Business Context and Reporting Period
This Form 8-K, filed on March 21, 2016, reports on events occurring on March 17, 2016, regarding National CineMedia, Inc. ("NCM, Inc.") and National CineMedia, LLC ("NCM LLC"). The filing details the execution of the annual Common Unit Adjustment for fiscal year 2015, which adjusts the ownership interests of the Founding Members (AMC, Cinemark, and Regal) based on changes in theatre attendance.
Key Financial Metrics and Ownership Changes
The filing does not report revenue, profit, or cash flow for the period. Instead, it focuses on equity adjustments and valuation metrics used to calculate the unit issuance.
- Enterprise Value Calculation: NCM LLC Enterprise Value was calculated at approximately $2.88 billion, based on an equity value of $1.95 billion, long-term funded debt of $936 million, and cash of approximately $3 million.
- Valuation Basis: The calculation utilized a 60-day weighted average share price of $14.7628 and a total attendance base of 703,001,493 attendees.
- Unit Issuance: A total of 1,416,515 new common membership units were issued to the Founding Members.
- Cash Consideration: No cash was received by NCM, Inc. or NCM LLC for the unit issuance. However, cash payments of $13.88 and $12.63 were made to Cinemark USA, Inc. and RCI, respectively, in lieu of partial units.
Material Changes Versus Prior Period
The ownership structure of NCM LLC changed following the 2015 adjustment, driven by a net increase in attendance of 5,101,727 attendees. The specific changes in ownership interest are as follows:
| Founding Member Group | Prior Ownership % | Post-Adjustment Ownership % | Change |
|---|---|---|---|
| AMC | 17.66% | 17.47% | -0.19% |
| Cinemark | 18.97% | 19.32% | +0.35% |
| Regal | 19.54% | 19.83% | +0.29% |
| NCM, Inc. | 43.83% | 43.38% | -0.45% |
Attendance changes were driven by the addition of 184 screens (increasing attendance by 5.2 million) and the disposition of 76 screens (decreasing attendance by 1.7 million). A "true-up" adjustment added 1.6 million attendees based on actual versus projected attendance for new theatres.
Guidance, Outlook, and Risks
The filing contains no forward-looking guidance, management commentary on future performance, or specific risk factors beyond the standard mechanics of the Common Unit Adjustment Agreement. The transaction was executed under Section 4(2) of the Securities Act as a private transaction not involving a public offering. The units issued are redeemable by the Founding Members for an equal number of NCM, Inc. common shares on a one-for-one basis.
Investor Verification Checklist
- Verify the settlement date of March 31, 2016, for the issuance of the 1,416,515 units.
- Confirm the impact of the -0.45% dilution to NCM, Inc.'s ownership stake in NCM LLC.
- Review the redemption rights allowing Founding Members to exchange NCM LLC units for NCM, Inc. common stock.
- Note that the valuation relies on a 60-day weighted average share price ending December 31, 2015, rather than the current market price.