the $26.0 million noncash gain on the sale of Fathom Events during
2013) and a $17.0 million higher payment to NCM LLC’s founding members under the tax receivable agreement

due primarily to additional payments made for operating loss carrybacks to prior years, partially offset by a $24.7
million smaller change in accounts receivable period over period primarily due to lower revenue and timing of
collections in the period.

Investing Activities. The $52.4 million decrease in cash used in investing activities for the year ended
January 1, 2015 compared to the year ended December 26, 2013 was due primarily to higher proceeds from the
sale and maturity of marketable securities, net of purchases, of approximately $40.9 million, a decrease of
approximately $5.9 million in affiliate payments for the upfront fees paid upon commencement of certain
network affiliate agreements and an increase of approximately $4.2 million in proceeds from notes receivable
from the founding members related to the sale of the Fathom Events business.

Financing Activities. The $40.8 million increase in cash used in financing activities during the year ended

January 1, 2015 compared to the year ended December 26, 2013 was due primarily to an increase of
approximately $31.8 million in cash dividends paid due primarily to the payment of a $29.3 million special cash
dividend of $0.50 per share during the first quarter of 2014 and lower proceeds from stock option exercises of
approximately $19.5 million, partially offset by a decrease in distributions to NCM LLC’s founding members of
approximately $16.3 million.

Cash Flows—Years Ended December 26, 2013 and December 27, 2012

Operating Activities. The $71.5 million increase in cash provided by operating activities for the year ended
December 26, 2013 versus the year ended December 27, 2012 was primarily due to the absence of $63.4 million
of payments for interest rate swap terminations that were incurred in 2012, a $11.9 million increase in other
operating activities, an $8.1 million lower payment to our founding members under the tax receivable agreement
in 2013 due to a larger tax loss in 2012 and a $5.8 million increase in income after non-cash items, partially
offset by a $21.5 million decrease in accounts receivable collections period over period primarily from the timing
of collections in the period.

Investing Activities. The $36.5 million increase in cash used in investing activities for the year ended
December 26, 2013 compared to the year ended December 27, 2012 was due primarily to higher purchases of
marketable securities, net of sales and maturities, of $34.9 million and an increase of $1.7 million in affiliate
payments for the upfront fees paid upon commencement of certain network affiliate agreements.

Financing Activities. The $59.2 million increase in cash used in financing activities during the year ended

December 26, 2013 compared to the year ended December 27, 2012 was due primarily to a decrease in cash
proceeds from borrowings, net of payments, of $74.0 million and an increase in distributions to NCM LLC’s
founding members of $15.8 million, partially offset by greater proceeds from stock option exercises of $18.1
million and $10.6 million lower debt issuance costs.

Sources of Capital and Capital Requirements

NCM, Inc.’s primary source of liquidity and capital resources is the quarterly available cash distributions
from NCM LLC as well as its existing cash balances and marketable securities, which as of January 1, 2015 were
$70.4 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. Refer to Note 10
to the audited Consolidated Financial Statements included elsewhere in this document and “Financings” below
for a detailed discussion of the debt transactions in 2013 and 2014.

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 year ended January 1, 2015
was $146.4 million ($67.0 million to NCM, Inc). NCM, Inc. expects to use cash received from the 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 January 21, 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
March 12, 2015 to be paid on March 26, 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.

Capital Expenditures

Capital expenditures of NCM LLC have typically been capitalized software upgrades for our DCS and
advertising proposal and inventory management and audience targeting systems being developed primarily by
our programmers and outside consultants, equipment required for our NOC and content production and post-
production facilities, office leasehold improvements, desktop equipment for use by our employees, and in certain
cases, the costs necessary to digitize all or a portion of a network affiliate’s theatres when they are added to our
network. Capital expenditures for the year ended January 1, 2015 were $8.8 million (including $1.6 million
associated with network affiliate additions) compared to $10.6 million (including $2.2 million associated with
network affiliate additions) for the 2013 period. The capital expenditures have typically been satisfied through
cash flow from operations. All capital expenditures related to the DCN within NCM LLC’s founding members’
theatres have been made by NCM LLC’s founding members under the ESAs. We expect they will continue to be
made by NCM LLC’s founding members in accordance with the ESAs.

We expect to make approximately $11.0 million to $12.0 million of capital expenditures in fiscal 2015,

primarily for upgrades to our DCS distribution and content management software and our other internal
management systems, including our proposal, inventory and audience targeting management systems, reporting
systems, server and storage upgrades, software licensing, our internet site, mobile app and network equipment
related to currently contracted network affiliate theatres. We expect these upgrades and improvements to our
management reporting systems, which are intended to provide additional advertising scheduling and placement
flexibility for our clients, should enhance our operating efficiencies, including allowing us to better manage our
advertising inventory and create more targeted buys from our national advertising clients to prepare us for future
growth. Our capital expenditures may increase should we decide to add additional network affiliates to our
network. We expect that additional expenditures, if any, would be funded in part by additional cash flows
associated with those new network affiliates. The commitments associated with our operating lease requirements
are included in “Contractual and Other Obligations” below.

Financings

As of 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. On June 18, 2014, NCM LLC entered into an incremental
amendment of its senior secured credit facility whereby the revolving credit facility was increased by $25.0
million. In addition, on July 2, 2014, NCM LLC entered into an amendment of its senior secured credit facility
whereby the maturity date was extended by two years to November 26, 2019, which corresponds to the maturity
date of the $270 million term loans. The amendment also contains certain amendments (“Conditional
Amendments”) to the senior secured credit facility that will only be effective upon the contribution of
Screenvision assets and NCM, Inc. debt to NCM LLC. Although it is under no obligation to do so, upon approval
of NCM, Inc.’s Board of Directors and NCM LLC’s founding members, NCM, Inc. may contribute the

Screenvision assets and the new NCM, Inc. debt facility to NCM LLC in exchange for NCM LLC common
membership units. To allow for this potential contribution to NCM LLC, the Conditional Amendments include
an increase in the amount of incremental senior secured indebtedness permitted by the Amended Credit Facility
from $160 million to $250 million. If the Screenvision contribution to NCM LLC does not occur by April 1,
2015, the Conditional Amendments will not become effective and lender consent for the Conditional
Amendments will be immediately and automatically revoked, unless extended. The obligations under the facility
are secured by a lien on substantially all of the assets of NCM LLC.

On July 2, 2014, in contemplation of the Merger with Screenvision, NCM, Inc. entered into Commitment
Letter with certain existing NCM LLC revolving credit facility lenders. Under the Commitment Letter, subject to
certain conditions, the lenders committed to make a term loan in an aggregate principal amount of $250 million
to fund the Screenvision merger and related expenses. This term loan is expected to finance the $225 million
portion of the merger consideration that will be paid in cash, along with fees and expenses incurred in connection
with the term loan and the Merger. The term loan will mature on the second anniversary of the funding of the
term loan. NCM, Inc. has the right to contribute the Screenvision assets and the $250 million loan to NCM LLC,
at which point, the Conditional Amendments to the amended senior secured credit facility described above will
become effective. On November 3, 2014, the DOJ filed the DOJ Action. A trial date has been scheduled for
April 13, 2015. We are working with the merger financing bank group to extend the merger financing
commitments to accommodate the litigation process.

On December 31, 2014, $14.0 million of the revolving credit facility matured and NCM LLC paid the

balance in full, along with any accrued and unpaid fees and interest.

On May 2, 2013, NCM LLC entered into an amendment of its senior secured credit facility whereby the
facility was increased from $265.0 million to $270.0 million. In connection with the amendment, the interest
rates on the revolving credit facility and term loans were reduced as described further in Note 10 to the audited
Consolidated Financial Statements. On July 5, 2011, NCM LLC completed a private placement of $200.0 million
in aggregate principal amount of 7.875% Senior Unsecured Notes for which the registered exchange offering was
completed on September 22, 2011. On April 27, 2012, NCM LLC completed a private placement of $400.0
million in aggregate principal amount of 6.00% Senior Secured Notes for which the registered exchange offering
was completed on November 26, 2012. For further information refer to Note 10 to the audited Consolidated
Financial Statements located elsewhere in this document.

The senior secured credit facility contains a number of covenants and financial ratio requirements, with
which NCM LLC was in compliance at January 1, 2015, including a consolidated net senior secured leverage
ratio as of January 1, 2015 of 3.4 versus a covenant of 6.5 times for each quarterly period. NCM LLC is
permitted to make quarterly dividend payments and other payments based on leverage ratios for NCM LLC and
its subsidiaries so long as no default or event of default has occurred and continues to occur. The quarterly
dividend payments and other distributions are made if the consolidated net senior secured leverage ratio is less
than or equal to 6.5 times.

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. If there are limitations
on the restricted payments, NCM LLC may not declare or pay any dividends, or make any payments on account
of NCM LLC, or set aside assets for the retirement or other acquisition of capital stock of the borrower or any
subsidiaries, or make any other distribution for obligations of NCM LLC. When these restrictions are effective,
NCM LLC may still pay the services fee and reimbursable costs pursuant to terms of the management agreement.
NCM LLC can also make payments pursuant to the tax receivable agreement in the amount, and at the time
necessary to satisfy the contractual obligations with respect to the actual cash tax benefits payable to NCM
LLC’s founding members.

Critical Accounting Policies

The significant accounting policies of the Company are described in Note 1 to the audited Consolidated

Financial Statements included elsewhere in this document. Certain accounting policies involve significant
judgments, assumptions and estimates by management that have a material impact on the carrying value of
certain assets and liabilities, which management considers critical accounting policies. The judgments,
assumptions and estimates used by management are based on historical experience, knowledge of the accounts
and other factors, which are believed to be reasonable under the circumstances and are evaluated on an ongoing
basis. Because of the nature of the judgments and assumptions made by management, actual results could differ
from these judgments and estimates, which could have a material impact on the carrying values of assets and
liabilities and the results of operations of the Company.

Allowance for doubtful accounts

Nature of Estimates Required. The allowance for doubtful accounts represents management’s estimate of
probable credit losses inherent in its trade receivables, which represent a significant asset on the balance sheet.
Estimating the amount of the allowance for doubtful accounts requires significant judgment and the use of
estimates related to the amount and timing of estimated losses based on historical loss experience, consideration
of current economic trends and conditions and debtor-specific factors, all of which may be susceptible to
significant change. Account receivable balances are charged against the allowance, while recoveries of amounts
previously charged are credited to the allowance. A provision for bad debt is charged to operations based on
management’s periodic evaluation of the factors previously mentioned, as well as, other pertinent factors. To the
extent actual outcomes differ from management estimates, additional provision for bad debt could be required
that could adversely affect earnings or financial position in future periods.

Sensitivity Analysis. As of January 1, 2015, our allowance for doubtful accounts was $4.3 million, or 3.6%

of the gross accounts receivable balance. A 10% difference in the allowance for doubtful accounts as of
January 1, 2015 would have affected net income attributable to NCM, Inc. by approximately $0.1 million.

Share-based compensation

Nature of Estimates Required. NCM, Inc.’s 2007 Equity Incentive Plan, as amended (the “Equity Incentive Plan”)

is treated as an equity plan under the provisions of Accounting Standards Codification ASC 718—Compensation—
Stock Compensation, and the determination of fair value of options, restricted stock and restricted stock units for
accounting purposes requires that management make complex estimates and judgments. Under the guidance, the fair
value of each employee stock option is estimated on the date of grant using an option pricing model that meets certain
requirements. Although we have not granted stock options since 2012, we use the Black-Scholes option pricing model
to estimate the fair value of stock option grants. The determination of fair value of stock options utilizing the Black-
Scholes model is affected by our stock price and a number of assumptions, including expected volatility, expected life,
risk-free interest rate and expected dividends.

The fair value of restricted stock and restricted stock units is based on the closing market price of our
common stock on the date of grant. Compensation expense equal to the fair value of each restricted stock award
or restricted stock unit is recognized ratably over the requisite service period. Certain of the restricted stock
awards include performance vesting conditions, which permit vesting to the extent that the Company achieves
specified non-GAAP targets at the end of the measurement period. Compensation expense is based on
management’s projections and the probability of achievement of those expectations, which requires considerable
judgment. We record a cumulative adjustment to share-based compensation expense in periods that we change
our estimate of the number of shares expected to vest. Additionally, we ultimately adjust the expense recognized
to reflect the actual vested shares following the resolution of the performance conditions.

Assumptions and Approach Used. In determining the value of stock options, we estimate an expected
dividend yield based upon our expectation of the dividend that will be paid out on the underlying shares during

the expected term of the option. Expected volatility is based on our historical stock prices using a mathematical
formula to measure the standard deviation of the change in the natural logarithm of our underlying stock price
over a period of time commensurate with the expected term. The risk-free interest rate is derived from the zero
coupon rate on U.S. Treasury instruments with a term commensurate with the award’s expected term.

For restricted stock with vesting contingent on the achievement of Company performance conditions, the

amount of compensation expense is estimated based on the expected achievement of the performance condition.
This requires us to make estimates of the likelihood of the achievement of Company performance conditions,
which is highly judgmental. We base our judgments as to the expected achievement of Company performance
conditions based on the financial projections of the Company that are used by management for business
purposes, which represent our best estimate of expected Company performance. We evaluate the assumptions
used to value stock-based awards on a quarterly basis. If factors change and we employ different assumptions,
stock-based compensation expense may differ significantly from what we have recorded in the past. If there are
any modifications or cancellations of stock-based awards, we may be required to accelerate, increase or decrease
any remaining, unrecognized stock-based compensation expense. To the extent that we grant additional stock-
based awards, compensation expense will increase in relation to the fair value of the additional grants.
Compensation expense may be significantly impacted in the future to the extent our estimates differ from actual
results.

Income Taxes

Nature of Estimates Required. We account for income taxes in accordance with ASC 740 – Income Taxes,

which requires an asset and liability approach to financial accounting and reporting for income taxes.
Accordingly, deferred tax assets and liabilities arise from the differences between the tax basis of an asset or
liability and its reported amount in the audited Consolidated Financial Statements. Deferred tax amounts are
determined using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as
provided under currently enacted tax law. Valuation allowances are to be established when necessary to reduce
deferred tax assets to the amount expected to be realized. We currently have no valuation allowance against
certain of our deferred tax assets. In addition, due to the basis differences resulting from our IPO-related
transactions (including the tax receivable agreement with NCM LLC’s founding members) and subsequent
adjustments pursuant to the common unit adjustment agreement, we are required to make cash payments under
the tax receivable agreement to NCM LLC’s founding members in amounts equal to 90% of our actual tax
benefit realized from the tax amortization of the basis difference for certain deferred assets noted above. The
requirements of the tax receivable agreement, as amended, are highly technical and complex and involve
management’s judgment, including judgments to determine hypothetical tax outcomes exclusive of the IPO date
transaction and agreements. If we were to fail to meet certain of the requirements of the tax receivable
agreement, we could be subject to additional payments to taxing authorities or to NCM LLC’s founding
members. Refer to Note 7 to the audited Consolidated Financial Statements included elsewhere in this document.

Sensitivity Analysis. For fiscal 2014, our provision for income taxes was $9.9 million. Changes in
management’s estimates and assumptions regarding the enacted tax rate applied to deferred tax assets and
liabilities, the ability to realize the value of deferred tax assets, or the timing of the reversal of tax basis
differences and judgments used to determine hypothetical tax outcomes exclusive of the IPO date transaction and
agreements could impact the provision for income taxes and change the effective tax rate. A 1% change in the
effective tax rate from 43.3% to 44.3% would have increased the current year income tax provision by
approximately $0.2 million.

Recent Accounting Pronouncements

For a discussion of the recent accounting pronouncements relevant to our business operations, refer to the
information provided under Note 1 to the audited Consolidated Financial Statements included elsewhere in this
document.

Related-Party Transactions

For a discussion of the related-party transactions, refer to the information provided under Note 9 to the

audited Consolidated Financial Statements included elsewhere in this document.

Off-Balance Sheet Arrangements

Our operating lease obligations, which primarily include office leases, are not reflected on our balance
sheet. Refer to “—Contractual and Other Obligations” for further detail. We do not believe these arrangements
are material to our current or future financial condition, results of operations, liquidity, capital resources or
capital expenditures.

Contractual and Other Obligations

Our contractual obligations as of January 1, 2015 were as follows:

Payments Due by Period (in millions)

Within
1 fiscal year

1-3
fiscal years

3-5

fiscal years Thereafter

Total

Borrowings (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash interest on borrowings (2) . . . . . . . . . . . . . . . . .
Office leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Network affiliate agreements (3)
. . . . . . . . . . . . . . . .
Payable to founding members under tax receivable

$ —
48.7
2.5
6.1

agreement (4)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19.6

Interest on payable to founding members under tax

receivable agreement (5)

. . . . . . . . . . . . . . . . . . . .

Total contractual cash obligations . . . . . . . . . . . .

14.6

$91.5

$ —
103.5
4.6
19.2

55.8

29.4

$292.0
106.2
3.4
7.0

52.6

29.8

$600.0
80.5
2.5
4.7

$ 892.0
338.9
13.0
37.0

38.3

52.8

166.3

126.6

$212.5

$491.0

$778.8

$1,573.8

(1) We have a $135.0 million variable rate revolving credit facility of which $22.0 million was outstanding as
of January 1, 2015. Debt service requirements under this agreement depend on the amounts borrowed and
the level of the base interest rate, in addition to a commitment fee on the unused portion of the revolving
credit facility. Refer to further discussion of the secured credit facility under “—Financial Condition and
Liquidity-Financings” above.

(2) The amounts of future cash interest payments in the table above are based on the amount outstanding on the

Senior Secured Notes, Senior Unsecured Notes, term loans and revolving credit facility, as well as,
estimated rates of interest over the term of the variable rate revolving credit facility and term loan. The
Senior Unsecured Notes due in 2021 are at a fixed rate of 7.875%. The Senior Secured Notes due in 2022
are at a fixed rate of 6.00%. In addition, we have variable rate term loans and a revolving credit facility.
Debt service requirements under this agreement depend on the amounts borrowed and the level of the base
interest rate, in addition to a commitment fee on the unused portion of the revolving credit facility. Refer to
further discussion of the secured credit facility under “—Financial Condition and Liquidity-Financings”
above. In addition to the cash interest, we expect to amortize the remaining $1.6 million in the first quarter
of 2015 related to our terminated interest rate swap agreements as discussed in Note 15 to the audited
Consolidated Financial Statements included elsewhere in this document.

