UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 2928, ~~2016~~2017

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

For the transition period from to

Commission file number: 333-176056

NATIONAL CINEMEDIA, LLC

(Exact name of registrant as specified in its charter)

Delaware

20-2632505

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

9110 East Nichols Avenue, Suite 200

Centennial, Colorado

80112-3405

(Address of principal executive offices)

(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act: None

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 ☐ 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 ☒

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 ☒ 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 ☒ 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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” ~~and~~ “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ ~~Accelerated~~Smaller ~~filer~~reporting company ☐ Non-accelerated filer ☒ (Do not check if a smaller reporting company) ~~Smaller~~Emerging ~~reporting~~growth company ☐ Accelerated filer ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition method for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of February 2827, ~~2017~~2018, the registrant had ~~137~~154,~~194~~081,~~745~~334 common membership units outstanding (excludes restricted shares which have vested and stock options which have been exercised subsequent to December 2928, ~~2016~~2017). The common membership units are not publicly traded.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of National CineMedia, Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 2423, ~~2017~~2018 and National CineMedia, Inc.’s definitive proxy statement to be used in connection with its Annual Meeting of Stockholders and to be filed within 120 days of December 2928, ~~2016~~2017 are incorporated by reference into Part III, Items 10-14, of this report on Form 10-K.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Business	5
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	2423
Item 2.	Properties	24
Item 3.	Legal Proceedings	2524
Item 4.	Mine Safety Disclosures	2524
	PART II
Item 5.	Market for Registrant’s Common Membership Units, Related Unitholder Matters and Issuer Purchases of Equity Securities	2625
Item 6.	Selected Financial Data	27
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3029
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	4543
Item 8.	Financial Statements and Supplementary Data	4543
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	4543
Item 9A.	Controls and Procedures	4543
Item 9B.	Other Information	4544
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	4644
Item 11.	Executive Compensation	4644
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	4644
Item 13.	Certain Relationships and Related Transactions, and Director Independence	4644
Item 14.	Principal Accounting Fees and Services	4644
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	4644
Signatures		4750

Certain Definitions

In this document, unless the context otherwise requires:

•

“NCM LLC” “the Company,” “we,” “us”, or “our” refers to National CineMedia, LLC, a Delaware limited liability company, which commenced operations on April 1, 2005.

•

“NCM, Inc.” refers to National CineMedia, Inc., a Delaware corporation, and its consolidated subsidiary National CineMedia, LLC, which acquired an interest in, and became a member and the sole manager of NCM LLC, upon completion of its initial public offering, or “IPO,” which closed on February 13, 2007. Also referred to as “manager” or “managing member.”

•

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

•

“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, AMC Starplex, LLC, which joined NCM LLC in December 2015 in connection with AMC’s acquisition of Starplex Cinemas 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.

•

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

•

“OIBDA” refers to operating income before depreciation and amortization expense.

• “Adjusted OIBDA” excludes from OIBDA non-cash share based payment costs, merger-related administrative costs, ~~and~~ CEO transition costs and early lease termination expense.

•

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

•

“DCN” refers to NCM LLC’s Digital Content Network.

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 theater attendance or viewership of the ~~FirstLook~~Noovie pre-show;

•

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

•

competition within the overall advertising industry;

• failure to effectively manage or continue our growth;

•

not maintaining our technological advantage;

•

national, regional and local economic conditions;

•

the loss of any major content partner or advertising customer;

• our inability to retain or replace our senior management;

•

changes to relationships with our founding members;

•

founding member and network affiliate government regulation could slow growth;

•

failure to effectively manage or continue our growth;

•

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-theater, 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; and

•

our inability to retain or replace our senior management.

Risks Related to Our Corporate Structure

•

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;

•

our founding members or their affiliates may have interests that differ from those of us or NCM, Inc.’s 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;

•

determination that NCM, Inc. or our founding members is an investment company and

•

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

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 LLC was organized on March 29, 2005 and began operations on April 5, 2005. NCM, Inc. is a holding company that manages its consolidated subsidiary, NCM LLC and held 4349.75% of the common membership units in NCM LLC as of December 2928, ~~2016~~2017. NCM LLC’s founding members, AMC, Cinemark and Regal, the three largest motion picture exhibition companies in the U.S., held the remaining 5650.35% of NCM LLC’s common membership units as of December 2928, ~~2016~~2017.

We have long-term ESAs with our founding members (over 2019 years remaining as of December 2928, ~~2016~~2017) and multi-year agreements with certain third-party theater circuits, referred to in this document as “network affiliates,” which expire at various dates between ~~July~~May 1431, ~~2017~~2018 and July 22, 2031. The ESAs and network affiliate agreements grant us exclusive rights in their theaters to sell advertising, subject to limited exceptions.

Our Business

We are America's Movie Network. As the #1 weekend network for Millennials (age 18-34) in the U.S., we are the connector between brands and movie audiences.

We currently derive revenue principally from the sale of advertising to national, regional and local businesses in ~~FirstLook~~Noovie, our cinema advertising and entertainment pre-show seen on movie screens across the U.S. We also sell advertising on our Lobby Entertainment Network (“LEN”), a series of strategically-placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. In addition, we sell online and mobile advertising across our Noovie digital products as well as through our Cinema Accelerator digital product to reach entertainment audiences beyond the theater.

We believe that the broad reach and digital delivery of our network provides an effective platform for national, regional and local advertisers to reach a large, young, engaged and affluent audience on a targeted and measurable basis.

On-Screen Advertising

~~FirstLook~~Noovie—Our on-screen ~~FirstLook~~Noovie pre-show was ~~created~~launched toin ~~provide~~September aof ~~more~~2017 replacing our prior pre-show called FirstLook. Our pre-show provides an entertaining pre-movie experience for theater patrons while serving as an incremental revenue source for our theater circuit partners. ItNoovie gives movie audiences a reason to arrive early to discover what’s next in entertainment, and it consists of national, regional and local advertising, as well as long-form entertainment and advertising content provided to us under exclusive multi-year arrangements with leading media, entertainment, technology and other companies (“content partners”).

~~FirstLook~~Noovie generally ranges in length from 20 to 30 minutes and ends at or about the advertised show time, when the movie trailers and feature film begin. The trailers that run before the feature film are not part of ~~FirstLook~~Noovie.

Because ~~FirstLook~~Noovie is customized by theater circuit, theater location/market, film rating, film genre and film title, we produce and distribute many different versions of ~~FirstLook~~Noovie each month. This programming flexibility provides advertisers with the ability to target specific audience demographics and geographic locations, and gives us the ability to ensure that the content and advertising is age-appropriate for the movie audience. It also enables us to incorporate the branding of a specific theater circuit if desired. We rotate ~~FirstLook~~Noovie’s long-form content segments between theaters approximately every two weeks to ensure that frequent moviegoers are entertained by fresh content.

We also have the capability to deliver three-dimensional (“3-D”) advertising campaigns within a 3-D version of the ~~FirstLook~~Noovie pre-show program prior to 3-D feature films.

All versions of ~~FirstLook~~Noovie are produced by our internal creative team, which is cost-effective and gives us significant flexibility. We also offer pre- and post-production advertising creative services to our clients (primarily local clients who may not have their own creative agency) for a fee.

Show Structure—~~FirstLook~~Noovie is comprised of up to four segments, each approximately four to seven minutes in length.

• Segment four is the first section of ~~FirstLook~~Noovie and begins approximately 20 to 30 minutes prior to the advertised show time. Entertaining content is a core element of Noovie, and ~~generally~~NCM ~~includes~~programs an exclusive Noovie content pod at the beginning of the show that gives audiences a look at “what’s Noovie” in their world, including movies Noovie Backlot and Noovie Genius), music Noovie Soundcheck), trivia (Name That Movie), local, and more. This Noovie pod is followed by 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 theaters, or across an entire DMA® or geographic region, as well as a long-form entertainment content segment from one of our content partners.

•

Segment two begins approximately 13 minutes before the advertised show time and features primarily national and regional advertisements, which are generally 30 or 60 seconds, as well as a long-form entertainment content segment from one of our content partners.

•

Segment one runs closest to the advertised show time at approximately 8 minutes and features primarily national advertisements, which are generally 30 or 60 seconds, as well as a long-form entertainment content segment from one of our content partners. Segment one also includes an advertisement for the founding members’ beverage supplier and a public service announcement (“PSA”).

The ~~FirstLook~~Noovie pre-show typically includes the following.:

National, Regional and Local Advertising—On-screen advertising in ~~FirstLook~~Noovie is sold on a cost per thousand (“CPM”) basis to national clients. We generally sell our national advertising units across our national network by film rating or groups of ratings, or by individual film or film genre grouping. This ability to target various groups of films offers national advertisers a way to target specific audience demographics at various price points and overall cost levels, which we believe expands the number of potential clients.

Local and regional advertising is primarily sold on a per-screen, per-week basis and can also be sold on a CPM basis. ~~Beginning~~The inNoovie ~~2016, the FirstLook~~ pre-show inventory is also ~~became~~ available in the STRATA ~~system,~~and aMediaocean systems, media buying and selling ~~software~~softwares which ~~allows~~allow advertising agencies to buy cinema advertising in the “National Spot TV” marketplace where advertising is purchased by national advertisers in several markets of their own selection. Being able to buy both TV and cinema locally in the National Spot marketplace makes it significantly easier for agencies to include cinema in the media mix for their clients and allows us to tap into athe ~~new~~ pool of advertising dollars budgeted for National Spot.

Our cinema advertising business has a diverse customer base, consisting of national, regional and local advertisers. As of December 2928, ~~2016~~2017, ~~504~~541 national advertisers across a wide variety of industries have advertised with us. During the year ended December 2928, ~~2016~~2017, we derived 70% of our advertising revenue from national clients (including advertising agencies that represent our clients) and 2423% of our advertising revenue from thousands of regional and local advertisers across the country (including advertising agencies that represent these clients).

Content. ~~The~~Beyond the Noovie-branded content at the beginning of the pre-show, the majority of our entertainment and advertising content segments are provided to us by content partners. Under the terms of the contracts, our content partners make available to us original entertainment content segments that are entertaining, informative or educational in nature in the ~~FirstLook~~Noovie program and make commitments to buy a portion of our advertising inventory at a specified CPM over a one or two-year period with options to renew, exercisable at the content partner’s option. The original content produced by these content partners typically features behind-the-scenes looks at the “making-of” feature films, upcoming broadcasts, cable television shows, or technology products. In ~~2016~~the first nine months of 2017, all of our content partners provided approximately two-minute segments. Following the launch of the Noovie pre-show in September 2017, the content partners provided approximately 90 second segments.

PSA. We ~~have~~had ~~two-year~~four agreements to exhibit a 40-second courtesy “silence your cell phone” PSA reminding moviegoers to silence their cell phones and refrain from texting during feature films, one with an insurance company, one with a home security company, one with a motion picture studio and another with a candy company which ~~expire~~all expired at the end of 2017. Three of these agreements have re-signed for 2018.

3-D Advertising. We also sell 3-D advertising, which runs prior to select 3-D films. These 3-D advertisements are placed at the end of the ~~FirstLook~~Noovie pre-show, after a message instructing the movie audience to put on their 3-D glasses, so that the glasses can be kept on throughout the remainder of ~~FirstLook~~Noovie, the film trailers and the 3-D feature film to provide for a better experience. 3-D advertisements provide average advertising CPMs that are higher than average two-dimensional (“2-D”) pricing due primarily to the fact that 3-D advertisements have heightened recall (based on third-party research).

Name That Movie. During 2017, we entered into a licensing agreement authorizing the production of Name That Movie trivia segments for our Noovie pre-show, social media channels and future digital properties in order to further entertain and engage moviegoers. We also offer the opportunity for our advertising customers to sponsor the Name That Movie segments and incorporate advertising into the game.

Beverage Advertising—We also have a long-term agreement to exhibit the advertising of the founding members’ beverage supplier. Under the ESAs, up to 90 seconds of the ~~FirstLook~~Noovie program can be sold to the founding members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements at a rate intended to approximate a market rate (per the ESA, the annual CPM change equals the prior year annual percentage change in the advertising CPM charged to unaffiliated third parties during segment one (closest to showtime) of the ~~FirstLook~~Noovie pre-show, limited to the highest advertising CPM being then-charged by NCM LLC). Each of the founding members has a relationship with a beverage concessionaire supplier under which they are obligated to provide on-screen advertising time as part of their agreement to purchase branded beverages sold in their theaters. During ~~2016~~2017, we sold 60 seconds to two of the founding members and 30 seconds to one of the founding members. During ~~2016~~2017, the beverage concessionaire revenue from the founding members’ beverage agreements was 67% of our total revenue. In the instance of encumbered theaters, we remain entitled to these beverage payments under the terms of the ESA which are treated as a reduction to the intangible asset and not classified as revenue.

Theater Circuit Messaging—The ~~FirstLook~~Noovie program also includes time slots for the founding members and network affiliates to advertise various activities associated with the operations of the theaters, including concessions, online ticketing partners, gift card and loyalty programs, special events presented by the theater operator and vendors of services provided to theaters, so long as such promotion is incidental to the vendor’s service or products sold in the theater. This time is provided to the theater 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.

Lobby Advertising

Lobby Entertainment Network—Our LEN is a network of video screens strategically located throughout the lobbies of all digitally equipped founding members’ theaters, as well as the majority of our network affiliate theaters. As of December 2928, ~~2016~~2017, our LEN had 3,~~029~~054 screens in 1,~~505~~536 theaters in our network. The LEN screens are placed in high-traffic locations such as concession stands, box offices 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 theater through our DCN, and the same program is displayed simultaneously on all lobby screens within a given theater, 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 founding members’ advertisements to promote activities associated with the operation of the theaters, including concessions, ticketing partners, gift card and loyalty programs, special events presented by the theater operator and vendors of services provided to theaters, 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 the founding members at no cost and one minute of which the founding members may purchase) to promote certain non-exclusive cross-marketing relationships entered into by the theater operators for the purpose of increasing theater attendance, which we call “strategic programs.”

Under the terms of the ESAs, the founding members also have the right to install additional screens in their theater lobbies which would not display our LEN programming, but would be used to promote strategic programs or products sold in their theater concessions, bars and dining operations, ticketing partner promotions, gift card and loyalty programs, special events presented by the founding member and vendors of services provided to theaters, 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 theater lobbies. These products can be sold individually or bundled with on-screen, LEN, online or mobile 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 or as they exit the theater;

•

tabling displays, product demonstrations and sampling;

•

touch-screen display units and kiosks; and

•

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

7Beginning in 2017 we have agreements with vendors enabling us to sell advertising on digital banner and screen equipment within certain exhibitor theater lobbies.

Under the terms of the ESAs, the 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 cinema advertising products allows us to offer integrated marketing solutions to advertisers that provide multiple touchpoints with theater patrons throughout the movie-going experience, which we believe is a competitive advantage over other national media platforms.

Digital Advertising

~~The~~At ~~Cinema~~its ~~Accelerator~~core, ~~digital~~Noovie ~~product~~is ~~expands~~NCM’s ~~cinema~~pre-show ~~advertising~~that ~~beyond~~audiences ~~the~~experience ~~theater environment to reach digitally-connected moviegoers~~ before ~~and after~~ the movie ~~experience~~, ~~both~~but ~~online~~Noovie ~~and~~also onstretches ~~mobile~~beyond ~~devices.~~the ~~Cinema~~theater ~~Accelerator~~as ~~identifies~~an ~~moviegoers~~integrated ~~through~~digital ~~exclusive~~ecosystem ~~first~~delivering ~~party~~entertaining ~~data~~content, ~~sources~~purposeful ~~including geo-location services~~commerce, ~~beacons~~ and ~~transaction~~interactive ~~data~~gaming ~~for~~opportunities. ~~the~~The ~~moviegoers~~Noovie ~~that~~pre-show ~~enter~~serves ~~the~~as ~~theaters~~a in“trailer” ~~our~~for ~~network. Using~~ the ~~moviegoer~~Noovie asdigital ~~our filter~~experience, wedriving ~~can~~movie ~~target~~audiences ~~specific~~from ~~demographics,~~the ~~genres~~big orscreen ~~layer~~to onNCM’s ~~other~~digital ~~data~~properties toand ~~provide~~back toagain. ~~our~~We ~~clients~~believe ~~with~~that aby ~~match~~creating ~~against~~a ~~their~~compelling ~~target~~consumer ~~audience.~~experience ~~Digital~~for ~~ads~~moviegoers, ~~are~~we ~~then~~can ~~distributed~~further ~~through~~enhance ~~multiple~~the ~~channels,~~marketability ~~including~~of ~~online~~our ~~and~~product ~~mobile~~offerings ~~banners,~~to ~~online~~our ~~and~~advertising ~~mobile~~customers. ~~pre-roll~~The ~~video~~Noovie ~~and~~digital ~~Facebook~~ecosystem ~~newsfeeds~~is designed to ~~reach~~provide ~~moviegoers~~digital ~~wherever~~advertising ~~they~~inventory ~~may~~and becapture ~~seeking~~exclusive ~~entertainment~~first ~~information~~party data and ~~content.~~ includes:

WeGaming—During ~~sell~~2017, ~~Cinema~~we ~~Accelerator~~acquired ~~through~~Fantasy Movie League, a ~~digital~~box ~~sales~~office ~~group~~predictions game that iscombines ~~embedded~~the asfierce ~~part~~competition of ~~our~~fantasy ~~national~~sports with the world of entertainment and ~~local~~movies. ~~sales~~Fantasy ~~organizations~~Movie toLeague ~~enable~~can ~~collaborative~~currently be played online at FantasyMovieLeague.com or through the Fantasy Movie League iOs app, ~~integrated~~and ~~selling~~it is promoted on-screen in our Noovie pre-show to help grow Fantasy Movie League’s gaming audience.

WeAdditionally, ~~believe~~during ~~that~~2017, ~~new~~we ~~digital~~began ~~products~~development ~~and~~of ~~revenue~~the ~~could~~first beNoovie, ~~developed~~app ~~and~~Noovie ~~additional~~ARcade, ~~in-theater~~created ~~advertisements~~to ~~could~~bring beaugmented ~~sold~~reality asgaming ~~integrated~~to ~~marketing~~the ~~packages~~big ~~with~~screen ~~digital~~and ~~offerings~~beyond. asWe ~~discussed~~intend to roll it out in ~~“Business~~select –markets ~~Our~~in ~~Strategy”~~2018 with a national roll-out to follow.

Cinema Accelerator—In addition to our ad-supported consumer-facing digital products, our Cinema Accelerator digital product expands cinema advertising beyond the theater environment to reach digitally-connected moviegoers before and after the movie experience, both online and on mobile devices. Cinema Accelerator identifies moviegoers through exclusive first party data sources including geo-location services, beacons and transaction data for the moviegoers that enter the theaters in our network. Using the moviegoer as our filter, we can target specific demographics, genres or layer on other data to provide to our clients with a match against their target audience. Digital ads are then distributed through multiple channels, including online and mobile banners, online and mobile pre-roll video and Facebook newsfeeds to reach moviegoers wherever they may be seeking entertainment information and content.

We sell NCM’s digital products through a digital sales group that is embedded as part of our national and local sales organizations to enable collaborative, integrated selling.

We believe that our new and upcoming digital products can be sold with additional in-theater advertisements as integrated marketing packages as discussed in “Business – Our Strategy”. We plan to continue to invest in our digital platform in 2018.

Our Network

In-theater advertising and entertainment content is distributed across NCM LLC’s national theater network — the largest digital in-theater network in North America.

Through the use of our proprietary DCN and Digital Content Software (“DCS”), we are able to schedule, deliver, play and reconcile advertising and entertainment content for ~~FirstLook~~Noovie and the LEN on a national, regional, local, theater and auditorium level.

~~Our~~The DCN is the combination of a satellite distribution network and a terrestrial management network,. ~~and~~We we also employ a variety of technologies that ~~“wrap”~~aid ~~around~~in distribution where the satellite ~~process~~delivery tois ~~help~~not available to provide uninterrupted service to our network of theaters. The DCN is controlled by our Network Operations Center (“NOC”) located in our headquarters in Centennial, CO, which operates 24 hours a day, seven days a week to proactively monitor and manage approximately ~~670~~730,000 alarm points and approximately ~~108~~117,000 hardware devices in movie theaters throughout the country. ~~Our~~DCN ~~NOC interfaces with our satellite provider network to~~ dynamically ~~control~~controls the quality, placement, timing of playback and completeness of content within specific auditoriums, and it also allows us to monitor and initiate repairs to the equipment in our digital network of theaters.

Advertising and entertainment content for our ~~FirstLook~~Noovie pre-show and LEN is uploaded from our NOC to our satellite distribution network and is ~~then~~ delivered via multicast technology to ~~all~~the theaters in our network and received by our ~~theater~~Alternative ~~management~~Content ~~system,~~Engine ~~where~~(“ACE”). itThe isACE ~~held~~holds the content until displayed in specified theater auditoriums and lobbies according to contract terms. Each theater auditorium and lobby has a hardware and software architecture that controls the content to be shown. After ~~the~~playback ~~theater~~of ~~management system receives advertising/entertainment~~ content, confirmation of ~~content~~ playback is returned via satellite to our NOC to be included in “post” reports provided to our advertising clients.

~~More~~According to Nielsen, more than 700 million moviegoers annually attend theaters that are currently under contract to present the ~~FirstLook~~Noovie pre-show and LEN programming, including the founding members and over 4050 leading national and regional theater network affiliates. A summary of the screens and theaters in our advertising network is set forth in the table below:

Our Network

(As of December 29, 2016)

	Advertising Network
	Theaters		Total Screens		% of Total
Founding Members		1,274		17,022		82.8	%
Network Affiliates		348		3,526		17.2	%
Total		1,622		20,548		100.0	%

AsOur of December 29, 2016, our FirstLook pre-show was displayed on 100% of network movie screens using digital projectors, with approximately 98% of those screens receiving content through our DCN, representing approximately 98% of our total network attendance. As of December 29, 2016, 18,585, or 90%, of 20,548 total digital screens are equipped with more powerful digital cinema projectors, with the remainder comprised of LCD projectors. Those screens not connected to our DCN display national and regional advertisements on digital projectors with content delivered on USB drives that are shipped to the theaters via overnight delivery services.Network

(As of December 28, 2017)

	Advertising Network
	Theaters		Total Screens		% of Total
Founding Members		1,262		16,808		80.6	%
Network Affiliates		419		4,042		19.4	%
Total		1,681		20,850		100.0	%

As of December 28, 2017, our Noovie pre-show was displayed on 100% of network movie screens using digital projectors, with approximately 98% of those screens receiving content through our DCN, representing approximately 98% of our total network attendance. As of December 28, 2017, 19,306, or 93%, of 20,850 total digital screens are equipped with more powerful digital cinema projectors, with the remainder comprised of LCD projectors. Those screens not connected to our DCN display national and regional advertisements on digital projectors with content delivered on USB drives that are shipped to the theaters via overnight delivery services.

Our Team

We had ~~610~~572 employees as of December 2928, ~~2016~~2017. Our employees are located in our Centennial, Colorado headquarters, in our advertising sales offices in New York, Los Angeles, Chicago, and Detroit, and our software development office in Minneapolis. We also have many 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.

Sales, Marketing, Research and Creative—We sell our in-theater and online advertising products through our national, local and regional, and digital sales teams.

As of December 2928, ~~2016~~2017, we had 4631 advertising sales and client development related ~~personnel~~employees (including management and sales support staff) within our national sales group. During ~~2016~~2017, approximately 3027% of the total compensation of the national sales staff was related to bonus or commission, which is based on achieving certain sales targets in order to enhance coordination and teamwork. Our national sales organization has proven to be 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, CA (outside Los Angeles), Chicago and Detroit.

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~~117 screens per representative. Their responsibility is to sell cinema and digital advertising to local clients as well as larger regional and spot advertisers. During ~~2016~~2017, approximately 7267% of the compensation for local and regional 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~~ December 2928, ~~2016~~2017, we had ~~202~~201 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. In early 2018, we re-envisioned the management of our local and regional sales team and reduced the number of local and regional sales leadership in order to minimize overhead costs.

We market our advertising products through our marketing group located primarily in our New York City sales office. We aggressively market and sell directly to clients as well as advertising agencies, including our participation in the ~~television~~ upfront advertising ~~selling~~marketplace ~~process~~ (the “Upfront”)~~, which is launched each year with a presentation to clients and advertising agencies in New York City during the main TV Upfront week~~. Based on the success of our Upfront efforts, we believe that we are capturing additional market share from traditional advertising media platforms such as broadcast and cable television. We also believe that enhanced research regarding cinema advertising and expanded analytics about our network has aided our sales efforts by providing our customers with compelling statistical evidence of the superiority of our cinema advertising products relative to other advertising mediums based on metrics such as brand recognition, message recall, and likeability which can enable them to target their customers. Our research team conducts our own proprietary studies, and we also commission third-party market research to assist our sales team. We also promote our advertising products through public relations, social media and advertising in national trade publications. As of December 2928, ~~2016~~2017, this team had 3433 personnel based primarily in New York that focus on the marketing, research, public relations and corporate development aspects of our business.

Our media and creative services department, based primarily in our Centennial, CO headquarters, uses state-of-the-art proprietary and non-proprietary technologies and practices to ensure the highest possible cinematic image and sound quality for our ~~FirstLook~~Noovie pre-show and LEN programming distributed over our network. 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. We believe that our expertise in creating and optimizing content for cinema playback within our ~~FirstLook~~Noovie pre-show has been instrumental in our ability to provide a better experience for movie audiences, as well as enhances our ability to attract and retain our on-screen advertising clients and build and retain relationships with network affiliates. For national and regional clients, our expertise in cinematic production and our ability to tailor advertisements developed for television, online or mobile to the high-definition cinema playback format required for the big screen allows our media team to use existing advertising creative, making it easier to add cinema to their media mix. For local clients, our ability to serve as a creative agency and develop full sight, sound and motion high-definition cinema advertisements to meet their needs and budget reduces a significant barrier to entry for smaller businesses. During

~~2016~~existing advertising creative, making it easier to add cinema to their media mix. For local clients, our ability to serve as a creative agency and develop full sight, sound and motion high-definition cinema advertisements to meet their needs and budget reduces a significant barrier to entry for smaller businesses. During 2017, we produced and performed post-production services for approximately 4139% of the local advertisements that played across our network. The founding members also engage us for the production of their on-screen concession product advertisements and policy trailers. As of December 2928, ~~2016~~2017, we had 5938 personnel that focused on the media, production and creative services aspects of our business.

Operations, Planning and ~~Planning~~Digital Gaming—As of December 2928, ~~2016~~2017, we had ~~109~~128 ~~personnel~~employees based primarily in our Centennial, CO headquarters that focused on the sales operations, planning, ~~and~~ network operations and digital gaming development aspects of our business.

Enterprise Information Systems, Finance, Legal, ~~People~~Human ~~& Organization~~Resources, Affiliate Partnerships and Administration—As of December 2928, ~~2016~~2017, we had ~~160~~141 ~~personnel~~employees based primarily in our Centennial, CO headquarters that focused on the Enterprise Information Systems, Finance, Legal, ~~People~~Human ~~& Organization (human resources)~~Resources, Affiliate Partnerships and Administration aspects of our business.

Competition

Our advertising business competes in the estimated $~~191~~197 billion U.S. advertising industry with many other forms of marketing media, including television, radio, print, internet, mobile and outdoor display advertising. While cinema advertising represents a small portion of the overall advertising industry today, we believe it is well positioned to capitalize on the shift of advertising spending away from traditional media, in particular television where consumers can skip advertisements through DVRs and other new digital technology, to newer and more targeted forms of media.

Our advertising business also competes with many other providers of cinema advertising, which vary substantially in size. As the largest cinema advertising network in the U.S., we believe that we are able to generate economies of scale, operating efficiencies and enhanced opportunities for our clients to reach an engaged movie audience on both a national and local level that allow us to better compete for premium video dollars in the larger advertising marketplace.

Competitive Strengths

We believe that several strengths position us well to compete in an increasingly fragmented media landscape.

Superior National Advertising Network

We believe that our cinema advertising network is an attractive option for marketers on both a national and local level, and delivers measurable results for our clients that are comparable, and ~~indeed~~ superior, to the television, online and mobile, or other video advertising networks that we compete against in the marketplace.

Extensive National Market Coverage—Our contractual agreements with our founding members and network affiliates provide long-term exclusive access (subject to limited exceptions) to sell cinema advertising across the largest network of digitally-equipped theaters in the U.S. This allows us to offer advertisers the broad reach and national scale that they need in an increasingly fragmented media marketplace.

As of December 2928, ~~2016~~2017:

• Our advertising network consisted of 20,~~548~~850 screens (1716,~~022~~808 operated by our founding members) located in 1,~~622~~681 theaters (1,~~274~~262 operated by the founding members) in 48 states and the District of Columbia, including each of the top 25 and 50 DMAs®, and ~~189~~187 DMAs® in total;

• Approximately 73% of our screens (77% 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®. Theaters within our network represented approximately 7069%, 6867%, and 6667% of the total theater attendance in theaters that present advertising in the top 10, top 25 and top 50 U.S. DMAs®, respectively and 6362% for all DMAs®, providing a very attractive platform for national advertisers who want exposure in larger markets or on a national basis;

• Our total annual network theater attendance was approximately ~~688~~655.8 million (~~586~~545.26 million from our founding members), which decreased 04.8% compared to ~~2015~~2016. Our network of modern theaters represented approximately 57.3% of the total U.S. theater attendance, with some of the most highly attended theaters in the industry, as measured by screens per location and attendance per screen;

• The average screens per theater in our network was 12.74 screens, 1.8 times the U.S. theater industry average, and the aggregate annual attendance per screen of theaters included in our network during ~~2016~~2017 was 3331,~~523~~453, versus the U.S. theater industry average attendance per indoor screen of 3228,~~893~~748, using metrics reported by the National Association of Theatre Owners (“NATO”).

