Business Context and Reporting Period
This Form 8-K filing by National CineMedia, Inc. (NCM, Inc.) reports on events occurring on March 17, 2009. The filing details the determination and issuance of common membership units to the Founding Members of National CineMedia, LLC (NCM LLC) pursuant to the annual common unit adjustment provisions of the Common Unit Adjustment Agreement dated February 13, 2007. The adjustment reflects changes in the network based on net new theatres and attendees added during the fiscal year ended January 1, 2009.
Key Financial Metrics and Capital Structure
The filing provides specific valuation metrics used to calculate the unit adjustment as of January 1, 2009:
- Outstanding Equity Equivalents: 99,377,452 (includes weighted average shares and LLC units).
- NCM, Inc. Share Price: $8.1087 (60-day weighted average).
- Company Equity Value: $805,821,945.
- Long-Term Funded Debt: $799,000,000.
- Cash and Cash Equivalents: $69,193,782.
- Company Enterprise Value: $1,535,628,163.
- Company Enterprise Value per Attendee: $2.2693722.
- Total Network Attendance: 676,675,325.
The filing does not provide revenue, profit, cash flow, or margin data for the reporting period.
Material Changes Versus Prior Period
The primary material change is the issuance of 2,126,104 new common membership units to the Founding Members (AMC, Cinemark, and Regal) based on a net attendance increase of 7,596,793 attendees. This resulted in the following shifts in ownership interest in NCM LLC:
- AMC: Ownership increased from 18.52% to 18.53% (+0.01%).
- Cinemark: Ownership increased from 14.07% to 14.96% (+0.89%).
- Regal: Ownership decreased from 25.05% to 25.04% (-0.01%).
- NCM, Inc.: Ownership decreased from 42.36% to 41.47% (-0.89%).
Additionally, cash payments totaling $10.12 were issued in lieu of partial units ($0.94 to AMC, $3.66 to Cinemark, and $5.52 to Regal). No cash consideration was received by NCM, Inc. or NCM LLC for the issuance of the units.
Outlook, Risks, and Unusual Items
Methodology and Adjustments: The adjustment calculation included a "true-up" for 31 new build theatres, reconciling projected year 1 attendance with actual attendance, resulting in an additional 115,666 attendees. The net attendance increase was driven by 298 new screens (average attendance ~34,010 per screen) offset by 127 disposed screens (average attendance ~20,897 per screen).
Excluded Closures: The filing notes a decrease of 2,287,178 attendees due to end-of-lease screen closures (132 screens), which were excluded from the unit adjustment calculation. Management believes approximately 46% of these attendees will shift to nearby theatres already in the network.
Risks and Contingencies: The units were issued under Section 4(2) of the Securities Act as a transaction not involving a public offering. The Founding Members have the option to redeem these units for cash or NCM, Inc. common stock on a one-for-one basis, which could impact future capital structure.
Investor Verification Checklist
- Verify the impact of the 0.89% dilution to NCM, Inc.'s ownership interest on future earnings per share.
- Confirm the redemption status of the newly issued units to determine if they will be converted to cash or stock.
- Assess the accuracy of the "true-up" attendance figures for the 31 new build theatres mentioned in the adjustment.
- Monitor the shift of attendees from the 132 excluded end-of-lease closures to existing network theatres to validate management's retention assumptions.
- Review the $799 million long-term funded debt figure in the context of the company's current liquidity position ($69.2 million cash).