(3) The value in this table represents the maximum potential payout under the revenue guarantees made by

NCM LLC to its network affiliates. During 2014, NCM LLC paid an inconsequential amount under these
agreements and an inconsequential amount of liabilities were recorded as of January 1, 2015 for these
obligations. For additional details refer to the information provided under Note 13 to the audited
Consolidated Financial Statements included elsewhere in this document.

(4) The tax receivable agreement entered into at the completion of our IPO provides for the payment by us to

NCM LLC’s founding members of 90% of the amount of cash savings, if any, in U.S. federal, state and

local income tax or franchise tax that we actually realize as a result of certain increases in our proportionate
share of tax basis in NCM LLC’s tangible and intangible assets. The payments to NCM LLC’s founding
members are based, in part, on actual annual income and as such, will vary based on our operating results.
The value in the table represents the estimated amounts payable under the tax receivable agreement as of
January 1, 2015.

(5) The tax receivable agreement described in footnote 4 above was discounted and recorded at present value.
The value in the table represents the estimated accretion of interest that would be due on the discounted
payable as of January 1, 2015.

The ESAs require payments based on a combination of NCM LLC founding member attendance, the
number of digital screens of each NCM LLC founding member and the number of higher quality digital cinema
systems of each NCM LLC founding member. The amount relating to the attendance factor will vary from
quarter to quarter and year to year as theatre attendance varies, while the amount relating to the digital screens
and digital cinema systems will also vary quarter to quarter and year to year as screens are converted to digital
screens, other screens are added or removed through acquisition, divestiture or closure activities of NCM LLC’s
founding members and NCM LLC founding members convert to the higher quality digital cinema systems. The
payments made to NCM LLC’s founding members also will vary due to the escalation of the rates paid for each
factor pursuant to the amended and restated ESAs. The rate per attendee increases 8% every five years, with the
first such increase taking effect for fiscal year 2012, while the rate per digital screen and digital cinema system
screen increase 5% annually. The table above does not include amounts payable under the ESAs as they are
based on variable factors, which are not capable of precise estimation.

Seasonality

Our revenue and operating results are seasonal in nature, coinciding with the timing of marketing

expenditures by our advertising clients and to a lesser extent the attendance patterns within the film exhibition
industry. 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:

FY 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FY 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FY 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FY 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.3%
17.6%
17.8%
17.8%

26.2%
24.5%
26.5%
25.4%

31.2%
32.1%
29.2%
25.6%

26.3%
25.8%
26.5%
31.2%

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

The following table reflects the quarterly percentage of total advertising revenue for the fiscal years ended

2011, 2012, 2013 and 2014:

15.3%
16.2%
17.3%
17.8%

25.5%
24.7%
27.4%
25.4%

32.9%
33.7%
29.9%
25.6%

26.3%
25.4%
25.4%
31.2%

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The primary market risk to which we are exposed is interest rate risk. The Senior Unsecured Notes and the

Senior Secured Notes bear interest at fixed rates, and therefore are not subject to market risk. As of January 1,
2015, the 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 $2.9 million for an annual period on the $22.0 million and $270.0 million outstanding as of
January 1, 2015 on our revolving credit facility and term loan, respectively.

Item 8. Financial Statements and Supplementary Data

Refer to Index to Financial Statements and Supplemental Information on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Effectiveness of Disclosure Controls and Procedures. 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 January 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 January 1, 2015 were effective.

Management’s Annual Report on Internal Control over Financial Reporting. Management is responsible for

establishing and maintaining, and has established and maintains, adequate internal control over financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). As of January 1, 2015, our
management evaluated, with the participation of the Chief Executive Officer (principal executive officer) and
Senior Vice President, Finance and Interim Co-Chief Financial Officer (principal financial officer), the
effectiveness of the Company’s internal control over financial reporting based on the framework in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on that evaluation, the Company’s management concluded that the Company’s internal
control over financial reporting as of January 1, 2015 was effective.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

The effectiveness of our internal control over financial reporting as of January 1, 2015 has been attested by

the Company’s registered independent public accounting firm, Deloitte & Touche LLP, as stated in its report,
which appears herein.

Changes in Internal Control over Financial Reporting.

There were no changes in the Company’s internal controls over financial reporting that occurred during the

quarter ended January 1, 2015, that have materially affected, or are reasonably likely to materially affect, the
Company’s internal controls over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
National CineMedia, Inc.
Centennial, Colorado

We have audited the internal control over financial reporting of National CineMedia, Inc. and subsidiaries (the
“Company”) as of January 1, 2015, based on criteria established in Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s
management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
company’s principal executive and principal financial officers, or persons performing similar functions, and
effected by the company’s board of directors, management, and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may not be
prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of January 1, 2015, based on the criteria established in Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements as of and for the year ended January 1, 2015 of the
Company and our report dated February 27, 2015 expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche LLP
Denver, Colorado
February 27, 2015

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item with respect to our directors is incorporated herein by reference from

the Proxy Statement under the heading “Proposal 1- Election of Directors.”

The information required by this item regarding our executive officers is set forth in Part I of this Annual Report
on Form 10-K under the heading “Executive Officers of the Registrant and is incorporated herein by this reference.”

Information regarding compliance with Section 16(a) of the Exchange Act by our directors and executive officers
and holders of ten percent of a registered class of our equity securities is incorporated in this item by reference from the
Proxy Statement under the heading “Section 16(a) Beneficial Ownership Reporting Compliance.”

Our Board adopted a Code of Business Conduct and Ethics that applies to all of our employees, including

our board of directors, chief executive officer and principal financial officer. The Code of Business Conduct and
Ethics sets forth the Company’s conflict of interest policy, records retention policy, insider trading policy and
policies for protection of the Company’s property, business opportunities and proprietary information. Our Code
of Business Conduct and Ethics is available free of charge on our website at ncm.com under the tab “Investor
Relations– Corporate Governance.” We intend to post on our website any amendments to, or waivers from our
Code of Business Conduct and Ethics applicable to senior financial executives.

Item 11. Executive Compensation

The information required by this item regarding compensation of executive officers and directors is
incorporated herein by reference from the Proxy Statement under the headings “Compensation of Executive
Officers,” “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation”.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters

For information with respect to the security ownership of directors, executive officers and holders of more

than 5% of a class of our voting securities, refer to the Proxy Statement under the heading “Beneficial
Ownership,” which information is incorporated herein by reference.

For Equity Incentive Plan information, refer to the Proxy Statement under the heading “Equity

Compensation Plan”, which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

For information with respect to certain relationships and related transactions, refer to the Proxy Statement

under the heading “Certain Relationships and Related Party Transactions,” which information is incorporated
herein by reference.

For information with respect to director independence, refer to the Proxy Statement under the heading

“Proposal 1—Election of Directors,” which information is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

The information required by this item with respect to principal accounting fees and services is incorporated

herein by reference from the Proxy Statement under the heading “Fees Paid to Independent Auditors.”

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) (1) and (a) (2) Financial statements and financial statement schedules

Refer to Index to Financial Statements on page F-1.

(b) Exhibits

Refer to Exhibit Index, beginning on page 75.

Financial Statement Schedules not included herein have been omitted because they are either not
required, not applicable, or the information is otherwise included herein.

Pursuant to the requirements of Section 13 or 15(d) 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.

SIGNATURES

Dated: February 27, 2015

NATIONAL CINEMEDIA, INC.
(Registrant)

/s/ Kurt C. Hall

Kurt C. Hall
President and Chief Executive Officer
(Principal Executive Officer)

/s/ David J. Oddo

David J. Oddo
Senior Vice President, Finance and Interim Co-
Chief Financial Officer (Principal Financial
Officer)

/s/

Jeffrey T. Cabot

Jeffrey T. Cabot
Senior Vice President, Controller and Interim Co-
Chief Financial Officer (Principal Accounting
Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Kurt C. Hall

Kurt C. Hall

/s/ David J. Oddo

David J. Oddo

/s/

Jeffrey T. Cabot

President, Chief Executive Officer
(Principal Executive Officer)

Senior Vice President, Finance and Interim
Co-Chief Financial Officer
(Principal Financial Officer)

Senior Vice President, Controller and
Interim Co-Chief Financial Officer
(Principal Accounting Officer)

February 27, 2015

/s/ Lawrence A. Goodman

Director

February 27, 2015

Lawrence A. Goodman

/s/ David R. Haas

David R. Haas

/s/ Stephen L. Lanning

Stephen L. Lanning

Director

February 27, 2015

Signature

Title

Date

/s/ Thomas F. Lesinski

Thomas F. Lesinski

Director

February 27, 2015

/s/ Paula Williams Madison

Director

February 27, 2015

Paula Williams Madison

/s/ Amy E. Miles

Amy E. Miles

/s/ Lee Roy Mitchell

Lee Roy Mitchell

/s/ Craig R. Ramsey

Craig R. Ramsey

/s/ Scott N. Schneider
Scott N. Schneider

Director

February 27, 2015

Exhibit

Reference Description

INDEX TO EXHIBITS

3.1

3.2

4.1

4.2

4.4

4.5

4.6

(1)

(2)

(27)

(33)

(34)

10.1

(3)

10.1.1

(19)

10.1.2

(21)

10.1.3

(46)

10.2

(3)

10.2.1

(15)

10.2.2

(22)

Amended and Restated Certificate of Incorporation.

Amended and Restated Bylaws.

Indenture, dated as of July 5, 2011, by and between National CineMedia, LLC and Wells
Fargo Bank, National Association, as trustee.

Form of 7.875% Senior Notes due 2021 (included in Exhibit 10.13.2).

Indenture, dated as of April 27, 2012, by and between National CineMedia, LLC and Wells
Fargo Bank, National Association, as trustee.

Form of 6.00% Senior Secured Notes due 2022 (included in Exhibit 4.4).

Registration Rights Agreement, dated as of April 27, 2012, by and between National
CineMedia, LLC and Barclays Capital Inc., as representative of the Initial Purchasers
named therein.

National CineMedia, LLC Third Amended and Restated Limited Liability Company
Operating Agreement dated as of February 13, 2007, by and among American Multi-
Cinema, Inc., Cinemark Media, Inc., Regal CineMedia Holdings, LLC and National
CineMedia, Inc.

First Amendment to Third Amended and Restated Limited Liability Company Operating
Agreement of National CineMedia, LLC dated as of March 16, 2009, by and among
American Multi-Cinema, Inc., Cinemark Media, Inc., Regal CineMedia Holdings, LLC
and National CineMedia, Inc.

Second Amendment to Third Amended and Restated Limited Liability Company
Operating Agreement of National CineMedia, LLC dated as of August 6, 2010, by and
among American Multi-Cinema, Inc., Cinemark Media, Inc., Regal CineMedia Holdings,
LLC and National CineMedia, Inc.

Third Amendment to the Third Amended and Restated Limited Liability Company
Operating Agreement of National CineMedia, LLC dated September 3, 2013, by and
among American Multi-Cinema, Inc., AMC ShowPlace Theatres, Inc., Cinemark Media,
Inc., Regal CineMedia Holdings, LLC, Regal Cinemas, Inc. and National CineMedia, Inc.

Exhibitor Services Agreement dated as of February 13, 2007, by and between National
CineMedia, Inc. and American Multi-Cinema, Inc. (Confidential treatment granted as to
certain portions, which portions were omitted and filed separately with the Commission.)

Amendment to Exhibitor Services Agreement dated as of November 5, 2008, by and
between National CineMedia LLC and American Multi-Cinema, Inc. (Confidential
treatment granted as to certain portions, which portions were omitted and filed separately
with the Commission.)

Second Amendment to Exhibitor Services Agreement dated as of October 1, 2010, by and
between National CineMedia, LLC and American Multi-Cinema, Inc. (Confidential
treatment granted as to certain portions, which portions were omitted and filed separately
with the Commission.)

10.2.3

(30)

Third Amendment to Exhibitor Services Agreement dated as of April 17, 2012, by and
between National CineMedia, LLC and American Multi-Cinema, Inc.

Exhibit

Reference Description

10.2.4

(51)

10.3

(3)

10.3.1

(16)

10.3.2

(23)

10.3.3

(31)

10.3.4

(51)

10.4

(3)

10.4.1

(17)

10.4.2

(24)

10.4.3

(32)

10.4.4

(51)

10.6

(3)

Amended and Restated Exhibitor Services Agreement dated as of December 26, 2013, by
and between National CineMedia, LLC and American Multi-Cinema, Inc. (Portions
omitted pursuant to request for confidential treatment and filed separately with the
Commission.)

Exhibitor Services Agreement dated as of February 13, 2007, by and between National
CineMedia, Inc. and Cinemark USA, Inc. (Confidential treatment granted as to certain
portions, which portions were omitted and filed separately with the Commission.)

Amendment to Exhibitor Services Agreement dated as of November 5, 2008, by and
between National CineMedia LLC and Cinemark USA, Inc. (Confidential treatment
granted as to certain portions, which portions were omitted and filed separately with the
Commission.)

Second Amendment to Exhibitor Services Agreement dated as of October 1, 2010, by and
between National CineMedia, LLC and Cinemark USA, Inc. (Confidential treatment
granted as to certain portions, which portions were omitted and filed separately with the
Commission.)

Third Amendment to Exhibitor Services Agreement dated as of April 17, 2012, by and
between National CineMedia, LLC and Cinemark USA, Inc.

Amended and Restated Exhibitor Services Agreement dated as of December 26, 2013, by
and between National CineMedia, LLC and Cinemark USA, Inc. (Portions omitted
pursuant to request for confidential treatment and filed separately with the Commission.)

Exhibitor Services Agreement dated as of February 13, 2007, by and between National
CineMedia, Inc. and Regal Cinemas, Inc. (Confidential treatment granted as to certain
portions, which portions were omitted and filed separately with the Commission.)

Amendment to Exhibitor Services Agreement dated as of November 5, 2008, by and
between National CineMedia LLC and Regal Cinemas, Inc. (Confidential treatment
granted as to certain portions, which portions were omitted and filed separately with the
Commission.)

Second Amendment to Exhibitor Services Agreement dated as of October 1, 2010, by and
between National CineMedia, LLC and Regal Cinemas, Inc. (Confidential treatment
granted as to certain portions, which portions were omitted and filed separately with the
Commission.)

Third Amendment to Exhibitor Services Agreement dated as of April 17, 2012, by and
between National CineMedia, LLC and Regal Cinemas, Inc.

Amended and Restated Exhibitor Services Agreement dated as of December 26, 2013, by
and between National CineMedia, LLC and Regal Cinemas, Inc. (Portions omitted
pursuant to request for confidential treatment and filed separately with the Commission.)

Common Unit Adjustment Agreement dated as of February 13, 2007, by and among
National CineMedia, Inc., National CineMedia, LLC, Regal CineMedia Holdings, LLC,
American Multi-Cinema, Inc., Cinemark Media, Inc., Regal Cinemas, Inc. and Cinemark
USA, Inc. (Confidential treatment granted as to certain portions, which portions were
omitted and filed separately with the Commission.)

10.7

(3)

Tax Receivable Agreement dated as of February 13, 2007, by and among National
CineMedia, Inc., National CineMedia, LLC, Regal CineMedia Holdings, LLC, Cinemark
Media, Inc., Regal Cinemas, Inc., American Multi-Cinema, Inc. and Cinemark USA, Inc.

Exhibit

Reference Description

10.7.1

(14)

10.8

(3)

10.9

(3)

10.10

(3)

10.11

(3)

10.12

(3)

10.13

(40)

10.13.1

(41)

10.13.2

(45)

10.13.3

(52)

10.14

(3)

10.14.1

(18)

10.15

(3)

10.15.1

(18)

10.18

(3)

Second Amendment to Tax Receivable Agreement effective as of April 29, 2008, by and
by and among NCM, Inc. and National CineMedia, LLC and the Founding Members and
the ESA Parties, amending the Tax Receivable Agreement dated as of February 13, 2007
and as first amended by the First Amendment to the Tax Receivable Agreement effective
as of August 7, 2007.

First Amended and Restated Loews Screen Integration Agreement by and between
National CineMedia, LLC and American Multi-Cinema, Inc. (Confidential treatment
granted as to certain portions, which portions were omitted and filed separately with the
Commission.)

Second Amended and Restated Software License Agreement dated as of February 13,
2007, by and among American Multi-Cinema, Inc., Regal CineMedia Corporation,
Cinemark USA, Inc., Digital Cinema Implementation Partners, LLC and National
CineMedia, LLC.

Director Designation Agreement dated as of February 13, 2007, by and among National
CineMedia, Inc., American Multi-Cinema, Inc., Cinemark Media, Inc. and Regal
CineMedia Holdings, LLC.

Registration Rights Agreement dated as of February 13, 2007, by and among National
CineMedia, Inc., American Multi-Cinema, Inc., Regal CineMedia Holdings, LLC and
Cinemark Media, Inc.

Management Services Agreement dated as of February 13, 2007, by and among National
CineMedia, Inc. and National CineMedia, LLC.

Amended and Restated Credit Agreement among National CineMedia, LLC and Barclays
Bank PLC, as Lead Arranger dated as of November 26, 2012.

Amendment No. 4 to the Credit Agreement dated as of February 13, 2007, as amended,
restated, modified or otherwise supplemented, among National CineMedia LLC and
Barclays Bank PLC, as administrative agent dated as of November 26, 2012.

Amendment No. 5 to the Credit Agreement dated as of February 13, 2007, as amended,
restated, modified or otherwise supplemented, among National CineMedia LLC, certain
lenders party thereto and Barclays Bank PLC, as administrative agent dated as of May 2,
2013.