Scalable, State-of-the-Art Digital Content Distribution Technology—Our use of the combination of satellite and terrestrial network technology, combined with the design and functionality of our DCS and NOC infrastructure, makes our network efficient and scalable and also allows us to target specific audiences and provide advertising scheduling flexibility and reporting. We have also focused our efforts on shortening lead times ~~through~~by ~~our~~accelerating ~~Turbo initiative to accelerate~~ the delivery time of media from proposal to on-screen across our network of movie theaters nationwide. ~~While we had been able to offer this to national clients previously~~National, ~~this has also allowed us to shorten the lead-times for~~ local and regional advertisers are able to run their ads in the ~~FirstLook~~Noovie pre-show to less than 72 hours ~~from~~following ~~proposal to delivery of~~ the adproposal ~~on screen~~ (comparable to TV), which is a significant improvement over the cinema industry’s traditional turn-around time frame and gives businesses that rely on time-sensitive promotional advertising strategies, such as car dealerships, retail stores and Quick Service Restaurants (“QSR”), the opportunity to take advantage of the power of cinema.

This scalability of our distribution technology has allowed us to expand our cinema advertising network with minimal additional capital expenditures or personnel, and we expect to benefit from this scalability in the future as we add new theaters from the founding members, our existing network affiliate relationships and the addition of new network affiliates.

Millennials, Content and Data

We believe that the Millennial audiences (age 18-34) in our network of theaters, the premium content of Hollywood films and our ~~FirstLook~~Noovie pre-show, and the advances we have made in cinema advertising data all give us a competitive advantage in the media marketplace.

Access to a Highly Attractive, Engaged Audience—We offer advertisers the ability to reach highly-coveted target demographics, including young, affluent, and educated moviegoers. According to Nielsen Cinema Audience Reports for ~~2016~~2017, 5456% of the NCM LLC audience were between the ages of 12-34 ~~and our Millennial movie-going audience (age 18-34) grew over 16% in 2015,~~ compared to ~~2014 and was up 4~~54% in 2016. Further, 3842% of NCM LLC moviegoers have a household income greater than $100,000 (versus 2830% of the general population) and 3739% have received a Bachelor’s degree or higher (versus 2930% of the general population) according to the ~~2016~~2017 Doublebase GfK MRI Study.

Because of the impact of cinema’s state-of-the-art immersive video and audio presentation, we also believe that movie audiences are highly engaged with the advertising and entertainment content that they view in our distraction-free theater environment. According to industry research, cinema advertising has significantly higher recall rates than advertising shown on television. And, cinema is one of the few advertising mediums where the ability to skip or turn off the marketing messages is limited.

Innovative, Branded Pre-Feature Content—The film content created by Hollywood studios is considered by many to be the finest entertainment content in the world, which creates a highly-desirable advertising environment for brands. We believe that our entertainment and advertising pre-feature program, ~~FirstLook~~Noovie, provides a high-quality entertainment experience for theater audiences and an effective marketing platform for advertisers. By partnering with leading media, entertainment, technology and other companies, we are able to provide better original content for our audience and more impact for the advertiser. Because we offer local and national “pods” within our ~~FirstLook~~Noovie pre-show, we are consistent with the placement of ads on television networks, which allows us to be more easily integrated into traditional sight-sound-and-motion media buys.

Superior Audience Measurability and Targeting—As with many other advertising mediums, we are measured by third-party research companies, such as Nielsen Holdings PLC, that provide us with the percentage of the total attendance in their seats at various times during our ~~FirstLook~~Noovie pre-show. What differentiates us from other advertising mediums, however, is that we also receive monthly attendance information by film, by rating and by screen for all of the founding member theaters and by flight and by location for the theaters operated by our network affiliates, which allows us to report the actual audience size for each showing of a film, including our ~~FirstLook~~Noovie pre-show. We believe that the ability to provide this level of detailed information to our clients gives us a distinct competitive advantage over traditional media platforms whose measurement is based only on extrapolations of a very small sample of the total audience.

During ~~2016~~2017, we continued to invest in our inventory management systems to expand our ability to target audiences by film genre. Our Cinema Audience Targeting Optimizer (“CATO”) now allows advertisers to go beyond targeting by the Motion Picture Association of America (“MPAA”) rating (G/PG, PG13 and R) to build media schedules at the film and genre level, more effectively targeting a brand’s key audience by matching it to the movie titles and/or genres that can best deliver that audience in a given campaign schedule.

In 2017, we also continued to invest in the development of our cloud-based Data Management Platform (“DMP”) which we believe will allow us to provide even more robust campaign data and analytics to our clients. To further enhance the connection between brands and movie audiences, we accumulate audience data from several sources within our new DMP. This audience data is then leveraged alone or alongside data science capabilities to offer highly effective campaigns, audience insights and closed-loop attribution reporting. We will continue to enhance the capabilities of the platform in 2018 by continuing to add data sources, segments and define and redefine needs.

Integrated Marketing and Digital Products

Our ability to bundle our on-screen advertising opportunities with integrated lobby, online and mobile marketing products allow us to offer advertisers multiple touchpoints to reach movie audiences before, during and after the film to execute true 360-degree marketing programs. We believe these multiple marketing impressions throughout the entire entertainment experience allows our advertisers to extend the exposure for their brands and products and create a more engaging relationship with movie audiences in

Inevery ~~2016,~~stage ~~we also began the development~~ of ~~our~~their ~~cloud-based~~movie ~~Data~~journey. ~~Management~~Additionally, ~~Platform~~the ~~(“DMP”)~~digital ~~which~~products weprovide ~~believe will allow~~ us towith ~~provide~~valuable, ~~even~~exclusive ~~more~~first ~~robust~~party ~~campaign~~ data ~~and~~which ~~analytics~~can tobe ~~our~~used ~~clients.~~by Toin-theater ~~further~~customers ~~enhance~~to ~~the~~better ~~connection~~attract ~~between brands~~ and ~~movie~~interact ~~audiences,~~with wetheir ~~will~~target ~~also~~market beor ~~filtering~~sold ~~media~~to ~~schedules through our~~ new ~~DMP – the first of its kind in the cinema industry – which will allow us to offer transaction-based insights, better targeted campaigns and closed-loop return on investment~~customers.

Integrated Marketing Products

Contractual Theater Circuit Partner and Advertiser Relationships

Our exclusive multi-year contractual relationships with our founding members and network affiliates allow us to offer advertisers a national network with the scale, flexibility and targeting to meet their marketing needs. Our exclusive multi-year contractual relationships with our content partners and PSA sponsors, as well as our agreements to satisfy our founding members’ on-screen marketing obligations to their beverage concessionaires, provide us with a significant upfront revenue commitment, accounting for approximately 30% of our total revenue for the year ended December 2928, ~~2016~~2017. In addition, our participation in the annual advertising Upfront marketplace has allowed us to secure significant annual upfront commitments from national advertisers looking to secure premium cinema inventory.

Strong Operating Margins with Limited Capital Requirements

Our annual Adjusted OIBDA margins have been consistently strong, ranging from approximately 4948% 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 operating income.) In addition, the 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 theaters including ~~the recent deployment of the~~ newer and higher quality digital cinema equipment. Due to the network equipment investments made in recent years by ~~the~~our founding members and network affiliates (in some cases through the DCIP digital cinema implementation joint venture) in new and acquired theaters 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 theaters expands.

Our capital expenditures have ranged from approximately 2% to 3% of revenues over the last five years. For the year ended December 2928, ~~2016~~2017, our capital expenditures were $1312.3 million, of which only $1.19 million primarily related to investments in network equipment to add new network affiliate theaters. We believe our expected level of Adjusted OIBDA and capital expenditures should provide us with the strategic and financial flexibility to pursue the further expansion of our national theater network, invest in other growth opportunities and continue to make dividend payments to our stockholders.

Our Strategy

We are continuing to pursue a growth strategy that involves growing our network affiliate partnerships, growing on-screen revenue, expanding digital product offerings, ensuring that we are the first choice for our customers, developing our people and capabilities, and allocating resources to strategy.

Grow the Business

We intend to focus on growing our business in the following strategic ways.

Grow Affiliate Partnerships—Our relationships with our exhibitors are a key and renewed focus of our business. In ~~2016~~2017, weour ~~created a new~~ Affiliate Partnership team is dedicated to serving the needs of our founding member theater circuits and our more than 4050 network affiliates nationwide. We continuously seek to expand our theater circuit customer base and add new network affiliate partners to our network that will allow us to increase our revenue by increasing the number of impressions we have available to sell to advertisers. It is also important to note that, under the terms of the ESAs and common unit adjustment agreement with the founding members and our network affiliate agreements, all new theaters built or acquired (subject to existing advertising sales agreements) by the founding members or network affiliates will become part of our network. Since NCM Inc.’s February 2007 IPO, the founding members have added approximately 43,~~000~~700 net new screens and 46 network affiliates have been added to our network with approximately 3,100 screens. During 2017, we added 302 net screens from the founding members and network affiliates. We expect this expansion to continue to improve our geographic coverage and enhance our ability to compete with other national advertising mediums, which will allow our exhibitor customers to maximize the advertising value of their audiences.

12Grow On-Screen Revenue—We plan to continue our successful strategy of selling our inventory like premium video in the larger advertising marketplace, once again utilizing the upfront advertising marketplace to maximize our use of inventory. This Upfront strategy has yielded positive results over the past six years, and we believe that the increased market awareness among media buyers and clients raises our credibility as a medium and allows us to gain upfront commitments traditionally made exclusively to cable and broadcast television networks, and more recently online and mobile networks. Further, we believe it will help to increase our share of video advertising spending by increasing the number of clients and client industries that buy our network. Over time, this greater shift toward more Upfront commitments allows us to bundle several flights throughout the year and stabilize month-to-month and quarter-to-quarter CPM volatility by increasing overall inventory utilization and balancing that utilization throughout the year. Consistent with the television industry upfront booking practices, a portion of our upfront commitments have cancellation options or options to reduce the amount that advertisers may purchase that could reduce what is ultimately spent by clients that have made upfront commitments and we would need to rely on the scatter market to replace those commitments.

~~screens~~During ~~and~~our 38Upfront ~~network~~presentation ~~affiliates~~in ~~have~~May ~~been~~of ~~added~~2017 toas ~~our~~part ~~network~~of ~~with~~the ~~approximately~~TV 2Upfront week,~~600~~ ~~screens.~~we ~~During~~announced ~~2016,~~that we ~~added~~were ~~187~~re-imagining ~~net~~our ~~screens~~cinema ~~from~~pre-show with the ~~founding~~launch ~~members~~of ~~and~~Noovie ~~network affiliates~~ and ~~thus~~introducing ~~far~~new indigital ~~2017~~channels wefor ~~have~~movie ~~entered~~audiences. ~~into~~Noovie ~~contracts~~was tolaunched ~~add~~in ~~new~~September ~~affiliates~~2017, ~~with~~and ~~370~~we ~~screens.~~are Wecontinuing ~~expect this expansion~~ to ~~continue~~enhance toaudience ~~improve~~engagement ~~our geographic coverage~~ and ~~enhance~~build ~~our~~the ~~ability~~Noovie tobrand ~~compete~~through ~~with~~cinema ~~other~~and ~~national~~social ~~advertising~~media ~~mediums~~marketing, ~~which~~all ~~will~~the ~~allow~~while ~~our~~remaining ~~exhibitor~~focused ~~customers~~on tomaintaining ~~maximize~~ the ~~advertising~~commercial value of ~~their~~our ~~audiences~~pre-show.

~~Grow On-Screen Revenue—~~We ~~plan~~also intend to ~~continue~~increase our ~~successful~~market ~~strategy~~share of ~~selling~~local ~~our~~and ~~inventory~~regional ~~like premium video in the larger~~ advertising ~~marketplace,~~spending ~~once~~by ~~again~~aggressively ~~utilizing~~pursuing ~~the~~further ~~annual~~integration ~~television~~into ~~upfront~~agency ~~selling~~planning ~~process~~and tobuying ~~maximize our use of inventory. This Upfront strategy has yielded positive results over the past five years~~tools, ~~and~~such weas ~~believe that the increased market awareness among media buyers and clients raises~~ our ~~credibility~~relationships aswith aSTRATA ~~medium~~ and ~~allows us to gain upfront commitments traditionally made exclusively to cable and broadcast television networks~~Mediaocean, ~~and~~leaders ~~more~~in ~~recently~~media ~~online~~buying and ~~mobile~~selling ~~networks. Further~~software, wewhich ~~believe~~allows itagencies ~~will help~~ to ~~increase~~buy ~~our~~cinema ~~share of video~~ advertising ~~spending~~in ~~by increasing~~ the ~~number~~National ofSpot ~~clients~~marketplace. ~~and~~By ~~client~~making ~~industries~~NCM ~~that~~an ~~buy~~option ~~our~~in ~~network. Over time,~~ this ~~greater shift toward more Upfront commitments allows us to bundle several flights throughout the year~~ and ~~stabilize~~other ~~month-to-month~~industrywide and ~~quarter~~in-~~to-quarter~~house ~~CPM~~agency ~~volatility~~planning ~~by increasing overall inventory utilization~~ and ~~balancing~~buying ~~that utilization throughout the year. Consistent with the television industry upfront booking practices~~systems, awe ~~portion~~believe ofwe ~~our~~can ~~upfront~~remove ~~commitments~~barriers ~~have cancellation options or options~~ to ~~reduce~~entry ~~the amount that advertisers may purchase that could reduce what is ultimately spent~~ by ~~clients~~incorporating ~~that~~cinema ~~have~~into ~~made~~media ~~upfront~~plans ~~commitments~~ and wetapping ~~would~~into ~~need~~new topools ~~rely~~of onadvertising ~~the scatter market to replace those commitments~~dollars.

AtFortify, Expand and Scale Our Digital Business—We intend to continue to upgrade our ~~fifth~~existing ~~annual~~digital ~~Upfront~~offerings ~~presentation~~as inwell ~~May~~as ofexpand ~~2016~~our ~~during~~Noovie ~~the~~digital TVecosystem ~~Upfront~~to ~~week~~include additional products that will engage movie audiences with exclusive and unique content, commerce, and gaming opportunities. During 2017 we ~~announced~~began ~~several~~development ~~initiatives~~of ~~for~~our ~~better~~Noovie ~~data-enhanced~~ARcade ~~targeting,~~and ~~including~~Noovie ~~CATO,~~apps which ~~allows~~are ~~advertisers~~expected to gobe ~~beyond~~released ~~targeting~~in by2018. ~~MPAA~~These ~~rating~~apps will allow us to ~~build~~capture ~~media~~exclusive ~~schedules~~first atparty ~~the~~data ~~film~~on our viewers. As we continue to create our own NCM owned-and-operated ~~genre~~ad ~~level~~inventory across our suite of digital products, ~~and~~we also plan to build our ~~new~~own ~~DMP~~foundational –capabilities for digital ad buying, selling and serving through the ~~first~~development of ~~its~~“Cinema ~~kind~~Accelerator in2.0,” ~~the~~an ~~cinema~~enhanced ~~industry~~version –of ~~which~~our ~~will~~existing ~~allow~~Cinema usAccelerator toproduct. ~~offer~~This ~~transaction-based~~upgraded ~~insights,~~version ~~better~~will ~~targeted~~also ~~campaigns,~~provide increased amounts of and ~~closed-loop~~better ~~return~~quality onfirst ~~investment~~party data. We ~~believe~~Cinema ~~that~~Accelerator ~~these~~currently ~~enhanced~~identifies ~~targeting~~moviegoers’ ~~capabilities~~mobile ~~will~~devices ~~help~~as tothey ~~attract~~enter a theater, and ~~retain~~re-engages them with a ~~larger~~brand’s ~~and~~messages ~~more~~wherever ~~diverse~~they ~~range~~are ofconsuming ~~advertising~~content ~~clients~~— ~~and~~on ~~thus~~mobile ~~grow~~devices, ~~our~~social ~~revenue~~media, or online.

We also intend to increase our market share of local and regional advertising spending by aggressively pursuing further integration into agency planning and buying tools, such as our relationship with STRATA, a leader in media buying and selling software, which allowed agencies to buy cinema advertising in the National Spot marketplace for the first time in 2016. By making NCM an option in this and other industrywide and in-house agency planning and buying systems, we believe we can remove barriers to entry by incorporating cinema into media plans and tapping into new pools of advertising dollars. We also plan to introduce additional ways to optimize our regional inventory into our regional sales process, including expanding national, and instituting dynamic pricing that is responsive to week-to-week market demand and inventory availability on a regional level as we have successfully done on a national level.

Collect and Leverage Movie Audience Data—We intend to continue to secure additional data partnerships that will allow us to collect and leverage movie audience data to enhance the attractiveness of our cinema advertising products to advertisers. In addition, we plan to enhance and expand our digital marketing products beyond our Cinema Accelerator product, which identifies moviegoers’ mobile devices as they enter a theater, and re-engages them with a brand’s messages wherever they are consuming content — on mobile devices, social media, or online.

Reinvent the Lobby—As our founding member and network affiliate theater circuit partners continue to reinvent their lobby business, we plan to work with them and follow their lead to leverage technology partnerships and stabilize other lobby inventory to make the lobby a better source of advertising revenue for both our advertising customers and our circuit partners.

Be the First Choice for Customers

Our approach is to always strive to be the first choice for our customers, including our advertising and agency customers, our exhibitors, and movie studios. By offering innovative on-screen, in-lobby and digital cinema advertising solutions to connect brands to unique, engaged and valuable young adult audiences at scale, we believe we can offer our advertiser and agency customers a valuable and effective marketing option that cannot be duplicated in any other medium. As the first choice for our customers, we can continue to expand our advertising client base and increase our market share of U.S. advertising spending. Our national sales team was successful in adding 34 clients in 2016 that were first time clients or had not advertised with us since our IPO. These new clients added in 2016 included companies in the apparel, beer, cable TV, computer hardware, department store, financial products and services, fitness, home audio equipment, home product, hotels and resorts, internet site, movie studio, personal care product, prepared food, family restaurant, supermarket, telecommunication hardware, tourism, toy and video game industries. Despite this growth, we believe there are still thousands of potential clients that currently advertise on other mediums such as television but have yet to advertise on our

and effective marketing option that cannot be duplicated in any other medium. As the first choice for our customers, we can continue to expand our advertising client base and increase our market share of U.S. advertising spending. Our national sales team was successful in adding 37 clients in 2017 that were first time clients or had not advertised with us since our IPO. These new clients added in 2017 included companies in the airlines, apparel, auto parts and services, college, confectionery, electronic stores, financial products and services, game and toy stores, home product, hotels and resorts, import auto, insurance, internet site, medical practitioners, movie studio, personal care product, pet stores and services, prepared food, family restaurant, live events and shows, toy and video game industries. Despite this growth, we believe there are still thousands of potential clients that currently advertise on other mediums such as television but have yet to advertise on our network. These strategies are designed to expand our relationships with existing advertising clients and broaden our advertising client base in new and existing client industries.

Develop People and Capabilities

Our success is tied to the quality of our management and staff. In order to ensure that we retain and attract high quality personnel, we seek to foster and maintain a culture that focuses on teamwork, personal growth, inclusion and diversity. We will continue to make meaningful investments in internal and external training programs for our management and staff to ensure that our personnel have, or build, the skillsets necessary to support our evolution and growth objectives. We have also adopted a succession plan that includes short-term and long-term planning elements to allow us to successfully continue operations should any of our senior management team become unavailable to us.

Resources to Strategy

We will continue to assess and eliminate off-target resources for a strategic focus on the future of NCM. We will be allocating resources to continuity and growth, with a focus from our staff on financial responsibility with company resources.

Intellectual Property Rights

We have been granted a perpetual, royalty-free license from the 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 the founding members.

We have secured U.S. trademark registrations for NCM, National CineMedia, and 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.

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 theater 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 theater attendance levels. Seasonal demand during the summer is driven by the absence of alternative attractive advertising mediums and during the winter holiday season due to consumers’ increased interest in the available motion pictures. 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 theater 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 ~~2014~~2015, ~~2015~~2016 and ~~2016~~2017.

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
FY 2014		17.8	%		25.4	%		25.6	%		31.2	%
FY 2015		17.2	%		25.4	%		25.0	%		30.6	%
FY 2015		17.2	%		27.2	%		25.0	%		30.6	%
FY 2016		17.0	%		25.8	%		25.4	%		31.8	%
FY 2017		16.9	%		22.8	%		27.3	%		33.0	%

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

~~“Investor~~Available ~~Relations”~~Information 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.

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 home 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

Refer to “Item 10. Directors, Executive Officers and Corporate Governance” for information regarding executive officers.

Item 1A. Risk Factors

Ownership of the Company’s notes involves certain risks. Holders of the Company’s notes and prospective investors should consider carefully the following material risks and other information in this document, including our historical financial statements and related notes included herein. The material 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 value of the notes to decline, perhaps significantly, and you may lose part or all of your investment.

Risks Related to Our Business and Industry

Significant declines in theater attendance or viewership of our ~~FirstLook~~Noovie pre-show could reduce the attractiveness of cinema advertising and could reduce our revenue

Our business is affected by the level of attendance at our founding members’ theaters and to a lesser extent our network affiliates, who operate in a highly competitive industry and whose attendance is reliant on the presence of motion pictures that attract audiences. Over the last 20 years, theater attendance has fluctuated from year to year but on average has remained relatively flat ~~at an aggregate annual growth rate of less than 0~~.~~5%.~~ The value of our advertising business could be adversely affected by a decline in theater 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. Further, the value of our national on-screen advertising and to a lesser extent our local and regional advertising is based on the number of theater patrons that are in their seats and thus have the opportunity to view the ~~FirstLook~~Noovie pre-show. Factors that could reduce attendance at our network theaters or viewership of our ~~FirstLook~~Noovie pre-show include the following:

• Ifif our network theater circuits cannot compete with other out-of-home entertainment due to an increase in the use of alternative film delivery methods (and the shortening of the “release window” between the release of major motion pictures to the alternative delivery methods), including network, syndicated cable and satellite television and DVDs, as well as video-on-demand, pay-per-view services, video streaming and downloads via the Internet;

•

theater circuits in our network continue to renovate auditoriums in certain of their theaters to install new larger, more comfortable seating, which reduces the number of seats in a theater auditorium. This renovation has been viewed favorably by patrons and many theater circuits have noted an intent to continue such renovations;

• many theater circuits in ~~NCM~~our ~~LLC’s~~ network offer reserved seating (utilized in approximately 1947.9% of our network as of ~~December~~January 2917, ~~2016~~2018), often in the newly renovated theaters described above, which allows patrons to reserve a seat which could affect how early patrons arrive to the theater and reduce the number of patrons that are in a theater seat to view the ~~FirstLook~~Noovie pre-show;

• changes in theater 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, which if the length of trailers increases, it could result in the ~~FirstLook~~Noovie pre-show starting further out from the show time of the film;

•

changes in theater patron amenities, including, online ticketing, bars and entertainment within exhibitor lobbies causing increased dwell time of patrons;

•

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;

•

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;

•

if the theaters in our network fail to maintain their theaters and provide amenities that consumers prefer;

•

if studios begin to reduce the number of feature films produced and their investments in those films or reduce the investments made to market those films;

• if future theater attendance declines significantly over an extended time period, one or more of the founding members or network affiliates may face financial difficulties and could be forced to sell or close theaters or reduce the number of screens it builds or upgrades or increase ticket prices; and

• ~~NCM~~our ~~LLC’s~~ network theater 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 theater patrons who view our advertising and pre-feature show.

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

We are considering potential opportunities for revenue growth, which we describe in “Business—Our Strategy.” The development of our online and mobile advertising network and mobile apps, as well as, collecting and leveraging movie audience data, and the integration of these marketing products with our core on-screen and theater lobby production is at an early stage and is under increasing competitive pressure from many online and mobile networks and others, and may not deliver the future benefits that we are expecting. ~~Should~~ If we are unable to execute on products relevant to the marketplace and these offerings do 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.

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 In weaddition, ~~cannot~~the pricing and volume of advertising may be affected by shifts in spending toward online and mobile offerings from more traditional media, or toward new ways of purchasing advertising, such as through automated purchasing, dynamic advertising insertion, third parties selling local advertising posts and advertising exchanges, some or all of which may not be as advantageous to the Company as current advertising methods. Expenditures by advertisers tend to be cyclical, reflecting overall

economic conditions, as well as budgeting and buying patterns. A decline in the economic prospects of advertisers or the economy in general could alter current or prospective advertisers’ spending priorities. 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.

~~Our~~In ~~business~~addition, advertisers’ willingness to purchase advertising from the Company may be adversely affected by lower theater attendance and ~~operations~~viewership ~~have~~of ~~experienced~~our ~~growth~~Noovie pre-show, ~~and~~as wenoted ~~may~~above. If pre-show viewership declines significantly, the Company will be ~~unable~~required to ~~effectively~~provide ~~manage~~additional oradvertising ~~continue~~time (makegoods) to national advertisers to reach agreed-on audience delivery thresholds. National advertising sales and rates also are dependent on the ~~growth~~methodology ofused ~~our~~to ~~network~~measure audience impressions. If a change is made to this methodology that reflects fewer audience impressions available during the pre-show, this would adversely affect the Company’s revenue and ~~advertising~~results ~~inventory~~of operations.

We have experienced, and may continue to experience, growth in our headcount and operations, 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. High turnover, loss of specialized talent or insufficient capital could also place significant demands on management and the success of the organization. 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 systems. 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 improved 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. Further, the amount of inventory we have to sell is limited by the length of the FirstLook pre-show and in order to maintain growth we will need to expand the number of theaters and screens in our network. If we are unable to maintain the size of our network, or grow our network, our revenue and operating results could be adversely impacted.

If we do not continue to upgrade our technology, our business could fail to grow and revenue and operating margins could decline

Failure to successfully or cost-effectively implement upgrades to our in-theater advertising network and proposal and inventory control, audience targeting 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 could hurt our ability to compete with those companies. Under the ESAs, the founding members are required to provide technology that is consistent with that in place at the signing of the ESA. We may request that our founding members upgrade the equipment or software installed in their theaters, but we must negotiate with our founding members as to the terms of such upgrade, including cost sharing terms, if any. 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. Over the last several years, we have been upgrading our proposal and inventory control systems, and developing enhancements to these systems that will allow us to target theater 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 in the not so distant past extreme disruption and volatility and certain parts of the world-wide economy remain fragile. A future decline in consumer confidence in the U.S. may lead to decreased demand for our services 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~~ even the loss of a small number of clients on large contracts 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 our founding members’ agreements to purchase on-screen advertising for their beverage concessionaires. We currently have marketing relationships with ~~eight~~six content partners, ~~seven~~one of which expire in ~~2017~~2018 and ~~one~~five in ~~2018~~2019. None of these companies individually accounted for over 10% of our total revenue during the year ended December 29, 2016. However, the agreements with the content partners, PSAs and beverage advertising with our founding members in aggregate accounted for approximately 30%, 30% and 34% of our total revenue during the years ended December 29, 2016, December 31, 2015 and January 1, 2015, 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.

~~We depend upon our senior management and our business may be adversely affected if we cannot retain or replace them~~ 17

~~Our~~total ~~success~~revenue ~~depends~~during inthe ~~part~~year ~~upon~~ended ~~the~~December ~~retention~~28, of2017. ~~our~~However, ~~experienced~~the ~~senior~~agreements ~~management~~ with ~~specialized~~the ~~industry~~content partners, ~~sales~~PSAs and ~~technical~~beverage ~~knowledge~~advertising ~~and/or~~with ~~industry relationships. In August 2015,~~ our ~~former~~founding ~~Chief~~members ~~Executive~~in ~~Officer~~aggregate ~~announced~~accounted ~~his~~for ~~resignation~~approximately ~~and~~30%, ~~following~~30% aand ~~defined~~30% ~~search~~of ~~process conducted by~~ our ~~Board~~total ofrevenue ~~Directors,~~during athe ~~new~~years ~~Chief~~ended ~~Executive~~December ~~Officer~~28, ~~was~~2017, ~~appointed~~December in29, ~~January~~ 2016~~. We~~ ~~also~~and ~~appointed~~December a31, ~~Chief~~2015, ~~Financial~~respectively. ~~Officer~~Because inwe ~~August~~derive ~~2016 following~~ a ~~defined~~significant ~~search~~percentage ~~process by our Board~~ of ~~Directors. Our Chief Financial Officer position was previously split between~~ our ~~Interim~~total ~~Co-Chief~~revenue ~~Financial~~from ~~Officers.~~a Ifrelatively ~~other~~small ~~critical~~number ~~members~~ of ~~our~~large ~~senior management team or other employees with special skills leave~~companies, ~~we might not be able to find qualified internal or external replacements; accordingly,~~ the loss of ~~critical~~one ~~members~~or more of ~~our~~them ~~senior~~as ~~management~~a ~~team~~customer ~~and key employees~~ could ~~have~~decrease ~~a material adverse effect on~~ our ~~ability~~revenue ~~to effectively pursue our business strategy~~ and ~~our~~adversely ~~relationships~~affect ~~with~~current ~~advertisers~~ and ~~content~~future ~~partners.~~operating ~~We do not have key-man life insurance covering any of our employees~~results.

