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National CineMedia Inc. Reports Operating Results (10-Q/A)
Posted by: gurufocus (IP Logged)
Date: November 5, 2009 06:17PM

National CineMedia Inc. (NCMI) filed Amended Quarterly Report for the period ended 2009-07-02. NATIONAL CINEMEDIA operates the largest digital in theatre network in North America that allows them to distribute advertisements and other content for our advertising meetings and events businesses utilizing our proprietary digital content network. They have long term exhibitor services agreements with our founding members Cinemark and Regal the three largest motion picture exhibition companies in the U.S.and multi year agreements with several other theatre operators whom they refer to as network affiliates. The network affiliate agreements grant them exclusive rights subject to limited exceptions to sell advertising on their theatre screens. National Cinemedia Inc. has a market cap of $638.5 million; its shares were traded at around $15.16 with a P/E ratio of 22.7 and P/S ratio of 1.7. The dividend yield of National Cinemedia Inc. stocks is 4.3%.

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 $0.1 million, $3.2 million and $4.0 million for the six months ended July 2, 2009, the quarter ended June 26, 2008 and the six months ended June 26, 2008, respectively. Regal made Consolidated Theatre payments to NCM LLC pursuant to the revised ESAs, which was $0.8 million, $1.1 million, $0.5 million and $0.5 million for the quarter and six months ended July 2, 2009 and the quarter and six months ended June 26, 2008, respectively.

National advertising revenue of $68.1 million (including $9.9 million of beverage revenue) for the quarter ended July 2, 2009 increased 16.5% compared to $58.5 million (including $10.6 million of beverage revenue) for the quarter ended June 26, 2008. The 21.5% increase in national revenue (excluding beverage revenue) was due primarily to an increase in national inventory utilization to 81.3% from 66.2%, while salable advertising impressions increased approximately 18.3%, or 267.4 million, primarily due to the inclusion in our network of the AMC Loews theatres, offset by a decrease in CPM’s of 6.2% (excluding beverage revenue). This revenue increase was also offset by a $0.7 million decrease, or 6.6%, in beverage revenue, primarily due to a reduction in contracted beverage advertising time by two of our founding members as compared to the quarter ended June 26, 2008, offset by a contractual annual 8% increase in beverage CPM and the additional attendance increase associated with the Consolidated Theatres acquired by Regal in the second quarter of 2008 and the strong theatrical box office. National advertising revenue also benefited from an increase in the allocation of content partner spending to the quarter ended July 2, 2009 versus the comparable period in 2008.

Local advertising revenue decreased $1.0 million or 6.1% to $15.3 million for the quarter ended July 2, 2009 compared to $16.3 million for the quarter ended June 26, 2008. The decrease is primarily due to current economic conditions. Local revenue per theatre attendee in the second quarter of 2009 declined to $0.08 per attendee compared to $0.11 for the second quarter of 2008 due to the revenue decrease noted above, as well as an increase in the number of attendees over our network.

National advertising revenues of $119.2 million (including $18.3 million of beverage revenue) for the six months ended July 2, 2009 increased 18.0% from $101.0 million (including $20.8 million of beverage revenue) for the 2008 period. National advertising revenue (excluding beverage revenue) for the six months ended July 2, 2009 increased 25.8% compared to the 2008 period, primarily due to an increase in national advertising inventory utilization (excluding beverage revenue) to 74.9% from 62.6% offset by a decrease in CPMs of 3.3% (excluding beverage revenue). The increase in utilization is due primarily to an increase in the allocation of annual spending by our content partners in the first half of the year in 2009 as compared to 2008, and was achieved despite increases in our salable impressions in the first half of 2009 compared to 2008. This revenue increase was offset by a $2.5 million decrease in beverage revenue, primarily due to a reduction in contracted beverage advertising time by two of our founding members in the first half of 2009 compared to 2008, offset by a contractual annual 8% increase in beverage CPM.

Local advertising revenue decreased $3.2 million or 11.6% to $24.3 million for the six months ended July 2, 2009 compared to $27.5 million for the six months ended June 26, 2008. The decrease appears to be due to current economic conditions. Local revenue per theatre attendee in the first half of 2009 declined to $0.07 per attendee compared to $0.09 for the first half of 2008.

As of July 2, 2009, our cash, cash equivalents and short-term investments balance was $61.6 million, a decrease of $7.6 million compared to the balance of $69.2 million as of January 1, 2009 and an increase of $43.5 million compared to the balance at June 26, 2008 (2008’s second quarter end).

Read the The complete Report

NCMI is in the portfolios of Ron Baron of Baron Funds.


Stocks Discussed: NCMI,
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