Amendment No. 6 to the Credit Agreement dated as of February 13, 2007, as amended,
restated, modified or otherwise supplemented, among National CineMedia LLC, certain
lenders party thereto and Barclays Bank PLC, as administrative agent dated as of July 2,
2014.

Employment Agreement dated as of February 13, 2007, by and among National
CineMedia, Inc., National CineMedia, LLC and Kurt C. Hall. +

First Amendment to Employment Agreement effective as of January 1, 2009, by and
among National CineMedia, Inc., National CineMedia, LLC and Kurt C. Hall. +

Employment Agreement dated as of February 13, 2007, by and among National
CineMedia, Inc., National CineMedia, LLC and Clifford E. Marks. +

First Amendment to Employment Agreement effective as of January 1, 2009, by and
among National CineMedia, Inc., National CineMedia, LLC and Clifford E. Marks. +

Employment Agreement dated as of February 13, 2007, by and among National
CineMedia, Inc., National CineMedia, LLC and Ralph E. Hardy. +

Exhibit

Reference Description

10.18.1

(18)

First Amendment to Employment Agreement effective as of January 1, 2009, by and
among National CineMedia, Inc., National CineMedia, LLC and Ralph E. Hardy. +

(44)

National CineMedia, Inc. 2007 Equity Incentive Plan.+

10.19

10.20

10.21

10.22

10.22.1

10.22.2

10.22.3

10.22.4

10.23

10.23.3

10.23.4

10.23.5

10.23.3

10.23.4

10.23.5

10.23.6

10.23.7

10.23.8

10.24

(4)

(5)

(6)

(18)

(25)

(29)

(42)

(7)

(29)

(42)

(47)

(48)

(53)

(54)

(8)

10.24.1

(36)

10.24.2

(49)

10.25

(9)

10.27

(10)

10.27.1

(37)

10.27.2

(49)

10.28

(11)

10.29

(12)

Form of Option Substitution Award. +

Form of Restricted Stock Substitution Award. +

Form of Stock Option Agreement. +

Form of 2009 Stock Option Agreement. +

Form of 2010 Stock Option Agreement. +

Form of 2011 Stock Option Agreement. +

Form of 2012 Stock Option Agreement. +

Form of Restricted Stock Agreement. +

Form of 2011 Restricted Stock Agreement. +

Form of 2012 Restricted Stock Agreement. +

Form of 2012-2 Restricted Stock Agreement. +

Form of 2013 Restricted Stock Agreement (Time Based). +

Form of 2013 Restricted Stock Agreement (Performance Based). +

Form of 2014 Restricted Stock Agreement (Time Based). +

Form of 2014 Restricted Stock Agreement (Performance Based). +

Form of 2015 Restricted Stock Agreement (Time Based). +

Form of 2015 Restricted Stock Agreement (Performance Based). +

Confirmation of Swap, dated as of June 12, 2007, between National CineMedia, LLC and
Morgan Stanley Capital Services Inc.

Confirmation of Partial Termination of Swap, dated May 21, 2012, between National
CineMedia, LLC and Morgan Stanley Capital Services LLC.

Cancellation of Swap, dated November 26, 2012, between National CineMedia, LLC and
Morgan Stanley Capital Services LLC.

ISDA Master Agreement dated as of March 2, 2007, between National CineMedia, LLC
and Morgan Stanley Capital Services and Schedule.

Confirmation of Swap, dated as of July 25, 2007, between National CineMedia, LLC and
Credit Suisse International.

Confirmation of Partial Termination of Swap, dated May 22, 2012, between National
CineMedia, LLC and Credit Suisse International.

Cancellation of Swap, dated December 13, 2012, between National CineMedia, LLC and
Credit Suisse International.

ISDA Master Agreement dated as of March 2, 2007, between National CineMedia, LLC
and Credit Suisse International and Schedule.

Confirmation of Swap, dated as of August 6, 2007, between National CineMedia, LLC
and JPMorgan Chase Bank, N.A.

Exhibit

Reference Description

10.29.1

(38)

10.29.2

(49)

Confirmation of Partial Termination of Swap, dated May 31, 2012, between National
CineMedia, LLC and JPMorgan Chase Bank, N.A.

Cancellation of Swap, dated January 9, 2013, between National CineMedia, LLC and
JPMorgan Chase Bank, N.A.

10.30

10.34

10.36

10.37

(13)

(18)

(25)

10.37.1

(39)

10.37.2

(49)

10.38

10.40

10.41

10.42

10.43

10.44

10.5

21.1

23.1

31.1

31.2

32.1

32.2

101.INS

101.SCH

101.CAL

101.DEF

101.LAB

101.PRE

(20)

(26)

(28)

(35)

(43)

(50)

(55)

ISDA Master Agreement dated as of August 6, 2007, between National CineMedia,
LLC and JPMorgan Chase Bank, N.A.

Form of Restricted Stock Unit Agreement. +

ISDA Novation Agreement dated as of February 4, 2010, between National CineMedia,
LLC, Lehman Brothers Special Financing Inc. and Barclays Bank PLC.

Confirmation of Swap, dated as of February 16, 2010, between National CineMedia,
LLC and Barclays Bank PLC.

Confirmation of Partial Termination of Swap, dated May 31, 2012, between National
CineMedia, LLC and Barclays Bank PLC.

Cancellation of Swap, dated December 13, 2012, between National CineMedia, LLC
and Barclays Bank PLC.

ISDA Master Agreement dated as of February 4, 2010 between National CineMedia,
LLC and Barclays Bank PLC.

National CineMedia, Inc. 2011 Performance Bonus Plan. +

Employment Agreement dated as of August 24, 2011, by and among National
CineMedia, Inc., National CineMedia, LLC and Earl B. Weihe. +

National CineMedia, Inc. 2012 Performance Bonus Plan. +

National CineMedia, Inc. Executive Performance Bonus Plan.

Employment Agreement dated as of January 15, 2014, by and among National
CineMedia, Inc., National CineMedia, LLC and Alfonso P. Rosabal, Jr.

Agreement and Plan of Merger dated as of May 5, 2014, by and among National
CineMedia, Inc., SV Holdco, LLC, Acquiror Sub 1, LLC, Acquiror Sub 2, LLC and
Screenvision, LLC

List of Subsidiaries.

Consent of Deloitte & Touche LLP.

Rule 13a-14(a) Certification of Chief Executive Officer

Rule 13a-14(a) Certification of Principal Financial Officer

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

*
**
+
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Filed herewith.
Furnished herewith.
Management contract.
Incorporated by reference to Exhibit 3.1 from the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on May 6, 2011.
Incorporated by reference to Exhibit 4.2 from the Registrant’s Registration Statement on Form S-8 (File
No. 333-140652) filed on February 13, 2007.
Incorporated by reference to Exhibits of the same number from the Registrant’s Current Report on
Form 8-K (File No. 001-33296) filed on February 16, 2007.
Incorporated by reference to Exhibit 4.4 from the Registrant’s Registration Statement on Form S-8 (File
No. 333-140652) filed on February 13, 2007.
Incorporated by reference to Exhibit 4.5 from the Registrant’s Registration Statement on Form S-8 (File
No. 333-140652) filed on February 13, 2007.
Incorporated by reference to Exhibit 4.6 from the Registrant’s Registration Statement on Form S-8 (File
No. 333-140652) filed on February 13, 2007.
Incorporated by reference to Exhibit 4.7 from the Registrant’s Registration Statement on Form S-8 (File
No. 333-140652) filed on February 13, 2007.
Incorporated by reference to Exhibit 10.1 from the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on August 10, 2007.
Incorporated by reference to Exhibit 10.2 from the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on August 10, 2007.
Incorporated by reference to Exhibit 10.1 from the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on November 9, 2007.
Incorporated by reference to Exhibit 10.2 from the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on November 9, 2007.
Incorporated by reference to Exhibit 10.3 from the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on November 9, 2007.
Incorporated by reference to Exhibit 10.4 from the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on November 9, 2007.
Incorporated by reference to Exhibit 10.1 from the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on May 5, 2008.
Incorporated by reference to Exhibit 10.1 from the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on November 6, 2008.
Incorporated by reference to Exhibit 10.2 from the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on November 6, 2008.
Incorporated by reference to Exhibit 10.3 from the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on November 6, 2008.
Incorporated by reference to Exhibits of the same number from the Registrant’s Annual Report on
Form 10-K (File No. 001-33296) filed on March 6, 2009.
Incorporated by reference to Exhibit 10.1.1 from the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on August 7, 2009.
Incorporated by reference to Exhibit 10.1 from the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on April 14, 2010.
Incorporated by reference to Exhibit 10.1 from the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on August 10, 2010.
Incorporated by reference to Exhibit 10.1 from the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on October 6, 2010.
Incorporated by reference to Exhibit 10.2 from the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on October 6, 2010.
Incorporated by reference to Exhibit 10.3 from the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on October 6, 2010.

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Incorporated by reference to Exhibits of the same number from the Registrant’s Annual Report on
Form 10-K (File No. 001-33296) filed on March 9, 2010.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on May 2, 2011.
Incorporated by reference to Exhibits of the same number from the Registrant’s Current Report on
Form 8-K (File No. 001-33296) filed on July 7, 2011.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on August 26, 2011.
Incorporated by reference to Exhibits of the same number from the Registrant’s Annual Report on
Form 10-K (File No. 001-33296) filed on February 25, 2011.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on April 18, 2012.
Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on April 18, 2012.
Incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on April 18, 2012.
Incorporated by reference to Exhibit 4.1 from the Registrant’s Current Report on Form 8-K
(File No. 001-33296) filed on April 30, 2012.
Incorporated by reference to Exhibit 4.3 from the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on April 30, 2012.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on May 4, 2012.
Incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on August 3, 2012.
Incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on August 3, 2012.
Incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on August 3, 2012.
Incorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on August 3, 2012.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on November 28, 2012.
Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on November 28, 2012.
Incorporated by reference to Exhibits of the same number from the Registrant’s Annual Report on
Form 10-K (File No. 001-33296) filed on February 24, 2012.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on May 2, 2013.
Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on May 2, 2013.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on May 7, 2013.
Incorporated by reference to Exhibit 10.1.3 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on September 9, 2013.
Incorporated by reference to Exhibit 10.23.5 to the Registrant’s Annual Report on Form 10-K (File
No. 001-33296) filed on February 22, 2013.
Incorporated by reference to Exhibit 10.23.6 to the Registrant’s Annual Report on Form 10-K (File
No. 001-33296) filed on February 22, 2013.
Incorporated by reference to Exhibits of the same number from the Registrant’s Annual Report on
Form 10-K (File No. 001-33296) filed on February 22, 2013.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on January 22, 2014.

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Incorporated by reference to Exhibits of the same number from the Registrant’s Annual Report on
Form 10-K (File No. 001-33296) filed on February 21, 2014.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on July 3, 2014.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on May 6, 2014.
Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File
No. 001-33296) filed on May 6, 2014.
Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File
No. 001-33296) filed on May 6, 2014.

INDEX TO FINANCIAL STATEMENTS

National CineMedia, Inc. and Subsidiaries

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of January 1, 2015 and December 26, 2013 . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the years ended January 1, 2015, December 26, 2013 and

Page

F-2
F-3

December 27, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-4

Consolidated Statements of Comprehensive Income for the years ended January 1, 2015,

December 26, 2013 and December 27, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Equity/(Deficit) for the years ended January 1, 2015, December 26, 2013
and December 27, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended January 1, 2015, December 26, 2013 and
December 27, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-5

F-6

F-7
F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
National CineMedia, Inc.
Centennial, Colorado

We have audited the accompanying consolidated balance sheets of National CineMedia, Inc. and subsidiaries
(the “Company”) as of January 1, 2015 and December 26, 2013, and the related consolidated statements of
income, comprehensive income, stockholders’ equity/(deficit), and cash flows for the years ended January 1,
2015, December 26, 2013 and December 27, 2012. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on the financial statements based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial
position of National CineMedia, Inc. and subsidiaries as of January 1, 2015 and December 26, 2013, and the
results of their operations and their cash flows for the years ended January 1, 2015, December 26, 2013 and
December 27, 2012, in conformity with accounting principles generally accepted in the United States of
America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of January 1, 2015, based on the
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 27, 2015 expressed an unqualified
opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP
Denver, Colorado
February 27, 2015

F-2

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)

January 1,
2015

December 26,
2013

ASSETS
CURRENT ASSETS:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables, net of allowance of $4.3 and $5.7, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of notes receivable—founding members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

NON-CURRENT ASSETS:

Property and equipment, net of accumulated depreciation of $72.9 and $69.5, respectively . . . . . . .
Intangible assets, net of accumulated amortization of $69.3 and $48.7, respectively . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs, net of accumulated amortization of $17.8 and $15.0, respectively . . . . . . . . . .
Long-term notes receivable, net of current portion—founding members . . . . . . . . . . . . . . . . . . . . .
Other investments (including $1.3 and $1.1 with related parties, respectively) . . . . . . . . . . . . . . . . .
Long-term marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13.4
21.7
116.5
3.6
6.9
6.1
4.2

172.4

22.4
488.6
227.3
15.5
16.6
2.5
45.5
0.6

819.0

54.7
71.3
120.4
3.1
4.2
7.6
4.2

265.5

25.6
492.0
244.2
17.7
20.8
1.1
—
0.4

801.8

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 991.4

$1,067.3

LIABILITIES AND EQUITY/(DEFICIT)
CURRENT LIABILITIES:

Amounts due to founding members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payable to founding members under tax receivable agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued payroll and related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable (including $1.0 and $0.8 to related party affiliates, respectively) . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34.9
19.6
19.2
10.7
13.3
8.5
1.0
—

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

107.2

NON-CURRENT LIABILITIES:

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payable to founding members under tax receivable agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

892.0
54.2
146.7

1,092.9

1,200.1

30.1
28.6
19.7
13.9
20.5
4.7
—
14.0

131.5

876.0
61.9
144.0

1,081.9

1,213.4

COMMITMENTS AND CONTINGENCIES (NOTE 13)
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, 58,750,926 and 58,519,137

issued and outstanding, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid in capital (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings (distributions in excess of earnings) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Total equity/(deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.6
(261.0)
(147.4)
(0.4)

(408.2)
199.5

(208.7)

0.6
(271.7)
(80.0)
(3.2)

(354.3)
208.2

(146.1)

TOTAL LIABILITIES AND EQUITY/DEFICIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 991.4

$1,067.3

Refer to accompanying notes to Consolidated Financial Statements.

F-3

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except share and per share data)

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

REVENUE:

Advertising (including revenue from founding members of $38.7,
$41.6 and $39.9, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . .
Fathom Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

394.0
—
394.0

426.3
36.5
462.8

OPERATING EXPENSES:

Advertising operating costs (including $3.7, $3.6 and $4.2 to

related parties, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fathom Events operating costs (including $0.0, $5.3 and $5.9 to

founding members, respectively) . . . . . . . . . . . . . . . . . . . . . . . .
Network costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Theatre access fees—founding members . . . . . . . . . . . . . . . . . . . .
Selling and marketing costs (including $0.9, $1.4 and $1.1 to

founding members, respectively) . . . . . . . . . . . . . . . . . . . . . . . .
Merger-related administrative costs . . . . . . . . . . . . . . . . . . . . . . . .
Other administrative and other costs . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . .

NON-OPERATING EXPENSES:

Interest on borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income (including $1.2, $0.0 and $0.0 from founding

members, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accretion of interest on the discounted payable to founding

members under tax receivable agreement . . . . . . . . . . . . . . . . . .
Change in derivative fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of terminated derivatives . . . . . . . . . . . . . . . . . . . . .
Impairment of investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on swap terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of Fathom Events to founding members . . . . . . . . . .
Other non-operating expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CONSOLIDATED NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

Less: Net income attributable to noncontrolling

NET INCOME ATTRIBUTABLE TO NCM, INC.

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .

NET INCOME PER NCM, INC. COMMON SHARE:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

WEIGHTED AVERAGE SHARES OUTSTANDING:

$
$

26.4

—
18.3
70.6

57.6
7.5
29.5
32.4
242.3
151.7

52.6

(1.8)

14.6
—
10.0
—
—
—
0.8
76.2
75.5
9.9
65.6

52.2
13.4

0.23
0.23

29.0

25.5
19.4
69.4

61.5
—
29.4
26.6
260.8
202.0

51.6

(0.4)

13.9
—
10.3
0.8
—
(25.4)
1.2
52.0
150.0
20.2
129.8

88.6
41.2

0.74
0.73

$
$

409.5
39.3
448.8

31.3

29.0
19.8
64.5

60.5
—
31.5
20.4
257.0
191.8

56.7

(0.4)

10.0
(3.0)
4.0
—
26.7
—
5.8
99.8
92.0
26.7
65.3

51.9
13.4

0.25
0.24

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per common share . . . . . . . . . . . . . . . . . . . . . . . . . .

58,709,534
59,005,320
1.38

56,014,404
56,628,457
0.88

54,377,135
55,026,771
0.88

Refer to accompanying notes to Consolidated Financial Statements.

F-4

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

CONSOLIDATED NET INCOME, NET OF TAX OF $9.9, $20.2 AND

$26.7, RESPECTIVELY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$65.6

$129.8

$65.3

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Amortization of terminated derivatives, net of tax of $1.8, $1.8 and

$0.7, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on cash flow hedges, net of tax of $0.0, $0.0 and
$5.7, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONSOLIDATED COMPREHENSIVE INCOME . . . . . . . . . . . . . . . . . .

8.2

—

73.8

Less: Comprehensive income attributable to noncontrolling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57.6

COMPREHENSIVE INCOME ATTRIBUTABLE TO NCM, INC. . . . . .

$16.2

8.5

—

138.3

94.2

$ 44.1

3.3

25.4

94.0

70.0

$24.0

Refer to accompanying notes to Consolidated Financial Statements.

F-5

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY/ (DEFICIT)
(In millions, except share and per share data)

Common Stock

Consolidated

Amount

NCM, Inc.