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

The ESAs with our 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. Our founding members’ theaters represent approximately 8381% of the screens and approximately 8583% of the attendance in our network as of December 2928, ~~2016~~2017. 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 continuing cooperation, investment and support of our founding members, the absence of which could adversely affect us. Pursuant to the ESAs, our founding members must make investments to replace digital network equipment within their theaters and equip newly constructed theaters with digital network equipment. If our founding members do not have adequate financial resources or operational strength, and if they do not replace equipment or equip new theaters 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. In March 2018 Regal was acquired by a U. K. based cinema operator and we have no indication of how this new ownership of Regal may affect its financial resources or its cooperation with us under the ESA or otherwise.

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

With certain limited exceptions, each of the ESAs prohibits the applicable founding member from engaging in any of the business activities that we provide in the founding member’s theaters under the amended ESAs, and from owning interests in other entities that compete with us. These provisions are intended to prevent the founding members from harming our business by providing cinema advertising services directly to their theaters 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:

interests in other entities that compete with us. These provisions are intended to prevent the founding members from harming our business by providing cinema advertising services directly to their theaters 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, the 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 our founding members declared bankruptcy, the ESA with that founding member may be rejected, renegotiated or deemed unenforceable

Each of our founding members currently has a significant amount of indebtedness, which is rated 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 theaters under long-term leases obsolete and unprofitable, were significant contributing factors to these bankruptcies. If a bankruptcy case were commenced by or against a founding member, it is possible that all or part of the ESA with that 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 founding member, and thus not be enforceable. Alternatively, the founding member could seek to renegotiate the ESA in a manner less favorable to us than the existing agreement. Should the founding member seek to sell or otherwise dispose of theaters or remove theaters 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 theaters the number of theaters 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’ theaters 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 theater circuit or the movie-going experience. The use of LEN or lobby promotions by our 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 approximately 4% of our total advertising revenue for the year ended December 2928, ~~2016~~2017. The founding members do not have the right to use their movie screens (including the ~~FirstLook~~Noovie pre-show 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 theater operations.

Our founding members also have the right to install a second network of video monitors in the theater lobbies in excess of those required to be installed for the LEN. This additional lobby video network, which we refer to as our founding members’ lobby network, may be used by the founding members to promote products or services related to operating the theaters, such as concessions and loyalty programs. The presence of our 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 founding members and our network affiliates are subject to substantial government regulation, which could slow their future growth of locations and screens and in turn slow our growth prospects.

Our founding members and our network affiliates are subject to various federal, state and local laws, regulations and administrative practices affecting their movie theater business, including provisions regulating antitrust, health and sanitation standards, access for those with disabilities, environmental, and licensing. Some of these laws and regulations also apply directly to us. Changes in existing laws or implementation of new laws, regulations and practices could have a significant impact on our founding members, our network affiliates’ and our respective businesses. For example, to the extent that antitrust laws, regulation and enforcement policy restrict the ability of the founding members or the network affiliates to acquire additional theaters, it may slow the future growth of those founding members or network affiliates and in turn the growth of our network.

We may be unable to effectively manage changes to our business strategy to continue the growth of our advertising inventory and network

If we do not effectively implement the changes within our strategy, we may not be able to continue our historical growth. To effectively execute on our strategy to expand our digital offerings and continue to grow our inventory, we will need to develop additional products. These enhancements and improvements could require an additional allocation of financial and management resources and acquisition of talent. High turnover, loss of specialized talent or insufficient capital could also place significant demands on management, the success of the organization, and our strategic outlook.

The amount of inventory we have to sell is limited by the length of the Noovie pre-show. In order to maintain in-theater growth we will need to expand the number of theaters and screens in our network. Considering our current market share, we may not be able to continue to expand our network which could negatively affect our ability to add new advertising clients. If we are unable to maintain the size of our network, or grow our network, our revenue and operating results could be adversely impacted.

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

In ~~the~~order to 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, 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-theater, online, and mobile services, including the websites we operate at ncm.com, ~~movienightout.com~~ and ~~firstlookonline~~Noovie.com, our Noovie mobile app ~~Movie Night Out®~~, and the features and 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-theater, online, and mobile services. We may discover that our business or the technology we use to provide our in-theater, 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-theater, 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-theater, online or mobile services may expose us to liability

Our in-theater, 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 content, 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 personal identifying information about those users. We also collect and maintain personal identifying information about users who view certain advertising displayed through our online and mobile services. The collection and use of personal identifiable information is governed by federal and state privacy, information security and consumer protection-related laws and regulations. These laws continue to evolve and may be inconsistent from one jurisdiction to another. Compliance with all such laws and regulations may increase our operating costs and adversely impact our ability to interact with users of our online and mobile services. Our collection and use of personal identifying 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 or state privacy information security or consumer protection-related laws or regulations or our posted privacy policies could result in actions against us by governmental entities or others. If an actual or perceived breach of our data occurs, the market perception of the effectiveness of our security measures could be harmed, and we could lose users of these services and the associated benefits from gathering such user data.

personal identifying 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 or state privacy information security or consumer protection-related laws or regulations or our posted privacy policies could result in actions against us by governmental entities or others. If an actual or perceived breach of our data occurs, the market perception of the effectiveness of our security measures could be harmed, and we could lose users of these services and the associated benefits from gathering such user data.

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. 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

A weak advertising market or the shift in spending of a major client from one quarter to another, the 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 or the same quarter in prior years and may not be indicative of our financial performance in subsequent quarters.

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

Our success depends in part upon the retention of our experienced senior management with specialized industry, sales and technical knowledge and/or industry relationships. In August 2015, our former Chief Executive Officer announced his resignation and, following a defined search process conducted by our Board of Directors, a new Chief Executive Officer was appointed in January 2016. We also appointed a Chief Financial Officer in August 2016 following a defined search process by our Board of Directors. In November 2017, our former General Counsel announced his resignation and, following a defined search process conducted by our Board of Directors, a new General Counsel was appointed in February 2018. If we are not able to find qualified internal or external replacements for critical members of our senior management team; accordingly, the loss of key employees 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.

Risks Related to Our Corporate Structure

Our substantial debt obligations could impair our financial condition or prevent us from achieving our business goals

We are party to substantial debt obligations. The senior secured credit facility and indentures contain restrictive covenants that limit our ability to take specified actions and prescribe minimum financial maintenance requirements that we must meet. Complying with these restrictions may prevent us from taking actions that we believe would help us to grow our business. For example, we may be unable to make acquisitions, investments or capital expenditures as a result of such covenants. Moreover, if we violate those restrictive covenants or ~~fail~~fails to meet the minimum financial requirements, it would be in default, which could, in turn, result in defaults under other obligations. Any such defaults could materially impair our financial condition and liquidity. For further information, refer to Note 7 to the audited financial statements included elsewhere in this document.

If we are unable to meet our debt service obligations, we 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, sell assets on satisfactory terms or at all or make cash distributions. In addition, our indebtedness could have other negative consequences for us, including without limitation:

•

limiting our ability to obtain financing in the future;

•

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

•

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

•

making us more vulnerable to an increase in interest rates, a downturn in our operating performance or decline in general economic conditions.

Despite our current levels of debt, we may still incur substantially more debt, including secured debt, which would increase the risks associated with our level of debt

The agreements relating to our debt, including the Notes due 2022, Notes due 2026 and the senior secured credit facility, limit but do not prohibit our ability to incur additional debt. Accordingly, we 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 “—Our substantial debt obligations could impair our financial condition or prevent us from achieving our business goals,” could intensify.

Our founding members or their affiliates may have interests that differ from those of NCM, Inc. and they may be able to influence our affairs

So long as a founding member beneficially owns at least 5% of our issued and outstanding common membership units, approval of at least 90% of the directors of NCM, Inc. 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 NCM, Inc. may take any of the following actions or may, in its capacity as manager of NCM LLC, authorize us 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 the founding members.

Pursuant to a director designation agreement, so long as a founding member owns at least 5% of our issued and outstanding common membership units, such founding member will have the right to designate a total of two nominees to NCM, Inc.’s Board of Directors who will be voted upon by NCM, Inc.’s stockholders. One such designee by each founding member must meet the independence requirements of the stock exchange on which NCM, Inc.’s common stock is listed. If, at any time, any founding member owns less than 5% of our then issued and outstanding common membership units, then such founding member shall cease to have any rights of designation. In December 2016, AMC agreed to a proposed final judgement in a lawsuit brought by the U.S. Department of Justice in connection with AMC’s acquisition of Carmike Cinemas, Inc. Among other conditions, AMC was required to relinquish its governance rights in NCM LLC, including its seats on the NCM, Inc. board of directors as well as its rights to nominate any person to serve on the NCM, Inc. board of directors. AMC’s non-independent designee to the board of directors resigned in December 2016.

any time, any founding member owns less than 5% of our then issued and outstanding common membership units, then such founding member shall cease to have any rights of designation.

If any director designee to NCM, Inc.’s board designated by our founding members is not appointed to NCM, Inc.’s board, nominated by NCM, Inc. or elected by NCM, Inc.’s stockholders, as applicable, then each of our founding members (so long as such founding member continues to own at least 5% of our 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 NCM, Inc.’s 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 a founding member will be excluded, so long as such founding member continues to hold the common stock acquired through such redemption or such founding member has disposed of such shares of common stock to another founding member. Shares of NCM, Inc.’s common stock otherwise acquired by the founding members will also be excluded, unless such shares of common stock were transferred by one founding member to another and were originally received by the transferring founding member upon redemption of NCM LLC common membership units.

Under these circumstances, NCM, Inc.’s corporate governance documents will allow our founding members and their affiliates to exercise a greater degree of influence in the operation of our business and that of NCM, Inc. and the management of our affairs and those of NCM, Inc. than is typically available to stockholders of a publicly-traded company. Even if our 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, Inc.

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

For the foreseeable future, we expect that NCM, Inc.’s Board of Directors will include directors and certain executive officers of our founding members and other directors who may have commercial or other relationships with our founding members. The majority of our outstanding membership interests also are owned by our founding members. Our 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 our founding members.

In addition, the structural relationship we have with our founding members could create conflicts of interest among the founding members, or between the 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 a founding member or between founding members. We may not be able to resolve any potential conflicts between us and a founding member and, even if we do, the resolution may be less favorable to us than if we were negotiating with an unaffiliated party.

members. We may not be able to resolve any potential conflicts between us and a 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 NCM, Inc.’s certificate of incorporation could enable the founding members to benefit from corporate opportunities that might otherwise be available to us

NCM, Inc.’s amended and restated certificate of incorporation contains provisions related to corporate opportunities that may be of interest to both our founding members and us. It provides that if a corporate opportunity is offered to us, NCM, Inc. 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 theaters, use of theaters for any purpose, sale of advertising and promotional services in and around theaters and any other business related to the motion picture theater business (except services as provided in the ESAs as from time to time amended and except as may be offered to one of NCM, Inc.’s officers in his capacity as an officer), no such person shall be liable to NCM, Inc. (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, the NCM, Inc. amended and restated certificate of incorporation and our operating agreement expressly provide that our 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 the 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 the 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 the founding members to themselves or their other affiliates or we lose key personnel to them.

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 the founding members to themselves or their other affiliates or we lose key personnel to them.

The agreements between us and our 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 our founding members were originally negotiated in the context of an affiliated relationship in which representatives of our founding members and their affiliates comprised NCM, Inc.’s 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 our 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.

If NCM, Inc. or our 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 NCM, Inc. is an “investment company” under the Investment Company Act of 1940, as amended. As sole manager of NCM LLC, NCM, Inc. controls us, and its interest in us is not an “investment security” as that term is used in the Investment Company Act of 1940. If NCM, Inc. were to stop participating in the management of NCM LLC, its interest in us 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). NCM, Inc.’s sole material asset is its equity interest in us. A determination that such asset was an investment security could result in NCM, Inc. being considered an investment company under the Investment Company Act of 1940. As a result, NCM, Inc. 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, Inc. intend to conduct our operations so that NCM, Inc. is not deemed an investment company under the Investment Company Act. However, if anything were to occur that would cause NCM, Inc. to be deemed an investment company, NCM, Inc. 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 our founding members that they are not investment companies under the Investment Company Act. If any founding member were deemed an investment company, the restrictions placed upon that founding member might inhibit its ability to fulfill its obligations under its ESA or restrict our ability to borrow funds.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Information with respect to our corporate headquarters and regional offices is presented below as of December 2928, ~~2016~~2017. 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	Facility	Size
Centennial, CO (1)	Headquarters (including the NOC)	82,721 sq. ft.
Chicago, IL (2)	Advertising Sales Office	3,~~971~~350 sq. ft.
New York, NY (3)	Advertising Sales Office	1721,~~498~~892 sq. ft.
Woodland Hills, CA (4)	Advertising Sales Office	6,062 sq. ft.
Minneapolis, MN (5)	Software Development Office	5,989 sq. ft.
Newport Beach, CA (6)	Regional Advertising Sales Office	1,417 sq. ft.
Detroit, MI (7)	Advertising Sales Office	200 sq. ft.
Mountain View, CA (8)	Corporate Development Office	162 sq. ft.

(1) This facility is leased through June 30, ~~2021~~2018. A new property in Centennial, CO (63,123 sq. ft.) will be leased beginning January 1, 2018 through June 30, 2028.

(2) This facility is leased through ~~September~~April 30, ~~2017~~2028.

24(3) This facility is leased through April 30, 2032.

(3) This facility is leased through April 30, 2017. A new property in New York, NY (21,892 sq. ft.) will be leased beginning March 1, 2017 through April 30, 2032.

(4)	This facility is leased through November 30, 2019.

(5)	This facility is leased through September 30, 2022.

(6)	This facility is leased through July 31, 2019.

(7) This facility is leased through March 22, ~~2017~~2018.

(8)	This facility is leased through July 31, 2018.

Item 3. Legal Proceedings

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.

2524

PART II

Item 5. Market for Registrant’s Common Membership Units, Related Unitholder Matters and Issuer Purchases of Equity Securities

There is no market for NCM LLC’s common membership units. All of NCM LLC’s outstanding membership units are owned by NCM, Inc. and NCM LLC’s three founding members.

The following table sets forth the distribution declared per common membership unit attributable to the periods indicated.

	Fiscal 2017
	Distribution
First Quarter (December 30, 2016 – March 30, 2017)	$	0.05
Second Quarter (March 31, 2017 – June 29, 2017)	$	0.16
Third Quarter (June 30, 2017 – September 28, 2017)	$	0.34
Fourth Quarter (September 29, 2017 – December 28, 2017)	$	0.48
	Fiscal 2016
	Distribution
First Quarter (January 1, 2016 – March 31, 2016)	$	0.01
Second Quarter (April 1, 2016 – June 30, 2016)	$	0.11
Third Quarter (July 1, 2016 – September 29, 2016)	$	0.33
Fourth Quarter (September 30, 2016 – December 29, 2016)	$	0.52
	Fiscal 2015
	Distribution
First Quarter (January 2, 2015 – April 2, 2015)	$	—
Second Quarter (April 3, 2015 – July 2, 2015)	$	0.35
Third Quarter (July 3, 2015 – October 1, 2015)	$	0.35
Fourth Quarter (October 2, 2015 – December 31, 2015)	$	0.43

Within 60 calendar days after the last day of each fiscal quarter, we will distribute all of our available cash, as defined in the NCM LLC Operating Agreement to our unitholders.

The terms of our senior secured credit facility may limit our ability to distribute cash under certain circumstances as discussed under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this document.

Dividend Policy

None.

Use of Proceeds from Sale of Registered Securities

None.

Unregistered Sales of Equity Securities and Use of Proceeds

NCM, Inc.’s Amended and Restated Certificate of Incorporation and the Third Amended and Restated Limited Liability Company Operating Agreement, as amended, of NCM LLC provide a redemption right to the NCM LLC members to exchange common membership units of NCM LLC for shares of NCM, Inc.’s common stock on a one for one basis, or at NCM, Inc.’s option, a cash payment equal to the market price of one share of NCM, Inc.’s common stock.

On December 21, 2015, NCM LLC received a Notice of Redemption from AMC, and NCM, Inc.’s Board of Directors authorized the exchange of 200,000 units for 200,000 shares of NCM, Inc. common stock. In connection with delivering the Notice of Redemption, AMC surrendered common membership units to NCM LLC for cancellation and NCM, Inc. contributed shares of its common stock to NCM LLC in exchange for an amount of newly issued common units equal to the number of units surrendered by AMC. NCM LLC distributed the shares of NCM, Inc.’s common stock to AMC to complete the redemption on December 30, 2015. The issuance of shares in this redemption was exempt from registration as the transaction by NCM, Inc. did not involve a public offering. As ~~of December 29, 2016, these shares had not been sold and AMC owned 200,000 shares of NCM, Inc. common stock.~~

On November 22, 2016, NCM, Inc. issued 40,000 shares of its common stock, subject to restrictions, to an operating company in connection with the execution of a multi-year commercial agreement. The shares are restricted and subject to vesting and forfeiture provisions, whereby, 20,000 shares vest at the end of the initial five-year term of the commercial agreement and the remaining 20,000 shares would vest at the end of a five-year renewal period, if renewed. The shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

On August 23, 2017, NCM LLC received a Notice of Redemption from AMC, and NCM, Inc.’s Board of Directors authorized the exchange of 14,600,000 units for 14,600,000 shares of NCM, Inc. commons stock. In connection with delivering the Notice of Redemption, AMC surrendered common membership units to NCM LLC for cancellation and NCM, Inc. contributed shares

of its common stock to NCM LLC in exchange for an amount of newly issued common units equal to the number of units surrendered by AMC. NCM LLC distributed the shares of NCM, Inc.’s common stock to complete the redemption on September 7, 2017. The issuance of shares in this redemption was exempt from registration as the transaction by NCM, Inc. did not involve a public offering.

On October 5, 2017, NCM LLC received a Notice of Redemption from AMC, and NCM, Inc.’s Board of Directors authorized the exchange of 1,000,000 units for 1,000,000 shares of NCM, Inc. commons stock. In connection with delivering the Notice of Redemption, AMC surrendered common membership units to NCM LLC for cancellation and NCM, Inc. contributed shares of its common stock to NCM LLC in exchange for an amount of newly issued common units equal to the number of units surrendered by AMC. NCM LLC distributed the shares of NCM, Inc.’s common stock to complete the redemption on October 20, 2017. The issuance of shares in this redemption was exempt from registration as the transaction by NCM, Inc. did not involve a public offering.

As discussed elsewhere in this document, in connection with AMC’s acquisition of Carmike, AMC has agreed with the DOJ that AMC would divest the majority of its equity interests in the Company and NCM LLC to various specified thresholds, so that by June 20, 2019 it will own no more than 4.99% of the Company and NCM LLC. These redemptions of NCM LLC membership units for Common Stock of NCM, Inc. are in furtherance of this divestiture plan.

Share Repurchase Program

None.

Issuer Purchases of Equity Securities

None.

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 NCM, Inc.’s equity compensation plans which is incorporated in this Item by this reference.

Stock Performance Graph

Not applicable.

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 financial statements and the notes thereto included elsewhere in this document, and historical audited ~~financial~~Financial ~~statements~~Statements, which have not been included in this document.

The results of operations data for the years ended December 2928, ~~2016~~2017, December 3129, ~~2015~~2016 and ~~January~~December 131, 2015 and the balance sheet data as of December 2928, ~~2016~~2017 and December 3129, ~~2015~~2016 are derived from the audited ~~financial~~Financial ~~statements~~Statements of NCM LLC included elsewhere in this document. The results of operations data for the years ended ~~December~~January 261, ~~2013~~2015 and December 2726, ~~2012~~2013 and the balance sheet data as of ~~January~~December 131, 2015, ~~December~~January 261, ~~2013~~2015 and December 2726, ~~2012~~2013 are derived from the audited ~~financial~~Financial ~~statements~~Statements of NCM LLC.

Results of Operations Data	Years Ended
($ in millions)	Dec. 2928, ~~2016~~2017		Dec. 3129, ~~2015~~2016		~~Jan~~Dec. 131, 2015		~~Dec~~Jan. 261, ~~2013~~2015		Dec. 2726, ~~2012~~2013
REVENUE:
Advertising	$	~~447~~426.61	$	~~446~~447.56	$	~~394~~446.05	$	~~426~~394.30	$	~~409~~426.53
Fathom Events		—		—		—		~~36.5~~—		3936.35
Total		~~447~~426.61		~~446~~447.56		~~394~~446.05		~~462~~394.80		~~448~~462.8
OPERATING EXPENSES:
Advertising operating costs		3032.04		30.80		2630.48		2926.04		3129.30
Fathom Events operating costs		—		—		—		~~25.5~~—		2925.05
Network costs		1715.18		17.81		1817.38		18.73		18.97
Theater access fees—founding members		7576.15		7275.51		7072.65		6970.46		6469.54
Selling and marketing costs		72.80		72.38		5772.63		6157.56		6061.5
Merger termination fee and related merger costs		—		~~41.8~~—		—41.8		—		—
Administrative and other costs		2325.61		2123.46		1921.34		2019.13		20.31
Administrative fee – managing member		20.2		17.2		10.2		10.0		12.1
Administrative fee—managing member		12.8		20.2		17.2		10.2		10.0
Depreciation and amortization		3537.86		3235.28		32.42		2632.64		2026.46
Total		~~274~~272.62		~~306~~274.06		~~234~~306.80		~~260~~234.8		~~257~~260.08
OPERATING INCOME		~~173~~153.09		~~140~~173.50		~~159~~140.25		~~202~~159.02		~~191~~202.80
NON-OPERATING EXPENSES		6351.58		5263.95		6252.19		3862.41		9038.24
INCOME BEFORE INCOME TAXES		~~109~~102.51		87109.65		9787.16		~~163~~97.61		~~101~~163.6
Provision for income taxes		0.2		0.12		0.81		0.78		0.67
NET INCOME	$	~~109~~101.39	$	87109.53	$	9687.35	$	~~162~~96.93	$	~~101~~162.09

	As of
Balance Sheet Data (in millions)	Dec. 28, 2017			Dec. 29, 2016			Dec. 31, 2015			Jan. 1, 2015			Dec. 26, 2013
Cash and cash equivalents	$	4.6		$	10.7		$	3.0		$	10.2		$	13.3
Receivables, net		160.6			160.5			148.9			116.5			120.4
Property and equipment, net		30.7			29.6			25.1			22.4			25.6
Total assets (1)		932.7			788.6			782.6			681.1			699.2
Borrowings, gross		932.0			935.0			936.0			892.0			890.0
Equity/(deficit)		(116.0	)		(256.9	)		(266.5	)		(317.4	)		(299.2	)
Total liabilities and equity (1)		932.7			788.6			782.6			681.1			699.2

Other Financial and Operating Data	Years Ended
(in millions, except cash distributions declared per common unit and screen data)	Dec. 2928, ~~2016~~2017			Dec. 3129, ~~2015~~2016			~~Jan~~Dec. 131, 2015			~~Dec~~Jan. 261, ~~2013~~2015			Dec. 2726, ~~2012~~2013
OIBDA (1)	$	208.8		$	172.7		$	191.6		$	228.6		$	212.2
OIBDA (2)	$	191.5		$	208.8		$	172.7		$	191.6		$	228.6
Adjusted OIBDA (1)	$	230.7		$	229.9		$	199.3		$	234.5		$	221.2
Adjusted OIBDA (2)	$	205.1		$	230.7		$	229.9		$	199.3		$	234.5
Adjusted OIBDA margin (1)		51.5	%		51.5	%		50.6	%		50.7	%		49.3	%
Adjusted OIBDA margin (2)		48.1	%		51.5	%		51.5	%		50.6	%		50.7	%
Capital expenditures	$	1312.3		$	13.03		$	813.80		$	108.68		$	10.46
Founding member screens at period end (2) (6)		17,022			16,981			16,497			16,562			15,528
Founding member screens at period end (3) (7)		16,808			17,022			16,981			16,497			16,562
Total screens at period end (3) (6)		20,548			20,361			20,109			19,878			19,359
Total screens at period end (4) (7)		20,850			20,548			20,361			20,109			19,878
DCN screens at period end (4) (6)		20,080			19,760			19,251			19,054			18,491
DCN screens at period end (5) (7)		20,419			20,080			19,760			19,251			19,054
Total attendance for period (5) (6)		688.8			694.7			688.2			699.2			690.4
Total attendance for period (6) (7)		655.8			688.8			694.7			688.2			699.2
Cash distributions declared per common unit attributable to the period	$	01.9703		$	10.1397		$	1.1413		$	1.5614		$	1.3456

	As of
Balance Sheet Data (in millions)	Dec. 29, 2016			Dec. 31, 2015			Jan. 1, 2015			Dec. 26, 2013			Dec. 27, 2012
Cash and cash equivalents	$	10.7		$	3.0		$	10.2		$	13.3		$	10.4
Receivables, net		160.5			148.9			116.5			120.4			98.5
Property and equipment, net		29.6			25.1			22.4			25.6			25.7
Total assets (7)		788.6			782.6			681.1			699.2			437.4
Borrowings, gross		935.0			936.0			892.0			890.0			879.0
Equity/(deficit)		(256.9	)		(266.5	)		(317.4	)		(299.2	)		(524.2	)
Total liabilities and equity (7)		788.6			782.6			681.1			699.2			437.4

Notes to the Selected Historical Financial and Operating Data

(1) ~~Operating~~During ~~Income~~the ~~Before~~first ~~Depreciation~~quarter ~~and~~of ~~Amortization (“OIBDA”)~~2016, ~~Adjusted~~the ~~OIBDA~~Company ~~and~~adopted ~~Adjusted~~Accounting ~~OIBDA~~Standards ~~margin~~Update ~~are~~2015-03, ~~not~~Interest ~~financial~~– ~~measures~~Imputation ~~calculated~~of inInterest ~~accordance~~(Subtopic ~~with~~835-30): ~~GAAP~~Simplifying in the ~~United~~Presentation ~~States.~~of ~~OIBDA~~Debt ~~represents~~Issuance ~~operating~~Costs ~~income~~(“ASU ~~before~~2015-03”) ~~depreciation~~ and ~~amortization~~Accounting ~~expense.~~Standards ~~Adjusted~~Update ~~OIBDA excludes from OIBDA non~~2015-~~cash share based payment costs~~15, ~~the~~Interest ~~merger~~– ~~termination~~Imputation ~~fee~~of ~~and~~Interest ~~related~~(“ASU ~~merger costs and Chief Executive Officer transition costs. Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. Our management uses these non~~2015-~~GAAP~~15”), ~~financial~~on ~~measures~~a toretrospective ~~evaluate operating performance~~basis, towhich ~~forecast~~provide ~~future~~guidance ~~results and as a basis~~ for ~~compensation.~~simplifying ~~The~~the ~~Company~~presentation ~~believes these are important supplemental measures~~ of ~~operating~~debt ~~performance~~issuance because they eliminate items that have less bearing on its operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measurescosts. ~~The~~In ~~Company~~connection ~~believes~~with the ~~presentation~~adoption of ~~these~~ASU ~~measures~~2015-03 ~~is relevant~~ and ~~useful~~ASU ~~for~~2015-15, ~~investors~~we ~~because~~reclassified itnet ~~enables~~deferred ~~them~~financing tocosts ~~view~~related ~~performance in a manner similar~~ to ~~the~~our ~~method~~term ~~used by the Company’s management~~loans, ~~helps~~secured ~~improve~~and ~~their~~unsecured ~~ability~~notes toin ~~understand~~ the ~~Company’s~~Balance ~~operating~~Sheet ~~performance~~as ~~and~~a ~~makes~~direct itdeduction ~~easier~~from ~~to compare~~ the ~~Company’s~~carrying ~~results~~amount ~~with other companies that may have different depreciation and amortization policies, non-cash share based compensation programs, levels~~ of ~~mergers~~those ~~and acquisitions~~borrowings, ~~CEO~~while ~~turnover,~~net ~~interest~~deferred ~~rates,~~financing ~~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 ofrelated ~~certain~~to ~~capitalized~~our ~~tangible~~revolving ~~and~~credit ~~intangible~~facility ~~assets~~remained ~~used~~an inasset ~~generating revenues~~ in the ~~Company’s~~Balance ~~business~~Sheet. InThe ~~addition,~~amounts ~~Adjusted~~presented ~~OIBDA~~above ~~has~~for ~~the~~total ~~limitation~~assets ofand ~~not~~total ~~reflecting~~liabilities ~~the~~and ~~effect~~equity ofreflect ~~the~~this ~~Company’s~~reclassification ~~share~~as ~~based~~of ~~payment~~December ~~costs~~28, ~~costs associated with the terminated merger with Screenvision~~2017, ~~LLC~~December ~~(“Screenvision”)~~29, or2016 ~~costs~~and ~~associated~~December ~~with~~31, ~~the resignation of the Company’s former Chief Executive Officer~~2015. ~~OIBDA~~Amounts orpresented ~~Adjusted OIBDA should not be regarded~~ as ~~an alternative to operating income, net income or as indicators~~ of ~~operating~~January ~~performance~~1, ~~nor~~2015 ~~should~~and ~~they~~December ~~be considered in isolation of~~26, or2013 asdo ~~substitutes~~not ~~for~~reflect ~~financial measures prepared in accordance with GAAP. The Company believes that operating income is~~ the ~~most directly comparable GAAP financial measure to OIBDA~~reclassification. ~~Because~~If ~~not all companies use identical calculations~~adjusted, ~~these non-GAAP presentations may not be comparable to other similarly titled measures of other companies, or calculations in~~ the ~~Company’s~~reclassification ~~debt~~for ~~agreement.~~ASU ~~OIBDA~~2015-03 and ~~Adjusted~~ASU ~~OIBDA~~2015-15 dowould ~~not~~reduce ~~reflect~~both ~~integration~~total ~~payments~~assets asand ~~integration~~total ~~payments~~liabilities ~~are~~and ~~recorded~~equity asshown aabove ~~reduction~~by ~~to intangible assets~~$12.7 ~~Integration~~million ~~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 our members~~$14.8 ~~During~~million ~~the~~as ~~years~~of ~~ended December 29, 2016, December 31, 2015,~~ January 1, 2015, and December 26, 2013 ~~and December 27~~, ~~2012, the Company recorded integration payments of $2.6 million, $2.7 million, $2.2 million, $2.8 million and $0.0 million,~~ respectively~~, from our founding members~~.

