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National CineMedia Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 3, 2010 04:35PM

National CineMedia Inc. (NCMI) filed Quarterly Report for the period ended 2010-07-01. National Cinemedia Inc. has a market cap of $778.5 million; its shares were traded at around $18.05 with a P/E ratio of 30.1 and P/S ratio of 2. The dividend yield of National Cinemedia Inc. stocks is 4%.

NCMI is in the portfolios of Ron Baron of Baron Funds, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

OIBDA and Adjusted OIBDA do not reflect the AMC Loews or Regal Consolidated Theatres integration payments. The integration payments received are added to Adjusted OIBDA to determine our compliance with financial covenants under our senior secured credit facility. AMC made Loews payments to NCM LLC pursuant to the AMC Loews screen integration agreement through April 2009, which were $0 and $0.1 million for the quarter and six months ended July 2, 2009, respectively. Regal made Consolidated Theatre payments to NCM LLC pursuant to the revised ESAs, which was $0.9 million, $1.3 million, $0.8 million and $1.1 million for the quarter ended July 1, 2010, the six months ended July 1, 2010, the quarter ended July 2, 2009 and the six months ended July 2, 2009, respectively.

National advertising revenues of $73.7 million (including $9.6 million of beverage revenue) for the quarter ended July 1, 2010 increased 8.1% from $68.2 million (including $9.9 million of beverage revenue) for the quarter ended July 2, 2009. National advertising revenue (excluding beverage revenue) for the quarter ended July 1, 2010 increased $5.8 million or 9.9% to $64.1 million compared to $58.3 million for the quarter ended July 2, 2009. This increase was due to continued expansion of our overall client base and favorable TV advertising scatter market that contributed to a 6.7% increase in national advertising CPM’s (excluding beverage revenue) and an increase in inventory utilization (excluding beverage revenue) to 92.5% for the quarter ended July 1, 2010 from 81.3% for the quarter ended July 2, 2009. Our inventory utilization was also impacted by an 8.3% decrease in advertising impressions available for sale for the quarter ended July 1, 2010 compared to the same period in 2009, due to lower than expected attendance in certain ratings, particularly PG-13. Our second quarter inventory utilization and CPM were both negatively impacted by the effects of a shift in allocation of spending by our content partners to later in 2010. The 2.3% decrease in payments from the founding members for their beverage concessionaire agreements was primarily due to a decrease in founding member attendance of 7.9% as compared to the second quarter of 2009 offset by the annual contractual 6% beverage revenue CPM increase. The decreases in overall theatre attendance in certain ratings resulted in a $4.6 million make-good reserve balance at July 1, 2010. The Company anticipates that this reserve will be recognized as revenue in the third and fourth quarter of 2010. The make-good reserve balance at July 2, 2009 was $1.1 million.

Local advertising revenue increased $1.1 million or 7.2% to $16.4 million for the quarter ended July 1, 2010 compared to $15.3 million for the quarter ended July 2, 2009. The increase is primarily due to an increase in the level of spending by smaller businesses and an increase in the number of larger regional contracts. Local revenue per theatre attendee increased 25.0% to $0.10 per attendee for the second quarter of 2010 compared to $0.08 for the second quarter of 2009, due to the increased sales revenue combined with an 8.4% decrease in theatre attendance, particularly PG-13, within our network.

Net income. Net income generated for the quarter ended July 1, 2010 was $4.6 million, a decrease of $2.5 million compared to net income for the quarter ended July 2, 2009, despite the increase of 8.5% in operating income. The level of net income was negatively impacted by a net non-cash $9.0 million change in derivative fair value since the second quarter of 2009 resulting in a $4.5 million expense for the quarter ended July 1, 2010 as compared to a $4.5 million credit for the quarter ended July 2, 2009 due to the change in fair value of an interest rate hedge associated with our senior secured credit facility. The decrease in income taxes in the second quarter of 2010 is due primarily to lower pretax income. Non-controlling interest expense decreased $1.6 million to $17.3 million for the quarter ended July 1, 2010 due to lower income before taxes, offset by the impact of additional common membership units issued in 2010.

National advertising revenues of $129.3 million (including $18.8 million of beverage revenue) for the six months ended July 1, 2010 increased 8.4% from $119.3 million (including $18.3 million of beverage revenue) for the 2009 period. National advertising revenue (excluding beverage revenue) for the six months ended July 1, 2010 increased 9.4% to $110.5 million compared to $101.0 million for the six months ended July 2, 2009, primarily due a 4.3% increase in CPMs (excluding beverage revenue) and an increase in national advertising inventory utilization (excluding beverage revenue) to 85.4% from 74.9% in 2009. The increase in CPMs is due to a favorable scatter television market. The increase in utilization is due to the expansion of our client base, and also impacted by the decreases in our salable impressions of 3.4% in the first half of 2010 compared to the first half of 2009. Both CPM and utilization were adversely impacted by a decrease in the allocation of annual spending by our content partners to the latter half of 2010 as compared with 2009. The Company had a $0.5 million increase in beverage revenue, primarily due to the contracted annual 6% increase in beverage CPM, offset by a decrease in our founding member attendance of 2.8% for the six months ended July 1, 2010 as compared to the six months ended July 2, 2009. The decrease in theatre attendance resulted in a $4.6 million make-good reserve balance at July 1, 2010. The Company anticipates this reserve will be recognized as revenue in the third and fourth quarter of 2010. The make-good reserve balance at July 2, 2009 was $1.1 million.

As of July 1, 2010, our cash, cash equivalents and short-term investments balance was $55.9 million, a decrease of $35.2 million compared to the balance of $91.1 million as of December 31, 2009 and a $5.7 million decrease compared to the balance at July 2, 2009. Our net debt balances (debt balance net of cash balance) decreased $19.3 million compared to the balance at July 2, 2009.

Read the The complete Report



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