Additional
Paid in
Capital
(Deficit)

Retained
Earnings
(Distribution
in Excess of
Earnings)

Accumulated
Other
Comprehensive
Loss

Noncontrolling
Interest

$(346.8)
(76.8)

53,934,605
—

$ 0.5
—

$(376.2)
—

$ (34.9)
—

$(17.3)
—

$ 81.1
(76.8)

Balance—December 29, 2011 . . . .
Distributions to members . . . . . . .
NCM LLC equity issued for

purchase of intangible asset . . . .

Income tax and other impacts of

NCM LLC ownership
changes . . . . . . . . . . . . . . . . . . .

Comprehensive income, net of

tax . . . . . . . . . . . . . . . . . . . . . . .

Share-based compensation

issued . . . . . . . . . . . . . . . . . . . . .

Share-based compensation

expense/capitalized . . . . . . . . . .
Cash dividends declared $0.88 per
share . . . . . . . . . . . . . . . . . . . . . .
Balance—December 27, 2012 . . . .

10.1

2.9

94.0

—

9.2

—

551,654

—

4.9

1.9

—

7.0

—

13.4

10.6

—

(49.0)
$(356.4)

—
54,486,259

—
$ 0.5

—
$(362.4)

(49.0)
$ (70.5)

—
$ (6.7)

Distributions to founding

members . . . . . . . . . . . . . . . . . .

(103.8)

NCM LLC equity issued for

purchase of intangible asset . . . .

Income tax and other impacts of

NCM LLC ownership
changes . . . . . . . . . . . . . . . . . . .
Issuance of shares . . . . . . . . . . . . .
NCM, Inc. investment in NCM

LLC . . . . . . . . . . . . . . . . . . . . . .

Comprehensive income, net of

tax . . . . . . . . . . . . . . . . . . . . . . .

Share-based compensation

221.6

(19.5)
41.1

(41.3)

138.3

—

—
2,300,000

—

issued . . . . . . . . . . . . . . . . . . . . .

18.6

1,732,878

Share-based compensation

expense/capitalized . . . . . . . . . .
Cash dividends declared $0.88 per
share . . . . . . . . . . . . . . . . . . . . . .
Balance—December 26, 2013 . . . .

6.0

—

(50.7)
$(146.1)

—
58,519,137

Distributions to founding

members . . . . . . . . . . . . . . . . . .

(79.4)

NCM LLC equity issued for

purchase of intangible asset . . . .

Income tax and other impacts of

NCM LLC ownership
changes . . . . . . . . . . . . . . . . . . .

Comprehensive income, net of

tax . . . . . . . . . . . . . . . . . . . . . . .

Share-based compensation

16.4

0.1

73.8

—

issued . . . . . . . . . . . . . . . . . . . . .

(0.6)

231,789

Share-based compensation

expense/capitalized . . . . . . . . . .

Excess tax benefit from share-

based compensation . . . . . . . . . .
Cash dividends declared $1.38 per
share . . . . . . . . . . . . . . . . . . . . . .
Balance—January 1, 2015 . . . . . . .

7.8

0.1

—

—
—

—

0.1

—

—
$ 0.6

—

101.4

(33.2)
41.1

(41.3)

—

18.5

4.2

—

—
—

—

41.2

—

0.6
—

—

2.9

—

—
$(271.7)

(50.7)
$ (80.0)

—
$ (3.2)

—
$ 208.2

—

7.5

(1.6)

—

(0.6)

5.3

0.1

—

13.4

—

2.8

—

(79.4)

8.9

1.7

57.6

—

2.5

—

(80.8)
$(208.7)

—
58,750,926

—
$ 0.6

—
$(261.0)

(80.8)
$(147.4)

—
$ (0.4)

—
$ 199.5

Refer to accompanying notes to Consolidated Financial Statements.

F-6

5.2

1.0

70.0

—

2.2

—
$ 82.7

(103.8)

120.2

13.1
—

—

94.2

—

1.8

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)

CASH FLOWS FROM OPERATING ACTIVITIES:

Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 65.6

$ 129.8

$ 65.3

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

Adjustments to reconcile consolidated net income to net cash provided by

operating activities:

Deferred income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from share-based compensation . . . . . . . . . . . . . . . . . . . . .
Accretion of interest on the discounted payable to founding members under

tax receivable agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on hedging transactions . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment on investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of terminated derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of non-consolidated entities . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of debt issuance costs and other non-operating items . . . . . . . . . . . .
Loss on swap terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of Fathom Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment for swap terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts due to founding members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment to founding members under tax receivable agreement . . . . . . . . . . . .
Income taxes and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . .

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale and maturities of marketable securities . . . . . . . . . . . . . . . . . . .
Payment from founding members for intangible assets . . . . . . . . . . . . . . . . . . . . . .
Purchases of intangible assets from network affiliates . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from note receivable—founding members . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Founding member integration payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions to founding members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of offering costs and fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of stock for restricted stock tax withholding . . . . . . . . . . . . . . . . . . . . .

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . .

12.6
32.4
7.7
0.1

14.6
—
—
10.0
2.8
(0.2)
—
—
—
—

2.7
(10.3)
3.0
(27.1)
4.0

117.9

(8.7)
(116.8)
120.8
—
(3.0)
4.2

(3.5)

(81.0)
138.0
(136.0)
(0.6)
2.1
(77.5)
—
(0.1)
0.8
(1.4)

(155.7)

(41.3)
54.7

14.6
26.6
5.9
—

13.9
—
0.8
10.3
2.8
—
1.2
—
(26.0)
—

(22.0)
6.6
0.9
(10.1)
(2.2)

153.1

(10.1)
(135.0)
98.1
—
(8.9)
—

(55.9)

(49.2)
59.0
(48.0)
(3.4)
2.1
(93.8)
(0.2)
—
20.3
(1.7)

(114.9)

(17.7)
72.4

33.5
20.4
9.0
(0.1)

10.0
(3.0)
—
4.0
2.4
—
5.9
26.7
—
(63.4)

(0.5)
4.0
(0.3)
(18.2)
(14.1)

81.6

(10.4)
(60.0)
58.0
0.2
(7.2)
—

(19.4)

(48.7)
546.0
(461.0)
(14.0)
—
(78.0)
—
0.1
2.2
(2.3)

(55.7)

6.5
65.9

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 13.4

$ 54.7

$ 72.4

Supplemental disclosure of non-cash financing and investing activity:

Purchase of an intangible asset with NCM LLC equity . . . . . . . . . . . . . . . . . . . . . .
Accrued distributions to founding members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating segment sold under notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of subsidiary equity with NCM, Inc. equity . . . . . . . . . . . . . . . . . . . . . . .
Increase in cost and equity method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Decrease) increase in dividends not requiring cash in the period . . . . . . . . . . . . . .
Write-off of property and equipment included in accrued expenses . . . . . . . . . . . .

Supplemental disclosure of cash flow information:

Cash paid for interest
(Refunds) payments for income taxes, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 16.4
$ 32.9
$ —
$ —
$
$
$

1.2
(0.2)
(0.4)

$ 49.9
(5.2)
$

$ 221.6
$ 31.0
$ 25.0
$ 41.1
0.3
$
$
1.5
$ —

$ 49.3
4.3
$

$ 10.1
$ 20.9
$ —
$ —
0.6
$
$
0.3
$ —

$ 50.7
5.2
$

Refer to accompanying notes to Consolidated Financial Statements.

F-7

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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”), an LLC owned
by NCM, Inc., American Multi-Cinema, Inc. and AMC ShowPlace Theatres, Inc. (“AMC”), wholly owned
subsidiaries of AMC Entertainment, Inc. (“AMCE”), 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 to sell advertising (the
“Services”) under long-term exhibitor services agreements (“ESAs”) with the founding members and certain
third-party theatre circuits under long-term network affiliate agreements referred to in this document as “network
affiliates”, which have terms from three to twenty years.

As of January 1, 2015, NCM LLC had 128,294,505 common membership units outstanding, of which

58,750,926 (45.8%) were owned by NCM, Inc., 25,792,942 (20.1%) were owned by Regal, 24,556,136
(19.1%) were owned by Cinemark and 19,194,501 (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.

Recent Transactions

On December 26, 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability
company owned 32% by each of the founding members and 4% by NCM LLC, as described further in Note 2—
Divestiture.

On May 5, 2014, NCM, Inc. entered into the Merger Agreement to merge with Screenvision for $375

million, consisting of $225 million in cash and $150 million of NCM, Inc. common stock (9,900,990 shares
based on a price of $15.15 per share). The merger consideration is subject to adjustment based upon
Screenvision’s Adjusted EBITDA for the twelve months ended April 30, 2014, which resulted in no adjustment
and is subject to adjustment based upon Screenvision’s positive working capital at closing up to a maximum of
$10 million. On November 3, 2014, the DOJ filed the DOJ Action. A trial date has been scheduled for April 13,
2015. Following the merger, NCM, Inc. will evaluate whether to contribute the Screenvision assets to NCM
LLC. Although it is under no obligation to do so, upon approval of NCM, Inc.’s Board of Directors and the
founding members, NCM, Inc. may contribute Screenvision assets and NCM, Inc. debt to NCM LLC in
exchange for 9,900,990 NCM LLC membership units. NCM, Inc. has secured a commitment from a group of
financial institutions for a $250 million term loan to finance the $225 million portion of the merger consideration
that will be paid in cash, along with fees and expenses incurred in connection with the term loan and the merger.
In addition, NCM LLC amended its senior secured credit facility to allow for the contribution of the Screenvision
assets and NCM, Inc. debt to NCM LLC following the closing of the merger. The Commitment Letter and NCM
LLC senior secured credit facility amendments expire on April 1, 2015. The Company is working with the
merger financing bank group to extend the merger financing commitments to accommodate the litigation
process.

Basis of Presentation

The Company has prepared its Consolidated Financial Statements and related notes of NCM, Inc. in
accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the

F-8

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

rules and regulations of the Securities and Exchange Commission (“SEC”). Certain reclassifications have been
made to the prior years’ financial statements to conform to the current presentation (refer to Note 7—Income
Taxes, whereby certain captions were broken out due to their significance in 2014). These reclassifications had
no effect on previously reported results of operations or retained earnings.

As a result of the various related-party agreements discussed in Note 9—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.

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, interest rate swaps and income taxes. Actual results could differ
from those estimates.

Significant Accounting Policies

Accounting Period—The Company has a 52-week or 53-week fiscal year ending on the first Thursday after
December 25. Fiscal year 2014 contained 53 weeks. Fiscal years 2013 and 2012 contained 52 weeks. Throughout
this document, the fiscal years are referred to as set forth below:

Fiscal Year Ended

Reference in
this Document

January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 26, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 27, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2014
2013
2012

Segment Reporting—Advertising is the principal business activity of the Company and is the Company’s
only reportable segment under the requirements of ASC 280—Segment Reporting. Fathom Events (prior to its
sale) was an operating segment under ASC 280. The Company does not evaluate its segments on a fully allocated
cost basis, nor does the Company track segment assets separately. As such, the results are not indicative of what
segment results of operations would have been had it been operated on a fully allocated cost basis. The Company
cautions that it would be inappropriate to assume that unallocated operating costs are incurred proportional to
segment revenue or any directly identifiable segment expenses. Refer to Note 16—Segment Reporting.

Revenue Recognition—The Company derives revenue principally from the advertising business, which
includes on-screen and lobby network (LEN) advertising and lobby promotions and advertising on entertainment
websites and mobile applications owned by us and other companies. Revenue is recognized when persuasive
evidence of an arrangement exists, delivery occurs or services are rendered, the sales price is fixed and
determinable and collectability is reasonably assured. The Company considers the terms of each arrangement to
determine the appropriate accounting treatment.

On-screen advertising consists of national and local advertising. National advertising is sold on a cost per

thousand (“CPM”) basis, while local and regional advertising is sold on a per-screen, per-week basis. The
Company recognizes national advertising as impressions (or theatre attendees) are delivered and recognizes local
on-screen advertising revenue during the period in which the advertising airs. The Company recognizes revenue
derived from lobby network and promotions when the advertising is displayed in theatre lobbies and recognizes
revenue from branded entertainment websites and mobile applications when the online or mobile impressions are

F-9

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

served. The Company may make contractual guarantees to deliver a specified number of impressions to view the
customers’ advertising. If those contracted number of impressions are not delivered, the Company will run
additional advertising to deliver the contracted impressions at a later date. The deferred portion of the revenue
associated with the undelivered impressions is referred to as a make-good provision. In rare cases, the Company
will make a cash refund of the portion of the contract related to the undelivered impressions. The Company
defers the revenue associated with the make-good until the advertising airs to the theatre attendance specified in
the advertising contract. The make-good provision is recorded within accrued expenses in the Consolidated
Balance Sheets. The Company records deferred revenue when cash payments are received, or invoices are issued,
in advance of revenue being earned and is classified as a current liability as it is expected to be earned within the
next twelve months. Fathom Events revenue was recognized in the period in which the event was held.

Barter Transactions—The Company enters into barter transactions that exchange advertising program time

for products and services used principally for selling and marketing activities. The Company records barter
transactions at the estimated fair value of the advertising exchanged based on fair value received for similar
advertising from cash paying customers. Revenues for advertising barter transactions are recognized when
advertising is provided, and products and services received are charged to expense when used. The Company
limits the use of such barter transactions to necessary items and services for which it would otherwise have paid
cash. Any timing differences between the delivery of the bartered revenue and the use of the bartered expense
products and services are recorded through accounts receivable. Revenue from barter transactions for the years
ended January 1, 2015, December 26, 2013 and December 27, 2012 was $1.3 million, $1.9 million and $3.0
million, respectively. Expense recorded from barter transactions for the years ended January 1,
2015, December 26, 2013 and December 27, 2012 was $1.2 million, $2.9 million and $1.3 million, respectively.

Operating Costs—Advertising-related operating costs primarily include personnel and other costs related to

advertising fulfillment, payments due to unaffiliated theatre circuits under the network affiliate agreements, and
to a lesser extent, production costs of non-digital advertising.

Fathom Events operating costs include revenue share under the ESAs to the founding members and revenue
share to affiliate theatres under separate agreements, payments to event content producers and other direct costs
of the meeting or event, including equipment rental, catering and movie tickets acquired primarily from the
founding members.

Payment to the founding members of a theatre access fee is comprised of a payment per theatre attendee, a

payment per digital screen and a payment per digital cinema projector equipped in the theatres, all of which
escalate over time. Refer to Item 7—“Management’s Discussion and Analysis of Financial Condition and Results
of Operations” included elsewhere in this document.

Network costs include personnel, satellite bandwidth, repairs, and other costs of maintaining and operating

the digital network and preparing advertising and other content for transmission across the digital network. These
costs were not specifically allocated between the advertising business and the Fathom Events business (prior to
the sale of Fathom Events).

Cash and Cash Equivalents—All highly liquid debt instruments and investments purchased with an
original maturity of three months or less are classified as cash equivalents and are considered available-for-sale
securities. There are cash balances in a bank in excess of the federally insured limits or in the form of a money
market demand account with a major financial institution.

Restricted Cash—As of January 1, 2015 and December 26, 2013, other non-current assets included
restricted cash of $0.3 million, which secures a letter of credit used as a lease deposit on the Company’s
New York office.

F-10

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Marketable Securities—The Company’s marketable securities are classified as available-for-sale and are
reported at fair value. The fair value of substantially all securities is determined by quoted market information
and pricing models using inputs based upon market information, including contractual terms, market prices and
yield curves. The estimated fair value of securities for which there are no quoted market prices is based on
similar types of securities that are traded in the market.

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
transacting with founding members or large, national advertising agencies who 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 January 1, 2015 and December 26, 2013,
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 years ended January 1, 2015, December 26, 2013 and December 27, 2012, there were no customers that
accounted for more than 10% of revenue.

Receivables consisted of the following (in millions):

As of

January 1,
2015

December 26,
2013

Trade accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for doubtful accounts . . . . . . . . . . . . .

$119.4
1.4
(4.3)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$116.5

$124.5
1.6
(5.7)

$120.4

Long-lived Assets—Property and equipment is stated at cost, net of accumulated depreciation or

amortization. Generally, the equipment associated with the digital network of the founding member theatres is
owned by the founding members, while the equipment associated with network affiliate theatres is owned by the
Company. Major renewals and improvements are capitalized, while replacements, maintenance, and repairs that
do not improve or extend the lives of the respective assets are expensed as incurred. The Company records
depreciation and amortization using the straight-line method over the following estimated useful lives:

Equipment
. . . . . . . . . . . . . . . . . . . .
Computer hardware and software . .
Leasehold improvements . . . . . . . . .

4-10 years
3-5 years
Lesser of lease term or asset life

Software and website development costs developed or obtained for internal use are accounted for in
accordance with ASC 350—Internal Use Software and ASC 350– Website Development Costs. The subtopics
require the capitalization of certain costs incurred in developing or obtaining software for internal use. The
majority of software costs related primarily to the Company’s inventory management systems and digital
network distribution system (DCS) and website development costs, which are included in equipment, are
depreciated over three to five years. As of January 1, 2015 and December 26, 2013, the Company had a net book
value of $9.5 million and $10.9 million, respectively, of capitalized software and website development costs.
Approximately $6.5 million, $6.1 million and $4.1 million was recorded for the years ended January 1, 2015,

F-11

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 26, 2013 and December 27, 2012, respectively, in depreciation expense related to software and
website development. For the years ended January 1, 2015, December 26, 2013 and December 27, 2012, the
Company recorded $1.7 million, $1.8 million and $0.8 million in research and development expense,
respectively.

The Company assesses impairment of long-lived assets pursuant with ASC 360 – Property, Plant and
Equipment. This includes determining if certain triggering events have occurred that could affect the value of an
asset. The Company has not recorded impairment charges related to long-lived assets.