(2) ~~Represents~~Operating Income Before Depreciation and Amortization (“OIBDA”), Adjusted OIBDA and Adjusted OIBDA margin are not financial measures calculated in accordance with GAAP in the United States. OIBDA represents operating income before depreciation and amortization expense. Adjusted OIBDA excludes from OIBDA non-cash share based payment costs, the merger termination fee and related merger costs, Chief Executive Officer transition costs and early lease termination expense. Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total ~~number~~revenue. Our management uses these non-GAAP financial measures to evaluate operating performance, to forecast future results and as a basis for compensation. The Company believes these are important supplemental measures of ~~screens~~operating ~~within~~performance ~~our~~because ~~advertising~~they ~~network~~eliminate ~~operated~~items that have less bearing on its operating performance and 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, CEO turnover, early lease termination expense, interest rates, 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, costs associated with the terminated merger with Screenvision, LLC (“Screenvision”), costs associated with the resignation of the Company’s former Chief Executive Officer, or early lease termination expense. 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 operating 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 and other encumbered theater payments as they 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 our members. During the years ended December 28, 2017, December 29, 2016, December 31, 2015, January 1, 2015 and December 26, 2013, the Company recorded integration and other encumbered theater payments of $20.9 million, $2.6 million, $2.7 million, $2.2 million and $2.8 million, respectively, from our founding members.

(3) Represents the total number of screens within our advertising network operated by our founding members.

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

~~(5) Represents the total attendance within our advertising network.~~28

(65) ~~Excludes~~Represents ~~screens~~the ~~and~~total ~~attendance~~number ~~associated~~of ~~with~~screens ~~certain~~that ~~Cinemark~~are ~~Rave~~connected ~~and AMC Rave theaters for all periods presented. Refer~~ to ~~Note 3 to~~ the ~~audited financial statements included elsewhere in this document~~DCN.

(76) ~~During~~Represents the ~~first~~total ~~quarter~~attendance ofwithin 2016, the Company adopted Accounting Standards Update 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”) and Accounting Standards Update 2015-15, Interest – Imputation of Interest (“ASU 2015-15”), on a retrospective basis, which provide guidance for simplifying the presentation of debt issuance costs. In connection with the adoption of ASU 2015-03 and ASU 2015-15, we reclassified net deferred financing costs related to our ~~term~~advertising loans, secured and unsecured notes in the Balance Sheet as a direct deduction from the carrying amount of those borrowings, while net deferred financing costs related to our revolving credit facility remained an asset in the Balance Sheetnetwork. The amounts presented above for total assets and total liabilities and equity reflect this reclassification as of December 29, 2016 and December 31, 2015. Amounts presented as of January 1, 2015, December 26, 2013 and December 27, 2012 do not reflect the reclassification. If adjusted, the reclassification for ASU 2015-03 and ASU 2015-15 would reduce both total assets and total liabilities and equity shown above by $12.7 million, $14.8 million and $14.6 million as of January 1, 2015, December 26, 2013 and December 27, 2012, respectively.

29(7) Excludes screens and attendance associated with certain AMC Rave, AMC Carmike and Cinemark Rave theaters for all periods presented. Refer to Note 3 to the audited Financial Statements included elsewhere in this document.

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

	Years Ended
	Dec. 29, 2016			Dec. 31, 2015			Jan. 1, 2015			Dec. 26, 2013			Dec. 27, 2012
	Dec. 28, 2017			Dec. 29, 2016			Dec. 31, 2015			Jan. 1, 2015			Dec. 26, 2013
Operating income	$	~~173~~153.09		$	~~140~~173.50		$	~~159~~140.25		$	~~202~~159.02		$	~~191~~202.80
Depreciation and amortization		3537.86			3235.28			32.42			2632.64			2026.46
OIBDA	$	~~208~~191.85		$	~~172~~208.78		$	~~191~~172.67		$	~~228~~191.6		$	~~212~~228.26
Share-based compensation costs (1)		1811.32			1418.83			714.78			57.97			95.09
Merger-related administrative costs (2)		—			~~41.8~~—			—41.8			—			—
CEO transition costs (3)		30.6			03.6			—0.6			—			—
Adjusted OIBDA	$	230.7		$	229.9		$	199.3		$	234.5		$	221.2
Early lease termination expense (4)		1.8			—			—			—			—
Total revenue	$	447.6		$	446.5		$	394.0		$	462.8		$	448.8
Adjusted OIBDA	$	205.1		$	230.7		$	229.9		$	199.3		$	234.5
Adjusted OIBDA margin		51.5	%		51.5	%		50.6	%		50.7	%		49.3	%
Total revenue	$	426.1		$	447.6		$	446.5		$	394.0		$	462.8
Adjusted OIBDA margin		48.1	%		51.5	%		51.5	%		50.6	%		50.7	%

(1) Share-based payments costs are included in network operations, selling and marketing, administrative expense and administrative fee – managing member in the accompanying audited ~~financial~~Financial ~~statements~~Statements. The amount of share-based compensation costs that were non-cash were approximately $7.2 million, $10.9 million, $8.0 million, $4.6 million, and $3.2 million ~~and $4.3 million~~ for the years ended December 28, 2017, December 29, 2016, December 31, 2015, January 1, 2015, and December 26, 2013 ~~and December 27~~, ~~2012,~~ respectively.

(2) Merger termination fee and related merger costs primarily include ~~the~~a merger termination payment and legal, accounting, advisory and other professional fees associated with the terminated merger with Screenvision.

(3)	Chief Executive Officer transition costs represent severance, consulting and related other costs.

~~The~~(4) ~~Company~~Early ~~has~~lease ~~also presented total operating expenses before the merger~~ termination ~~fee~~expense ~~and~~represents ~~related~~an ~~merger~~expense ~~costs~~recorded ~~within~~upon ~~its results of operations section below which is not a financial measure calculated in accordance with GAAP. Operating expenses before~~ the ~~merger~~early termination ~~fee~~of ~~and related merger costs represent operating costs less costs associated with~~ the ~~terminated~~lease ~~Screenvision merger. This non-GAAP financial measure is used to provide readers a comparison~~ of our ~~2016~~corporate ~~results~~headquarters tobecause ~~our 2015 results without including~~ the ~~impact~~early ~~of the nonrecurring merger~~ termination ~~fee~~payment ~~and~~made ~~related~~by ~~merger~~the ~~costs. The~~ Company ~~believes~~was ~~this~~reimbursed isby an important supplemental measure because it eliminates these nonrecurring costs to highlight trends in its ongoing business that may not otherwise be apparent when relying solely on GAAP financial measures. Operating expenses before the ~~merger~~landlord ~~termination fee and related merger costs should not be regarded as an alternative to operating expenses or as an indicator~~ of ~~operating performance, nor should it be considered in isolation of, or as a substitute for financial measures prepared in accordance with GAAP. The Company believes that total operating expenses is~~ the ~~most~~new ~~directly comparable GAAP financial measure~~building.

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.

Overview

We are America’s Movie Network. As the #1 weekend network for Millennials (age 18-34) in the U.S., we are the connector between brands and movie audiences. We currently derive revenue principally from the sale of advertising to national, regional and local businesses in ~~FirstLook~~Noovie, our cinema advertising and entertainment pre-show seen on movie screens across the U.S. We also sell advertising on our LEN, a series of strategically-placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. In addition, we sell online and mobile advertising through our Cinema Accelerator digital product to reach entertainment audiences beyond the theater. We have long-term ESAs (over 19 years remaining as of December 28, 2017) and multi-year agreements with network affiliates, which expire at various dates between May 31, 2018 and July 22, 2031. The weighted average remaining term (based on attendance) of the ESAs and the network affiliate agreements is 16.9 years as of December 28, 2017. The ESAs and network affiliate agreements grant us exclusive rights in their theaters to sell advertising, subject to limited exceptions. Our Noovie pre-show and LEN programming are distributed predominantly via satellite through our proprietary DCN. Approximately 98% of the aggregate founding member and network affiliate theater attendance is generated by theaters connected to our DCN (the remaining screens receive advertisements on USB drives) and 100% of the Noovie pre-show is projected on digital projectors (93% digital cinema projectors and 7% LCD projectors).

3029

~~lobbies,~~Management asfocuses ~~well~~on asseveral ~~other~~measurements ~~forms~~that ofwe ~~advertising~~believe provide us with the necessary ratios and ~~promotions~~key inperformance ~~theater~~indicators ~~lobbies.~~to Inmanage ~~addition~~our business, determine how we ~~sell~~are ~~online~~performing versus our internal goals and ~~mobile~~targets, ~~advertising~~and ~~through~~against the performance of our ~~Cinema~~competitors ~~Accelerator~~and ~~digital~~other ~~product~~benchmarks toin ~~reach~~the ~~entertainment~~marketplace ~~audiences~~in ~~beyond~~which ~~the~~we ~~theater~~operate. We ~~have~~focus ~~long-term~~on ~~ESAs~~many ~~(over~~operating 20metrics ~~years~~including ~~remaining~~changes asin ofrevenue, ~~December 29~~OIBDA, ~~2016)~~Adjusted OIBDA and ~~multi-year~~Adjusted ~~agreements~~OIBDA ~~with~~margin, ~~network~~as ~~affiliates,~~defined ~~which~~and ~~expire~~discussed atin ~~various~~“Notes ~~dates~~to ~~between~~the ~~July~~Selected ~~14,~~Historical ~~2017~~Financial and ~~July~~Operating 22Data” above, ~~2031.~~as ~~The~~some ~~weighted~~of ~~average~~our ~~remaining~~primary ~~term~~measurement ~~(based~~metrics. onIn ~~attendance)~~addition, ofwe ~~the~~monitor ~~ESAs~~our ~~and~~monthly ~~the~~advertising ~~network~~performance ~~affiliate~~measurements, ~~agreements~~including isadvertising ~~18.1~~inventory ~~years~~utilization, asnational ofand ~~December~~local ~~29,~~advertising ~~2016.~~pricing ~~The~~(CPM), ~~ESAs~~local and ~~network~~regional ~~affiliate~~advertising ~~agreements~~rate ~~grant~~per usscreen ~~exclusive~~per ~~rights~~week, inlocal ~~their~~and ~~theaters~~regional toand ~~sell~~total advertising, ~~subject~~revenue toper ~~limited exceptions~~attendee. ~~Our~~We ~~FirstLook~~also ~~pre-show~~monitor ~~and~~free ~~LEN~~cash ~~programming~~flow, ~~are~~the ~~distributed~~dividend ~~predominantly~~coverage ~~via~~ratio, ~~satellite~~financial ~~through~~leverage ~~our~~(net ~~proprietary~~debt ~~DCN.~~divided ~~Approximately~~by ~~98%~~Adjusted ofOIBDA ~~the~~plus ~~aggregate~~integration ~~founding member~~ and ~~network~~other ~~affiliate~~encumbered theater ~~attendance~~payments), iscash ~~generated~~balances byand ~~theaters~~revolving ~~connected~~credit facility availability to ~~our~~ensure ~~DCN~~debt ~~(the~~covenant ~~remaining~~compliance ~~screens~~and ~~receive~~that ~~advertisements~~there onis ~~USB~~adequate ~~drives)~~cash ~~and~~availability ~~100%~~to offund ~~the~~our ~~FirstLook~~working ~~pre-show~~capital isneeds ~~projected~~and ondebt ~~digital~~obligations ~~projectors~~and ~~(90%~~current ~~digital~~and ~~cinema~~future ~~projectors~~dividends ~~and~~declared ~~10%~~by ~~LCD~~our ~~projectors)~~Board of Directors.

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 at least once per quarter with officers, managers and staff to discuss and analyze operating results and address significant variances to budget and prior year in an effort to identify trends and changes in our business. We focus on many operating metrics including changes in revenue, OIBDA, Adjusted OIBDA and Adjusted OIBDA margin, as defined and discussed in “Notes to the Selected Historical Financial and Operating Data” above, as some of our primary measurement metrics. In addition, we monitor our monthly advertising performance measurements, including advertising inventory utilization, national and local advertising pricing (CPM), local and regional advertising rate per screen per week, local and regional and total advertising revenue per attendee. We also monitor free cash flow, the dividend coverage ratio, financial leverage (net debt divided by Adjusted OIBDA), cash balances and revolving credit facility availability to ensure debt covenant compliance and 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.

Recent Transactions

On May 5, 2014, NCM, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”) to merge with Screenvision. On November 3, 2014, the DOJ filed a lawsuit seeking to enjoin the merger. On March 16, 2015, NCM, Inc. announced the termination of the Merger Agreement and the lawsuit was dismissed. After the Merger Agreement was terminated, NCM LLC reimbursed NCM, Inc. for certain expenses pursuant to an indemnification agreement among NCM LLC, NCM, Inc. and the founding members. On March 17, 2015, NCM LLC paid Screenvision an approximate $26.8 million termination payment on behalf of NCM, Inc. During the year ended December 31, 2015, NCM LLC also either paid directly or reimbursed NCM, Inc. for the legal and other merger-related costs of approximately $15.0 million ($7.5 million incurred by NCM, Inc. during the year ended January 1, 2015 and approximately $7.5 million incurred by NCM LLC during the year ended December 31, 2015). NCM, Inc. and the founding members each bore a pro rata portion of the termination fee and the related merger expenses based on their aggregate ownership percentages in NCM LLC when the expenses were incurred.

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 operating income.

	Years Ended									% Change
($ in millions)	Dec. 2928, ~~2016~~2017			Dec. 3129, ~~2015~~2016			~~Jan~~Dec. 131, 2015			~~2015~~2016 to ~~2016~~2017			~~2014~~2015 to ~~2015~~2016
Revenue	$	~~447~~426.61		$	~~446~~447.56		$	~~394~~446.05			0(4.28	%)		130.32	%
Operating expenses:
Advertising		~~173~~178.90			173.69			~~154~~173.6			0.2.4	%		120.32	%
Network, administrative and unallocated costs		~~100~~94.72			90100.67			8090.26			11(6.15	%)		1311.01	%
Merger termination fee and related merger costs (1)		—			~~41.8~~—			—41.8			~~(100~~0.0	%)		100.0	%
Total operating expenses		~~274~~272.62			~~306~~274.06			~~234~~306.80			(100.39	%)		30(10.3	%)
Operating income		~~173~~153.09			~~140~~173.50			~~159~~140.25			23(11.10	%)		~~(11~~23.71	%)
Non-operating expenses		6351.58			5263.95			6252.19			20(18.04	%)		~~(14~~20.80	%)
Income tax expense		0.2			0.12			0.81			~~100~~0.0	%		~~(87~~100.50	%)
Net income	$	~~109~~101.39		$	87109.53		$	9687.35			24(6.98	%)		(924.19	%)
Adjusted OIBDA	$	~~230~~205.71		$	~~229~~230.97		$	~~199~~229.39			0(11.31	%)		150.43	%
Adjusted OIBDA margin		5148.51	%		51.5	%		5051.65	%		0(3.04	%)		0.90	%
Total theater attendance (in millions) (2)		~~688~~655.8			~~694~~688.78			~~688~~694.27			(04.8	%)		(0.98	%)

(1) Merger termination fee and related merger costs primarily include the merger termination payment and legal, accounting, advisory and other professional fees associated with ~~the~~a terminated merger with Screenvision (refer to Note 6 to the audited Financial Statements included elsewhere in this document.

(2) Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Rave, AMC Carmike and Cinemark Rave theaters that are currently part of another cinema advertising network for all periods presented. Refer to Note 3 to the audited ~~financial~~Financial ~~statements~~Statements included elsewhere in this document.

Basis of Presentation

Prior to the completion of NCM, Inc.’s 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 our founding members, and became a member of and the sole manager of NCM LLC. We entered into several agreements to ~~effect~~affect the reorganization and the financing transaction and certain amendments were made to the existing ESAs to govern the relationships among NCM LLC and our founding members after the completion of these transactions.

The results of operations data discussed herein were derived from the audited ~~financial~~Financial ~~statements~~Statements and accounting records of NCM LLC 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 2015 and 2016 contained 52 weeks. Our 2017 fiscal year will contain 52 weeks. Throughout this document, we refer to our fiscal years as set forth below:30

		Reference in
Fiscal Year Ended		this Document
December 29, 2016		2016
December 31, 2015		2015
January 1, 2015		2014

We have a 52-week or 53-week fiscal year ending on the first Thursday after December 25. Fiscal years 2015, 2016 and 2017 contained 52 weeks. Our 2018 fiscal year will contain 52 weeks. Throughout this document, we refer to our fiscal years as set forth below:

		Reference in
Fiscal Year Ended		this Document
December 28, 2017		2017
December 29, 2016		2016
December 31, 2015		2015

Results of Operations

Fiscal Years 2017 and 2016

Revenue. Total revenue decreased $21.5 million, or 4.8%, from $447.6 million for 2016 to $426.1 million for 2017. The following is a summary of revenue by category (in millions):

	Fiscal Year					$ Change			% Change
		2017		2016		2016 to 2017			2016 to 2017
National advertising revenue		$	296.3	$	311.9	$	(15.6	)		(5.0	%)
Local and regional advertising revenue			99.9		107.0		(7.1	)		(6.6	%)
Founding member advertising revenue from beverage concessionaire agreements			29.9		28.7		1.2			4.2	%
Total revenue		$	426.1	$	447.6	$	(21.5	)		(4.8	%)

The following table shows data on revenue per attendee for 2017 and 2016:

		Fiscal Year				% Change
	2017			2016		2016 to 2017
National advertising revenue per attendee		$	0.452	$	0.453		(0.2	%)
Local and regional advertising revenue per attendee		$	0.152	$	0.155		(1.9	%)
Total advertising revenue (excluding founding member beverage revenue) per attendee		$	0.604	$	0.608		(0.7	%)
Total advertising revenue per attendee		$	0.650	$	0.650		0.0	%
Total theater attendance (in millions) (1)			655.8		688.8		(4.8	%)

(1)

Represents the total attendance within NCM LLC’s advertising network, excluding screens and attendance associated with certain AMC Rave, AMC Carmike and Cinemark Rave theaters for all periods presented. Refer to Note 3 to the audited financial statements included elsewhere in this document.

National advertising revenue. The $15.6 million, or 5.0%, decrease in national advertising revenue (excluding beverage revenue from NCM LLC’s founding members) was due primarily to a 4.7% decrease in impressions sold and a 4.2% decrease in national advertising CPMs (excluding beverage) during 2017, compared to 2016. The decline was partially offset by a $8.0 million, or 19.6%, increase in other revenue not included in the inventory measured by impressions sold or CPMs, related to an increase in branded content and online and mobile revenue. The decrease in national advertising impressions sold was primarily due to lower content partner spending, partially offset by an increase scatter market demand for 2017, compared to 2016. The decrease in national advertising CPMs was due primarily to lower CPMs on revenue from upfront advertisers and unfavorable customer mix as less impressions were sold to higher CPM customers, year over year. However, national inventory utilization remained consistent at 118.4% for 2016 compared to118.5% for 2017, on a 4.8% decrease in network attendance. Inventory utilization is calculated as utilized impressions divided by total advertising impressions, which is based on eleven 30-second salable national advertising units in our Noovie pre-show, which can be expanded, should market demand dictate.

Local and regional advertising revenue. The $7.1 million, or 6.6%, decrease in local and regional advertising revenue was driven by a 6.2% decrease in the volume of contracts and a 2.8% decrease in the average contract dollar amount, primarily related to a decrease in spending within the military and tourism category in 2017, compared to 2016. Additionally, local and regional advertising revenue was adversely impacted by hurricanes Harvey and Irma due to reduced advertising spending during the recovery from the storms as well as, by the transfer of AMC theaters to another advertising provider in accordance with the Final Judgement with the DOJ (which were partially offset by the addition of theaters from new affiliates). This decrease in

local and regional advertising revenue was partially offset by an increase in online and mobile revenue of approximately $1.9 million in 2017, compared to 2016.

Founding member beverage revenue. The $1.2 million, or 4.2%, increase in national advertising revenue from the founding members’ beverage concessionaire agreements was due primarily to a 10.2% increase in beverage revenue CPMs, partially offset by a 6.9% decrease in founding member attendance during 2017, compared to 2016. The 2017 beverage revenue CPM is based on the change in CPM during segment one of our pre-show from 2015 to 2016, which increased 10.2%.

Operating expenses. Total operating expenses decreased $2.4 million, or 0.9%, from $274.6 million for 2016 to $272.2 million for 2017. The following table shows the changes in operating expense for 2017 and 2016 (in millions):

	Fiscal Year				$ Change			% Change
	2017		2016		2016 to 2017			2016 to 2017
Advertising operating costs	$	32.4	$	30.0	$	2.4			8.0	%
Network costs		15.8		17.1		(1.3	)		(7.6	%)
Theater access fees—founding members		76.5		75.1		1.4			1.9	%
Selling and marketing costs		72.0		72.8		(0.8	)		(1.1	%)
Administrative and other costs		25.1		23.6		1.5			6.4	%
Administrative fee—managing member		12.8		20.2		(7.4	)		(36.6	%)
Depreciation and amortization		37.6		35.8		1.8			5.0	%
Total operating expenses		272.2		274.6		(2.4	)		(0.9	%)

Advertising operating costs. Advertising operating costs increased $2.4 million, or 8.0%, from $30.0 million for 2016 to $32.4 million for 2017. This increase was primarily the result of a $2.6 million increase in affiliate advertising payments and a $0.8 million increase in personnel related expenses. The increase in affiliate advertising payments was primarily driven by a 13.8%, or 477 screen, increase in the number of average affiliate screens due to the addition of affiliates to our network for 2017, compared to 2016. The increase in personnel related expenses were primarily related to higher salary expense in 2017, compared to 2016. These increases in advertising operating costs were partially offset by a $1.0 million decrease in production costs related to lower production revenue during 2017, compared to 2016.

Network costs. Network costs decreased $1.3 million, or 7.6%, from $17.1 million for 2016 to $15.8 million for 2017. This decrease was primarily related to a $0.8 million decrease in personnel related expenses due to lower salaries and bonus expense (related to lower performance against internal targets) and a $0.2 million decrease in network maintenance costs related to our DCN in 2017, compared to 2016.

Theater access fees—founding members. Theater access fees increased $1.4 million, or 1.9%, from $75.1 million for 2016 to $76.5 million for 2017. The increase was due to a $3.3 million increase due to a contractual 8% rate increase on the fee per patron (the fee per patron rate increases every five years with this increase taking place in 2017) and a $1.2 million increase in the expense associated with the founding member digital screens that are connected to the DCN related primarily to an annual 5% increase specified in the ESAs on this fee. These increases were partially offset by a decrease of $3.1 million in theater access fees due to a 6.9% decrease in founding member attendance in 2017, compared to 2016.

Selling and marketing costs. Selling and marketing costs decreased $0.8 million, or 1.1%, from $72.8 million for 2016 to $72.0 million for 2017. This decrease was primarily due to a $2.8 million decrease in personnel related expenses due primarily to lower commission based expense and lower non-cash share-based compensation expense (driven by lower revenue and lower performance against internal targets), partially offset by severance expense related to the elimination of certain sales leadership positions. Further selling and marketing costs decreased due to a $1.0 million decrease in marketing research during 2017, compared to 2016. These decreases in selling and marketing costs were partially offset by a $2.4 million increase in non-cash impairment expense recorded during 2017, compared to 2016, related to investments obtained in prior years in exchange for advertising services and a $0.9 million increase in online publisher expense driven by an increase in online and mobile revenue.

Administrative and other costs. Administrative and other costs increased $1.5 million, or 6.4%, from $23.6 million for 2016 to $25.1 million for 2017 due primarily to a $1.8 million early lease termination charge for our corporate headquarters (the payment of which was reimbursed by the new landlord).

Administrative fee – managing member. Administrative fee-managing member decreased $7.4 million, or 36.6%, from $20.2 million for 2016 to $12.8 million for 2017 due primarily to the following nonrecurring expenses recognized in 2016: 1) $2.8 million of CEO transition costs, which consisted primarily of severance and consulting costs to our former CEO, 2) $2.3 million of non-cash share-based compensation expense associated with the modification of equity awards pursuant to agreements with our former CEO, 3) $1.5 million of non-cash share-based compensation expense and bonus expense (related to lower performance against internal targets), and 4) $0.5 million of consulting fees. Amounts recorded are based on the terms of the

management services agreement which states NCM LLC pays NCM, Inc. service fees which are equal to the cost of NCM, Inc. employees and any reimbursable costs incurred by NCM, Inc.

Depreciation and amortization. Depreciation and amortization expense increased $1.8 million, or 5.0%, from $35.8 million for 2016 to $37.6 million for 2017. The increase was due to an increase in depreciation expense primarily from more software being placed into service in 2017, compared to 2016 and an acceleration in depreciation expense on the leasehold improvements of our corporate headquarters location following the early termination of our lease.

Non-operating expenses. Total non-operating expenses decreased $11.7 million, or 18.4%, from $63.5 million for 2016 to $51.8 million for 2017. The following table shows the changes in non-operating expense for 2017 and 2016 (in millions):

	Fiscal Year						$ Change			% Change
	2017			2016			2016 to 2017			2016 to 2017
Interest on borrowings	$	52.8		$	54.0		$	(1.2	)		(2.2	%)
Interest income		(0.7	)		(0.9	)		0.2			(22.2	%)
Loss on early retirement of debt		—			10.4			(10.4	)		100.0	%
Other non-operating income		(0.3	)		—			(0.3	)		(100.0	%)
Total non-operating expenses	$	51.8		$	63.5		$	(11.7	)		(18.4	%)

The decrease in non-operating expense was due primarily to the absence of a $10.4 million loss on the early retirement of debt recorded in 2016 for the redemption of the senior unsecured notes and a $1.2 million decrease in interest on borrowings primarily related to a one-month period between the issuance of and redemption of notes in 2016, whereby interest was paid on both notes.

Net income. Net income decreased $7.4 million from $109.3 million in 2016 to $101.9 million in 2017. The decrease in net income was due to a $19.1 million decrease in operating income primarily related to lower revenue as described above, partially offset by a $11.7 million decrease in non-operating expenses, as described further above.

Fiscal Years 2016 and 2015

Revenue. Total revenue increased $1.1 million, or 0.2%, from $446.5 million for ~~the year ended December 31,~~ 2015 to $447.6 million for ~~the year ended December 29,~~ 2016. The following is a summary of revenue by category (in millions):


	Fiscal Year				$ Change			% Change
	2016		2015		2015 to 2016			2015 to 2016
National advertising revenue	$	311.9	$	307.0	$	4.9			1.6	%
Local and regional advertising revenue		107.0		109.5		(2.5	)		(2.3	%)
Founding member advertising revenue from beverage concessionaire agreements		28.7		30.0		(1.3	)		(4.3	%)
Total revenue	$	447.6	$	446.5	$	1.1			0.2	%

The following table shows data on revenue per attendee for ~~the years ended December 29,~~ 2016 and ~~December 31,~~ 2015:

	Fiscal Year				% Change
	2016		2015		2015 to 2016
National advertising revenue per attendee	$	0.453	$	0.442		2.5	%
Local and regional advertising revenue per attendee	$	0.155	$	0.158		(1.9	%)
Total advertising revenue (excluding founding member beverage revenue) per attendee	$	0.608	$	0.600		1.3	%
Total advertising revenue per attendee	$	0.650	$	0.643		1.1	%
Total theater attendance (in millions) (1)		688.8		694.7		(0.8	%)

(1)

Represents the total attendance within NCM LLC’s advertising network, excluding screens and attendance associated with certain AMC Rave and Cinemark Rave theaters for all periods presented. Refer to Note 3 to the audited financial statements included elsewhere in this document.

