Reaffirms Full Year 2017 Outlook
National CineMedia, Inc. (NASDAQ: NCMI) (the Company), the
managing member and owner of 39.3% of National CineMedia, LLC (NCM
LLC), the operator of the largest in-theater digital media network
in North America, today announced consolidated results for the
fiscal second quarter and six months ended June 29, 2017.
Total revenue for the second quarter ended June 29, 2017
decreased 15.9% to $97.1 million from $115.4 million for the
comparable quarter last year. Adjusted OIBDA decreased 28.8% to
$42.3 million for the second quarter of 2017 from $59.4 million for
the second quarter of 2016. Operating income decreased 39.1% to
$28.3 million for the second quarter of 2017 from $46.5 million for
the second quarter of 2016. Included in Adjusted OIBDA and
operating income were $1.7 million and $0.7 million of non-cash
impairment charges during the second quarter of 2017 and second
quarter of 2016, respectively, on investments obtained in prior
years in exchange for advertising services. Net income for the
second quarter of 2017 was $1.5 million, or net income of $0.02 per
diluted share, compared to net income of $6.8 million, or net
income of $0.11 per diluted share, for the second quarter of 2016.
As adjusted to exclude the CEO transition-related costs in 2017 and
2016 and early lease termination expense in 2017, net income for
the second quarter of 2017 would have been $0.03 per diluted share
and net income for the second quarter of 2016 would have remained
$0.11 per diluted share.
Total revenue for the six months ended June 29, 2017 decreased
11.8% to $169.0 million from $191.6 million for the comparable
period last year. Adjusted OIBDA decreased 28.2% to $59.9 million
for the first six months of 2017 from $83.4 million for the first
six months of 2016. Operating income decreased 36.1% to $33.4
million for the first six months of 2017 from $52.3 million for the
first six months of 2016. Included in Adjusted OIBDA and operating
income were $3.1 million and $0.7 million of non-cash impairment
charges during the first six months of 2017 and the first six
months of 2016, respectively, on investments obtained in prior
years in exchange for advertising services. Net loss for the first
six months of 2017 was $3.5 million, or a loss of $0.06 per diluted
share, compared to net income of $2.5 million, or income of $0.04
per diluted share for the first six months of 2016. As adjusted to
exclude the CEO transition-related costs and early lease
termination expense, net loss for the first six months of 2017
would have been $0.05 per diluted share and net income for the
first six months of 2016 would have been $0.07 per diluted share.
Adjusted OIBDA and adjusted earnings per share are non-GAAP
measures. See the tables at the end of this release for the
reconciliations to the closest GAAP basis measurement.
Commenting on the Company’s second quarter of 2017 operating
results and second half of 2017 positioning, Andy England, NCM’s
CEO said, “The second quarter completed a challenging first half of
2017, but the second half of 2017 is shaping up nicely so far with
the third quarter pacing ahead of last year. This gives us a solid
sales foundation to build upon to finish out the year strong and
reaffirm our guidance for 2017, as we look forward to the launch of
our new Noovie pre-show this fall.”
2017 Outlook
For the full year 2017, the Company reaffirms its outlook of
total revenue to be down 6% to 1% and Adjusted OIBDA to be down 12%
to 6% from the full year 2016. The Company expects total revenue in
the range of $422.0 million to $442.0 million for the full year
2017, compared to total revenue for the full year 2016 of $447.6
million and Adjusted OIBDA in the range of $202.0 million to $217.0
million for the full year 2017 compared to Adjusted OIBDA for the
full year 2016 of $230.7 million. This outlook includes the impact
of an 8% increase in the theater access fee paid to the founding
members that occurs every five years as well as the non-cash
impairment charges of $3.1 million recorded for the first six
months of 2017, described above. During 2017, the Company expects
to record approximately $18.0 million to $20.0 million in
integration payments from Cinemark and AMC associated with Rave
Theatres and Carmike Theatres, which are recorded as a reduction of
an intangible asset.
Supplemental Information
Integration payments due from Cinemark and AMC associated with
Rave Theatres and Carmike Theatres for the quarter ended June 29,
2017 and June 30, 2016 and six month ended June 29, 2017 and June
30, 2017 were $4.3 million, $0.7 million, $4.7 million and $0.8
million, respectively. The integration payments were recorded as a
reduction of an intangible asset.
Conference Call
The Company will host a conference call and audio webcast with
investors, analysts and other interested parties August 7, 2017 at
5:00 P.M. Eastern time. The live call can be accessed by dialing
1-877-407-9039 or for international participants 1-201-689-8470.
Participants should register at least 15 minutes prior to the
commencement of the call. Additionally, a live audio webcast will
be available to interested parties at www.ncm.com under the
Investor Relations section. Participants should allow at least 15
minutes prior to the commencement of the call to register, download
and install necessary audio software.
The replay of the conference call will be available until
midnight Eastern Time, August 21, 2017, by dialing 1-844-512-2921
or for international participants 1-412-317-6671, and entering
conference ID 13666483.
About National CineMedia, Inc.
National CineMedia (NCM) is America’s Movie Network. As the #1
Millennial weekend network in the U.S., NCM is the connector
between brands and movie audiences. According to Nielsen, more than
750 million moviegoers annually attend theaters that are currently
under contract to present NCM’s pre-show in 49 leading national and
regional theater circuits including AMC Entertainment Inc.