Intangible assets—Intangible assets consist of contractual rights to provide its services within the theatres

of the founding members and network affiliates and are stated at cost, net of accumulated amortization. The
Company records amortization using the straight-line method over the contractual life of the intangibles,
corresponding to the term of the ESAs or the term of the contract with the network affiliate. Intangible assets are
tested for impairment at least annually during the fourth quarter or whenever events or changes in circumstances
indicate the carrying value may not be fully recoverable. In its impairment testing, the Company estimates the
fair value of its ESAs or network affiliate agreements by determining the estimated future cash flows associated
with the ESAs or network affiliate agreements. If the estimated fair value is less than the carrying value, the
intangible asset is written down to its estimated fair value. Significant judgment is involved in estimating long-
term cash flow forecasts. The Company has not recorded impairment charges related to intangible assets.

Other Investments—Other investments consisted of the following (in millions):

Investment in AC JV, LLC (1) . . . . . . . . . . . . . . . . . . . .
Other investments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of

January 1,
2015

December 26,
2013

$1.3
1.2

$2.5

$ 1.1
—

$ 1.1

(1) Refer to Note 9—Related Party Transactions.
(2) During 2014, the Company received equity securities in some privately held companies as consideration for
advertising contracts. The equity securities were accounted for under the cost method and represent an
ownership of less than 20%. The Company does not exert significant influence of these companies’
operating or financial activities.

The Company reviews investments accounted for under the cost and equity methods for impairment
whenever events or changes in circumstances indicate that the carrying amount of the investment may not be
fully recoverable. In order to determine whether the carrying value of investments may have experienced an
“other-than-temporary” decline in value necessitating the write-down of the recorded investment, the Company
considers various factors including the investees financial condition and quality of assets, the length of time the
investee has been operating, the severity and nature of losses sustained in current and prior years, qualifications
in accountant’s reports due to liquidity or going concern issues, investee announcements of adverse changes,
downgrading of investee debt, regulatory actions, loss of principal customer, negative operating cash flows or
working capital deficiencies and the record of an impairment charge by the investee for goodwill, intangible or
long-lived assets. Once a determination is made that an other-than-temporary impairment exists, the Company
writes down its investment to fair value. During the years ended January 1, 2015, December 26, 2013 and
December 27, 2012, the Company recorded other-than-temporary impairment charges of $0.0 million, $0.8
million and $0.0 million. The impairment charge during 2013 wrote the investment to a remaining fair value of
$0.0 million.

F-12

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts Due to/from Founding Members—Amounts due to/from founding members include amounts due

for the theatre access fee, offset by a receivable for advertising time purchased by the founding members on
behalf of their beverage concessionaire plus any amounts outstanding under other contractually obligated
payments. Payments to or received from the founding members against outstanding balances are made monthly.
Available cash distributions are made quarterly.

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. The Company’s unrecognized
tax benefits or related interest and penalties are immaterial. Refer to Note 7—Income Taxes.

Debt Issuance Costs—In relation to the issuance of outstanding debt discussed in Note 10—Borrowings,

there is a balance of $15.5 million and $17.7 million in deferred financing costs as of January 1, 2015 and
December 26, 2013, respectively. The debt issuance costs are being amortized on a straight-line basis over the
terms of the underlying obligations and are included in interest on borrowings, which approximates the effective
interest method.

The changes in debt issuance costs are as follows (in millions):

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance payments . . . . . . . . . . . . . . . .
Amortization of debt issuance costs . . . . . . .
Write-off of debt issuance costs . . . . . . . . . .

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17.7
0.6
(2.8)
—

$15.5

$18.3
3.4
(2.8)
(1.2)

$17.7

$12.6
14.0
(2.4)
(5.9)

$18.3

Share-Based Compensation—In 2012, the Company issued stock options, restricted stock and restricted
stock units. In 2013 and 2014, the Company only issued restricted stock and restricted stock units. Restricted
stock and restricted stock units vest upon the achievement of Company performance measures and service
conditions or only 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 expected
to vest. Ultimately, the Company adjusts the expense recognized to reflect the actual vested shares following the

F-13

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Compensation cost of stock options was based on the estimated grant date fair value using the Black-
Scholes option pricing model, which requires that the Company make estimates of various factors. Under the fair
value recognition provisions of ASC 718 Compensation – Stock Compensation, the Company recognizes share-
based compensation net of an estimated forfeiture rate, and therefore only recognizes compensation cost for those
shares expected to vest over the requisite service period of the award. Refer to Note 11—Share-Based
Compensation for more information.

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

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

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

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

Derivative Instruments—NCM LLC is exposed to various financial and market risks including changes in

interest rates that exist as part of its ongoing operations. In 2012, NCM LLC utilized certain interest rate swaps to
manage these risks. In accordance with ASC 815—Derivatives and Hedging, the effective portion of changes in
the fair value of a derivative that was designated as a cash flow hedge was recorded in Accumulated Other
Comprehensive Income (“AOCI”) and reclassified into earnings in the same period or periods during which the
hedged transaction affects earnings. Any ineffectiveness associated with designated cash flow hedges, as well as,
any change in the fair value of a derivative that is not designated as a hedge, was recorded immediately in the
Consolidated Statements of Income. For more information, refer to Note 15—Derivative Instruments and
Hedging Activities.

Consolidation—NCM, Inc. consolidates the accounts of NCM LLC under the provision 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.

F-14

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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):

Net income attributable to NCM, Inc. . . . . . . . . . .
NCM LLC equity issued for purchase of

intangible asset

. . . . . . . . . . . . . . . . . . . . . . . . .

Income tax and other impacts of NCM LLC

ownership changes . . . . . . . . . . . . . . . . . . . . . .
NCM, Inc. investment in NCM LLC . . . . . . . . . .
Issuance of shares . . . . . . . . . . . . . . . . . . . . . . . . .

Change from net income attributable to NCM,

Inc. and transfers from noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

$13.4

$ 41.2

$13.4

7.5

(1.6)
—
—

101.4

(33.2)
(41.3)
41.1

4.9

1.9
—
—

$19.3

$109.2

$20.2

Recent Accounting Pronouncements

In March 2014, the Emerging Issues Task Force (“EITF”) reached a final consensus on Issue 13-D,
Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could
be Achieved after the Requisite Service Period (“EITF 13-D”). Under EITF 13-D, a performance target that can
be achieved after the requisite service period should be treated as a performance condition that affects vesting,
rather than a condition that affects grant date fair value. Compensation cost is recognized over the requisite
service period if it is probable that the performance condition will be achieved. If necessary, compensation cost is
subsequently adjusted, to reflect those awards that ultimately vest. EITF 13-D will be effective, on a prospective
basis, for the Company during its first quarter of 2016, with early adoption permitted. The adoption of this
standard is not anticipated to have a material impact on the Company’s audited Consolidated Financial
Statements or notes thereto.

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 beginning in fiscal year 2017 and early
adoption is not permitted. 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 audited Consolidated Financial Statements or notes thereto, as well as, which transition method it intends to
use.

In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial
Statements—Going Concern (“ASU 2014-15”). ASU 2014-15 requires that management evaluate at each annual
and interim reporting period whether there is a substantial doubt about an entity’s ability to continue as a going
concern within one year of the date that the financial statements are issued. ASU 2014-15 will be effective for
fiscal years and interim periods beginning after December 15, 2016 and early application is permitted. The
Company does not expect that the application of ASU 2014-15 will have an impact on the audited Consolidated
Financial Statements or notes thereto.

F-15

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In November 2014, the FASB issued ASU 2014-17, Business Combinations (Topic 805): Pushdown

Accounting (“ASU 2014-17”). The amendments in ASU 2014-17 provide guidance on whether and at what
threshold an acquired entity that is a business or nonprofit activity may elect to apply pushdown accounting in its
separate financial statements upon a change-in-control event in which an acquirer obtains control of the acquired
entity. The amendments in ASU 2014-17 were effective on November 18, 2014. After the effective date, an
acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent
change-in-control event. However, if the financial statements for the period in which the most recent change-in-
control event occurred already have been issued or made available to be issued, the application of this guidance
would be a change in accounting principle. The adoption of ASU 2014-17 did not have any impact on the audited
Consolidated Financial Statements or notes thereto.

The Company has considered all other recently issued accounting pronouncements and does not believe the
adoption of such pronouncements will have a material impact on its audited Consolidated Financial Statements.

2. DIVESTITURE

On December 26, 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability
company (AC JV, LLC) owned 32% by each of the founding members and 4% by NCM LLC. In consideration
for the sale, NCM LLC received a total of $25.0 million in promissory notes from its founding members (one-
third or approximately $8.3 million from each founding member). The notes receivable bear interest at a fixed
rate of 5.0% per annum, compounded annually. Interest and principal payments are due annually in six equal
installments commencing on the first anniversary of the closing. Due to the related party nature of the
transaction, NCM LLC formed a committee of independent directors that hired a separate legal counsel and an
investment banking firm who advised the committee and rendered an opinion as to the fairness of the transaction.
NCM LLC deconsolidated Fathom Events and recognized a gain on the sale of approximately $26.0 million
during the year ended December 26, 2013. The gain was measured as the difference between (a) the net fair value
of the retained noncontrolling investment and the consideration received for the sale and (b) the carrying value of
Fathom Events net assets (approximately $0.1 million). NCM LLC recorded approximately $0.6 million of
expenses related to the sale, which were recorded as a reduction to the gain. Approximately $1.1 million of the
gain recognized related to the re-measurement of the Company’s retained 4% interest in AC JV, LLC. The fair
value of NCM LLC’s retained noncontrolling investment of $1.1 million was determined by applying NCM
LLC’s ownership percentage to the fair value of AC JV, LLC, which was valued using comparative market
multiples. Under the terms of the agreement, the assets and liabilities related to Fathom events held prior to the
sale were not assumed by the buyer and those pertaining to Fathom events held post-closing were transferred to
the buyer.

Future minimum principal payments under the notes receivable as of January 1, 2015 are approximately as

follows (in millions):

Year

Minimum Principal
Payments

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4.2
4.2
4.2
4.1
4.1

$20.8

On December 26, 2013, NCM LLC amended and restated its existing ESAs with each of the founding

members to remove those provisions addressing the rights and obligations related to the digital programming

F-16

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

services of the Fathom Events business. These rights and obligations were conveyed to AC JV, LLC in
connection with the sale. In connection with the sale, NCM LLC entered into a transition services agreement to
provide certain corporate overhead services for a fee and reimbursement for the use of facilities and certain
services including creative, technical event management and event management for the newly formed limited
liability company for a period of nine months following the closing. In addition, NCM LLC entered into a
services agreement with a term coinciding with the ESAs, which grants the newly formed limited liability
company advertising on-screen and on the LEN and a pre-feature program prior to Fathom events reasonably
consistent with what was previously dedicated to Fathom. In addition, the services agreement provides that NCM
LLC will assist with event sponsorship sales in return for a share of the sponsorship revenue. NCM LLC has also
agreed to provide creative and media production services for a fee. For more information, refer to Note 9—
Related Party Transactions.

Due to the Company’s continuing equity method investment in the newly formed limited liability company,

the operations of Fathom Events and the gain on the sale were recorded in continuing operations on the
Consolidated Statements of Income. Refer to Note 9—Related Party Transactions for further discussion of the
investment.

3. EARNINGS PER SHARE

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

January 1,
2015

Years Ended

December 26,
2013

December 27,
2012

Net income attributable to NCM, Inc. (in

millions)

. . . . . . . . . . . . . . . . . . . . . . . . . .

13.4

41.2

13.4

Weighted average shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Dilutive effect of stock options

58,709,534

56,014,404

54,377,135

and restricted stock . . . . . . . . . . . . . .

295,786

614,053

649,636

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .

59,005,320

56,628,457

55,026,771

Earnings per NCM, Inc. share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

0.23
0.23

$
$

0.74
0.73

$
$

0.25
0.24

The effect of the 69,306,057, 63,718,411 and 57,393,735, exchangeable NCM LLC common units held by

the founding members for the years ended January 1, 2015, December 26, 2013, and December 27, 2012,
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 dividends paid on NCM Inc.’s
common shares. In addition, there were 72,533, 30,358 and 76,956 stock options and non-vested (restricted)
shares for the years ended January 1, 2015, December 26, 2013, and December 27, 2012, respectively, excluded
from the calculation as they were antidilutive, primarily because exercise prices associated with those shares
were above the average market value. The Company’s non-vested (restricted) shares do not meet the definition of
a participating security as the dividends will not be paid if the shares do not vest.

F-17

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. PROPERTY AND EQUIPMENT

The following is a summary of property and equipment, at cost less accumulated depreciation (in millions):

As of

January 1,
2015

December 26,
2013

Equipment, computer hardware and software . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . .

Subtotal

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . .

$ 89.4
3.6
(72.9)

20.1
2.3

$ 90.2
3.6
(69.5)

24.3
1.3

Total property and equipment

. . . . . . . . . . . . . . . .

$ 22.4

$ 25.6

For the years ended January 1, 2015, December 26, 2013, and December 27, 2012, the Company recorded

depreciation expense of $11.1 million, $10.4 million, and $8.7 million, respectively.

5. INTANGIBLE ASSETS

The Company’s intangible assets consist of contractual rights to provide its services within the theatres of

the founding members and network affiliates. The Company records amortization using the straight-line method
over the contractual life of the intangibles, corresponding to the term of the ESAs or the term of the contract with
the network affiliate. The Company’s intangible assets with NCM LLC’s 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.
The Company also records intangible assets for upfront fees paid to network affiliates upon commencement of a
network affiliate agreement. Pursuant to ASC 350-10—Intangibles—Goodwill and Other, 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 contract with the network affiliate. 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. In addition, if common
membership units are issued to a founding member for theatres under an existing on-screen consulting agreement
with an alternative provider, NCM LLC may receive payments from the founding member pursuant to the ESAs
on a quarterly basis in arrears in accordance with certain run-out provisions (“integration payments”). Integration
payments approximate 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. The integration payments are
recorded as a reduction to net intangible assets, and not as part of operating income.

F-18

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of the Company’s intangible assets (in millions):

As of
December 26,
2013

Additions (1) Amortization

Integration
Payments (3)

. . . . . . . . . . . . . . . . . .
Gross carrying amount
Accumulated amortization . . . . . . . . . . . . . . .

$540.7
(48.7)

Total intangible assets, net

. . . . . . . . . . .

$492.0

$19.4
—

$19.4

$ —
(20.6)

$(20.6)

$(2.2)
—

$(2.2)

As of
January 1,
2015

$557.9
(69.3)

$488.6

As of
December 27,
2012

Additions (2) Amortization

Integration
Payments (3)

As of
December 26,
2013

Gross carrying amount . . . . . . . . . . . . . . . . .
Accumulated amortization . . . . . . . . . . . . . .

$312.8
(32.5)

Total intangible assets, net . . . . . . . . . .

$280.3

$230.7
—

$230.7

$ —

(16.2)

$(16.2)

$(2.8)
—

$(2.8)

$540.7
(48.7)

$492.0

(1) During the first quarter of 2014, NCM LLC issued 1,087,911 common membership units to its founding

members for the rights to exclusive access to net new theatre screens and attendees added by the founding
members to NCM LLC’s network during 2013. NCM LLC recorded a net intangible asset of $16.4 million
in the first quarter of 2014 as a result of the Common Unit Adjustment.
During 2014, the Company purchased intangible assets for $3.0 million associated with network affiliate
agreements.

(2) During the first quarter of 2013, NCM LLC issued 4,536,014 common membership units to its founding

members for the rights to exclusive access to net new theatre screens and attendees added by the founding
members to NCM LLC’s network during 2012. NCM LLC recorded a net intangible asset of $69.0 million
in the first quarter of 2013 as a result of the common unit adjustment.
In June 2013, NCM LLC issued 5,315,837 common membership units to Cinemark for attendees added in
connection with Cinemark’s acquisition of Rave Cinemas and one other newly built theatre. NCM LLC
recorded a net intangible asset of approximately $91.2 million for this Common Unit Adjustment.
In November 2013, NCM LLC issued 3,372,241 common membership units to Regal for attendees added in
connection with Regal’s acquisition of Hollywood Theatres and three other newly built theatres. NCM LLC
recorded a net intangible asset of approximately $61.6 million for this Common Unit Adjustment.
During 2013, the Company purchased intangible assets for $8.9 million associated with network affiliate
agreements.

(3) Rave had pre-existing advertising agreements for some of the theatres it owned prior to its acquisition by

Cinemark, as well as, prior to the acquisition of certain Rave theatres by AMC in December 2012. As a
result, AMC and Cinemark will make integration payments over the remaining term of those agreements.
During the year ended January 1, 2015 and December 26, 2013, NCM LLC recorded a reduction to net
intangible assets of $2.2 million and $2.8 million, respectively, related to integration payments due from
AMC and Cinemark. During the year ended January 1, 2015 and December 26, 2013, the founding members
paid $2.1 million and $2.1 million, respectively, in integration payments.

As of January 1, 2015 and December 26, 2013, the Company’s intangible assets related to the founding

members, net of accumulated amortization was $458.3 million and $463.4 million, respectively with weighted
average remaining lives of 22.2 years and 23.0 years as of January 1, 2015 and December 26, 2013, respectively.

As of January 1, 2015 and December 26, 2013, the Company’s intangible assets related to the network
affiliates, net of accumulated amortization was $30.3 million and $28.6 million, respectively with weighted
average remaining lives of 14.9 years and 15.8 years as of January 1, 2015 and December 26, 2013, respectively.

F-19

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended January 1, 2015, December 26, 2013 and December 27, 2012 the Company recorded
amortization expense of $20.6 million, $16.2 million and $11.7 million, respectively. The estimated aggregate
amortization expense for each of the five succeeding years is as follows (in millions):

Year

Amortization

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$21.2
$21.3
$21.3
$21.7
$23.4

6. ACCRUED EXPENSES

The following is a summary of the Company’s accrued expenses (in millions):

As of
January 1,
2015

As of
December 26,
2013

Make-good reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . .

Total accrued expenses . . . . . . . . . . . . . . . . . . . . .