National advertising revenue. The $4.9 million, or 1.6%, increase in national advertising revenue (excluding beverage revenue from the founding members) was due primarily to a 9.6% increase in national advertising CPMs (excluding beverage) during the year ended December 29, 2016 compared to the year ended December 31, 2015 and a $5.4 million increase in online, mobile and other revenue not included in the inventory measured by impressions sold or by CPMs. The increase in national advertising CPMs was due primarily to higher CPMs on upfront commitments year over year and to a lesser extent higher CPMs in the scatter market as well. These increases to revenue were partially offset by an 8.2% decrease in impressions sold during the year ended December 29, 2016, compared to the year ended December 31, 2015. The decrease in impressions sold was due primarily to fewer impressions sold during the first half of 2016, compared to the first half of 2015. The decrease in impressions sold resulted in a decrease in national inventory utilization, from 128.3% in 2015 to 118.4% in 2016 on a 0.8% decrease in network attendance. Inventory utilization is calculated as utilized impressions divided by total advertising impressions, which is based on eleven 30-second salable national advertising units in our FirstLook pre-show, which can be expanded, should market demand dictate.

Local and regional advertising revenue. The $2.5 million, or 2.3%, decrease in local and regional advertising revenue was driven by a decrease in revenue from contracts greater than $100,000, whereby they had a 6.9% decrease in contract volume and a 5.6% decrease in average contract value during 2016, compared to 2015. The decrease in revenue from contracts greater than $100,000 was driven by fewer contracts that were greater than $1 million. This was partially offset by revenue from contracts less than $100,000 which increased 2.5% in contract volume primarily related to the expansion of our salesforce and diversification of our client base.

Founding member beverage revenue. The $1.3 million, or 4.3%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was due to a decrease of $3.0 million related to one of the founding members reducing the length of its beverage advertising unit by 30 seconds beginning July 1, 2015, partially offset by a 5.7% increase in beverage revenue CPMs. The 2016 beverage revenue CPM is based on the change in CPM during segment one of the FirstLook pre-show from 2014 to 2015, which increased 5.7%.

~~Operating~~2016 ~~expenses.~~compared ~~Total~~to ~~operating~~2015 ~~expenses~~and ~~decreased~~a $315.4 million increase in online, mobile and other revenue not included in the inventory measured by impressions sold or 10by CPMs.~~3%,~~ The ~~from~~increase ~~$306.0~~in ~~million~~national ~~for~~advertising ~~the~~CPMs was due primarily to higher CPMs on upfront commitments year ~~ended~~over ~~December~~year 31and to a lesser extent higher CPMs in the scatter market as well. These increases to revenue were partially offset by an 8.2% decrease in impressions sold during 2016, ~~2015~~compared to ~~$274~~2015.6 ~~million~~The ~~for~~decrease in impressions sold was due primarily to fewer impressions sold during the ~~year~~first ~~ended~~half ~~December~~of 292016, ~~2016~~compared to the first half of 2015. The ~~following~~decrease ~~table~~in ~~shows~~impressions ~~the~~sold ~~changes~~resulted in ~~operating~~a ~~expense~~decrease ~~for~~in ~~the~~national ~~year~~inventory ~~ended~~utilization, ~~December~~from ~~29,~~128.3% in 2015 to 118.4% in 2016 ~~and~~on ~~December~~a 310.8% decrease in network attendance. Inventory utilization is calculated as utilized impressions divided by total advertising impressions, ~~2015~~which (is based on eleven 30-second salable national advertising units in ~~millions):~~our pre-show, which can be expanded, should market demand dictate.

	Fiscal Year					$ Change			% Change
	2016		2015			2015 to 2016			2015 to 2016
Advertising operating costs	$	30.0	$	30.8	$		(0.8	)		(2.6	%)
Network costs		17.1		17.8			(0.7	)		(3.9	%)
Theater access fees—founding members		75.1		72.5			2.6			3.6	%
Selling and marketing costs		72.8		72.3			0.5			0.7	%
Administrative and other costs		23.6		21.4			2.2			10.3	%
Administrative fee—managing member		20.2		17.2			3.0			17.4	%
Depreciation and amortization		35.8		32.2			3.6			11.2	%
Total operating expenses before the merger termination fee and related merger costs		274.6		264.2			10.4			3.9	%
Merger termination fee and related merger costs		—		41.8			(41.8	)		100.0	%
Total operating expenses	$	274.6	$	306.0	$		(31.4	)		(10.3	%)

~~Advertising~~Founding ~~operating~~member ~~costs~~beverage revenue. ~~Advertising~~The ~~operating costs decreased~~ $01.83 million, or 24.63%, ~~from~~decrease ~~$30.8~~in ~~million~~national ~~for~~advertising revenue from the ~~year~~founding ~~ended~~members’ ~~December~~beverage ~~31,~~concessionaire ~~2015~~agreements was due to a decrease of $303.0 million ~~for~~related to one of the ~~year~~founding ~~ended~~members ~~December~~reducing ~~29,~~the ~~2016.~~length ~~This~~of ~~decrease~~its ~~was~~beverage ~~primarily~~advertising ~~due~~unit toby 30 seconds beginning July 1, 2015, partially offset by a $05.47% ~~million~~increase ~~decrease~~ in ~~personnel~~beverage ~~related~~revenue ~~expenses~~CPMs. ~~and~~The ~~$0.2~~2016 ~~million~~beverage ~~lower~~revenue ~~on-screen~~CPM ~~production~~is ~~costs~~based ~~during~~on ~~year~~the ~~ended~~change ~~December~~in ~~29,~~CPM ~~2016,~~during ~~compared~~segment toone of the ~~year~~pre-show ~~ended~~from ~~December~~2014 ~~31,~~to 2015, which increased 5.7%.

~~Network~~Operating ~~costs~~expenses. ~~Network~~Total ~~costs~~operating ~~decreased~~expenses increased $031.74 million, or 310.93%, from $17306.80 million for ~~the~~2016 ~~year ended December 31, 2015~~ to $17274.16 million for ~~the~~2015. The ~~year~~following ~~ended~~table ~~December~~shows ~~29,~~the ~~2016~~changes ~~due~~in ~~primarily~~operating toexpense afor ~~decrease~~2016 ofand ~~$0.5~~2015 ~~million~~ (in ~~network maintenance costs related to our DCN.~~ millions):

Theater access fees—founding members. Theater access fees increased $2.6 million, or 3.6%, from $72.5 million for the year ended December 31, 2015 to $75.1 million for the year ended December 29, 2016. The increase was due to a $2.6 million increase in the fee associated with the number of founding member digital screens that are connected to the DCN, including higher quality digital cinema projectors and related equipment. The $2.6 million increase in digital screen fees increased $1.5 million related to an annual 5% rate increase specified in the ESAs and $1.1 million from an increase in the number of founding member screens equipped with higher quality digital cinema equipment. Theater access fees based upon founding member attendance remained consistent during 2016, compared to 2015 as founding member attendance remained flat year over year.

	Fiscal Year				$ Change			% Change
	2016		2015		2015 to 2016			2015 to 2016
Advertising operating costs	$	30.0	$	30.8	$	(0.8	)		(2.6	%)
Network costs		17.1		17.8		(0.7	)		(3.9	%)
Theater access fees—founding members		75.1		72.5		2.6			3.6	%
Selling and marketing costs		72.8		72.3		0.5			0.7	%
Administrative and other costs		23.6		21.4		2.2			10.3	%
Administrative fee—managing member		20.2		17.2		3.0			17.4	%
Depreciation and amortization		35.8		32.2		3.6			11.2	%
Total operating expenses before merger termination fee and related merger costs		274.6		264.2		10.4			3.9	%
Merger termination fee and related merger costs		—		41.8		(41.8	)		(100.0	%)
Total operating expenses	$	274.6	$	306.0	$	(31.4	)		(10.3	%)

~~Selling~~Advertising ~~and~~operating ~~marketing~~ costs. ~~Selling~~Advertising ~~and~~operating ~~marketing~~ costs ~~increased~~decreased $0.58 million, or 02.76%, from $7230.38 million for ~~the year ended December 31,~~ 2015 to $7230.80 million for ~~the year ended December 29,~~ 2016. This ~~increase~~decrease was primarily due to ~~an increase of $0.9 million in online publisher expense related to higher online and mobile revenue,~~ a $0.84 million ~~increase~~decrease in ~~marketing~~personnel ~~research~~related expenses and $0.72 million ~~due~~lower ~~to a non~~on-~~cash~~screen ~~impairment~~production ~~charge on an investment obtained in exchange for advertising services. These increases to selling and marketing~~ costs ~~were partially offset by a $1.7 million decrease in personnel related expenses due primarily to lower commission and bonus expense~~ during ~~the year ended December 29,~~ 2016, compared to ~~the year ended December 31,~~ 2015.

~~Administrative~~Network ~~and other~~ costs. ~~Administrative~~ ~~and~~Network ~~other~~ costs ~~increased~~decreased $20.27 million, or ~~10.~~3.9%, from $2117.48 million for ~~the year ended December 31,~~ 2015 to $2317.61 million for ~~the year ended December 29,~~ 2016~~. The~~ ~~increase was primarily~~ due ~~to a $1.2 million increase in personnel related expenses due~~ primarily to ~~higher non-cash share-based compensation expense partially offset by lower bonus expense,~~ a ~~$0.7~~decrease ~~million~~of ~~increase in non-income based tax expense and~~ $0.5 million ofin ~~higher~~network ~~CEO~~maintenance ~~transition~~ costs related to ~~consulting payments made to~~ our ~~former CEO~~DCN.

~~Administrative~~Theater ~~fee~~access –fees—founding ~~managing member~~members. ~~Administrative~~Theater ~~fee-managing~~access ~~member~~fees increased $32.06 million, or 173.46%, from $1772.25 million for ~~the~~2015 ~~year~~to ~~ended~~$75.1 ~~December~~million ~~31,~~for ~~2015~~2016. The increase was due to a $~~20.~~2.6 million ~~for~~increase in the ~~year~~fee ~~ended~~associated ~~December~~with ~~29,~~the ~~2016~~number ~~due~~of ~~primarily~~founding member digital screens that are connected to athe DCN, including higher quality digital cinema projectors and related equipment. The $2.56 million increase in ~~CEO~~digital ~~transition~~screen ~~costs,~~fees ~~which~~increased ~~consisted~~$1.5 ~~primarily~~million ofrelated ~~severance~~to ~~costs~~an toannual ~~our~~5% ~~former~~rate ~~CEO~~increase specified in the ESAs and $1. ~~Amounts~~1 ~~recorded~~million ~~are~~from ~~based~~an onincrease in the ~~terms~~number of ~~the~~founding ~~management~~member ~~services~~screens ~~agreement~~equipped ~~which~~with ~~states~~higher ~~NCM~~quality ~~LLC~~digital ~~pays~~cinema ~~NCM, Inc~~equipment. Theater ~~service~~access fees ~~which~~based ~~are~~upon ~~equal~~founding tomember ~~the~~attendance ~~cost~~remained ofconsistent ~~NCM~~during 2016, ~~Inc.~~compared ~~employees~~to ~~and~~2015 ~~any~~as ~~reimbursable~~founding ~~costs~~member ~~incurred~~attendance byremained ~~NCM,~~flat ~~Inc~~year over year.

Selling and marketing costs. Selling and marketing costs increased $0.5 million, or 0.7%, from $72.3 million for 2015 to $72.8 million for 2016. This increase was primarily due to an increase of $0.9 million in online publisher expense related to higher online and mobile revenue, a $0.8 million increase in marketing research expenses and $0.7 million due to a non-cash impairment charge on an investment obtained in exchange for advertising services. These increases to selling and marketing

~~Depreciation~~costs ~~and~~were ~~amortization.~~partially ~~Depreciation~~offset ~~and~~by ~~amortization~~a ~~expense increased~~ $31.67 million, ordecrease ~~11.2%,~~in ~~from~~personnel ~~$32.2 million~~related ~~for~~expenses ~~the year ended December 31, 2015 to $35.8 million for the year ended December 29, 2016. The increase was~~ due ~~to an increase in amortization expense of intangible assets related~~ primarily to ~~founding~~lower ~~member~~commission ~~common~~and ~~unit~~bonus ~~adjustments, partially offset by lower depreciation~~ expense asduring ~~assets~~2016, ~~became~~compared ~~fully~~to ~~depreciated~~2015.

~~Merger~~Administrative ~~termination~~and ~~fee~~other costs. Administrative and ~~related~~other ~~merger~~ costs increased $2.2 ~~The~~million, ~~merger~~or ~~termination~~10.3%, ~~fee~~from ~~and~~$21.4 ~~related~~million ~~merger~~for ~~costs~~2015 ~~were~~to $4123.86 million for ~~the~~2016. The ~~year~~increase ~~ended~~was ~~December~~primarily ~~31,~~due ~~2015~~to a $1.2 million increase in personnel related expenses due primarily to ~~the~~higher ~~merger~~non-cash ~~termination~~share-based ~~payment~~compensation ofexpense ~~approximately~~partially ~~$26.8~~offset ~~million~~by ~~and~~lower ~~approximately~~bonus expense, a $~~15.~~0.7 million increase in ~~primarily~~non-income ~~legal,~~based ~~accounting,~~tax ~~advisory~~expense and ~~other~~$0.5 ~~professional~~million ~~fees~~of ~~associated~~higher ~~with~~CEO ~~the~~transition ~~terminated~~costs ~~Screenvision~~related ~~merger~~to consulting payments made to our former CEO.

~~Non-operating~~Administrative ~~expenses~~fee – managing member. ~~Total~~ ~~non~~Administrative fee-~~operating~~managing ~~expenses~~member increased $103.60 million, or 2017.04%, from $5217.92 million for ~~the~~2015 ~~year~~to ~~ended~~$20.2 ~~December~~million ~~31,~~for ~~2015~~2016 due primarily to a $632.5 million ~~for~~increase ~~the~~in ~~year~~CEO ~~ended~~transition ~~December 29~~costs, ~~2016~~which consisted primarily of severance costs to our former CEO. ~~The~~Amounts ~~following~~recorded ~~table~~are ~~shows~~based on the ~~changes~~terms inof ~~non-operating~~the ~~expense~~management ~~for~~services ~~the~~agreement ~~years~~which ~~ended~~states ~~December~~NCM 29LLC pays NCM, ~~2016~~Inc. ~~and~~service ~~December~~fees 31which are equal to the cost of NCM, ~~2015~~Inc. ~~(in~~employees ~~millions):~~and any reimbursable costs incurred by NCM, Inc.

	Fiscal Year						$ Change			% Change
	2016			2015			2015 to 2016			2015 to 2016
Interest on borrowings	$	54.0		$	52.2		$	1.8			3.4	%
Interest income		(0.9	)		(1.1	)		0.2			(18.2	%)
Amortization of terminated derivatives		—			1.6			(1.6	)		(100.0	%)
Loss on early retirement of debt		10.4			—			10.4			100.0	%
Other non-operating expense		—			0.2			(0.2	)		(100.0	%)
Total non-operating expenses	$	63.5		$	52.9		$	10.6			20.0	%

Depreciation and amortization. Depreciation and amortization expense increased $3.6 million, or 11.2%, from $32.2 million for 2015 to $35.8 million for 2016. The increase was due to an increase in amortization expense of intangible assets related primarily to founding member common unit adjustments, partially offset by lower depreciation expense as assets became fully depreciated.

~~The~~Merger ~~increase~~termination infee ~~non-operating~~and ~~expense~~related ~~was~~merger ~~due primarily to a $10~~costs.4 ~~million loss on early retirement of debt recorded in the year ended December 29, 2016 as a result of the redemption of our Notes due 2021.~~ The ~~loss~~merger ontermination ~~early~~fee ~~retirement of debt included an approximate $7.9 million redemption premium~~ and ~~the~~related ~~write-off~~merger ~~of approximately $2.5 million in unamortized debt issuance~~ costs. ~~The~~were ~~interest on borrowings increased approximately~~ $141.8 million infor ~~2016 compared to~~ 2015 due to the ~~one-month~~merger ~~period~~termination ~~between~~payment ~~the issuance~~ of ~~the~~approximately ~~Notes~~$26.8 ~~due~~million ~~2026 in August 2016~~ and ~~the~~approximately ~~redemption~~$15.0 ofmillion ~~the Notes due 2021~~ in ~~September~~primarily ~~2016~~legal, ~~whereby interest was paid on both notes for one month~~accounting, asadvisory ~~well~~and ~~as,~~other aprofessional ~~higher~~fees ~~LIBOR~~associated ~~rate~~with ~~on our term loans during 2016 compared to 2015. These increases in non-operating expenses were partially offset by a $1.6 million decrease in~~ the ~~amortization of~~ terminated ~~derivatives~~Screenvision ~~as the amortization period ended in February 2015~~merger.

~~Net~~Non-operating ~~income~~expenses. Total ~~Net~~non-operating ~~income~~expenses increased $2110.86 million, or 20.0%, from $8752.59 million for ~~the year ended December 31,~~ 2015 to $~~109~~63.35 million for ~~the year ended December 29,~~ 2016. The ~~increase~~following intable ~~net~~shows ~~income~~the ~~was~~changes ~~due to an increase~~ in ~~operating income of $32.5 million, as described above, partially offset by an increase of $10.6 million in~~ non-operating expense ~~and~~for an2016 ~~increase~~and 2015 (in ~~income tax expense of $0.1 million.~~ millions):

Fiscal Years 2015 and 2014

	Fiscal Year						$ Change			% Change
	2016			2015			2015 to 2016			2014 to 2015
Interest on borrowings	$	54.0		$	52.2		$	1.8			3.4	%
Interest income		(0.9	)		(1.1	)		0.2			(18.2	%)
Amortization of terminated derivatives		—			1.6			(1.6	)		(100.0	%)
Loss on early retirement of debt		10.4			—			10.4			100.0	%
Other non-operating expense		—			0.2			(0.2	)		(100.0	%)
Total non-operating expenses	$	63.5		$	52.9		$	10.6			20.0	%

~~Revenue~~The increase in non-operating expense was due primarily to a $10.4 million ~~Total~~loss ~~revenue~~on ~~increased~~early retirement of debt recorded in 2016 as a result of the redemption of our Notes due 2021. The loss on early retirement of debt included an approximate $527.9 million redemption premium and the write-off of approximately $2.5 million, orin 13unamortized debt issuance costs.~~3%,~~ ~~from~~The interest on borrowings increased approximately $~~394~~1.08 million ~~for~~in 2016 compared to 2015 due to the ~~year~~one-month ~~ended~~period ~~January~~between 1the issuance of the Notes due 2026 in August 2016 and the redemption of the Notes due 2021 in September 2016, ~~2015~~whereby tointerest ~~$446.5~~was ~~million~~paid on both notes for ~~the~~one ~~year~~month, ~~ended~~as ~~December~~well 31as, a higher LIBOR rate on our term loans during 2016 compared to 2015. ~~The~~These ~~following~~increases isin non-operating expenses were partially offset by a ~~summary~~$1.6 million decrease in the amortization of ~~revenue~~terminated byderivatives ~~category~~as (the amortization period ended in ~~millions):~~February 2015.

	Fiscal Year				$ Change			% Change
	2015		2014		2014 to 2015			2014 to 2015
National advertising revenue	$	307.0	$	255.9	$	51.1			20.0	%
Local and regional advertising revenue		109.5		99.7		9.8			9.8	%
Founding member advertising revenue from beverage concessionaire agreements		30.0		38.4		(8.4	)		(21.9	%)
Total revenue	$	446.5	$	394.0	$	52.5			13.3	%

Net income. Net income increased $21.8 million from $87.5 million for 2015 to $109.3 million for 2016. The increase in net income was due to an increase in operating income of $32.5 million, as described above, partially offset by an increase of $10.6 million in non-operating expense and an increase in income tax expense of $0.1 million.

The following table shows data on revenue per attendee for the years ended December 31, 2015 and January 1, 2015 (in millions):

	Fiscal Year				% Change
	2015		2014		2014 to 2015
National advertising revenue per attendee	$	0.442	$	0.372		18.8	%
Local and regional advertising revenue per attendee	$	0.158	$	0.145		9.0	%
Total advertising revenue (excluding founding member beverage revenue) per attendee	$	0.600	$	0.517		16.1	%
Total advertising revenue per attendee	$	0.643	$	0.573		12.2	%
Total theater attendance (in millions) (1)		694.7		688.2		0.9	%

(1) Represents the total attendance within NCM LLC’s advertising network, excluding screens and attendance associated with certain AMC Rave and Cinemark Rave theaters for all periods presented. Refer to Note 3 to the audited financial statements included elsewhere in this document.

National advertising revenue. The $51.1 million, or 20.0%, increase in national advertising revenue (excluding beverage revenue from the founding members) was due primarily to a 14.2% increase in impressions sold during the year ended December 31, 2015, compared to the year ended January 1, 2015 and a 6.7% increase in national advertising CPMs (excluding beverage) during the year ended December 31, 2015, compared to the year ended January 1, 2015. The increase in impressions sold was driven by an increase in national inventory utilization from 115.7% for the year ended January 1, 2015 to 128.3% for the year ended December 31, 2015, due to an expansion of our client base and increased spending by certain existing clients, related in part to the success of our strategy to compete in the national television Upfront marketplace. Inventory utilization is calculated as utilized impressions divided by total advertising impressions, which is based on eleven 30-second salable national advertising units in our FirstLook pre-show, which can be expanded, should market demand dictate. This increase in impressions sold was also driven by an increase in our network theater attendance of 0.9% related to an overall increase in cinema industry attendance resulting from a stronger film release schedule and the addition of new network screens. The increase in CPMs relates primarily to our successful Upfront sales campaign and strong scatter market.

Local and regional advertising revenue. The $9.8 million, or 9.8%, increase in local and regional advertising revenue was driven by an increase of $6.9 million, or 21.7%, in revenue from larger regional contracts (greater than $100,000). The volume of contracts greater than $100,000 increased 33.9%, partially offset by a decrease of 9.1% in average contract value of contracts greater than $100,000. The increase in volume of contracts greater than $100,000 was due to the stronger film release schedule and higher sales to agencies responsible for larger regional advertising budgets. Revenue from local contracts under $100,000 increased 4.8% during the year ended December 31, 2015, compared to the year ended January 1, 2015.

Founding member beverage revenue. The $8.4 million, or 21.9%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was due to a 14.4% decrease in beverage revenue CPMs and a decrease of 0.4% in founding member attendance during the year ended December 31, 2015, compared to the year ended January 1, 2015. The 2015 beverage revenue CPM is based on the change in CPM during segment one of the FirstLook pre-show from 2013 to 2014, which decreased 14.4%. Founding member beverage revenue also decreased by $2.7 million due to one of the founding members reducing the length of the beverage advertising unit from 60 seconds to 30 seconds beginning July 1, 2015. We have the right to sell the 30 second unit to other clients.

Operating expenses. Total operating expenses increased $29.4 million, or 12.5%, from $234.8 million for the year ended January 1, 2015 to $264.2 million for the year ended December 31, 2015. The following table shows the changes in operating expense for the year ended December 31, 2015 and January 1, 2015 (in millions):

	Fiscal Year				$ Change			% Change
	2015		2014		2014 to 2015			2014 to 2015
Advertising operating costs	$	30.8	$	26.4	$	4.4			16.7	%
Network costs		17.8		18.3		(0.5	)		(2.7	%)
Theater access fees—founding members		72.5		70.6		1.9			2.7	%
Selling and marketing costs		72.3		57.6		14.7			25.5	%
Administrative and other costs		21.4		19.3		2.1			10.9	%
Administrative fee—managing member		17.2		10.2		7.0			68.6	%
Depreciation and amortization		32.2		32.4		(0.2	)		(0.6	%)
Total operating expenses before merger termination fee and related merger costs		264.2		234.8		29.4			12.5	%
Merger termination fee and related merger costs		—		41.8		(41.8	)		(100.0	%)
Total operating expenses	$	264.2	$	234.8	$	29.4			12.5	%

Advertising operating costs. Advertising operating costs increased $4.4 million, or 16.7%, from $26.4 million for the year ended January 1, 2015 to $30.8 million for the year ended December 31, 2015. This increase was primarily the result of a $3.6 million increase in affiliate advertising payments which was driven by higher national and local advertising revenue and a 3.5% increase in the number of average affiliate screens for the year ended December 31, 2015, compared to the year ended January 1, 2015.

Network costs. Network costs decreased $0.5 million, or 2.7%, from $18.3 million for the year ended January 1, 2015 to $17.8 million for the year ended December 31, 2015 due primarily to a decrease of $0.5 million in personnel related expenses due primarily to lower salaries due to department realignment, partially offset by higher bonus expense due to improved performance against targets compared to 2014.

Theater access fees—founding members. Theater access fees increased $1.9 million, or 2.7%, from $70.6 million for the year ended January 1, 2015 to $72.5 million for the year ended December 31, 2015. The increase was due to a $2.0 million increase in the fee associated with the number of founding member digital screens that are connected to the DCN, including higher quality digital cinema projectors and related equipment. These fees increased $1.3 million related to an annual 5% rate increase specified in the ESAs and $0.7 million from an increase in the number of founding member screens equipped with the higher quality digital cinema equipment. This increase of $2.0 million was partially offset by a $0.1 million decrease in attendance related fees due to a 0.4% decrease in founding member attendance during the year ended December 31, 2015 compared to the year ended January 1, 2015.

Selling and marketing costs. Selling and marketing costs increased $14.7 million, or 25.5%, from $57.6 million for the year ended January 1, 2015 to $72.3 million for the year ended December 31, 2015. This increase was primarily due to an increase of $8.5 million in personnel related expenses due primarily to higher non-cash share-based compensation expense, higher commission expense and higher bonus expense, all primarily related to better performance against targets and higher revenue compared to 2014. Selling and marketing costs also increased due to an increase of $2.1 million in bad debt expense due to a smaller reserve in 2014 compared to 2015 and an increase of $1.2 million in non-cash barter expense.

Administrative and other costs. Administrative and other costs increased $2.1 million, or 10.9%, from $19.3 million for the year ended January 1, 2015 to $21.4 million for the year ended December 31, 2015. The increase was primarily due to an increase of $2.1 million in personnel related expenses due primarily to higher non-cash share-based compensation expense and higher bonus expense, both primarily related to better performance against targets compared to 2014.

Administrative fee – managing member. Administrative fee-managing member increased $7.0 million, or 68.6%, from $10.2 million for the year ended January 1, 2015 to $17.2 million for the year ended December 31, 2015 due primarily to personnel-related expenses due primarily to higher non-cash share-based compensation expense and higher bonus expense, both primarily related to better performance against targets compared to 2014. Amounts recorded are based on the terms of the management services agreement which states NCM LLC pays NCM, Inc. service fees which are equal to the cost of NCM, Inc. employees and any reimbursable costs incurred by NCM, Inc.

Depreciation and amortization. Depreciation and amortization expense decreased $0.2 million, or 0.6%, from $32.4 million for the year ended January 1, 2015 to $32.2 million for the year ended December 31, 2015 due to lower depreciation expense as assets became fully depreciated, partially offset by an increase in amortization expense of intangible assets related to new affiliate agreements and the founding member common unit adjustments.

Merger termination fee and related merger costs. Merger-related costs were $41.8 million for the year ended December 31, 2015 due to the merger termination payment of approximately $26.8 million and $15.0 million in legal, accounting and advisory fees associated with the terminated Screenvision merger.

Non-operating expenses. Total non-operating expenses decreased $9.2 million, or 14.8%, from $62.1 million for the year ended January 1, 2015 to $52.9 million for the year ended December 31, 2015. The following table shows the changes in non-operating expense for the years ended December 31, 2015 and January 1, 2015 (in millions):

	Fiscal Year						$ Change			% Change
	2015			2014			2014 to 2015			2014 to 2015
Interest on borrowings	$	52.2		$	52.6		$	(0.4	)		(0.8	%)
Interest income		(1.1	)		(1.3	)		0.2		NM
Amortization of terminated derivatives		1.6			10.0			(8.4	)		(84.0	%)
Other non-operating expense		0.2			0.8			(0.6	)		(75.0	%)
Total non-operating expenses	$	52.9		$	62.1		$	(9.2	)		(14.8	%)

NM = Not meaningful.

The decrease in non-operating expense was due primarily to an $8.4 million decrease in the amortization of terminated derivatives as the amortization period ended in February 2015 and a decrease of $0.6 million in other non-operating expense.

Net income. Net income decreased $8.8 million from $96.3 million for the year ended January 1, 2015 to $87.5 million for the year ended December 31, 2015. The decrease in net income was due to a decrease in operating income of $18.7 million, as described above, partially offset by a decrease in non-operating expenses of $9.2 million and a decrease in income tax expense of $0.7 million.

