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National CineMedia Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 7, 2010 06:17AM
National CineMedia Inc. (NCMI) filed Quarterly Report for the period ended 2010-04-01. National Cinemedia Inc. has a market cap of $771.5 million; its shares were traded at around $17.9 with a P/E ratio of 30.9 and P/S ratio of 2. The dividend yield of National Cinemedia Inc. stocks is 3.4%.NCMI is in the portfolios of Ron Baron of Baron Funds, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
National advertising revenues of $55.6 million (including $9.2 million of beverage revenue) for the quarter ended April 1, 2010 increased 8.6% from $51.1 million (including $8.4 million of beverage revenue) of revenue for the quarter ended April 2, 2009. National advertising revenue (excluding beverage revenue) for the quarter ended April 1, 2010 increased $3.6 million or 8.5% to $46.4 million compared to $42.7 million for the quarter ended April 2, 2009. This increase was primarily due to an increase in inventory utilization (excluding beverage revenue) to 78.1% for the quarter ended April 1, 2010 as compared to 67.4% for the quarter ended April 2, 2009, a 2.4% increase in advertising impressions available for sale along with an increase in national advertising CPMs of 1.7% over the comparable quarter of 2009. The increase in CPMs is due to a favorable scatter market client mix, associated with a tight TV scatter market. The increase in inventory utilization was primarily due to the continued expansion of our overall client base and tight TV scatter market. The increase in payments from the founding members for their beverage concessionaire agreements was primarily due to an increase in founding member attendance of 3.1% as compared to the first quarter of 2009 due to a continued strong movie slate, as well as the contracted annual 6% increase in beverage advertising CPM.
Local advertising revenue increased $3.2 million or 35.6% to $12.2 million for the quarter ended April 1, 2010 compared to $9.0 million for the quarter ended April 2, 2009. The increase is primarily due to increased spending by smaller businesses and an increase in the number of larger regional contracts with national clients that are benefiting from the economic recovery. Local revenue per theatre attendee increased 32.5% to $0.08 per attendee for the first quarter of 2010 compared to $0.06 for the first quarter of 2009 due to the effect of the higher revenue and a 2.3% increase in attendance across our network to 161.9 million as compared to 158.3 million in the first quarter of 2009.
Fathom Events revenue increased $3.4 million, or 25.4%, to $16.8 million for the quarter ended April 1, 2010 as compared to $13.4 million for the quarter ended April 2, 2009. This increase was due to continued growth in our Fathom Consumer events division, slightly offset by a small decrease in our Fathom Business events division which continues to be adversely impacted by the soft economy as larger corporate clients delay their marketing and employee communication events. Our Fathom Consumer events business revenue benefited from the broadening of the programming offerings and categories during the first quarter of 2010, as well as the continued expansion of our live network capabilities, resulting in a 10.5% increase in the Consumer divisions number of event locations.
As of April 1, 2010 our cash, cash equivalents and short-term investments balance was $82.6 million, a decrease of $8.5 million compared to the balance of $91.1 million as of December 31, 2009 but an $11.3 million increase compared to the balance at April 2, 2009.
Management believes that future funds generated from NCM LLCs operations and cash on hand should be sufficient to fund working capital requirements, NCM LLCs debt service requirements, and capital expenditure and other investing requirements, through the next 12 months. Cash flows generated by NCM LLCs distributions to NCM, Inc. and the founding members can be impacted by the seasonality experienced in advertising revenues and to a lesser extent theatre attendance. NCM LLC is required pursuant to the terms of its operating agreement to distribute its available cash, as defined in the operating agreement, to its members (the founding members and NCM, Inc.). The available cash distribution to the members of NCM LLC for the quarter ended April 1, 2010 was $10.5 million, of which $4.3 million was NCM, Inc.s portion, which will be paid in the second quarter of fiscal 2010. NCM, Inc. will use cash received from the available cash distributions to fund income taxes, payments associated with the tax sharing agreement with the founding members and current and future dividends as declared by the board of directors, including a dividend declared in April 2010 of $0.18 per share (approximately $7.8 million) which will be paid on June 3, 2010. Distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund NCM, Inc.s tax receivable payments to the founding member circuits, income taxes and its regular dividend for the foreseeable future.
The primary market risk to which we are exposed is interest rate risk. We have entered into variable-to-fixed interest rate swap arrangements economically hedging $550.0 million of the $725.0 million term loan at a fixed interest rate of 6.734%. For a discussion of market risks, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk contained in our annual report on Form 10-K for the fiscal year ended December 31, 2009 and incorporated by reference herein. While the current interest rates on that debt are lower than those implicit in the hedge, a 100 basis point fluctuation in market interest rates would have the effect of increasing or decreasing our interest expense by approximately $2.6 million for an annual period on a total of $255.0 million of unhedged debt. Because each of our interest rate swaps was in a liability position at April 1, 2010, we are not currently exposed to counterparty risk related to the swaps.
Stocks Discussed: NCMI,