$ 2.0
12.6
2.4
2.2

$19.2

$ 1.8
12.7
2.6
2.6

$19.7

7. INCOME TAXES

On the IPO date, NCM, Inc. and the founding members entered into a tax receivable agreement. Under the
terms of this agreement, NCM, Inc. will make cash payments to the founding members in amounts equal to 90%
of NCM, Inc.’s actual tax benefit realized from the tax amortization of the intangible assets described below. For
purposes of the tax receivable agreement, cash savings in income and franchise tax will be computed by
comparing NCM, Inc.’s actual income and franchise tax liability to the amount of such taxes that NCM, Inc.
would have been required to pay had there been no increase in NCM, Inc.’s proportionate share of tax basis in
NCM LLC’s tangible and intangible assets and had the tax receivable agreement not been entered into. The tax
receivable agreement applies to NCM, Inc.’s taxable years up to and including the 30th anniversary date of the
offering. The Company paid the founding members $18.2 million in 2012 ($0.9 million was for the 2010 tax year
and $17.3 million for the 2011 tax year), $10.1 million in 2013 ($0.9 million was for the 2011 tax year and $9.2
million for the 2012 tax year) and $27.1 million in 2014 ($0.1 million was for the 2012 tax year, $6.7 million was
net operating loss carrybacks for the 2009, 2010 and 2011 tax years and $20.3 million for the 2013 tax year).

F-20

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has provided total income taxes, as follows (in millions):

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

Current:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (3.3)
0.4

Total current income tax expense/(benefit)

. . . .

$ (2.9)

Deferred:

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10.3
2.5

Total deferred income tax expense . . . . . . . . . .

$12.8

$ 3.6
1.9

$ 5.5

$16.7
1.2

$17.9

$ (6.6)
(0.2)

$ (6.8)

$28.8
4.8

$33.6

Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

(3.3)

(0.1)

Total income tax provision on Consolidated Statements

of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9.9

$20.2

$26.7

Income tax expense/(benefit) on other comprehensive

income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1.8

$ (6.7)

A reconciliation of the provision for income taxes as reported and the amount computed by multiplying
income before taxes, less noncontrolling interest, by the U.S. federal statutory rate of 35% was (in millions):

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

Provision calculated at federal statutory income

tax rate:

Income before income taxes . . . . . . . . . . . . .
Less: Noncontrolling interests . . . . . . . . . . . .

$ 26.2
(18.3)

Income attributable to NCM, Inc. . . . . .
Out of period correction to enacted

state rate (1) . . . . . . . . . . . . . . . . . . . .

Current year change to enacted state

rate . . . . . . . . . . . . . . . . . . . . . . . . . . .

State and local income taxes, net of federal

benefit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NCM LLC income taxes . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . .
Allocation to founding members under tax

receivable agreement . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.9

—

0.8

0.9
0.9
0.9

(1.8)
—
0.3

$ 52.1
(30.9)

21.2

$ 32.2
(18.2)

14.0

—

(1.2)

2.2
0.8
—

(0.7)
(3.3)
1.2

9.6

1.4

1.1
0.6
—

(1.2)
(0.1)
1.3

Total income tax provision . . . . . . . . . .

$ 9.9

$ 20.2

$ 26.7

(1) During 2012, NCM, Inc. corrected errors in the blended state tax rate used to measure the net deferred tax

asset “Excess of tax basis over book basis—investment in consolidated subsidiary NCM LLC”. The impact
of these adjustments was a total out of period income statement impact of $5.3 million which consisted of
an adjustment to deferred tax expense of $9.6 million offset by a reduction of TRA interest expense of $4.3
million.

F-21

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant components of the Company’s deferred tax assets and deferred tax liability consisted of the

following (in millions):

Deferred tax assets:

Investment in consolidated subsidiary NCM LLC (1)(2) . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Years Ended

January 1,
2015

December 26,
2013

$218.7
6.6
0.3
4.1
4.5

234.2
—

$233.4
6.6
2.1
0.6
5.7

248.4
—

Total deferred tax assets, net of valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$234.2

$248.4

Deferred tax liabilities:

Discount on liability for income taxes payable to founding members under tax

sharing agreement (3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 48.9
2.8
0.3
2.5
0.7

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 55.2

$ 53.3
3.4
2.2
2.7
0.3

$ 61.9

(1) NCM LLC made an election under Internal Revenue code (“IRC”) §754 of the Internal Revenue Code to
step-up the Company’s outside basis in its share of NCM LLC’s inside basis of assets under IRC §743(b)
resulting in a deferred tax asset for the Company’s acquired share of NCM LLC’s assets. The majority of
this deferred tax asset is attributable to intangible assets that are amortized over the remainder of the 15-year
period for federal income tax purposes and accounted for as distributions under U.S. generally accepted
accounting principles. The Company recorded additional step-up in tax basis as a result of subsequent
payments made by NCM, Inc. to the founding members under the tax receivable agreement resulting from
amortization of the IRC §743(b) adjustment.

(2) For federal income tax purposes, an amortizable intangible asset was created on the tax-basis balance sheet
of NCM LLC as a result of the founding members agreeing to modify NCM LLC’s payment obligations
under the ESAs and as a result of the common unit adjustments, which are further described in
Note 5—Intangible Assets. The tax effect of NCM, Inc.’s share of the intangible asset is amortized over the
remainder of the 30-year life for federal income tax purposes. Additionally, units issued under Common
Unit Adjustments and subsequent payments to the founding members under the tax receivable agreement,
create additional layers of tax basis amortized over the remaining period of the ESA. The ESA deferred tax
asset was adjusted to reflect the changes in ownership that occurred during the year due to the common unit
adjustments.

(3) NCM, Inc. recorded a long-term payable to founding members related to the tax receivable agreement,

which is recorded at its present value. The discount on this liability is a temporary difference that resulted in
a deferred tax liability. The Company recorded accretion of interest on the discounted payable of $14.6
million and $13.9 million for the year ended January 1, 2015 and December 26, 2013, respectively.

F-22

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of January 1, 2015, the Company had gross federal net operating loss carryforwards of approximately

$8.4 million, which expire in 2034. As of January 1, 2015, the Company had gross state net operating loss
carryforwards of approximately $28.6 million, which expire at various dates between 2017 and 2034. The
Company reversed a valuation allowance it had against its capital loss carryforwards as of December 26, 2013, as
some of the carryforwards were utilized in 2013 and the remainder were utilized in 2014.

The Company is subject to taxation in the U.S. and various states. NCM LLC’s fiscal year 2007 and 2008
tax returns were under examination by the Internal Revenue Service (“IRS”). On September 10, 2013, NCM LLC
and NCM, Inc., in its capacity as tax matters partner for NCM LLC, received a “No Adjustments Letter” from the
IRS which stated that the IRS completed its review of the NCM LLC tax returns for the fiscal years ended 2007
and 2008 and did not propose any adjustments to those tax returns. NCM, Inc. had previously contested
adjustments proposed by the IRS through the administrative appeals process. The Company had not recorded any
adjustment to its financial statements for this matter and as such there was no effect on the Company’s financial
statements for the year ended December 26, 2013 related to the closure of these audits.

As of January 1, 2015 and December 26, 2013, 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.

8. EQUITY

As of January 1, 2015, the Company has authorized capital stock of 175,000,000 shares of common stock,
par value of $0.01 per share, and 10,000,000 shares of preferred stock, par value of $0.01 per share. There were
no shares of preferred stock issued or outstanding as of January 1, 2015. There were 58,750,926 shares of
common stock issued and outstanding as of January 1, 2015.

The holders of NCM Inc. common stock are entitled to one vote per share on all matters submitted for
action by the NCM Inc. stockholders. Holders of common stock are entitled to share equally, share for share, in
declared dividends.

The authorized but unissued shares of common stock and preferred stock are available for future issuance

without stockholder approval. These additional shares may be used for a variety of corporate purposes, including
share based compensation, future public offerings to raise additional capital, corporate acquisitions and exchange
on a one-for-one basis under the founding members’ right to convert their NCM LLC membership units into
Company common stock.

NCM LLC’s founding members received all proceeds from NCM, Inc.’s IPO and related issuances of debt,

except for amounts needed to pay out-of-pocket costs of the financings and other expenses. The ESAs with the
founding members were amended and restated in conjunction with the IPO under which NCM LLC became the
exclusive provider of advertising services to the founding members for a 30-year term. In conformity with
accounting guidance of the SEC concerning monetary consideration paid to promoters, such as the founding
members, in exchange for property conveyed by the promoters, the excess over predecessor cost was treated as a
special distribution. Because the founding members had no cost basis in the ESAs, nearly all payments to the
founding members with the proceeds of the IPO and related debt, have been accounted for as distributions. The
distributions by NCM LLC to the founding members made at the date of the IPO resulted in a consolidated
stockholders’ deficit. As a noncontrolling interest cannot be shown as an asset, the founding members’ interest in
NCM LLC’s members equity is included in distributions in excess of paid in capital in the accompanying
Consolidated Balance Sheets.

F-23

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. RELATED PARTY TRANSACTIONS

Founding Member Transactions—In connection with the 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:

• ESAs. Under the ESAs, NCM LLC is the exclusive provider within the United States of advertising
services in the founding members’ theatres (subject to pre-existing contractual obligations and other
limited exceptions for the benefit of the founding members). The advertising services include the on-
screen advertising of the FirstLook pre-show, use of the LEN and lobby promotions. Further, some
advertising in the FirstLook pre-show is sold to NCM LLC’s founding members to be used to satisfy
the founding members’ on-screen advertising commitments under their beverage concessionaire
agreements. In consideration for access to the founding members’ theatre attendees for on-screen
advertising and use of the founding members’ theatres for the LEN and lobby promotions, the founding
members receive a monthly theatre access fee.

• Common Unit Adjustment Agreement. The common unit adjustment agreement provides a

mechanism for adjusting membership units held by the founding members based on increases or
decreases in the number of screens operated by each founding member.

• Tax Receivable Agreement. The tax receivable agreement provides for the effective payment by

NCM, Inc. to the founding members of 90% of the amount of cash savings, if any, in U.S. federal, state
and local income tax or franchise tax that is actually realized as a result of certain increases in NCM,
Inc.’s proportionate share of tax basis in NCM LLC’s tangible and intangible assets resulting from the
IPO and related transactions. Refer to Note 7 – Income Taxes for further details.

Following is a summary of the transactions between the Company and the founding members (in millions):

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

Included in the Consolidated Statements of Income:
Revenue:

Beverage concessionaire revenue (included in advertising

revenue) (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$38.4

$41.4

$39.7

Advertising inventory revenue (included in advertising

revenue) (2)
Operating expenses:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Theatre access fee (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue share from Fathom Events (included in Fathom Events
operating costs) (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Purchase of movie tickets and concession products and rental of

theatre space (included in Fathom Events operating costs) (5) . . .
Purchase of movie tickets and concession products and rental of
theatre space (included in selling and marketing costs) (6) . . .

Purchase of movie tickets and concession products (included in

advertising operating costs) (6)

. . . . . . . . . . . . . . . . . . . . . . . .
Purchase of movie tickets and concession products and rental of

theatre space (included in other administrative and other
costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.3

70.6

—

0.9

—

0.1

0.2

69.4

5.1

0.2

1.4

0.2

—

0.2

64.5

5.5

0.4

1.1

—

F-24

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

Non-operating expenses:

Gain on sale of Fathom Events (7) . . . . . . . . . . . . . . . . . . . . . . . .
Interest income from notes receivable (included in interest

income) (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

1.2

25.4

—

(1) For the years ended January 1, 2015, December 26, 2013 and December 27, 2012, the founding members

purchased 60 seconds of on-screen advertising time (with a right to purchase up to 90 seconds) from NCM
LLC to satisfy their obligations under their beverage concessionaire agreements at a specified 30 second
equivalent CPM.

(2) The value of such purchases is calculated by reference to NCM LLC’s advertising rate card.
(3) Comprised of payments per theatre attendee, payments per digital screen with respect to the founding
member theatres included in the Company’s network and payments for access to higher quality digital
cinema equipment.

(4) Prior to the sale of Fathom Events on December 26, 2013, these payments are at rates (percentage of event

revenue) included in the ESAs based on the nature of the event.

(5) Prior to the sale of Fathom Events on December 26, 2013, these were used primarily for marketing resale to

Fathom Events customers.

(6) Used primarily for marketing to NCM LLC’s advertising clients.
(7) Refer to discussion of Fathom sale in Note 2—Divestiture.

As of

January 1,
2015

December 26,
2013

Included in the Consolidated Balance Sheets:
Current portion of note receivable—founding members (1) . . . . . . . . . . . . . . . . . . . . . . .
Long-term portion of note receivable—founding members (1)
. . . . . . . . . . . . . . . . . . . .
Investment in AC JV, LLC (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common unit adjustments and integration payments, net of amortization (included in

intangible assets) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current payable to founding members under tax receivable agreement . . . . . . . . . . . . . .
Long-term payable to founding members under tax receivable agreement . . . . . . . . . . . .

4.2
16.6
1.3

458.3
19.6
146.7

4.2
20.8
1.1

463.4
28.6
144.0

(1) Refer to discussion of Fathom sale in Note 2—Divestiture.
(2) 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. The Company concluded that its
interest was more than minor under the accounting guidance despite the fact that 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.

At the date of the Company’s IPO, the NCM LLC was granted a perpetual, royalty-free license from NCM

LLC’s founding members to use certain proprietary software that existed at the time for the delivery of digital
advertising and other content through the DCN to screens in the U.S. NCM LLC has made improvements to this
software since the IPO date and NCM LLC owns those improvements, except for improvements that were
developed jointly by NCM LLC and NCM LLC’s founding members, if any.

F-25

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to the terms of the NCM LLC Operating Agreement in place since the completion of the 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 for the
years ended January 1, 2015, December 26, 2013 and December 27, 2012 are as follows (in millions):

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

AMC . . . . . . . . . . . . . . . . . . .
Cinemark . . . . . . . . . . . . . . . .
Regal . . . . . . . . . . . . . . . . . . .

$ 21.9
28.0
29.5

Total founding

members . . . . . . . . . .
. . . . . . . . . . . . . . .

NCM, Inc.

79.4
67.0

Total . . . . . . . . . . . . . . . .

$146.4

$ 29.8
36.9
37.1

103.8
89.6

$193.4

$ 23.1
24.2
29.5

76.8
72.8

$149.6

The mandatory distributions of available cash by NCM LLC to its founding members for the quarter ended
January 1, 2015 of $32.9 million, is included in amounts due to founding members in the Consolidated Balance
Sheets as of January 1, 2015 and will be made in the first quarter of 2015.

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

Theatre access fees, net of beverage revenues . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost and other reimbursement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions payable to founding members . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 0.8
(0.6)
9.1

0.8
(0.2)
11.6

1.2
—
12.2

$ 2.8
(0.8)
32.9

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9.3

$12.2

$13.4

$34.9

AMC Cinemark Regal

Total

Amounts due to founding members as of December 26, 2013 were comprised of the following (in millions):

$ 0.6
(2.0)
8.7

0.7
(0.7)
10.9

1.1
(0.6)
11.4

$ 2.4
(3.3)
31.0

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7.3

$10.9

$11.9

$30.1

AMC Cinemark Regal

Total

Common Unit Membership Redemption—The NCM LLC Operating Agreement provides a redemption

right of the founding members to exchange common membership units of NCM LLC for shares of the
Company’s common stock on a one-for-one basis, or at the Company’s option, a cash payment equal to the
market price of one share of NCM, Inc. common stock. During the third quarter of 2013, Regal exercised the
redemption right of an aggregate 2,300,000 common membership units for a like number of shares of common
stock. Such redemptions took place immediately prior to the closing of an underwritten public offering and the
closing of an overallotment option. The Company did not receive any proceeds from the sale of its common stock
by Regal. Pursuant to ASC 810-10-45, the Company accounted for the change in its ownership interest in NCM
LLC as an equity transaction and no gain or loss was recognized in the Consolidated Statements of Income.
During 2013, the Company recorded a $4.1 million deferred tax asset for its additional ownership interest in
NCM LLC to reflect the tax effected difference between the tax basis and the book basis, the majority of which

F-26

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

will be amortized over a 15-year period for federal income tax purposes. In addition, the Company recorded an
increase of $4.5 million in its long-term payable to founding members for the estimated payment to the founding
members of 90% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax
that the Company expects to realize as a result of the deferred tax asset, which is recorded at its present value.
The discount on this liability is a temporary difference that resulted in an additional $2.1 million deferred tax
liability.

AC JV, LLC Transactions—Following is a summary of the transactions between NCM LLC and AC JV,

LLC (in millions):

Included in the Consolidated Statements of Income:

Years Ended

January 1,
2015

December 26,
2013

Transition services (included in network costs) (1) . . . .
Equity in earnings of non-consolidated entities
(included in other non-operating expense)

. . . . . . . .

$0.2

0.2

$—

—

(1)

In connection with the sale of Fathom Events, NCM LLC entered into a transition services agreement to
provide certain corporate overhead services for a fee and reimbursement for the use of facilities and certain
services including creative, technical event management and event management for the newly formed
limited liability company for a period of nine months following the closing. These fees received by NCM
LLC are included as an offset to network costs in the audited 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.

The following is a summary of advertising operating costs in the Consolidated Statements of Income

between the Company and its related party affiliates (in millions):

Related Party Affiliate

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

Starplex (1) . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . .

$3.5
0.2

$3.7

$2.9
0.5

$3.4

$3.2
1.0

$4.2

The following is a summary of the accounts payable balance between the Company and its related party

affiliates included in the Consolidated Balance Sheets (in millions):

Related Party Affiliate

As of

January 1,
2015

December 26,
2013

Starplex (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$0.9
0.1

$1.0

$0.7
0.1

$0.8

(1) Starplex Operating L.P. (“Starplex”) is an affiliate of one of NCM, Inc.’s former directors, who served on

the board of directors during 2014.

F-27

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 years ended
January 1, 2015 and December 26, 2013, this company generated approximately $0.3 million and $0.6 million,
respectively, in revenue for NCM LLC and there was approximately $0.3 million and $0.6 million, respectively,
of accounts receivable due from this company as of January 1, 2015 and December 26, 2013.