Known Trends and Uncertainties

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

Our Marketplace—Changes in the current macro-economic environment and changes in the national, regional and local advertising markets, present uncertainties that could impact our results of operations, including the timing and amount of spending from our advertising clients as expenditures from advertisers tend to be cyclical, reflecting overall economic conditions, as well as our clients’ budgeting and buying patterns. In the current environment, it is difficult to know if these changes are short-term or temporary in nature or are long-term trends and changes. These changes include increased competition related to the expansion of online and mobile advertising platforms. as well as fluctuations from quarter to quarter of the demand from national and local advertisers. Further, we could ~~negatively~~ be negatively impacted by factors that could reduce the viewership of our ~~FirstLook~~Noovie pre-show, such as the expansion of ~~reserve~~reserved seating (utilized in approximately 47.9% of our network as of January 17, 2018), online ticketing, an increase in the number and length of trailers for upcoming films, increased dwell time of patrons in exhibitor lobbies before showtime and lower network attendance, which could result from shortening of release windows, increases in theater ticket prices as compared to other entertainment options, more alternative methods of delivering movies to consumers, lower consumer confidence and disposable income and a decline in the motion picture box office. The ~~impact~~motion topicture ~~our~~box ~~business~~office ~~associated~~could ~~with~~be ~~these~~impacted ~~issues~~by ~~could~~audience’s beinterest ~~mitigated~~in ~~over~~the ~~time~~available ~~due~~motion topictures, ~~factors~~shrinking ~~including~~theatrical exclusive release windows, and the ~~increase~~marketing inefforts ~~salable~~of ~~advertising~~the ~~impressions,~~major ~~better~~motion ~~geographic~~picture ~~coverage~~studios. ~~related~~These tofactors may affect the ~~expansion~~attractiveness of our ~~network,~~offerings ~~diversification~~to ~~and~~advertisers. If ~~growth~~pre-show ofviewership ~~our~~declines ~~advertising~~significantly, ~~client~~we ~~base,~~will ~~improvements~~be inrequired ~~FirstLook~~to ~~pre-show~~provide ~~engagement~~additional adadvertising ~~upgrades~~time (makegoods) to ~~our~~national ~~inventory~~advertisers ~~management~~to ~~and~~reach ~~data~~agreed-on ~~management~~audience ~~systems~~delivery thresholds. National Weadvertising ~~could~~sales ~~also~~and ~~benefit~~rates ifalso ~~the~~are ~~effectiveness~~dependent ofon ~~cinema~~the ~~advertising~~methodology ~~improves~~used ~~relative~~ to ~~other~~measure ~~advertising~~audience ~~mediums~~impressions. WeIf ~~continue~~a tochange ~~participate~~is inmade ~~the~~to ~~Upfronts~~this ~~and~~methodology ~~believe~~ that ~~over~~reflects ~~time,~~fewer aaudience ~~shift~~impressions ~~toward~~available ~~more~~during ~~upfront~~the ~~commitments~~pre-show, this would ~~allow~~adversely usaffect toour ~~bundle~~revenues ~~several~~and ~~client~~results ~~flights~~of ~~throughout~~operations. ~~the~~The ~~year~~impact into anour ~~effort~~business toassociated ~~stabilize~~with ~~month-to-month~~these ~~and~~issues ~~quarter-to-quarter~~could ~~volatility.~~be ~~Consistent~~mitigated ~~with~~over time due to factors including the ~~television~~increase ~~industry~~in ~~upfront~~salable ~~booking~~advertising ~~practices~~impressions, abetter ~~portion~~geographic coverage related to the expansion of our ~~upfront~~network, ~~commitments~~diversification ~~have~~and ~~cancellation~~growth ~~options~~of orour ~~options~~advertising toclient ~~reduce~~base, ~~the~~improvements ~~amount~~in ~~that~~Noovie ~~advertisers~~pre-show ~~may~~engagement ~~purchase~~and upgrades to our inventory management and wedata ~~would~~management ~~need~~systems. toWe ~~rely~~could onalso benefit if the ~~scatter~~effectiveness ~~market~~of cinema advertising improves relative to ~~replace~~other ~~those~~advertising ~~commitments~~mediums.

~~The~~Through ~~net~~continued ~~screens~~participation ~~added~~in the advertising upfront marketplace, we believe that over time, we will be able to secure more upfront commitments from advertisers. This will allow us to bundle several client flights throughout the year in an effort to stabilize month-to-month and quarter-to-quarter volatility. These upfront customers include agreements entered into with content partners who provide original entertainment content segments and make commitments to buy a portion of our ~~network~~advertising byinventory at a specified CPM. Consistent with the television industry upfront booking practices, a portion of our ~~founding~~upfront ~~members~~and content partner commitments have cancellation options or options to reduce the amount that advertisers may purchase and ~~network~~we ~~affiliates~~would ~~during~~need to rely on the ~~year~~scatter ~~ended~~market ~~December~~to 29replace those commitments. In addition, ~~2016~~advertising ~~were~~sold asthrough ~~follows~~our upfront commitments may be placed throughout the period very irregularly which may affect our overall sales; for example, if a substantial portion of advertising from our upfront commitments is scheduled for peak periods of advertising demand, we will have fewer peak period advertising slots available for sale into the higher priced scatter market. Volatility in scatter market demand could cause our financial results to vary period to period.

38Our Network—The net screens added to our network by our founding members and network affiliates during 2017 were as follows.

	Number of screens
	Founding Members			Network Affiliates			Total
Balance as of December 31, 2015		16,981			3,380			20,361
New affiliates (1)		—			38			38
Openings, net of closures		41			108			149
Balance as of December 29, 2016		17,022			3,526			20,548
New affiliates (1)		—			525			525
AMC screen transfers (2)		(318	)		—			(318	)
Openings, net of closures		104			(9	)		95
Balance as of December 28, 2017		16,808			4,042			20,850

(1) ~~During~~Represent ~~the~~seven ~~year ended December 29, 2016, we added three net~~ new affiliates ~~with~~added ~~232~~to ~~screens, partially offset by the loss of a theater circuit that was acquired by a circuit not in~~ our network, ~~resulting~~during ~~in 194 screens being removed from our network~~2017.

We(2) ~~believe~~Refer ~~that adding screens and attendees~~ to ~~our~~Memorandum ~~network~~of ~~will~~Understanding ~~provide our advertising clients~~ with aAMC ~~better~~below ~~marketing~~for ~~product~~further ~~with increased reach and improved geographic coverage~~information. We have begun to offer our advertising clients better audience targeting capabilities and more robust campaign data analytics that are expected to assist with our strategy to provide a better product offering to advertisers and thus expand our overall national client base. 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 against other national, regional and local video advertising platforms, including television, online and mobile video platforms and other out of home video advertising platforms.

InWe ~~2014,~~believe wethat ~~experienced~~adding ascreens ~~decline~~and ofattendees ~~16.4%, in national advertising CPMs (excluding beverage revenue) compared~~ to ~~the~~our ~~prior~~network ~~year~~will ~~due~~provide ~~primarily~~our ~~to the increased competition from other national video networks, including online and mobile~~ advertising ~~platforms,~~clients ~~television~~with ~~networks~~a ~~and~~better ~~other~~marketing ~~out-of-home~~product ~~video~~with ~~networks~~increased ~~and~~reach ~~the implementation of more aggressive seasonal~~ and ~~volume~~improved ~~pricing~~geographic ~~strategies~~coverage. We ~~that~~have ~~contributed~~begun to ~~the~~offer ~~expansion of~~ our ~~inventory utilization related to the addition of new client categories that traditionally buy their television~~ advertising ~~at lower CPMs. After adjusting our pricing through 2014 to be more attractive to a broader number of potential~~ clients, tobetter ~~compete~~audience ~~more~~targeting ~~effectively~~capabilities ~~with various forms of premium video advertising~~ and ~~reflect~~more ~~seasonal~~robust ~~marketplace~~campaign ~~supply~~data ~~and~~analytics ~~demand~~that ~~characteristics,~~we ~~during~~believe ~~2015~~will ~~and~~provide ~~2016,~~a webetter ~~experienced~~product anoffering ~~increase of 6.7%~~ and ~~9.6%,~~should ~~respectively,~~expand inour overall national ~~advertising~~client ~~CPMs (excluding beverage revenue)~~base. We ~~experience~~also ~~even~~believe ~~more~~that ~~substantial~~the ~~volatility~~continued ~~quarter-to-quarter.~~growth ~~This~~of ~~volatility~~our inmarket ~~utilization~~coverage ~~can~~could bestrengthen ~~driven~~our byselling ~~the~~proposition ~~loss~~and orcompetitive ~~addition~~positioning ofagainst ~~one~~other ~~or more significant~~ national ~~contracts~~, ~~whereby~~regional ~~the timing~~ and ~~amount~~local ofvideo ~~these national contracts can be based upon the~~ advertising ~~budgets of our customers~~platforms, ~~product~~including ~~launches~~television, ~~the~~online ~~financial~~and ~~performance~~mobile ofvideo ~~our~~platforms ~~customers~~and or other ~~industry~~out orof ~~macro-economic~~home ~~factors.~~video Weadvertising ~~expect our CPMs and utilization to continue to be impacted period to period based upon the factors described above~~platforms.

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 the first six months of 2015, we sold 60 seconds to our founding members. Beginning July 1, 2015, one of our founding members reduced their beverage advertising from 60 seconds to 30 seconds. We have the right to sell the 30 second unit to other clients. The other founding members’ current long-term contracts with their beverage suppliers 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, the time sold to the founding member beverage supplier is priced equal to the advertising CPM for the previous year charged to unaffiliated third parties during segment one (closest to show time) of the FirstLook pre-show, limited to the highest advertising CPM being then-charged by us, which in 2016 increased 10.2%. Thus, the CPM on our beverage concessionaire revenue in 2017 will increase by 10.2%, compared to 2016.36

InMemorandum ~~consideration~~of ~~for~~Understanding ~~our~~with ~~access~~AMC—During tothe ~~founding~~first ~~members’~~quarter ~~theater~~of ~~attendees~~2017, ~~for~~NCM, ~~on-screen~~Inc. ~~advertising~~ and ~~use~~NCM ofLLC ~~lobbies~~entered ~~and~~into ~~other~~a ~~space~~binding ~~within~~Memorandum ~~the~~of ~~founding~~Understanding ~~members’~~(“MOU”) ~~theaters~~with ~~for~~AMC to effectuate aspects of the ~~LEN~~Final ~~and~~Judgment ~~lobby~~entered ~~promotions,~~into by the ~~founding~~Department ~~members~~of ~~receive~~Justice ain ~~monthly~~connection ~~theater~~with ~~access~~AMC’s ~~fee~~acquisition ~~under~~of ~~the~~Carmike ~~ESAs~~Cinemas, Inc. Pursuant ~~The~~to ~~theater~~the ~~access~~MOU, ~~fee~~AMC isreceived ~~composed~~NCM LLC common membership units in respect of athe ~~fixed~~annual ~~payment~~attendance ~~per~~at ~~patron~~such ~~and~~Carmike atheaters ~~fixed~~in ~~payment~~accordance ~~per~~with ~~digital~~the ~~screen~~Common ~~(connected~~Unit toAdjustment Agreement during the ~~DCN)~~first quarter of 2017. ~~The~~Since ~~payment~~these ~~per~~theaters ~~theater~~are ~~patron~~subject ~~increases~~to byan 8%existing ~~every~~on-screen ~~five~~advertising ~~years,~~agreement with ~~the~~an ~~next~~alternative ~~increase~~provider, ~~taking~~AMC ~~effect~~will ~~for~~make ~~fiscal~~integration ~~year~~payments ~~2017,~~to ~~and~~us reflecting the ~~payment~~estimated ~~per~~advertising ~~digital~~cash ~~screen~~flow ~~increases~~that ~~annually~~we bywould ~~5%. The~~have ~~theater~~generated if we had exclusive access ~~fee~~to ~~paid~~sell advertising in those theaters. The integration payments will continue until the ~~aggregate~~earlier toof ~~all~~(i) ~~founding~~the ~~members~~date ~~cannot~~the betheaters ~~less~~are ~~than~~transferred ~~12%~~to our network or (ii) the expiration of ~~our~~the ~~aggregate~~ESA. Integration payments are calculated based upon the advertising ~~revenue~~cash ~~(as~~flow ~~defined~~that the Company would have generated if it had exclusive access to sell advertising in the ~~ESA),~~theaters orwith itpre-existing ~~will~~advertising beagreements ~~adjusted~~and ~~upward~~fluctuate tobased ~~reach~~on ~~this~~earnings ~~minimum~~and ~~payment~~Adjusted OIBDA. ~~Pursuant~~ toThe ~~ESAs,~~ESA ~~the~~additionally ~~theater~~entitles ~~access~~NCM ~~fee~~LLC ~~paid~~to payments related to the founding members’ ofon-screen ~~NCM~~advertising ~~LLC~~commitments ~~included~~under antheir ~~additional~~beverage ~~fee~~concessionaire agreements for ~~access~~encumbered theaters. These payments are also accounted for as a reduction to the ~~higher~~intangible ~~quality~~asset. ~~digital~~During ~~cinema~~the ~~systems~~years ended December 28, 2017, December 29, 2016 and December 31, 2015, the Company recorded a reduction to net intangible assets of $20. ~~This~~9 ~~additional~~million, ~~fee~~$2.6 ~~will~~million ~~continue~~and $2.7 million, respectively, related to ~~increase~~these asCarmike ~~additional~~integration ~~screens~~and ~~are~~other ~~equipped~~encumbered ~~with~~theater ~~the~~payments ~~new~~as ~~digital~~well ~~cinema~~as ~~equipment~~those made by AMC and Cinemark for the ~~fee~~previous ~~increases~~acquisition ~~annually~~of byRave 5%Cinemas. As ofDuring the years ended December 28, 2017, December 29, 2016 and December 31, ~~90%~~2015, AMC and Cinemark paid a total of ~~our~~$12.9 ~~founding~~million, ~~member~~$2.4 ~~network~~million ~~screens~~and ~~were~~$2.6 ~~showing~~million, ~~advertising~~respectively, onrelated ~~digital~~to ~~cinema~~the ~~projectors~~integration and other encumbered theater payments (as payments are made one quarter and one month in arrears, respectively).

39Further, during the first quarter of 2017, AMC transferred 17 theaters (318 screens) to another advertising provider in accordance with the Final Judgment, for which AMC surrendered NCM LLC common membership units during the first quarter of 2017. At the end of the 10-year term of the Final Judgment, these theaters will revert back to us. Also, in April 2017, AMC completed a sale of five theaters on our network pursuant to the Final Judgment. AMC will surrender NCM LLC common unit membership units to NCM LLC for these divestures pursuant to the Common Unit Adjustment Agreement at the next Adjustment Date. These 22 transferred and sold theaters represent approximately 1.3% of our total theater network as of December 28, 2017. The Common Unit Adjustments are discussed further within Trends Related to Ownership in NCM LLC below.

Lastly, AMC also agreed to reimburse us for our incurred and ongoing costs and expenses in connection with the Final Judgment including, but not limited to, our financial advisor and legal fees up to $1.0 million of such costs and expenses. During the year ended 2017, we incurred $1.3 million of these costs, of which $1.0 million was reimbursed during 2017 and the remaining $0.3 million is included within administrative costs within the Income Statement.

Utilization and Pricing— We have experienced volatility in our pricing (CPMs) over the years, with annual national CPM increases (decreases) ranging from (16.4%) to 9.7% over the last five years. In the year ended December 28, 2017, we experienced a decline of 4.2%, in national advertising CPMs (excluding beverage revenue) compared to the year ended December 29, 2016. This volatility in pricing can be driven by increased competition from other national video networks, including online and mobile advertising platforms, television networks and other out-of-home video networks and seasonal marketplace supply and demand characteristics. Volatility in pricing is also caused by changes in our customer mix period to period due to the variation in CPMs charged to each customer. We have also experienced volatility in our utilization over the years, with annual national inventory utilization ranging from 109.3% to 128.3% over the last five years. We experience even more substantial volatility quarter-to-quarter. This volatility in utilization can be driven by the loss or addition of one or more significant national contracts, whereby the timing and amount of these national contracts can be based upon the advertising budgets of our customers, product launches, the financial performance of our customers or other industry or macro-economic factors. We expect our CPMs and utilization to continue to be impacted period to period based upon the factors described above.

Beverage Revenue—Under the ESAs, up to 90 seconds of the Noovie pre-show program can be sold to our founding members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements. For the years ended 2017 and 2016, two of the founding members purchased 60 seconds of on-screen advertising time and one founding member purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements. Our founding members’ current long-term contracts with their beverage suppliers require the 30 or 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, the time sold to the founding member beverage supplier is priced equal to the advertising CPM for the previous year charged to unaffiliated third parties during segment one (closest to showtime) of the Noovie pre-show, limited to the highest advertising CPM being then-charged by us, which in 2017 increased 1.1%. Thus, the CPM on our beverage concessionaire revenue in 2018 will increase by 1.1% compared to 2017. Beverage revenue is also impacted by network theater attendance. The ESAs additionally entitle us to these beverage payments for encumbered theaters. These payments are accounted for as a reduction to the intangible asset.

Theater Access Fees—In consideration for our access to our founding members’ theater attendees for on-screen advertising and use of lobbies and other space within the founding members’ theaters for the LEN and lobby promotions, the founding members receive a monthly theater access fee under the ESAs. The theater access fee is composed of a fixed payment per patron and a fixed

payment per digital screen (connected to the DCN). The payment per theater patron increases by 8% every five years, with the most recent increase occurring in fiscal year 2017. Pursuant to the ESAs, the theater 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. As of December 28, 2017, 99% of our founding member network screens were showing advertising on digital cinema projectors, and thus the future impact on the theater access fee related to additional digital cinema installations within existing founding member theaters is expected to be minimal. The payment per digital screen increases annually by 5%. The theater 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. As of December 28, 2017 and December 29, 2016, we had no liabilities recorded for the minimum payment, as the theater access fee was in excess of the minimum.

Trends and Uncertainties Related to Liquidity and Financial Performance

Debt— During the past several years, we amended our senior secured credit facility to extend the maturity, expand the revolver availability and reduce the interest rate spreads. In August 2016 we completed a private placement of $250.0 million in aggregate principal amount of 5.750% Senior Unsecured Notes due in 2026. A portion of the proceeds were used to redeem our $200.0 million 7.875% Senior Unsecured Notes due 2021. The remaining proceeds, after the payment of fees and the redemption premium were used to pay down the balance on our revolving credit facility. As a result of these financing transactions on our revolving credit facility and ~~our~~ senior notes, we extended the average maturities of our debt and as of December 2928, ~~2016~~2017, the average remaining maturity of our debt is 54.7 years. As of December 2928, ~~2016~~2017, approximately 70% of our outstanding borrowings bear interest at fixed rates. The remaining 30% of our outstanding 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 7 to the audited financial statements included elsewhere in this document.

Trends Related to Ownership in NCM LLC

Common Unit Adjustments—In accordance with our Common Unit Adjustment Agreement with ~~our~~its founding members, on an annual basis we determine the amount of common membership units to be issued to or returned by the founding members based on theater additions or dispositions during the previous year. ~~During~~In ~~the~~addition, ~~first~~our ~~quarter~~Common ofUnit ~~2016,~~Adjustment weAgreement ~~issued~~requires ~~1,416,515~~that ~~common~~a ~~membership~~Common ~~units~~Unit toAdjustment ~~our~~occur ~~founding members~~ for ~~the~~a ~~rights~~specific tofounding ~~exclusive~~member ~~access~~if toits ~~the~~acquisition ~~theater~~or ~~screens~~disposition ~~and~~of ~~attendees added~~theaters, ~~net~~in ofa ~~dispositions~~single bytransaction ~~the~~or ~~founding~~cumulatively ~~members~~since tothe ~~our~~most ~~network~~recent ~~during~~Common ~~2015. We~~Unit ~~recorded~~Adjustment, aresults ~~net~~in ~~intangible~~an ~~asset~~attendance ofincrease ~~$21.1~~or ~~million~~decrease ~~during~~in ~~the~~excess ~~first~~of ~~quarter~~two percent of ~~2016~~the asannual atotal ~~result~~attendance ofat the ~~Common~~prior ~~Unit~~adjustment ~~Adjustment~~date.

In ~~December~~During ~~2016~~2017, ~~AMC completed its acquisition of a large motion picture exhibitor, Carmike Cinemas, Inc. (“Carmike”). Following~~ the acquisition, AMC retained Carmike’s ownership in another cinema advertising provider (Screenvision) and the long-term agreement with that provider to provide cinema advertising remains in effect. In connection with the acquisition, AMC and the DOJ entered into a settlement regarding certain actions that AMC must take in order to complete the acquisition. Among those, AMC is required to divest the majority of its equity interests in us, so that by June 20, 2019 it owns no more than 4.99% of our outstanding membership units. AMC must complete the divestiture per the following ~~schedule:~~Common ~~(i)~~Unit onAdjustments or before December 20, 2017, AMC must own no more than 15% of our outstanding membership units, (ii) on or before December 20, 2018, AMC must own no more than 7.5% of our outstanding membership units and (iii) on or before June 20, 2019, AMC must own no more than 4.99% of our outstanding membership units. As required by the DOJ settlement, AMC also relinquished its governance rights in us, including its seats on the NCM, Inc. Board of Directors as well as its rights to nominate any person to serve on the NCM, Inc. Board of Directors. As of December 29, 2016, AMC’s non-independent designee to the NCM, Inc. Board of Directors had resigned. Further, AMC is required to change the pre-show advertising provider for 24 identified theaters comprising 384 screens from NCM LLC to Screenvision or sell those theaters to a non-NCM network buyer. Seven of those 24 theaters either did not have a cinema advertising provider, they were already being sold by AMC or it was an encumbered theater that we were receiving integration payments for, such that 17 of the 24 theaters currently need to be transferred or sold. AMC is also required to divest 15 AMC or Carmike theaters covering 15 local markets. As of the date of this filing, we are not aware which of those 15 theaters will be in our network or if they would be sold to another founding member or network affiliate. These theater transfers or sales represent approximately 2% of our total network of theaters as of December 29, 2016.occurred:

~~Pursuant to NCM, Inc~~1.’s ~~Amended~~Annual ~~and~~Common ~~Restated~~Unit ~~Certificate~~Adjustment offor ~~Incorporation~~2016 ~~and~~Fiscal ~~NCM~~Year—During ~~LLC’s Third Amended and Restated Limited Liability Company Operating Agreement~~2017, aswe ~~amended,~~issued ~~members~~approximately ~~of NCM LLC, other than NCM, Inc~~2.,4 ~~may~~million ~~choose to have~~ common membership units ~~redeemed, and NCM, Inc. may elect~~ to ~~redeem through either a cash payment or the issuance of shares of~~ its ~~common~~founding ~~stock~~members ~~on a one-~~for~~-one~~ ~~basis. Further,~~ the ~~sale~~rights ofto ~~AMC~~exclusive ~~theaters~~access orto ~~transfer~~the oftheater ~~advertising~~screens onand ~~those~~attendees ~~theaters~~added, ~~may~~net ~~require~~of ~~AMC~~dispositions toby ~~transfer~~the ~~and~~founding ~~surrender,~~members ~~and NCM LLC~~ to ~~cancel,~~our ~~common~~network ~~membership~~during ~~units related to~~ the ~~theater~~2016 ~~dispositions~~fiscal year.

Extraordinary Common Unit Adjustment for AMC’s Acquisition of Carmike—Pursuant to the MOU, NCM LLC issued approximately 18.4 million NCM LLC common membership units to AMC in respect of the annual attendance at Carmike theaters in accordance with the Common Unit Adjustment Agreement. AMC’s acquisition of Carmike meets the criteria for a Common Unit Adjustment for this acquisition because it resulted in an extraordinary attendance increase of approximately 9.5%.

Surrendered Units for AMC Screen Transfers—The Final Judgment required AMC to transfer advertising rights to 17 theaters from NCM LLC to another advertising provider. Pursuant to the MOU, AMC surrendered approximately 4.7 million NCM LLC common membership units in respect of such theaters. The 4.7 million NCM LLC common membership units were comprised of (i) approximately 2.9 million NCM LLC common membership units pursuant to the adjustment for divested theaters in the Common Unit Adjustment Agreement and (ii) approximately 1.8 million NCM LLC common membership units valued at $25.0 million to compensate for lost operating income for these theaters during the 10-year term of the Final Judgment.

During 2017, AMC exercised the redemption right of an aggregate 15.6 million common membership units for the like number of shares of NCM, Inc.’s common stock. 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 Statements of Income.

The table below presents the ownership percentages of NCM LLC for each quarter of 2017.

	As of
	March 30, 2017			June 29, 2017			September 28, 2017			December 28, 2017
NCM, Inc.		39.3	%		39.3	%		48.8	%		49.5	%
AMC		24.7	%		24.7	%		15.2	%		14.5	%
Cinemark		18.1	%		18.1	%		18.1	%		18.1	%
Regal		17.9	%		17.9	%		17.9	%		17.9	%

AMC Mandatory Ownership Divestitures—Pursuant to the Final Judgment, AMC is required to divest the majority of its equity interests in NCM LLC and NCM, Inc., so that by June 20, 2019 it owns no more than 4.99% of NCM LLC’s common membership units and NCM, Inc. common stock, taken together, on a fully converted basis (“NCM’s outstanding equity interests”). AMC must complete the divestiture per the following schedule: (i) on or before December 20, 2017, AMC must own no more than 15.0% of NCM’s outstanding equity interests, (ii) on or before December 20, 2018, AMC must own no more than 7.5% of NCM’s outstanding equity interests and (iii) on or before June 20, 2019, AMC must own no more than 4.99% of NCM’s outstanding equity interests. Pursuant to the MOU, AMC also has agreed, among other things, subject to limited exceptions to retain at least 4.5% of NCM’s outstanding equity interests during the term of the Final Judgment, subject to certain exceptions which allow for certain sell downs after the 30-month anniversary of the MOU. As of December 28, 2017, AMC owned 15.1% of NCM’s outstanding equity interests.

Pursuant to NCM, Inc.’s Amended and Restated Certificate of Incorporation and NCM LLC’s Third Amended and Restated Limited Liability Company Operating Agreement, as amended, members of NCM LLC, other than NCM, Inc., may choose to have common membership units redeemed, and NCM, Inc. may elect to redeem through either a cash payment based on the three-day variable weighted average closing price of NCM, Inc.’s common stock prior to the redemption date or the issuance of shares of its common stock on a one-for-one basis.

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 our founding members and managing member, interest or principal payments on our term loan and the Notes due 2022 and Notes due 2026.

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

	Years Ended						$ Change			~~$ Change~~
	December 29, 2016		December 31, 2015		January 1, 2015		2015 to 2016			2014 to 2015
	December 28, 2017		December 29, 2016		December 31, 2015		2016 to 2017			2015 to 2016
Cash and cash equivalents	$	104.76	$	310.07	$	103.20	$	7(6.71	)	$	(7.27	)
Revolver availability (1)		158.82		69158.08		~~113~~69.0		89(0.86	)		~~(44~~89.08	)
Total liquidity	$	~~169~~162.58	$	72169.05	$	~~123~~72.20	$	97(6.57	)	$	~~(51~~97.25	)

(1) The revolving credit facility portion of our 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. Our total capacity under the revolving credit facility was $175.0 million, as$135.0 million and $135.0 million less $4.8 million, $1.2 million and $0.0 million, respectively, of ~~December~~outstanding 29letters of credit or $170.2 million, ~~2016~~$133.8 million and $135.0 million, respectively, as of December 3128, ~~2015~~2017 and ~~January~~December 129, 2016 and December 31, 2015, respectively.

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

	Years Ended
	2016			2015			2014
	2017			2016			2015
Operating cash flow	$	~~150~~152.32		$	~~107~~150.53		$	~~143~~107.45
Investing cash flow	$	(128.40	)	$	(1112.14	)	$	(711.51	)
Financing cash flow	$	(~~130~~150.23	)	$	(~~103~~130.62	)	$	(~~139~~103.06	)

Cash Flows – Fiscal Years 2017 and 2016

Operating Activities. The $1.9 million increase in cash provided by operating activities for 2017, compared to 2016 was due primarily to an increase in the change in accounts receivable of $13.4 million related to higher collections during 2017, compared to 2016, partially offset by $7.4 million decrease in net income, as discussed above, and a $6.5 million increase in the change in accounts payable and accrued expenses due to the timing of payments.

Investing Activities. The $4.4 million decrease in cash used in investing activities for 2017, compared to 2016 was due primarily to $2.8 million of higher proceeds from the founding member notes receivable due to the timing of payments and a $1.3 million decrease in purchases of property and equipment.

Financing Activities. The $20.1 million increase in cash used in financing activities for 2017, compared to 2016 was due primarily to a $37.8 million increase in distributions to founding and managing member, partially offset by a $10.5 million increase in

founding member integration and other encumbered theater payments related primarily to the AMC acquisition of Carmike and a $4.8 million reduction in the payment of debt issuance costs.

Cash Flows – Fiscal Years 2016 and 2015

Operating Activities. The $42.8 million increase in cash provided by operating activities for the year ended December 29, 2016 compared to the year ended December 31, 2015 was due primarily to a $21.8 million increase in net income, as described further above, and an increase in the change in accounts receivable of $22.0 million related to higher collections in the period.

Investing Activities. The $1.3 million increase in cash used in investing activities for the year ended December 29, 2016 compared to the year ended December 31, 2015 was due primarily to a decrease of approximately $1.4 million lower proceeds from notes receivable due to timing of the payments.

Financing Activities. The $26.6 million increase in cash used in financing activities during the year ended December 29, 2016 compared to the year ended December 31, 2015 was due primarily to higher repayments, net of proceeds, under our revolving credit facility of $95.0 million, partially offset by $42.1 million of proceeds from the issuance of the Notes due 2026, net of the redemption of the Notes due 2021 and a decline of $32.1 in distributions paid to the founding members and managing member.