NCM LLC has an agreement with AEG Live, an affiliate of The Anschutz Corporation, for AEG Live to

showcase musical artists in the FirstLook pre-show. The Anschutz Corporation is a wholly-owned subsidiary of
the Anschutz Company, which is the controlling stockholder of Regal. During the year ended January 1, 2015,
NCM LLC received approximately $0.7 million in revenue from AEG Live and as of January 1, 2015, had $0.4
million of accounts receivable from AEG Live.

NCM LLC provides on-screen advertising free of charge to a charity associated with the Anschutz

Corporation. There were no amounts recorded in the audited Consolidated Financial Statements during the years
ended January 1, 2015 or December 26, 2013 for these services.

10. BORROWINGS

The following table summarizes NCM LLC’s total outstanding debt as of January 1, 2015 and

December 26, 2013 and the significant terms of its borrowing arrangements:

Borrowings ($ in millions)

Outstanding Balance as of

January 1,
2015

December 26,
2013

Revolving Credit Facility . . . . . . . . . . . . . . . . . . . . .
Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Unsecured Notes . . . . . . . . . . . . . . . . . . . . . .
Senior Secured Notes . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current portion of long-term debt . . . . . . . . . .

$ 22.0
270.0
200.0
400.0

$892.0
—

Long-term debt, less current portion . . . . . . . .

$892.0

$ 20.0
270.0
200.0
400.0

$890.0
(14.0)

$876.0

Maturity Date

Interest Rate

November 26, 2019
November 26, 2019
July 15, 2021
April 15, 2022

(1)
(1)
7.875%
6.000%

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

Senior Secured Credit Facility—As of 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. On June 18, 2014, NCM LLC
entered into an incremental amendment of its senior secured credit facility whereby the revolving credit facility
was increased by $25.0 million. In addition, on July 2, 2014, NCM LLC entered into an amendment of its senior
secured credit facility whereby the maturity date was extended by two years to November 26, 2019, which
corresponds to the maturity date of the $270 million term loans. The amendment also contains Conditional
Amendments to the senior secured credit facility that will only be effective upon the contribution of Screenvision
assets and NCM, Inc. debt to NCM LLC. Although it is under no obligation to do so, upon approval of NCM,
Inc.’s Board of Directors and NCM LLC’s founding members, NCM, Inc. may contribute the Screenvision assets
and the new NCM, Inc. debt facility to NCM LLC in exchange for NCM LLC common membership units. To
allow for this potential contribution to NCM LLC, the Conditional Amendments include an increase in the
amount of incremental senior secured indebtedness permitted by the Amended Credit Facility from $160 million
to $250 million. If the Screenvision contribution to NCM LLC does not occur by April 1, 2015, the Conditional
Amendments will not become effective and lender consent for the Conditional Amendments will be immediately

F-28

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and automatically revoked, unless extended. Refer to discussion of the NCM, Inc. Commitment letter below for
further details. The obligations under the senior secured credit facility are secured by a lien on substantially all of
the assets of NCM LLC.

Revolving Credit Facility—The revolving credit facility portion of NCM LLC’s total borrowings is
available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of
business and for other transactions permitted under the senior secured credit facility, and a portion is available for
letters of credit.

As of January 1, 2015, NCM LLC’s total availability under the $135.0 million revolving credit facility was

$113.0 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 applicable margins on the revolving credit facility are the LIBOR index plus 2.00% or the base rate plus
1.00%. The weighted-average interest rate on the outstanding balance on the revolving credit facility as of
January 1, 2015 was 2.17%. On December 31, 2014, $14.0 million of the revolving credit facility matured and
NCM LLC paid the balance in full, along with any accrued and unpaid fees and interest. The maturity date
applicable to the remaining revolving credit facility principal is November 26, 2019.

Term Loans—In connection with the amendment of its senior secured credit facility on May 2, 2013, the

interest rate on the term loans decreased by 50 basis points to a rate 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 January 1, 2015
was 2.92%. 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 at January 1, 2015, including maintaining a consolidated net senior secured
leverage ratio of 6.5 times on a quarterly basis. NCM LLC is permitted to make quarterly dividend payments and
other payments based on leverage ratios for NCM LLC and its subsidiaries so long as no default or event of
default has occurred and continues to occur. The quarterly dividend payments and other distributions are made
even if consolidated net senior secured leverage ratio is less than or equal to 6.5 times. 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. If there are limitations on the restricted
payments, NCM LLC may not declare or pay any dividends, or make any payments on account of NCM LLC, or
set aside assets for the retirement or other acquisition of capital stock of the borrower or any subsidiaries, or
make any other distribution for obligations of NCM LLC. When these restrictions are effective, NCM LLC may
still pay the services fee and reimbursable costs pursuant to terms of the management agreement. NCM LLC can
also make payments pursuant to the tax receivable agreement in the amount, and at the time necessary to satisfy
the contractual obligations with respect to the actual cash tax benefits payable to NCM LLC’s founding
members. As of January 1, 2015, the NCM LLC’s consolidated net senior secured leverage ratio was 3.4 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 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

F-29

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to all existing and future secured debt, including indebtedness under the Company’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 January 1, 2015.

Senior Secured Notes due 2022—On April 27, 2012, NCM LLC completed a private placement of $400.0

million in aggregate principal amount of 6.00% 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 January 1, 2015.

NCM, Inc. Commitment Letter—On July 2, 2014, in contemplation of the Merger with Screenvision, NCM,
Inc. entered into the Commitment Letter with certain existing NCM LLC revolving credit facility lenders. Under
the Commitment Letter, subject to certain conditions, the lenders committed to make a term loan in an aggregate
principal amount of $250 million to fund the Screenvision merger and related expenses. This term loan is
expected to finance the $225 million portion of the merger consideration that will be paid in cash, along with fees
and expenses incurred in connection with the term loan and the Merger. The term loan will mature on the second
anniversary of the funding of the term loan. NCM, Inc. has the right to contribute the Screenvision assets and the
$250 million loan to NCM LLC, at which point, the Conditional Amendments to the amended senior secured
credit facility described above would become effective. On November 3, 2014, the DOJ filed the DOJ Action. A
trial date has been scheduled for April 13, 2015. The Commitment Letter and NCM LLC senior secured credit
facility amendments expire on April 1, 2015. The Company is working with the merger financing bank group to
extend the merger financing commitments to accommodate the litigation process.

Future Maturities of Borrowings—The scheduled annual maturities on the Senior Secured Credit Facility

and Senior Secured and Senior Unsecured Notes as of January 1, 2015 are as follows (in millions):

Year

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$ —
—
—
—
292.0
600.0

$892.0

11. SHARE-BASED COMPENSATION

The NCM, Inc. 2007 Equity Incentive Plan, as amended (the “Equity Incentive Plan”), reserves 12,974,589

shares of common stock available for issuance or delivery under the Equity Incentive Plan of which 4,126,037
remain available for future grants as of January 1, 2015. The types of awards that may be granted under the
Equity Incentive Plan include stock options, stock appreciation rights, restricted stock, restricted stock units or
other stock based awards. Stock options awarded under the Equity Incentive Plan are granted with an exercise
price equal to the closing market price of NCM, Inc. common stock on the date the Company’s board of directors

F-30

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

approves the grant. Upon vesting of the restricted stock awards or exercise of options, NCM LLC will issue
common membership units to the Company equal to the number of shares of the Company’s common stock
represented by such awards. Options and restricted stock vest annually over a three or five-year period and
options have either 10-year or 15-year contractual terms. A forfeiture rate of 5% was estimated to reflect the
potential separation of employees. Certain option and share awards provide for accelerated vesting if there is a
change in control, as defined in the Equity Incentive Plan. In addition, certain restricted stock awards include
performance vesting conditions, which permit vesting to the extent that the Company achieves specified non-
GAAP targets at the end of the measurement period. The length of the measurement period is two to three years.
Restricted stock units granted to non-employee directors vest after approximately one year.

Compensation Cost—The Company recognized $7.7 million, $5.9 million and $9.0 million for the years

ended January 1, 2015, December 26, 2013 and December 27, 2012, respectively, of share-based compensation
expense and $0.1 million, $0.1 million and $0.2 million was capitalized during the years ended January 1,
2015, December 26, 2013 and December 27, 2012, respectively. No compensation expense was recorded for the
2012 non-vested restricted stock grants subject to performance conditions as the grants were not expected to vest
due to the projected underperformance against the specified non-GAAP targets as of January 1, 2015. The
income tax benefit recognized in the income statement for share-based compensation was approximately $1.4
million, $1.0 million, and $2.6 million for the years ended January 1, 2015, December 26, 2013 and
December 27, 2012, respectively. As of January 1, 2015, unrecognized compensation cost related to unvested
options was approximately $0.1 million, which will be recognized over a weighted average remaining period of
0.5 years. As of January 1, 2015, unrecognized compensation cost related to restricted stock and restricted stock
units was approximately $12.5 million, which will be recognized over a weighted average remaining period of
1.9 years.

Stock Options—A summary of option award activity under the Equity Incentive Plan as of January 1, 2015,

and changes during the year then ended are presented below:

Weighted
Average
Remaining
Contractual
Life (in
years)

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value (in
millions)

Options

Outstanding as of December 26, 2013 . . . . . . . . . . . . . . . . . . 3,056,582 $17.02
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Antidilution adjustments made to outstanding options in

—
(57,499)
(92,831)
—

—
13.91
16.50
—

connection with a special dividend (1)

. . . . . . . . . . . . . . .

98,589

16.49

Outstanding as of January 1, 2015 . . . . . . . . . . . . . . . . . . . . . 3,004,841 $16.53

Exercisable as of January 1, 2015 . . . . . . . . . . . . . . . . . . . . . 2,839,945 $16.74
Vested and expected to vest as of January 1, 2015 . . . . . . . . 3,004,548 $16.53

5.7

5.7
5.7

$1.1

$0.8
$1.1

(1)

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 the Company’s employees 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

F-31

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

The weighted average grant date fair value of granted options was $4.08 per share for the year ended
December 27, 2012. The intrinsic value of options exercised during the year was $0.2 million, $6.1 million and
$1.4 million for the years ended January 1, 2015, December 26, 2013 and December 27, 2012, respectively. The
total fair value of awards vested during the years ended January 1, 2015, December 26, 2013 and December 27,
2012 was $2.2 million, $4.9 million and $7.8 million, respectively.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing

valuation model that uses the assumptions noted in the table below. Expected volatilities are based on implied
volatilities from traded options on the Company’s stock, historical volatility of the Company’s stock, and other
factors. The Company uses historical data to estimate option exercise and employee termination within the
valuation model. The expected term of options granted is derived from the output of the option valuation model
and represents the period of time that options granted are expected to be outstanding. The risk-free rate for
periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of
grant. The following assumptions were used in the valuation of the options for the years ended January 1,
2015, December 26, 2013 and December 27, 2012:

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

Expected term (in years) . . . . . . . . . . . . . . . . . .
Risk free interest rate . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . .

(1)
(1)
(1)
(1)

6.0
0.8%-1.1%
53.2%-54.6%
5.5%

(1) The Company did not grant stock options during the years ended January 1, 2015 and December 26, 2013.

Restricted Stock and Restricted Stock Units—Under the non-vested stock program, common stock of the

Company may be granted at no cost to officers, independent directors and employees, subject to requisite service
and/or meeting financial performance targets, and as such restrictions lapse, the award vests in that proportion.
The participants are entitled to cash dividends and to vote their respective shares (in the case of restricted stock),
although the sale and transfer of such shares is prohibited and the shares are subject to forfeiture during the
restricted period. Additionally, the accrued cash dividends for 2012, 2013 and 2014 grants are subject to
forfeiture during the restricted period should the underlying shares not vest.

The weighted average grant date fair value of non-vested stock was $19.18, $15.17 and $13.23 for the years
ended January 1, 2015, December 26, 2013 and December 27, 2012, respectively. The total fair value of awards
vested was $3.6 million, $7.5 million and $6.9 million during the years ended January 1, 2015, December 26,
2013 and December 27, 2012, respectively.

As of January 1, 2015, the total number of restricted stock and restricted stock units that are ultimately

expected to vest, after consideration of expected forfeitures and estimated vesting of performance-based
restricted stock is 1,166,813.

F-32

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of restricted stock award and restricted stock unit activity under the Equity Incentive Plan as of

January 1, 2015, and changes during the year then ended are presented below:

Number of
Restricted Shares and
Restricted Stock
Units

Weighted Average
Grant-Date Fair
Value

Non-vested balance as of December 26, 2013 . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested balance as of January 1, 2015 . . . . . . . .

2,074,866
919,050
(257,390)
(580,530)

2,155,996

$14.91
19.18
13.97
16.54

$16.40

12. EMPLOYEE BENEFIT PLANS

The Company sponsors the NCM 401(k) Profit Sharing Plan (the “Plan”) under Section 401(k) of the
Internal Revenue Code of 1986, as amended, for the benefit of substantially all full-time employees. The Plan
provides that participants may contribute up to 20% of their compensation, subject to Internal Revenue Service
limitations. Employee contributions are invested in various investment funds based upon election made by the
employee. The Company made discretionary contributions of $1.0 million, $1.0 million and $1.0 million during
the years ended January 1, 2015, December 26, 2013 and December 27, 2012, respectively.

13. COMMITMENTS AND CONTINGENCIES

Legal Actions—The Company is subject to claims and legal actions in the ordinary course of business. The

Company believes such claims will not have a material effect on its financial position, results of operations or
cash flows.

On November 3, 2014, the DOJ filed, in the U.S. district court for the Southern District of New York, the
DOJ Action seeking to enjoin the proposed merger between NCM, Inc. and Screenvision. The DOJ claims that
the proposed merger would eliminate competition in the market for pre-show services and eliminate competition
between NCM, Inc. and Screenvision for advertisers. On November 3, 2014, the DOJ filed the DOJ Action. A
trial date has been scheduled for April 13, 2015. A merger termination payment is discussed below.

Operating Commitments—The Company leases office facilities for its headquarters in Centennial,
Colorado and also in various cities for its sales and marketing and software development personnel. Total lease
expense for the years ended January 1, 2015, December 26, 2013 and December 27, 2012, was $2.2 million, $2.3
million and $2.3 million, respectively. Future minimum lease payments under noncancelable operating leases as
of January 1, 2015 are as follows (in millions):

Year

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Minimum
Lease
Payments

$ 2.5
2.6
2.0
1.7
1.7
2.5

$13.0

F-33

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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
20 years, prior to any renewal periods of which some are at the option of the Company. During October 2014, the
Company offered to all of its network affiliates an extension of their existing agreements by five years, with the
per-attendee guarantee and other terms remaining the same as those on the last year of their original term. None
of these agreements have yet been signed. As of January 1, 2015, the maximum potential amount of future
payments the Company could be required to make pursuant to the minimum revenue guarantees is $37.0 million
over the remaining terms of the network affiliate agreements, which calculation does not include any potential
extensions offered subsequent to January 1, 2015. As of January 1, 2015, the Company had an inconsequential
amount of liabilities recorded for these obligations and as of December 26, 2013, the Company had no liabilities
recorded for these obligations, as such guarantees are less than the expected share of revenue paid to the affiliate.

Merger Termination Payment—As described above, on May 5, 2014, the Company entered into the Merger

Agreement to merge with Screenvision, and on November 3, 2014, the DOJ filed a lawsuit seeking to enjoin the
proposed merger. If prior to May 5, 2015 (or 90 days thereafter if extended by the Company or Screenvision),
certain conditions to the merger are not fulfilled, the merger is prohibited by law or a final non-appealable
government order, or if the Company materially breaches its representations or covenants such that the closing
conditions in the Merger Agreement cannot be satisfied, Screenvision may be able to terminate the Merger
Agreement and, upon termination, the Company may be required to pay a termination fee of approximately $28.8
million. NCM LLC would indemnify NCM, Inc. and bear a pro rata portion of this fee based upon NCM, Inc.’s
ownership percentage in NCM LLC, with NCM LLC’s founding members bearing the remainder of the fee in
accordance with their ownership percentage in NCM LLC. If Screenvision or its affiliates materially breach their
representations or covenants such that the closing conditions in the Merger Agreement cannot be satisfied, they
will be required to pay NCM, Inc. a termination fee of $10 million, and if Screenvision is subsequently sold
within one year of the termination, an additional amount equal to the amount by which the sale proceeds are
greater than $385 million will be paid to NCM, Inc. up to a maximum of $28.8 million (including the $10
million). As of January 1, 2015, the Company did not have a liability recorded for this termination fee.

14. FAIR VALUE MEASUREMENTS

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—As described in Note 1—

Basis of Presentation and Summary of Significant Accounting Policies, 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.

As of January 1, 2015 and December 26, 2013, the Company had other investments of $2.5 million and $1.1

million, respectively. The fair value of these investments has not been estimated as of January 1, 2015 as there

F-34

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. Refer to Note 1—Basis of Presentation and Summary of Significant Accounting Policies for more
details. 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 January 1, 2015, the Company had notes receivable totaling $20.8 million from its founding members

related to the sale of Fathom Events, as described in Note 2—Divestiture. 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 are as follows (in millions):

As of January 1, 2015

As of December 26, 2013

Carrying Value

Fair Value (1)

Carrying Value

Fair Value (1)

Term Loans . . . . . . . . . . . . . . . . . . . .
Senior Unsecured Notes . . . . . . . . . . .
Senior Secured Notes . . . . . . . . . . . . .

$270.0
200.0
400.0

$257.9
210.8
400.8

$270.0
200.0
400.0

$269.5
220.4
414.0

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

Recurring Measurements—The fair values of the Company’s assets and liabilities measured on a recurring

basis pursuant to ASC 820-10 Fair Value Measurements and Disclosures are as follows (in millions):

Fair Value Measurements at Reporting Date Using

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)
. . . . . . . . . . . . . . . . . . . . .
Short-term marketable securities (2)
. . . . . . . .
Long-term marketable securities (2) . . . . . . . . .