Cash Flows – Fiscal Years 2015 and 2014

Operating Activities. The $35.9 million decrease in cash provided by operating activities for the year ended December 31, 2015 compared to the year ended January 1, 2015 was due primarily to a decrease in the change in accounts receivable due to higher revenue and timing of collections in the period.

Investing Activities. The $3.6 million increase in cash used in investing activities for the year ended December 31, 2015 compared to the year ended January 1, 2015 was due primarily to an increase of approximately $3.9 million in purchases of property, plant and equipment during 2015.

Financing Activities. The $35.4 million decrease in cash used in financing activities during the year ended December 31, 2015 compared to the year ended January 1, 2015 was due primarily to $42.0 million greater proceeds from borrowings, net of repayments, due to higher borrowings on the revolving credit facility to pay the merger termination fee and related merger costs, as described above, partially offset by a $8.2 million decrease in distributions to our members.

Sources of Capital and Capital Requirements

Our primary source of liquidity and capital resources includes cash from operations, availability under the revolving credit facility and cash on hand. Refer to Note 7 to the audited Financial Statements included elsewhere in this document and “Financings” below for a detailed discussion of the debt transactions in ~~2015~~2016 and ~~2016~~2017. Management believes that future funds generated from our operations and cash on hand should be sufficient to fund working capital requirements, our debt service requirements, and capital expenditure and other investing requirements, through the next twelve months. Cash flows 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 theater attendance. We are required pursuant to the terms of our operating agreement to distribute our available cash, as defined in the operating agreement, quarterly to our members (the founding members and NCM, Inc.). The available cash distribution to the members of NCM LLC for the year ended December 28, 2017 was approximately $160.9 million.

service requirements, and capital expenditure and other investing requirements, through the next twelve months. Cash flows 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 theater attendance. We are required pursuant to the terms of our operating agreement to distribute our available cash, as defined in the operating agreement, quarterly to our members (the founding members and NCM, Inc.). The available cash distribution to the members of NCM LLC for the year ended December 29, 2016, net of the negative available cash generated in the first quarter of 2015 and netted against the second quarter of 2016 distribution, was approximately $61.8 million.

Capital Expenditures

~~Our~~ Capital expenditures ~~have~~include ~~typically been~~ capitalized software development or upgrades for our DCS and advertising proposal and inventory management, ~~and~~ audience targeting and data management systems as well as digital applications 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 theaters when they are added to our network. Capital expenditures for the year ended December 2928, ~~2016~~2017 were $1312.3 million (including $1.19 million associated with network affiliate additions) compared to $13.03 million (including $1.1 million associated with network affiliate additions) for the ~~2015~~2016 period. The capital expenditures have typically been satisfied through cash flow from operations. All capital expenditures related to the DCN within our founding members’ theaters have been made by our founding members under the ESAs. We expect they will continue to be made by our founding members in accordance with the ESAs.

We expect to make approximately $1519.0 million to $1621.0 million of capital expenditures in fiscal ~~2017~~2018, primarily for $8.0 million to $9.0 million of digital product development, $1.0 million to $2.0 million of headquarter relocation costs and approximately $10.0 million in upgrades to our DCS distribution and content management software and our other internal management systems, including our proposal, inventory and audience targeting and data management systems, reporting systems, network equipment related to currently contracted network affiliate theaters, server and storage upgrades and software licensing. We expect these digital products to allow us to capture exclusive first party data on our viewers and build our own foundational capabilities for digital ad buying, selling and serving. 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, create more targeted buys and provide more robust campaign data for our advertising clients to help drive future growth. Our capital expenditures ~~will~~may increase as we 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 December 2928, ~~2016~~2017, our senior secured credit facility consisted of a $175.0 million revolving credit facility and a $270.0 million term loan. On May 26, 2016, we entered into an incremental amendment of our senior secured credit facility whereby the revolving credit facility was increased by $40.0 million to $175.0 million. Onand ~~June 18,~~matures 2014, we entered into an incremental amendment of our senior secured credit facility whereby the revolving credit facility was increased by $25.0 million to $135.0 million. In addition, on July 2, 2014, we entered into an amendment of our senior secured credit facility whereby the maturity date was extended by two years to November 26, 2019, which corresponds towith the maturity date of the $270.0 million term loans.

On August 19, 2016, we completed a private placement of $250.0 million in aggregate principal amount of 5.750% Senior Unsecured Notes. On September 19, 2016, we redeemed our $200.0 million 7.875% Senior Unsecured Notes at a redemption price of 103.938% of the principal amount plus accrued and unpaid interest. On April 27, 2012, we 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 7 to the audited financial statements located elsewhere in this document.

The senior secured credit facility contains a number of covenants and financial ratio requirements, with which we were in compliance at December 2928, ~~2016~~2017, including a consolidated net senior secured leverage ratio as of December 2928, ~~2016~~2017 of 3.02 versus a covenant of 6.5 times for each quarterly period. We are permitted to make quarterly dividend payments and other payments based on leverage ratios for NCM LLC and our subsidiary 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 our consolidated net senior secured leverage ratio is below 6.5 times and we are in compliance with our debt covenants. If there are limitations on the restricted payments, we may not declare or pay any dividends, make any payments on our account, set aside assets for the retirement or other acquisition of capital stock of the borrower or any subsidiary, or make any other distribution for our obligations. When these restrictions are effective, we may still pay the services fee and reimbursable costs pursuant to terms of the management agreement. We 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 our founding members.

capital stock of the borrower or any subsidiary, or make any other distribution for our obligations. When these restrictions are effective, we may still pay the services fee and reimbursable costs pursuant to terms of the management agreement. We 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 our founding members.

Critical Accounting Policies

The significant accounting policies of the Company are described in Note 1 to the audited 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~~Amounts deemed uncollectible within the account receivable ~~balances~~balance 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 December 2928, ~~2016~~2017, our allowance for doubtful accounts was $6.30 million, or 3.86% of the gross accounts receivable balance. A 10% difference in the allowance for doubtful accounts as of December 2928, ~~2016~~2017 would have affected net income by approximately $0.61 million.

Share-Based Compensation

Nature of Estimates Required. NCM, Inc.’s 2016 Equity Incentive Plan and its 2007 Equity Incentive Plan, as amended (the “Equity Incentive Plans”) are treated as equity plans 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 estimates and judgments. When stock options were granted prior to 2013, we used the Black-Scholes option pricing model to estimate the fair value of stock option grants, which was 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 NCM, Inc.’s common stock on the date of grant. ~~Compensation~~Restricted ~~expense equal to the fair value of each restricted~~ stock ~~award~~and or restricted stock ~~unit~~units isvest ~~recognized~~upon ~~ratably over~~ the ~~requisite~~achievement ~~service period. Certain~~ of ~~the~~Company ~~restricted stock awards include performance vesting conditions, which permit vesting to the extent that NCM, Inc. achieves specified non~~three-~~GAAP~~year 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. Further, for both stock options and restricted stock we estimate a forfeiture rate to reflect the potential separation of employees.

performance measures and service conditions or only service conditions whereby they vest ratably over three years. Compensation expense equal to the fair value of each restricted stock award or restricted stock unit is recognized ratably over this requisite service period. For the restricted stock awards including performance vesting conditions, compensation expense is based on management’s projections and the probability of achievement of those targets, 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. Further, for both stock options and restricted stock we estimate a forfeiture rate to reflect the potential separation of employees.

Assumptions and Approach Used. In determining the value of stock options, we estimated an expected dividend yield based upon our expectation of the dividend that would be paid out on the underlying NCM, Inc. shares during the expected term of the option. Expected volatility is based on NCM, Inc.’s 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 NCM, Inc.’s 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 NCM, Inc.’s performance conditions, which is highly judgmental. We base our judgments as to the expected achievement of NCM, Inc.’s performance conditions based on the financial projections of NCM, Inc. that are used by management for business purposes, which represent our best estimate of expected NCM, Inc. 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 NCM, Inc. grants 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. Further, we estimate a forfeiture rate of restricted stock based upon historical forfeitures. If future forfeitures differ significantly from our past experience our compensation expense may be significantly impacted.

make estimates of the likelihood of the achievement of NCM, Inc.’s performance conditions, which is highly judgmental. We base our judgments as to the expected achievement of NCM, Inc.’s performance conditions based on the financial projections of NCM, Inc. that are used by management for business purposes, which represent our best estimate of expected NCM, Inc. 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 NCM, Inc. grants 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. Further, we estimate a forfeiture rate of restricted stock based upon historical forfeitures. If future forfeitures differ significantly from our past experience our compensation expense may be significantly impacted.

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 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 6 to the audited 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 December 2928, ~~2016~~2017 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)	$	—	$	~~285~~282.0	$	—400.0	$	~~650~~250.0	$	~~935~~932.0
Cash interest on borrowings (2)		5051.07		~~103~~106.24		7861.3		7653.16		~~307~~273.60
Office leases		3.23		6.48		56.28		1525.5		3042.34
Network affiliate agreements (3)		1120.53		1534.45		1024.69		2.49		3982.96
Total contractual cash obligations	$	6475.73	$	~~410~~429.07	$	94493.10	$	~~744~~332.0	$	1,~~312~~330.80

(1) We have a $175.0 million variable rate revolving credit facility of which $~~160~~12.0 million was outstanding as of December 2928, ~~2016~~2017 and $4.8 million is restricted due to outstanding letters of credit. 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 Secured Notes due in 2022 are at a fixed rate of 6.00%. The Senior Unsecured Notes due in 2026 are at a fixed rate of 5.750%. 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.

(3) The value in this table represents the maximum potential payout under the revenue guarantees made to our network affiliates. During ~~2016~~2017, we paid $0.1 million under these agreements and no liabilities were recorded as of December 2928, ~~2016~~2017 for these obligations. For additional details refer to the information provided under Note 10 to the audited financial statements included elsewhere in this document.

The ESAs require payments based on a combination of our founding member attendance, the number of digital screens of each founding member and the number of higher quality digital cinema systems of each founding member. The amount relating to the attendance factor will vary from quarter to quarter and year to year as theater 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 and other screens are added or removed through acquisition, divestiture or closure activities of our founding members. The payments made to our 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 next such increase taking effect for fiscal year 2022, 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.

relating to the attendance factor will vary from quarter to quarter and year to year as theater 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 our founding members and our founding members convert to the higher quality digital cinema systems. The payments made to our 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 next such increase taking effect for fiscal year 2017, 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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The primary market risk to which we are exposed is interest rate risk. The Notes due 2026 and the Notes due 2022 bear interest at fixed rates, and therefore are not subject to market risk. As of December 2928, ~~2016~~2017, the interest rate risk that we are exposed to is related to our $175.0 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 $2.98 million for an annual period on the $1512.0 million and $270.0 million outstanding as of December 2928, ~~2016~~2017 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 Chief Financial Officer (principal financial officer) as appropriate to allow timely decisions regarding required disclosure. As of December 2928, ~~2016~~2017, our management evaluated, with the participation of the Chief Executive Officer and 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 December 2928, ~~2016~~2017 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 December 2928, ~~2016~~2017, our management evaluated, with the participation of the Chief Executive Officer (principal executive officer) and 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 December 2928, ~~2016~~2017 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.

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 December 29, 2016, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.43

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 December 28, 2017, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

We do not have executive officers or directors. Instead, we are managed by the Board of Directors of our manager, NCM, Inc., and the executive officers of our manager perform all of our management functions pursuant to our operating agreement and the management services agreement between us and NCM, Inc. As a result, the executive officers of our manager are essentially our executive officers, and their compensation is administered by our manager.

The information required by this item regarding directors of NCM, Inc. is incorporated herein by reference from NCM, Inc.’s Proxy Statement under the heading “Proposal 1 – Election of Directors.” The information required by this item regarding executive officers of NCM, Inc. is incorporated herein by reference from NCM, Inc.’s Annual Report on Form 10-K under the heading “Item 1. Business – Executive Officers of the Registrant” and is incorporated herein by this reference.

Item 11. Executive Compensation

The information required by this item regarding compensation of executive officers and directors of NCM, Inc. is incorporated herein by reference from NCM, Inc.’s 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 NCM, Inc.’s voting securities, refer to NCM, Inc.’s Proxy Statement under the heading “Beneficial Ownership,” which information is incorporated herein by reference.

For Equity Incentive Plan information, refer to NCM, Inc.’s 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 NCM, Inc.’s Proxy Statement under the heading “Certain Relationships and Related Party Transactions,” which information is incorporated herein by reference.

For information with respect to NCM, Inc. director independence, refer to NCM, Inc.’s 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 NCM, Inc.’s 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 4744.

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

INDEX TO EXHIBITS

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
3.1		Amended and Restated Certificate of Incorporation. Of National CineMedia, Inc.	NCM, Inc.	10-Q	001-33296	3.1	5/6/2011
3.2		Amended and Restated Bylaws of National CineMedia, Inc.	NCM, Inc.	S-8	001-33296	4.2	2/13/2007
3.3		Certificate of Formation of National CineMedia, LLC	NCM LLC	S-4	333-176056	3.3	8/4/2011
4.1		Indenture, dated as of April 27, 2012, by and between National CineMedia, LLC and Wells Fargo Bank, National Association, as trustee.	NCM, Inc.	8-K	001-33296	4.1	4/30/2012
4.2		Form of 6.00% Senior Secured Notes due 2022 (included in Exhibit 4.1).	NCM, Inc.	8-K	001-33296	4.1	4/30/2012
4.3		Indenture, dated as of August 19, 2016, by and between National CineMedia, LLC and Wells Fargo Bank, National Association, as trustee.	NCM, Inc.	8-K	001-33296	4.1	8/19/2016
4.4		Form of 5.750% Senior Secured Notes due 2026 (included in Exhibit 4.1).	NCM, Inc.	8-K	001-33296	4.1	8/19/2016
10.1		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.	NCM, Inc.	8-K	001-33296	10.1	2/16/2007
10.1.1		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.	NCM, Inc.	10-Q	001-33296	10.1.1	8/7/2009
10.1.2		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.	NCM, Inc.	8-K	001-33296	10.1	8/10/2010
10.1.3		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.	NCM, Inc.	8-K	001-33296	10.1.3	9/9/2013
10.2		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.)	NCM, Inc.	10-K	001-33296	10.2.4	2/21/2014
10.3		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.)	NCM, Inc.	10-K	001-33296	10.3.4	2/21/2014

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
10.3.1		Waiver of Section 12.06 of the Exhibitor Services Agreement dated as of March 14, 2017, by and between National CineMedia, LLC and Cinemark USA, Inc.	NCM, Inc.	8-K	001-33296	10.3	3/15/2017
10.4		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.)	NCM, Inc.	10-K	001-33296	10.4.4	2/21/2014
10.4.1		First Amendment to Amended and Restated Exhibitor Services Agreement dated as of March 9, 2017, by and between National CineMedia, LLC and Regal Cinemas, Inc.	NCM, Inc.	8-K	001-33296	10.2	3/15/2017
10.5		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.)	NCM, Inc.	8-K	001-33296	10.6	2/16/2007
10.5.1		First Amendment to Amended and Restated Exhibitor Services Agreement dated as of March 9, 2017, by and between National CineMedia, LLC and American Multi-Cinema, Inc.	NCM, Inc.	8-K	001-33296	10.1	3/15/2017
10.6		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.	NCM, Inc.	8-K	001-33296	10.7	2/16/2007
10.6.1		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.	NCM, Inc.	8-K	001-33296	10.1	5/5/2008
10.7		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.)	NCM, Inc.	8-K	001-33296	10.8	2/16/2007
10.8		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.	NCM, Inc.	8-K	001-33296	10.9	2/16/2007
10.9		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.	NCM, Inc.	8-K	001-33296	10.10	2/16/2007
10.10		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.	NCM, Inc.	8-K	001-33296	10.11	2/16/2007

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
10.11		Management Services Agreement dated as of February 13, 2007, by and among National CineMedia, Inc. and National CineMedia, LLC.	NCM, Inc.	8-K	001-33296	10.12	2/16/2007
10.12		Amended and Restated Credit Agreement among National CineMedia, LLC and Barclays Bank PLC, as Lead Arranger dated as of November 26, 2012.	NCM, Inc.	8-K	001-33296	10.1	11/28/2012
10.12.1		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.	NCM, Inc.	8-K	001-33296	10.2	11/28/2012
10.12.2		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.	NCM, Inc.	8-K	001-33296	10.1	5/7/2013
10.12.3		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.	NCM, Inc.	8-K	001-33296	10.1	7/3/2014
10.13		Employment Agreement dated as of December 31, 2015, by and between National CineMedia, Inc. and Andrew J. England. +	NCM, Inc.	8-K	001-33296	10.1	1/5/2016
10.14		Employment Agreement dated as of May 8, 2015, by and among National CineMedia, Inc., National CineMedia, LLC and Clifford E. Marks. +	NCM, Inc.	10-Q	001-33296	10.1	5/21/2015
10.15		Employment Agreement dated as of August 11, 2016, by and between the Company and Katherine L. Scherping. +	NCM, Inc.	8-K	001-33296	10.1	8/11/2016
10.17		Employment Agreement dated as of February 13, 2007, by and among National CineMedia, Inc., National CineMedia, LLC and Ralph E. Hardy. +	NCM, Inc.	8-K	001-33296	10.18	2/16/2007
10.17.1		First Amendment to Employment Agreement effective as of January 1, 2009, by and among National CineMedia, Inc., National CineMedia, LLC and Ralph E. Hardy. +	NCM, Inc.	10-K	001-33296	10.18.1	3/6/2009
10.17.2		Separation, General Release and Consulting Agreement dated as of November 6, 2017, by and among National CineMedia, Inc., National CineMedia, LLC and Ralph E. Hardy. +	NCM, Inc.	8-K	001-33296	10.1	11/6/2017
10.18		Form of Indemnification Agreement	NCM, Inc.	8-K	001-33296	10.1	2/13/2007
10.18.1		Director Service Agreement dated April 28, 2017, among National CineMedia, Inc., National CineMedia, LLC and Scott Schneider.	NCM, Inc.	8-K	001-33296	10.1	5/4/2017
10.19		National CineMedia, Inc. 2007 Equity Incentive Plan. +	NCM, Inc.	8-K	001-33296	10.2	5/2/2013
10.20		National CineMedia, Inc. 2016 Equity Incentive Plan. +	NCM, Inc.	S-8	001-33296	4.1	4/29/2016
10.21		Form of Option Substitution Award. +	NCM, Inc.	S-8	001-33296	4.4	2/13/2007
10.22		Form of Restricted Stock Substitution Award. +	NCM, Inc.	S-8	001-33296	4.5	2/13/2007

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
10.23		Form of Stock Option Agreement. +	NCM, Inc.	S-8	001-33296	4.6	2/13/2007
10.23.1		Form of 2009 Stock Option Agreement. +	NCM, Inc.	10-K	001-33296	10.22.1	3/6/2009
10.23.2		Form of 2010 Stock Option Agreement. +	NCM, Inc.	10-K	001-33296	10.22.2	3/9/2010
10.23.3		Form of 2011 Stock Option Agreement. +	NCM, Inc.	10-K	001-33296	10.22.3	2/25/2011
10.23.4		Form of 2012 Stock Option Agreement. +	NCM, Inc.	10-K	001-33296	10.22.4	2/24/2012
10.24		Form of Restricted Stock Agreement. +	NCM, Inc.	S-8	001-33296	4.7	2/13/2007
10.24.1		Form of 2015 Restricted Stock Agreement (Time Based). +	NCM, Inc.	10-K	001-33296	10.23.7	2/27/2015
10.24.2		Form of 2015 Restricted Stock Agreement (Performance Based). +	NCM, Inc.	10-K	001-33296	10.23.8	2/27/2015
10.24.3		Form of 2016 Restricted Stock Agreement (Time Based). +	NCM, Inc.	10-K	001-33296	10.22.7	2/26/2016
10.24.4		Form of 2016 Restricted Stock Agreement (Performance Based). +	NCM, Inc.	10-K	001-33296	10.22.8	2/26/2016
10.24.5		Form of 2016 Restricted Stock Agreement under the National CineMedia, Inc. 2016 Equity Incentive Plan (Time Based).	NCM, Inc.	S-8	001-33296	4.2	4/29/2016
10.24.6		Form of 2016 Restricted Stock Agreement under the National CineMedia, Inc. 2016 Equity Incentive Plan (Performance Based).	NCM, Inc.	S-8	001-33296	4.3	4/29/2016
10.24.7		Form of 2017 Restricted Stock Agreement (Time Based). +	NCM, Inc.	10-K	001-33296	10.26.9	2/24/2017
10.24.8		Form of 2017 Restricted Stock Agreement (Performance Based). +	NCM, Inc.	10-K	001-33296	10.26.10	2/24/2017
10.24.9*		Form of 2018 Restricted Stock Agreement (Time Based). +
10.24.10*		Form of 2018 Restricted Stock Agreement (Performance Based). +
10.25		Form of Restricted Stock Unit Agreement. +	NCM, Inc.	10-K	001-33296	10.34	3/6/2009
10.25.1		Form of Restricted Stock Unit Agreement under the National CineMedia, Inc. 2016 Equity Plan.	NCM, Inc.	S-8	001-33296	4.4	4/29/2016
10.25.2		Form of Restricted Stock Unit Agreement under the National CineMedia, Inc. 2016 Equity Plan, amended.	NCM, Inc.	10-K	001-33296	10.27.2	2/24/2017
10.26		National CineMedia, Inc. Executive Performance Bonus Plan. +	NCM, Inc.	8-K	001-33296	10.1	5/2/2013
12.1	*	Computation of ratio of earnings to fixed charges.
31.1	*	Rule 13a-14(a) Certification of Chief Executive Officer.
31.2	*	Rule 13a-14(a) Certification of Chief Financial Officer.
32.1	**	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2	**	Certification of Chef Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS	*	XBRL Instance Document.
101.SCH	*	XBRL Taxonomy Extension Schema Document.
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document.

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document.

*	Filed herewith.

**	Furnished herewith.

+	Management contract.

SIGNATURES

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.

NATIONAL CINEMEDIA, LLC

(Registrant)

		By: National CineMedia, Inc., its manager
Dated:	~~February~~March 2814, ~~2017~~2018	/s/ Andrew J. England
		Andrew J. England
		Chief Executive Officer and Director
		(Principal Executive Officer)

Dated:	~~February~~March 2814, ~~2017~~2018	/s/ Katherine L. Scherping
		Katherine L. Scherping
		Chief Financial Officer
		(Principal Financial and 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/ Andrew J. England	Chief Executive Officer and Director	~~February~~March 2814, ~~2017~~2018
Andrew J. England	(Principal Executive Officer)
/s/ Katherine L. Scherping	Chief Financial Officer	~~February~~March 2814, ~~2017~~2018
Katherine L. Scherping	(Principal Financial and Accounting Officer)
/s/ Scott N. Schneider	~~Non-Employee Executive~~ Chairman	~~February~~March 2814, ~~2017~~2018
Scott N. Schneider
/s/ Peter B. Brandow	Director	February 28, 2017
/s/ Lawrence A. Goodman	Director	March 14, 2018
Peter B. Brandow
/s/ Lawrence A. Goodman	Director	February 28, 2017
Lawrence A. Goodman
/s/ David R. Haas	Director	~~February~~March 2814, ~~2017~~2018
David R. Haas
/s/ Stephen L. Lanning	Director	February 28, 2017
/s/ Thomas F. Lesinski	Director	March 14, 2018
Stephen L. Lanning
/s/ Thomas F. Lesinski	Director	February 28, 2017
Thomas F. Lesinski
/s/ Paula Williams Madison	Director	~~February~~March 2814, ~~2017~~2018
Paula Williams Madison
/s/ Lee Roy Mitchell	Director	~~February~~March 2814, ~~2017~~2018
Lee Roy Mitchell
Mark Segall	Director
Renana Teperberg	Director

INDEX TO EXHIBITS

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
3.1		Amended and Restated Certificate of Incorporation. Of National CineMedia, Inc.	NCM, Inc.	10-Q	001-33296	3.1	5/6/2011
3.2		Amended and Restated Bylaws of National CineMedia, Inc.	NCM, Inc.	S-8	001-33296	4.2	2/13/2007
3.3		Certificate of Formation of National CineMedia, LLC	NCM LLC	S-4	333-176056	3.3	8/4/2011
4.1		Indenture, dated as of July 5, 2011, by and between National CineMedia, LLC and Wells Fargo Bank, National Association, as trustee.	NCM, Inc.	8-K	001-33296	4.1	7/7/2011
4.2		Form of 7.875% Senior Notes due 2021 (included in Exhibit 10.13.2).	NCM, Inc.	8-K	001-33296	4.2	7/7/2011
4.4		Indenture, dated as of April 27, 2012, by and between National CineMedia, LLC and Wells Fargo Bank, National Association, as trustee.	NCM, Inc.	8-K	001-33296	4.1	4/30/2012
4.5		Form of 6.00% Senior Secured Notes due 2022 (included in Exhibit 4.4).	NCM, Inc.	8-K	001-33296	4.2	4/30/2012
4.6		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.	NCM, Inc.	8-K	001-33296	4.3	4/30/2012
4.7		Indenture, dated as of August 19, 2016, by and between National CineMedia, LLC and Wells Fargo Bank, National Association, as trustee.	NCM, Inc.	8-K	001-33296	4.1	8/19/2016
4.8		Form of 5.750% Senior Secured Notes due 2026 (included in Exhibit 4.1).	NCM, Inc.	8-K	001-33296	4.2	8/19/2016
4.9		Registration Rights Agreement, dated as of August 19, 2016, by and between National CineMedia, LLC and J.P. Morgan Securities LLC, as representative of the Initial Purchasers named therein.	NCM, Inc.	8-K	001-33296	4.3	8/19/2016
10.1		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.	NCM, Inc.	8-K	001-33296	10.1	2/16/2007
10.1.1		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.	NCM, Inc.	10-Q	001-33296	10.1.1	8/7/2009

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
10.1.2		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.	NCM, Inc.	8-K	001-33296	10.1.2	8/10/2010
10.1.3		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.	NCM, Inc.	8-K	001-33296	10.1.3	9/9/2013
10.2		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.)	NCM, Inc.	10-K	001-33296	10.2.4	2/21/2014
10.3		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.)	NCM, Inc.	10-K	001-33296	10.3.4	2/21/2014
10.4		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.)	NCM, Inc.	10-K	001-33296	10.4.4	2/21/2014
10.5		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.)	NCM, Inc.	8-K	001-33296	10.6	2/16/2007
10.6		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.	NCM, Inc.	8-K	001-33296	10.7	2/16/2007
10.6.1		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.	NCM, Inc.	8-K	001-33296	10.1	5/5/2008

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
10.7		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.)	NCM, Inc.	8-K	001-33296	10.8	2/16/2007
10.8		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.	NCM, Inc.	8-K	001-33296	10.9	2/16/2007
10.9		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.	NCM, Inc.	8-K	001-33296	10.10	2/16/2007
10.10		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.	NCM, Inc.	8-K	001-33296	10.11	2/16/2007
10.11		Management Services Agreement dated as of February 13, 2007, by and among National CineMedia, Inc. and National CineMedia, LLC.	NCM, Inc.	8-K	001-33296	10.12	2/16/2007
10.12		Amended and Restated Credit Agreement among National CineMedia, LLC and Barclays Bank PLC, as Lead Arranger dated as of November 26, 2012.	NCM, Inc.	8-K	001-33296	10.1	11/28/2012
10.12.1		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.	NCM, Inc.	8-K	001-33296	10.2	11/28/2012
10.12.2		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.	NCM, Inc.	8-K	001-33296	10.1	5/7/2013
10.12.3		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.	NCM, Inc.	8-K	001-33296	10.1	7/3/2014
10.13		Employment Agreement dated as of February 13, 2007, by and among National CineMedia, Inc., National CineMedia, LLC and Kurt C. Hall. +	NCM, Inc.	8-K	001-33296	10.14	2/16/2007
10.13.1		First Amendment to Employment Agreement effective as of January 1, 2009, by and among National CineMedia, Inc., National CineMedia, LLC and Kurt C. Hall. +	NCM, Inc.	10-K	001-33296	10.14.1	3/6/2009