Total assets . . . . . . . . . . . . . . . . . . . . . . . .

$ 2.5
21.7
45.5

$69.7

$ 2.5
9.5
41.5

$53.5

$ —

12.2
4.0

$16.2

$—
—
—

$—

F-35

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements at Reporting Date
Using

As of
December 26,
2013

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)
. . . . . . . . . . . . . . . . . . . . . .
Short-term marketable securities (2) . . . . . . . . . .

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .

$28.3
71.3

$99.6

$—
4.5

$ 4.5

$28.3
66.8

$95.1

$—
—

$—

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

(2) Short-Term and Long-Term Marketable Securities—The carrying amount and fair value of the marketable

securities are equivalent since the Company accounts for these instruments at fair value. The Company’s
government agency bonds, commercial paper and certificates of deposit are valued using third party broker
quotes. The value of the Company’s government agency bonds is derived from quoted market information.
The inputs in the valuation are generally classified as Level 1 given the active market for these securities;
however if an active market does not exist, the inputs are recorded at a lower level in the fair value
hierarchy. The value of commercial paper and certificates of deposit is derived from pricing models using
inputs based upon market information, including contractual terms, market prices and yield curves. The
inputs to the valuation pricing models are observable in the market, and as such are generally classified as
Level 2 in the fair value hierarchy. For the years ended January 1, 2015 and December 26, 2013, there was
an inconsequential amount of net realized gains (losses) recognized in interest income and an
inconsequential amount of net unrealized holding gains (losses) included in other comprehensive income.
Original cost of short term marketable securities is based on the specific identification method. As of
January 1, 2015 and December 26, 2013, there were no gross unrealized losses related to individual
securities that had been in a continuous loss position for 12 months or longer.

F-36

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost basis, aggregate fair value and maturities of the marketable securities the Company held

as of January 1, 2015 and December 26, 2013 are as follows:

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 . . . . . . . . . . . . . . . . . . . . .
Short-term commercial paper:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial
Industrial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .
Short-term certificates of deposit

Total short-term marketable securities . . . . .
Long-term U.S. government treasury bonds . . . . . . . . .
Long-term municipal bonds . . . . . . . . . . . . . . . . . . . . . .
Long-term U.S. government agency bonds . . . . . . . . . .
Long-term certificates of deposit . . . . . . . . . . . . . . . . . .

Total long-term marketable securities . . . . . .

$ 9.4

$ 9.5

3.4
3.3
3.0
2.5

21.6
5.1
0.3
36.1
4.0

45.5

3.4
3.3
3.0
2.5

21.7
5.1
0.3
36.1
4.0

45.5

Total marketable securities . . . . . . . . . . . . . .

$67.1

$67.2

0.5

—
0.1
0.2
0.6

2.7
1.4
3.3
3.1

As of December 26, 2013

Amortized
Cost Basis
(in millions)

Aggregate
Fair Value
(in millions)

Maturities (1)
(in years)

MARKETABLE SECURITIES:

Short-term municipal . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term commercial paper:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial
Industrial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4.5

50.3
8.8
7.7

Total marketable securities . . . . . . . . . . . . . .

$71.3

$ 4.5

50.3
8.8
7.7

$71.3

0.2

0.3
0.1
0.1

(1) Maturities—Securities available for sale include obligations with various contractual maturity dates some of

which are greater than one year. The Company considers the securities to be liquid and convertible to cash
within 30 days.

15. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

During 2012, NCM LLC terminated interest rate swap agreements that were used to hedge its interest rate
risk associated with its term loans. Following the termination of the swap agreements, the variable interest rate
on NCM LLC’s $270.0 million term loans are unhedged and as of January 1, 2015 and December 26, 2013, the
Company did not have any outstanding derivative assets or liabilities.

During the year ended December 27, 2012, NCM LLC paid breakage fees of $63.4 million which
represented the settlement of NCM LLC’s loss position on its interest rate swap agreements. The swaps were
terminated with NCM LLC in a loss position and therefore, NCM LLC paid its counterparties the outstanding

F-37

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

amounts due based upon the fair market value on that date. The Company accounted for the $63.4 million in
payments by recording a loss on swap terminations of $26.7 million in the Consolidated Statements of Income,
which related to swaps that hedged the interest payments on debt that was paid off during NCM LLC’s
refinancing. Since those future interest payments were no longer probable of occurring, the Company
discontinued hedge accounting and immediately reclassified the balance in AOCI of $26.7 million into earnings
in accordance with ASC 815 Derivatives and Hedging (“ASC 815”). The remainder of the breakage fees, or
$36.7 million, was for swaps in which the underlying debt remained outstanding. The balance in AOCI related to
these swaps was fixed and is being amortized into earnings over the remaining life of the original interest rate
swap agreement, or February 13, 2015, as long as the debt remains outstanding. The Company considered the
guidance in ASC 815 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 January 1, 2015, there was
approximately $1.6 million outstanding related to these discontinued cash flow hedges which continues to be
reported in AOCI, which the Company estimates will be amortized to earnings in the first quarter of 2015.

During the years ended December 26, 2013 and December 27, 2012, the Company also recorded changes in

the fair value and amortization of AOCI related to an interest rate swap on its term loan in which the Company
discontinued cash flow hedge accounting in 2008 due to the bankruptcy of its counterparty.

The effect of derivative instruments in cash flow hedge relationships on the audited Consolidated Financial
Statements for the years ended January 1, 2015, December 26, 2013 and December 27, 2012 were as follows (in
millions):

Unrealized Gain Recognized in NCM,
Inc.’s Other Comprehensive
Income (Pre-tax)

Realized Loss Recognized in Interest
on Borrowings (Pre-tax)

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

January 1,
2015

December 26,
2013

December 27,
2012

Interest Rate Swaps . . . . . . .

$10.0

$10.3

$26.0

$—

$(9.1)

The effect of derivatives not designated as hedging instruments under ASC 815 on the audited Consolidated

Financial Statements for the years ended January 1, 2015, December 26, 2013 and December 27, 2012 were as
follows (in millions):

Gain (Loss) Recognized in Non-
Operating Expenses (Pre-tax)

Years Ended

Derivative Instruments not Designated as
Hedging Instruments

Income Statement Location

January 1,
2015

December 26,
2013

December 27,
2012

Realized loss on derivative

instruments . . . . . . . . . . . . . . . . . . . . .

Gain from change in fair value on cash

flow hedges . . . . . . . . . . . . . . . . . . . . .

Amortization of AOCI on discontinued

cash flow hedges . . . . . . . . . . . . . . . . .

Interest on borrowings
Change in derivative fair
value
Amortization of terminated
derivatives

Total

. . . . . . . . . . . . . . . . . . . . . . . .

$ —

$(5.1)

—

3.0

(10.0)

(10.3)

$(10.0)

$(10.3)

(4.0)

$(6.1)

F-38

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in AOCI by component for the year ended January 1, 2015 were as follows (in millions):

Year Ended

January 1,
2015

December 26,
2013

Income Statement Location

Balance at beginning of period . . . . . . . . . . . .

$ (3.2)

$ (6.7)

Amounts reclassified from AOCI:

Amortization on discontinued cash

flow hedges . . . . . . . . . . . . . . . . .

10.0

10.3

Amortization of terminated derivatives

Total amounts reclassified from

AOCI . . . . . . . . . . . . . . . . . . . . . . . . . .

10.0

10.3

Noncontrolling interest on

reclassifications . . . . . . . . . . . . . . . . . .
Tax effect on reclassifications . . . . . . . . .

Net other comprehensive income . . . . . .

(5.4)
(1.8)

2.8

Impact of subsidiary ownership

changes . . . . . . . . . . . . . . . . . . . . . . . .

—

(5.6)
(1.8)

2.9

0.6

Balance at end of period . . . . . . . . . . . . . . . . .

$ (0.4)

$ (3.2)

16. SEGMENT REPORTING

Advertising revenue accounted for 100.0%, 92.1% and 91.2%, of consolidated revenue for the years ended

January 1, 2015, December 26, 2013 and December 27, 2012, respectively. The following tables present revenue,
less directly identifiable expenses to arrive at income before income taxes for the advertising reportable segment,
the combined Fathom Events operating segments (disposed on December 26, 2013), and network, administrative
and unallocated costs. Refer to Note 1—Basis of Presentation and Summary of Significant Accounting Policies.

Year Ended January 1, 2015 (in millions)

Advertising

Fathom
Events (1)

Network,
Administrative
and Unallocated
Costs

Consolidated

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating costs . . . . . . . . . . . . . . . . . . . . . . .
Selling and marketing costs . . . . . . . . . . . . . .
Administrative and other costs . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . .
Interest and other non-operating costs . . . . .

Income (loss) before income taxes . . . . . . . .

$394.0
97.0
54.8
2.8
—
—

$239.4

$—
—
—
—
—
—

$—

$ —
18.3
2.8
34.2
32.4
76.2

$(163.9)

$394.0
115.3
57.6
37.0
32.4
76.2

$ 75.5

F-39

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 26, 2013 (in millions)

Advertising

Fathom
Events (1)

Network,
Administrative
and Unallocated
Costs

Consolidated

Income (loss) before income taxes . . . . . . . .

$426.3
98.4
56.1
2.9
—
—

$268.9

$36.5
25.5
3.6
0.9
—
—

$ 6.5

$ —
19.4
1.8
25.6
26.6
52.0

$(125.4)

$462.8
143.3
61.5
29.4
26.6
52.0

$150.0

Year Ended December 27, 2012 (in millions)

Advertising

Fathom
Events (1)

Network,
Administrative
and Unallocated
Costs

Consolidated

Income (loss) before income taxes . . . . . . . .

$409.5
95.8
53.9
2.6
—
—

$257.2

$39.3
29.0
4.2
0.8
—
—

$ 5.3

$ —
19.8
2.4
28.1
20.4
99.8

$(170.5)

$448.8
144.6
60.5
31.5
20.4
99.8

$ 92.0

The following is a summary of revenue by category (in millions):

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

National advertising revenue . . . . . . . . . . . . . . . . . . . . . . . . .
Local and regional advertising revenue . . . . . . . . . . . . . . . .
Founding member advertising revenue from beverage

concessionaire agreements . . . . . . . . . . . . . . . . . . . . . . . .
Fathom Consumer revenue (1) . . . . . . . . . . . . . . . . . . . . . . .
Fathom Business revenue (1)
. . . . . . . . . . . . . . . . . . . . . . . .

$258.8
96.8

$295.0
89.9

38.4
—
—

41.4
34.4
2.1

$288.7
81.1

39.7
34.2
5.1

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$394.0

$462.8

$448.8

(1) Fathom Events was sold on December 26, 2013 as discussed in Note 9—Related Party Transactions.

F-40

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. VALUATION AND QUALIFYING ACCOUNTS

The Company’s valuation allowance for doubtful accounts and deferred tax assets for the years ended

January 1, 2015, December 26, 2013 and December 27, 2012 were as follows (in millions):

Years Ended

January 1,
2015

December 26,
2013

December 27,
2012

ALLOWANCE FOR DOUBTFUL ACCOUNTS:

Balance at beginning of period . . . . . . . . . . . . . . . . . . .
Provision for bad debt . . . . . . . . . . . . . . . . . . . . . .
Write-offs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . .

VALUATION ALLOWANCE ON DEFERRED TAX

ASSETS:

Balance at beginning of period . . . . . . . . . . . . . . . . . . .
Valuation allowance (reversed) recorded . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . .

$ 5.7
(0.1)
(1.3)

$ 4.3

$—
—
—

$—

$ 4.5
2.1
(0.9)

$ 5.7

$ 3.3
(3.3)
—

$—

$ 4.3
1.2
(1.0)

$ 4.5

$ 3.2
—
0.1

$ 3.3

18. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following represents selected information from the Company’s unaudited quarterly Consolidated
Statements of Income for the years ended January 1, 2015 and December 26, 2013 (in millions, except per share
data):

2014

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated net (loss) income . . . . . . . . . . . . . . . . . . . . . . .
(Loss) Net income attributable to NCM, Inc. . . . . . . . . . . . .
(Loss) Earnings per NCM, Inc. share, basic (1) . . . . . . . . . .
(Loss) Earnings per NCM, Inc. share, diluted (1)
. . . . . . . .

2013

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated net income (2) . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) Net income attributable to NCM, Inc. (2)
. . . . . . . . .
(Loss) Earnings per NCM, Inc. share, basic (1)(2) . . . . . . . .
(Loss) Earnings per NCM, Inc. share, diluted (1)(2) . . . . . . .

First
Quarter

Second
Quarter

$ 70.2
57.4
12.8
(4.6)
(3.1)
(0.05)
(0.05)

First
Quarter

$ 82.2
60.6
21.6
1.9
(1.0)
(0.02)
(0.02)

$99.9
59.6
40.3
17.9
3.6
0.06
0.06

Second
Quarter

$122.8
64.8
58.0
32.0
9.5
0.17
0.17

Third
Quarter

$100.8
60.1
40.7
19.4
4.8
0.08
0.08

Third
Quarter

$135.1
67.7
67.4
42.3
13.7
0.24
0.24

Fourth
Quarter

$123.1
65.2
57.9
32.9
8.1
0.14
0.14

Fourth
Quarter

$122.7
67.7
55.0
53.6
19.0
0.35
0.34

(1) Earnings per share in each quarter is computed using the weighted-average number of common shares

outstanding during that quarter while earnings per share for the full year is computed using the weighted
average number of common shares outstanding during the year.

F-41

NATIONAL CINEMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) During the fourth quarter of 2013, the Company recorded a gain of $25.4 million related to the sale of

Fathom Events. Refer to Note 2—Divestiture.

19. SUBSEQUENT EVENT

On January 21, 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 March 12, 2015 to be paid on March 26,
2015.

F-42

[THIS PAGE INTENTIONALLY LEFT BLANK]

CORPORATE INFORMATION

BOARD OF DIRECTORS

CORPORATE HEADQUARTERS

National CineMedia, Inc.
9110 E. Nichols Ave., Suite 200
Centennial, CO 80112 | 800.828.2828 | ncm.com

STOCK INFORMATION

Traded on the NASDAQ Global Market
under the symbol NCMI

INVESTOR RELATIONS

Phone: 800-844-0935
Email: Investors@ncm.com

TRANSFER AGENT AND REGISTRAR

Computershare
P.O. Box 30170
College Station, TX 77842-3170
computershare.com/investor

FORM 10-K

We will provide, without charge, a copy of our
Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, to any stockholder who requests
one. Copies of the 10-K and all exhibits thereto can be ob-
tained from our website under the tab “Investor Relations >
Financial Information > SEC Filings.” These reports are also
available free of charge by written request to:

NCM, Inc.
ATTN: Investor Relations
9110 E. Nichols Ave., Suite 200
Centennial, CO 80112

CODE OF BUSINESS CONDUCT AND ETHICS

Our Code of Business Conduct and Ethics is available free
of charge on our website (ncm.com) under the tab “Investor
Relations > Corporate Governance.”

Kurt C. Hall

Chairman, President and Chief Executive
Officer of National CineMedia, Inc.

Lawrence A. Goodman

Founder and President of
White Mountain Media

David R. Haas

Private Investor and Financial Consultant,
Retired Senior Vice President and

Controller of Time Warner, Inc.

Stephen L. Lanning
Retired United States Air Force

Brigadier General

Thomas F. Lesinski

Founder and Chief Executive Officer

of Energi Entertainment

Paula Williams Madison
Chairman and Chief Executive Officer

of Madison Media Management LLC

Amy E. Miles
Chief Executive Officer of
Regal Entertainment Group

Lee Roy Mitchell
Chairman of Cinemark USA, Inc.

Craig R. Ramsey
Executive Vice President and Chief Financial

Officer of AMC Entertainment Holdings, Inc.

Scott N. Schneider
Chief Executive Officer of AHC LLC

EXECUTIVE OFFICERS

Kurt C.Hall

President and Chief Executive Officer

ANNUAL MEETING

National CineMedia, Inc. stockholders are invited to attend
our annual meeting. The meeting will be held on May 8,
2015 at 9:00 a.m. Mountain Time at the following venue:

Clifford E. Marks

President of Sales

Ralph E. Hardy

United Artist Theatre
Meadows 12
9355 Park Meadows Drive
Littleton, CO 80124

Executive Vice President and General Counsel

Alfonso P. Rosabal, Jr.

Executive Vice President, Chief Operations

Officer and Chief Technology Officer

David J. Oddo

Senior Vice President, Finance and

Interim Co-Chief Financial Officer

Jeffrey T. Cabot

Senior Vice President, Controller and

Interim Co-Chief Financial Officer

FIRSTLOOK
FirstLook is a digital entertainment and advertising pre-feature

program showcasing content from leading media, entertainment,

and technology companies, along with national, regional, and local

advertising. FirstLook provides both a high-quality entertainment

experience for patrons and an effective marketing platform for

advertisers. The NCM Cinema Network is North America’s largest

big screen advertising network with approximately 1,600 theatres

and over 20,100 screens, including the nation’s leading movie theatres.

LOBBY ENTERTAINMENT NETWORK (LEN)
Our LEN is a network of video screens strategically located

throughout the lobbies of all of our digitally equipped

theatres. The LEN screens are strategically placed in

high-traffic locations such as concession stands and film

queuing and other waiting areas. Programming on our LEN

consists of an approximately 30-minute loop of branded entertainment

content segments created specifically for the lobby with advertisements running

between each segment.

LOBBY PROMOTIONS
NCM offers a wide variety of advertising and promotional products in

theatre lobbies including experimental interactive touch-screen platforms,

box office handouts, lobby signage/displays, and theatre concessions.

ONLINE AND MOBILE NETWORK
The NCM Interactive Network allows advertisers to reach

entertainment audiences with high-impact and fully integrated

media campaigns. Our custom ad units, apps, and widgets give

brands the opportunity to integrate with engaging content across

our vast network of movie and entertainment sites.

NATIONAL CINEMEDIA, INC.
9110 E. Nichols Ave., Suite 200 | Centennial, CO 80112 | 800.828.2828 | ncm.com