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
10.13.2		Separation Agreement dated as of October 18, 2015, by and between National CineMedia, Inc. and Kurt C. Hall. +	NCM, Inc.	8-K	001-33296	10.1	10/21/2015
10.13.3		Consulting Agreement dated as of October 18, 2015, by and between National CineMedia, Inc. and Kurt C. Hall. +	NCM, Inc.	8-K	001-33296	10.2	10/21/2015
10.14		Employment Agreement dated as of December 31, 2015, by and between National CineMedia, Inc. and Andrew J. England. +	NCM, Inc.	8-K	001-33296	10.1	1/5/2016
10.15		Employment Agreement dated as of May 8, 2015, by and among National CineMedia, Inc., National CineMedia, LLC and Clifford E. Marks. +	NCM, Inc.	10-Q	001-33296	10.1	5/21/2015
10.16		Employment Agreement dated as of February 13, 2007, by and among National CineMedia, Inc., National CineMedia, LLC and Ralph E. Hardy. +	NCM, Inc.	8-K	001-33296	10.18	2/16/2007
10.16.1		First Amendment to Employment Agreement effective as of January 1, 2009, by and among National CineMedia, Inc., National CineMedia, LLC and Ralph E. Hardy. +	NCM, Inc.	10-K	001-33296	10.18.1	3/6/2009
10.17		Employment Agreement dated as of January 15, 2014, by and among National CineMedia, Inc., National CineMedia, LLC and Alfonso P. Rosabal, Jr. +	NCM, Inc.	8-K	001-33296	10.1	1/22/2014
10.18		Retention Bonus Agreement dated January 29, 2016, between the Company and David J. Oddo. +	NCM, Inc.	8-K	001-33296	10.1	7/19/2016
10.19		Employment Agreement dated as of August 11, 2016, between the Company and Katherine L. Scherping. +	NCM, Inc.	8-K	001-33296	10.1	8/11/2016
10.20		Director Service Agreement dated January 22, 2016, among National CineMedia, Inc., National CineMedia, LLC and Scott Schneider.	NCM, Inc.	8-K	001-33296	10.1	1/26/2016
10.21		National CineMedia, Inc. 2007 Equity Incentive Plan. +	NCM, Inc.	8-K	001-33296	10.2	5/2/2013
10.22		National CineMedia, Inc. 2016 Equity Incentive Plan. +	NCM, Inc.	S-8	001-33296	4.1	4/29/2016
10.23		Form of Option Substitution Award. +	NCM, Inc.	S-8	001-33296	4.4	2/13/2007
10.24		Form of Restricted Stock Substitution Award. +	NCM, Inc.	S-8	001-33296	4.5	2/13/2007
10.25		Form of Stock Option Agreement. +	NCM, Inc.	S-8	001-33296	4.6	2/13/2007
10.25.1		Form of 2009 Stock Option Agreement. +	NCM, Inc.	10-K	001-33296	10.22.1	3/6/2009
10.25.2		Form of 2010 Stock Option Agreement. +	NCM, Inc.	10-K	001-33296	10.22.2	3/9/2010
10.25.3		Form of 2011 Stock Option Agreement. +	NCM, Inc.	10-K	001-33296	10.22.3	2/25/2011
10.25.4		Form of 2012 Stock Option Agreement. +	NCM, Inc.	10-K	001-33296	10.22.4	2/24/2011
10.26		Form of Restricted Stock Agreement. +	NCM, Inc.	S-8	001-33296	4.7	2/13/2007
10.26.1		Form of 2014 Restricted Stock Agreement (Time Based). +	NCM, Inc.	10-Q	001-33296	10.1	5/6/2014
10.26.2		Form of 2014 Restricted Stock Agreement (Performance Based). +	NCM, Inc.	10-Q	001-33296	10.2	5/6/2014

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
10.26.3		Form of 2015 Restricted Stock Agreement (Time Based). +	NCM, Inc.	10-K	001-33296	10.23.7	2/27/2015
10.26.4		Form of 2015 Restricted Stock Agreement (Performance Based). +	NCM, Inc.	10-K	001-33296	10.23.8	2/27/2015
10.26.5		Form of 2016 Restricted Stock Agreement (Time Based). +	NCM, Inc.	10-K	001-33296	10.22.7	2/26/2016
10.26.6		Form of 2016 Restricted Stock Agreement (Performance Based). +	NCM, Inc.	10-K	001-33296	10.22.8	2/26/2016
10.26.7		Form of 2016 Restricted Stock Agreement under the National CineMedia, Inc. 2016 Equity Incentive Plan (Time Based).	NCM, Inc.	S-8	001-33296	4.2	4/29/2016
10.26.8		Form of 2016 Restricted Stock Agreement under the National CineMedia, Inc. 2016 Equity Incentive Plan (Performance Based).	NCM, Inc.	S-8	001-33296	4.3	4/29/2016
10.26.9		Form of 2017 Restricted Stock Agreement (Time Based). +	NCM, Inc.	10-K	001-33296	10.26.9	2/24/2017
10.26.10		Form of 2017 Restricted Stock Agreement (Performance Based). +	NCM, Inc.	10-K	001-33296	10.26.10	2/24/2017
10.27		Form of Restricted Stock Unit Agreement. +	NCM, Inc.	10-K	001-33296	10.34	3/6/2009
10.27.1		Form of Restricted Stock Unit Agreement under the National CineMedia, Inc. 2016 Equity Plan.	NCM, Inc.	S-8	001-33296	4.4	4/29/2016
10.27.2		Form of Restricted Stock Unit Agreement under the National CineMedia, Inc. 2016 Equity Plan, amended.	NCM, Inc.	10-K	001-33296	10.27.2	2/24/2017
10.28		National CineMedia, Inc. Executive Performance Bonus Plan. +	NCM, Inc.	8-K	001-33296	10.1	5/2/2013
10.29		ISDA Master Agreement dated as of March 2, 2007, between National CineMedia, LLC and Morgan Stanley Capital Services and Schedule.	NCM, Inc.	10-Q	001-33296	10.2	8/10/2007
10.30		ISDA Master Agreement dated as of March 2, 2007, between National CineMedia, LLC and Credit Suisse International and Schedule.	NCM, Inc.	10-Q	001-33296	10.2	11/9/2007
10.31		ISDA Master Agreement dated as of August 6, 2007, between National CineMedia, LLC and JPMorgan Chase Bank, N.A.	NCM, Inc.	10-Q	001-33296	10.4	11/9/2007
10.32		ISDA Novation Agreement dated as of February 4, 2010, between National CineMedia, LLC, Lehman Brothers Special Financing Inc. and Barclays Bank PLC.	NCM, Inc.	10-K	001-33296	10.36	3/9/2010
10.33		ISDA Master Agreement dated as of February 4, 2010 between National CineMedia, LLC and Barclays Bank PLC.	NCM, Inc.	8-K	001-33296	10.1	4/14/2010
12.1	*	Computation of ratio of earnings to fixed charges.
31.1	*	Rule 13a-14(a) Certification of Chief Executive Officer.

			Incorporation by Reference to NCM, Inc.
Exhibit	Ref.	Description	Registrant	Form	SEC File No.	Exhibit	Filing Date
31.2	*	Rule 13a-14(a) Certification of Chief Financial Officer.
32.1	**	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2	**	Certification of Chef Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.INS	*	XBRL Instance Document.
101.SCH	*	XBRL Taxonomy Extension Schema Document.
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

** Furnished herewith.

+ Management contract.

INDEX TO FINANCIAL STATEMENTS

		Page
National CineMedia, LLC
Report of Independent Registered Public Accounting Firm		F-2
Balance Sheets as of December 29, 2016 and December 31, 2015		F-3
Balance Sheets as of December 28, 2017 and December 29, 2016		F-3
Statements of Income for the years ended December 29, 2016, December 31, 2015 and January 1, 2015		F-4
Statements of Income for the years ended December 28, 2017, December 29, 2016 and December 31, 2015		F-4
Statements of Comprehensive Income for the years ended December 29, 2016, December 31, 2015 and January 1, 2015		F-5
Statements of Comprehensive Income for the years ended December 28, 2017, December 29, 2016 and December 31, 2015		F-5
Statements of Members’ Equity/(Deficit) for the years ended December 29, 2016, December 31, 2015 and January 1, 2015		F-6
Statements of Members’ Equity/(Deficit) for the years ended December 28, 2017, December 29, 2016 and December 31, 2015		F-6
Statements of Cash Flows for the years ended December 29, 2016, December 31, 2015 and January 1, 2015		F-7
Statements of Cash Flows for the years ended December 28, 2017, December 29, 2016 and December 31, 2015		F-7
Notes to Financial Statements		F-9

F - 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Members and Board of Directors ~~and Members~~ of

National CineMedia, LLC

~~Centennial,~~Opinion ~~Colorado~~on the Financial Statements

We have audited the accompanying balance sheets of National CineMedia, LLC (the “"Company”") as of December 2928, ~~2016~~2017 and December 3129, ~~2015~~2016, ~~and~~ the related statements of income, comprehensive income, members'’ equity/ (deficit), and cash flows for the years ended December 28, 2017, December 29, 2016, and December 31, 2015 and ~~January~~the 1,related ~~2015~~notes (collectively referred to as the “financial statements”). ~~These~~In our opinion, the financial statements ~~are~~present fairly, in all material respects, the ~~responsibility~~financial position of the Company's ~~management.~~as ~~Our~~of ~~responsibility~~December is28, to2017 ~~express~~and anDecember ~~opinion~~29, on2016, ~~these~~the ~~financial~~results ~~statements~~of ~~based~~its onoperations ~~our~~and ~~audits~~its cash flows for the years ended December 28, 2017, December 29, 2016 and December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

WeBasis 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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.Opinion

InThese ~~our opinion, such~~ financial statements ~~present~~are ~~fairly,~~the inresponsibility ~~all~~of ~~material respects,~~ the ~~financial~~Company's ~~position~~management. ofOur ~~National~~responsibility ~~CineMedia,~~is ~~LLC~~to asexpress ofan ~~December~~opinion ~~29,~~on ~~2016~~the ~~and~~Company's ~~December~~financial ~~31,~~statements ~~2015,~~based ~~and~~on ~~the~~our ~~results~~audits. ofWe ~~its~~are ~~operations~~a ~~and~~public ~~its~~accounting ~~cash~~firm ~~flows~~registered ~~for~~with the ~~years~~Public ~~ended~~Company ~~December~~Accounting ~~29,~~Oversight ~~2016,~~Board ~~December~~(United ~~31,~~States) ~~2015~~(PCAOB) and ~~January~~are 1,required ~~2015,~~to inbe ~~conformity~~independent with ~~accounting~~respect ~~principles~~to ~~generally~~the ~~accepted~~Company in accordance with the ~~United~~U.S. ~~States~~federal securities laws and the applicable rules and regulations of ~~America~~the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP

Denver, Colorado

~~February~~March 2713, ~~2017~~2018

We have served as the Company’s auditor since 2005.

F - 2

NATIONAL CINEMEDIA, LLC

BALANCE SHEETS

(In millions)

	December 29, 2016			December 31, 2015
	December 28, 2017			December 29, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	104.76		$	310.07
Receivables, net of allowance of $6.3 and $5.6, respectively		160.5			148.9
Receivables, net of allowance of $6.0 and $6.3, respectively		160.6			160.5
Prepaid expenses		34.02			23.70
Prepaid administrative fees to managing member		0.8			0.78
Current portion of notes receivable- founding members		54.62			45.26
Other current assets		~~0.3~~—			—0.3
Total current assets		~~180~~174.94			~~159~~180.59
NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $64.1 and $64.1, respectively		29.6			25.1
Property and equipment, net of accumulated depreciation of $70.4 and $64.1, respectively		30.7			29.6
Intangible assets, net of accumulated amortization of $118.9 and $91.9, respectively		560.5			566.7
Intangible assets, net of accumulated amortization of $145.4 and $118.9, respectively		717.2			560.5
Long-term notes receivable, net of current portion - founding members		84.31			128.53
Other investments		63.65			56.46
Debt issuance costs, net		1.93			21.39
Other assets		01.75			0.57
Total non-current assets		~~607~~758.63			~~612~~607.56
TOTAL ASSETS	$	~~788~~932.57		$	~~772~~788.05
LIABILITIES AND MEMBERS’ EQUITY/(DEFICIT)
CURRENT LIABILITIES:
Amounts due to founding members		4232.7			3542.57
Amounts due to managing member		2538.83			2225.98
Accrued expenses		19.05			1819.90
Accrued payroll and related expenses		9.95			149.49
Accounts payable		1316.42			1113.24
Deferred revenue		107.31			10.23
Total current liabilities		~~121~~123.13			~~113~~121.1
NON-CURRENT LIABILITIES:
Long-term debt, net of debt issuance costs of $10.7 and $10.6, respectively		924.3			925.4
Long-term debt, net of debt issuance costs of $8.7 and $10.7, respectively		923.3			924.3
Total non-current liabilities		924.3			925.4
Other non-current liabilities		2.1			—
Total liabilities		1,045.4			1,038.5
Total non-current liabilities		925.4			924.3
Total liabilities		1,048.7			1,045.4
COMMITMENTS AND CONTINGENCIES (NOTE 10)
MEMBERS’ EQUITY/(DEFICIT)		(~~256~~116.90	)		(~~266~~256.59	)
TOTAL LIABILITIES AND EQUITY/(DEFICIT)	$	~~788~~932.57		$	~~772~~788.05

Refer to accompanying notes to financial statements.

F - 3

NATIONAL CINEMEDIA, LLC

STATEMENTS OF INCOME

(In millions)

	Years Ended
	December 29, 2016			December 31, 2015			January 1, 2015
	December 28, 2017			December 29, 2016			December 31, 2015
Revenue (including revenue from founding members of $29.1, $30.2 and $38.7, respectively)	$	447.6		$	446.5		$	394.0
Revenue (including revenue from founding members of $29.9, $29.1 and $30.2, respectively)	$	426.1		$	447.6		$	446.5
OPERATING EXPENSES:
Advertising operating costs		3032.04			30.80			2630.48
Network costs		1715.18			17.81			1817.38
Theater access fees—founding members		7576.15			7275.51			7072.65
Selling and marketing costs		72.80			72.38			5772.63
Merger termination fee and related merger costs		—			~~41.8~~—			—41.8
Administrative and other costs		2325.61			2123.46			1921.34
Administrative fee—managing member		2012.28			1720.2			1017.2
Depreciation and amortization		3537.86			3235.28			32.42
Total		~~274~~272.62			~~306~~274.06			~~234~~306.80
OPERATING INCOME		~~173~~153.09			~~140~~173.50			~~159~~140.25
NON-OPERATING EXPENSES:
Interest on borrowings		5452.08			5254.20			52.62
Interest income		(0.97	)		(10.19	)		(1.31	)
Amortization of terminated derivatives		—			~~1.6~~—			101.06
Loss on early retirement of debt		~~10.4~~—			—10.4			—
Other non-operating expense		—			0.2			0.8
Other non-operating (income) expense		(0.3	)		—			0.2
Total		6351.58			5263.95			6252.19
INCOME BEFORE INCOME TAXES		~~109~~102.51			87109.65			9787.16
Income tax expense		0.2			0.12			0.81
NET INCOME	$	~~109~~101.39		$	87109.53		$	9687.35

Refer to accompanying notes to financial statements

F - 4

NATIONAL CINEMEDIA, LLC

STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

	Years Ended
	December 29, 2016		December 31, 2015		January 1, 2015
	December 28, 2017		December 29, 2016		December 31, 2015
NET INCOME, NET OF TAX OF $0.2, $0.1 AND $0.8, RESPECTIVELY	$	109.3	$	87.5	$	96.3
NET INCOME, NET OF TAX OF $0.2, $0.2 AND $0.1, RESPECTIVELY	$	101.9	$	109.3	$	87.5
OTHER COMPREHENSIVE INCOME:
Amortization of terminated derivatives		—		~~1.6~~—		101.06
COMPREHENSIVE INCOME	$	~~109~~101.39	$	89109.13	$	~~106~~89.31

Refer to accompanying notes to financial statements.

F - 5

NATIONAL CINEMEDIA, LLC

STATEMENTS OF MEMBERS’ EQUITY/ (DEFICIT)

(In millions, except unit amounts)

	Units		Amount
Balance—December 26, 2013		126,974,805	$	(299.2	)
Capital contribution from managing member		231,789		0.8
Distribution to managing member		—		(67.0	)
Distribution to founding members		—		(79.4	)
Units issued for purchase of intangible asset		1,087,911		16.4
Comprehensive income		—		106.3
Share-based compensation expense/capitalized		—		4.7
Balance—January 1, 2015		128,294,505	$	(317.4	)
Capital contribution from managing member		288,228		1.3
Distribution to managing member		—		(66.3	)
Distribution to founding members		—		(82.2	)
Units issued for purchase of intangible asset		6,560,239		100.7
Comprehensive income		—		89.1
Share-based compensation expense/capitalized		—		8.3
Balance—December 31, 2015		135,142,972	$	(266.5	)
Capital contribution from managing member		635,258		0.5
Distribution to managing member		—		(57.5	)
Distribution to founding members		—		(75.1	)
Units issued for purchase of intangible asset		1,416,515		21.1
Comprehensive income		—		109.3
Share-based compensation expense/capitalized		—		11.3
Balance—December 29, 2016		137,194,745	$	(256.9	)
Capital contribution from managing member		767,810		(9.4	)
Distribution to managing member		—		(75.9	)
Distribution to founding members		—		(85.0	)
Units issued for purchase of intangible asset		16,118,779		201.8
Comprehensive income		—		101.9
Share-based compensation expense/capitalized		—		7.5
Balance—December 28, 2017		154,081,334	$	(116.0	)

Refer to accompanying notes to financial statements.

F - 6

NATIONAL CINEMEDIA, LLC

STATEMENTS OF CASH FLOWS

(In millions)

	Years Ended
	December 29, 2016			December 31, 2015			January 1, 2015
	December 28, 2017			December 29, 2016			December 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	~~109~~101.39		$	87109.53		$	9687.35
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3537.86			3235.28			32.42
Non-cash share-based compensation		107.92			810.09			48.60
Amortization of terminated derivatives		—			1.6			10.0
Impairment on investment		3.1			0.7			—
Amortization of debt issuance costs		2.6			2.6			2.8
Amortization of terminated derivatives		—			—			1.6
Redemption premium paid and write-off of debt issuance costs related to redemption of Senior Notes due 2021		10.4			—			—
Amortization of debt issuance costs		2.6			2.6			2.6
Other		0.7			0.3			(0.2	)
Redemption premium paid and write-off of debt issuance costs related to redemption of Senior Notes due 2021		—			10.4			—
Cash distributions from non-consolidated entities		0.2			0.2			—
Other		(0.3	)		—			0.3
Cash distributions from non-consolidated entities		0.3			0.2			0.2
Changes in operating assets and liabilities:
Receivables, net		(130.51	)		(3513.5	)		2(35.75	)
Accounts payable and accrued expenses		(2.12	)		5(2.01	)		(95.10	)
Amounts due to founding members and managing member		~~(3.~~0.5	)		(3.20	)		03.82
Deferred revenue		—(3.1	)		~~1.7~~—			31.87
Other, net		~~(1.~~0.3	)		0(1.70	)		(0.7	)
Net cash provided by operating activities		~~150~~152.32			~~107~~150.53			~~143~~107.45
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(1211.96	)		(12.69	)		(812.76	)
Purchases of intangible assets from network affiliates		(2.3	)		(2.7	)		(3.0	)
Acquisition of a business		(0.2	)		—			—
Proceeds from note receivable - founding members		2.8			4.2			4.2
Purchases of intangible assets from network affiliates		(2.1	)		(2.3	)		(2.7	)
Net cash used in investing activities		(12.4	)		(11.1	)		(7.5	)
Proceeds from restricted cash		0.3			—			—
Proceeds from note receivable - founding members		5.6			2.8			4.2
Net cash used in investing activities		(8.0	)		(12.4	)		(11.1	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings under the revolving credit facility		~~126~~80.0			~~215~~126.0			~~138~~215.0
Repayments of borrowings under the revolving credit facility		(~~177~~83.0	)		(~~171~~177.0	)		(~~136~~171.0	)
Proceeds from issuance of Senior Notes due 2026		~~250.0~~—			—250.0			—
Redemption of Senior Notes due 2021		~~(207.9~~—	)		—(207.9	)		—
Payment of debt issuance costs		~~(4.8~~—	)		—(4.8	)		~~(0.6~~—	)
Founding member integration payments		2.4			2.6			2.1
Founding member integration and other encumbered theater payments		12.9			2.4			2.6
Distributions to founding members and managing member		(~~119~~157.42	)		(~~151~~119.54	)		(~~143~~151.35	)
Unit settlement for share-based compensation		0(3.50	)		10.35			01.83
Net cash used in financing activities		(~~130~~150.23	)		(~~103~~130.62	)		(~~139~~103.06	)
CHANGE IN CASH AND CASH EQUIVALENTS		7(6.71	)		(7.27	)		(37.12	)
CASH AND CASH EQUIVALENTS:
Beginning of period		310.07			103.20			1310.32
End of period	$	104.76		$	310.07		$	103.20

Refer to accompanying notes to financial statements.

F - 7

NATIONAL CINEMEDIA, LLC

STATEMENTS OF CASH FLOWS (CONTINUED)

(In millions)

	Years Ended
	December 29, 2016		December 31, 2015		January 1, 2015
	December 28, 2017		December 29, 2016		December 31, 2015
Supplemental disclosure of non-cash financing and investing activity:
Purchase of an intangible asset with NCM LLC equity	$	21201.18	$	~~100~~21.71	$	16100.47
Accrued distributions to founding members and managing member	$	7074.85	$	5770.68	$	6057.6
Increase in cost and equity method investments	$	2.0	$	3.1	$	1.2
Accrued integration and other encumbered theater payments from founding members	$	9.0	$	—	$	—
Accrued purchases of property and equipment	$	0.4	$	—	$	—
Increase in cost and equity method investments	$	—	$	2.0	$	3.1
Supplemental disclosure of cash flow information:
Cash paid for interest	$	5249.59	$	4952.75	$	49.97
Cash paid for income taxes, net of refunds	$	0.34	$	—0.3	$	—

Refer to accompanying notes to financial statements.

F - 8

NATIONAL CINEMEDIA, LLC

NOTES TO FINANCIAL STATEMENTS

1.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NCM LLC commenced operations on April 1, 2005 and is owned by NCM, Inc., AMC, Regal and Cinemark. NCM LLC operates the largest digital in-theater network in North America, allowing NCM LLC to sell advertising under ESAs with the founding members and certain third-party theater circuits under long-term network affiliate agreements referred to in this document as “network affiliates”, which have terms from ~~three~~one to twenty years.

As of December 2928, ~~2016~~2017, the Company had ~~137~~154,~~194~~081,~~745~~334 common membership units outstanding, of which 5976,~~874~~242,~~412~~222 (4349.75%) were owned by NCM, Inc., 27,~~072~~871,~~701~~862 (1918.71%) were owned by ~~Regal~~Cinemark, 2627,~~384~~574,~~644~~620 (1917.29%) were owned by ~~Cinemark~~Regal and 2322,~~862~~392,~~988~~630 (1714.45%) 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 May 5, 2014, NCM, Inc. entered into the Merger Agreement to merge with Screenvision. On November 3, 2014, the DOJ filed a lawsuit seeking to enjoin the merger. On March 16, 2015, the Company announced the termination of the Merger Agreement and the lawsuit was dismissed. After the Merger Agreement was terminated, NCM LLC reimbursed NCM, Inc. for certain expenses pursuant to an indemnification agreement among NCM LLC, NCM, Inc. and the founding members. On March 17, 2015, NCM LLC paid Screenvision an approximate $26.8 million termination payment on behalf of NCM, Inc. During the year ended December 31, 2015, NCM LLC also either paid directly or reimbursed NCM, Inc. for the legal and other merger-related costs of approximately $15.0 million ($7.5 million incurred by NCM, Inc. during the year ended January 1, 2015 and approximately $7.5 million incurred by NCM LLC during the year ended December 31, 2015). The Company and the founding members each bore a pro rata portion of the merger termination fee and the related merger expenses based on their aggregate ownership percentages in NCM LLC when the expenses were incurred.

Basis of Presentation

The Company has prepared its financial statements and related notes of NCM LLC in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the 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 the Statements of Cash Flows whereby a certain line item previously included within the ‘Other’ caption was broken out separately due to its significance in 2017). 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 6—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.

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.

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 and share-based compensation. 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 years 2015, ~~and~~ 2016 ~~contained 52 weeks~~ and ~~fiscal~~2017 ~~year 2014~~ contained 5352 weeks. Throughout this document, the fiscal years are referred to as set forth below:

Fiscal Year Ended		Reference in this Document
December 28, 2017		2017
December 29, 2016		2016
December 31, 2015		2015
January 1, 2015		2014

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 the Company 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 and to a lesser extent on a CPM basis. The Company recognizes national advertising as impressions (or theater attendees) are delivered and recognizes local on-screen advertising revenue during the period in which the advertising airs as dictated by sales contracts. The Company recognizes revenue derived from lobby network and promotions when the advertising is displayed in theater lobbies and recognizes revenue from branded entertainment websites and mobile applications when the online or mobile impressions are

F - 9

NATIONAL CINEMEDIA, LLC

NOTES TO FINANCIAL STATEMENTS

~~arrangement~~served. ~~exists,~~The ~~delivery~~Company ~~occurs~~may ormake ~~services~~contractual guarantees to deliver a specified number of impressions to view the customers’ advertising. If those contracted number of impressions are ~~rendered~~not delivered, the ~~sales~~Company ~~price~~will isrun ~~fixed~~additional ~~and~~advertising ~~determinable~~to ~~and~~deliver ~~collectability~~the contracted impressions at a later date. The deferred portion of the revenue associated with the undelivered impressions is ~~reasonably~~referred ~~assured~~to as a make-good provision. ~~The~~In rare cases, the Company ~~considers~~will make a cash refund of the ~~terms~~portion of ~~each~~the ~~arrangement~~contract related to ~~determine~~the undelivered impressions. The Company defers the ~~appropriate~~revenue ~~accounting~~associated ~~treatment~~with the make-good until the impressions guaranteed in the advertising contract have been satisfied. The make-good provision is recorded within accrued expenses in the Balance Sheets. The Company records deferred revenue when cash payments are received, or invoices are issued, in advance of revenue being earned. Deferred revenue is classified as a current liability as it is expected to be earned within the next twelve months.

~~On-screen~~The ~~advertising~~Company ~~consists~~recorded ofnon-cash ~~national~~revenue ~~and~~of ~~local advertising~~$0.0 ~~National advertising is sold on a cost per thousand (CPM) basis~~million, ~~while~~$0.0 ~~local~~million and ~~regional advertising is sold on a per-screen, per-week basis and to a lesser extent on a CPM basis~~$3.1 ~~The~~million ~~Company recognizes national advertising as impressions (or theater attendees) are delivered and recognizes local on-screen advertising revenue~~ during the ~~period~~years inended ~~which~~December ~~the~~28, ~~advertising~~2017, ~~airs~~December as29, ~~dictated~~2016 ~~by sales contracts. The Company recognizes revenue derived from lobby network~~ and ~~promotions~~December ~~when~~31, ~~the~~2015, ~~advertising~~respectively, iswhere ~~displayed in theater lobbies and recognizes revenue from branded entertainment websites and mobile applications when~~ the ~~online or mobile impressions are served. The~~ Company ~~may~~received ~~make~~equity ~~contractual~~securities ~~guarantees~~in toprivately ~~deliver~~held acompanies ~~specified~~as ~~number of impressions to view the customers’ advertising~~consideration. ~~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~~Company ~~portion~~recorded of the revenue ~~associated~~at ~~with~~ the ~~undelivered~~estimated ~~impressions~~fair isvalue ~~referred to as a make-good provision. In rare cases, the Company will make a cash refund~~ of the ~~portion~~advertising ofexchanged ~~the~~based ~~contract~~upon ~~related to~~ the ~~undelivered~~fair ~~impressions.~~value ~~The~~of ~~Company defers~~ the ~~revenue associated with the make-good until the~~ advertising ~~airs~~sold tofor ~~the theater attendance specified in the advertising contract. The make-good provision is recorded within accrued expenses in the Balance Sheets. The Company records deferred revenue when~~ cash ~~payments are received, or invoices are issued, in advance of revenue being earned. Deferred revenue is classified as a current liability as it is expected to be earned~~ within ~~the next twelve months~~contracts.

Barter Transactions—The Company ~~recorded~~enters ~~non-cash~~into ~~revenue~~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 $0the advertising exchanged based on fair value received for similar advertising from cash paying customers.0 Revenues ~~million~~for advertising barter transactions are recognized when advertising is provided, ~~$3.1~~and ~~million~~products and $1services received are charged to expense when used.2 ~~million~~Revenue ~~during~~from barter transactions for the years ended December 2928, ~~2016~~2017, December 3129, ~~2015~~2016 and ~~January~~December 131, 2015, ~~respectively,~~was ~~where~~$0.8 ~~the~~million, ~~Company~~$2.5 ~~received~~million ~~equity~~and ~~securities~~$2.0 inmillion, ~~privately held companies as consideration~~respectively. ~~The~~ ~~Company~~Expense recorded ~~the~~from ~~revenue~~barter attransactions for the ~~estimated~~years ~~fair~~ended ~~value~~December of28, ~~the~~2017, ~~advertising~~December ~~exchanged~~29, ~~based~~2016 ~~upon~~and ~~the~~December ~~fair~~31, ~~value~~2015 ofwas ~~the~~$1.4 ~~advertising~~million, ~~sold~~$2.3 ~~for~~million ~~cash~~and ~~within~~$2.5 ~~contracts~~million, respectively.

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. Revenue from barter transactions for the years ended December 29, 2016, December 31, 2015 and January 1, 2015 was $2.5 million, $2.0 million and $1.3 million, respectively. Expense recorded from barter transactions for the years ended December 29, 2016, December 31, 2015 and January 1, 2015 was $2.3 million, $2.5 million and $1.2 million, respectively.

Operating Costs—Advertising-related operating costs primarily include personnel and other costs related to advertising fulfillment, payments due to unaffiliated theater circuits under the network affiliate agreements, and to a lesser extent, production costs of non-digital advertising.

Payments to the founding members of a theater access fee is comprised of a payment per theater attendee, a payment per digital screen and a payment per digital cinema projector equipped in the theaters, 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.

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