(NYSE:AMC), Cinemark Holdings, Inc. (NYSE:CNK) and Regal
Entertainment Group (NYSE: RGC). NCM’s cinema advertising network
offers broad reach and unparalleled audience engagement with over
20,600 screens in approximately 1,700 theaters in 187 Designated
Market Areas® (all of the top 50). NCM Digital goes beyond the big
screen, extending in-theater campaigns into online and mobile
marketing programs to reach entertainment audiences. National
CineMedia, Inc. (NASDAQ:NCMI) owns a 39.3% interest in, and is the
managing member of, National CineMedia, LLC. For more information,
visit www.ncm.com.
Forward-Looking Statements
This press release contains various
forward-looking statements that reflect management’s current
expectations or beliefs regarding future events, including
statements providing guidance and projections for the full year
2017, and beliefs about our third quarter and remainder of the year
sales prospects. Investors are cautioned that reliance on these
forward-looking statements involves risks and uncertainties.
Although the Company believes that the assumptions used in the
forward-looking statements are reasonable, any of these assumptions
could prove to be inaccurate and, as a result, actual results could
differ materially from those expressed or implied in the
forward-looking statements. The factors that could cause actual
results to differ materially from those expressed or implied in the
forward-looking statements are, among others, 1) level of theater
attendance or viewership of the pre-show; 2) increased competition
for advertising expenditures; 3) technological changes and
innovations; 4) economic conditions, including the level of
expenditures on cinema advertising; 5) our ability to renew or
replace expiring advertising and content contracts; 6) our need for
additional funding, risks and uncertainties relating to our
significant indebtedness; 7) fluctuations in operating costs; 8)
changes in interest rates; and 9) changes in accounting principles.
In addition, the outlook provided does not include the impact of
any future unusual or infrequent transactions; sales and
acquisitions of operating assets and investments; any future
noncash impairments of intangible and fixed assets; amounts related
to litigation or the related impact of taxes that may occur from
time to time due to management decisions and changing business
circumstances. The Company is currently unable to forecast
precisely the timing and/or magnitude of any such amounts or
events. Please refer to the Company’s Securities and Exchange
Commission filings, including the “Risk Factor” section of the
Company’s Annual Report on Form 10-K for the year ended December
29, 2016, for further information about these and other risks.
NATIONAL CINEMEDIA,
INC.Condensed Consolidated Statements of
IncomeUnaudited($ in millions, except per share
data)
Quarter Ended Six Months Ended
June 29,2017
June 30,2016
June 29,2017
June 30,2016
Revenue (including revenue from founding
members of $7.6, $7.2, $16.0 and $14.5,
respectively)
$ 97.1 $ 115.4 $ 169.0 $ 191.6 OPERATING EXPENSES: Advertising
operating costs 7.5 8.3 12.5 13.3 Network costs 4.0 4.3 8.2 8.8
Theater access fees—founding members 18.7 18.9 39.3 37.6 Selling
and marketing costs 18.9 19.1 37.0 37.7 Administrative and other
costs 10.5 9.4 19.8 24.3 Depreciation and amortization 9.2
8.9 18.8 17.6 Total 68.8 68.9
135.6 139.3 OPERATING INCOME 28.3 46.5
33.4 52.3 NON-OPERATING EXPENSES: Interest on
borrowings 13.1 13.5 26.3 26.9 Interest income (0.4 ) (0.4 ) (0.8 )
(1.0 )
Accretion of interest on the discounted
payable to founding members under tax receivable
agreement
2.9 3.4 6.3 7.0 Other non-operating income — —
(0.1 ) — Total 15.6 16.5 31.7
32.9 INCOME BEFORE INCOME TAXES 12.7 30.0 1.7 19.4
Income tax expense
1.8 4.5 0.3 2.4 CONSOLIDATED NET INCOME
10.9 25.5 1.4 17.0
Less: Net income attributable to
noncontrolling interests
9.4 18.7 4.9 14.5
NET INCOME (LOSS) ATTRIBUTABLE TO NCM,
INC.
$ 1.5 $ 6.8 $ (3.5 ) $ 2.5
NET INCOME (LOSS) PER NCM, INC. COMMON
SHARE:
Basic $ 0.02 $ 0.11 $ (0.06 ) $ 0.04 Diluted $ 0.02 $ 0.11 $ (0.06
) $ 0.04 Dividends declared per common share $ 0.22 $ 0.22 $
0.44 $ 0.44
NATIONAL CINEMEDIA, INC.Selected
Condensed Balance Sheet DataUnaudited ($ in
millions)
As of June 29, 2017 December 29,
2016 Cash, cash equivalents and marketable securities $ 51.6 $
68.7 Receivables, net 99.2 160.5 Property and equipment, net 30.0
29.6 Total assets 1,121.7 1,057.4 Borrowings, gross 930.0 935.0
Total equity/(deficit) (68.3 ) (181.2 ) Total liabilities and
equity 1,121.7 1,057.4
NATIONAL CINEMEDIA,
INC.Operating DataUnaudited
Quarter Ended June 29, 2017
June 30, 2016 Total Screens (100% Digital) at
Period End (1)(6) 20,623 20,471 Founding Member
Screens at Period End (2)(6) 16,716 17,028 DCN (Digital Content
Network) Screens at Period End (3)(6) 20,033 20,061
Quarter Ended Six Months Ended
(in millions)
June 29,2017
June 30,2016
June 29,2017
June 30,2016
Total Attendance for Period (4)(6) 160.0 172.2 341.5 344.5 Founding
Member Attendance for Period (5)(6) 132.5 145.9 285.8 294.1 Capital
Expenditures $ 3.0 $ 3.0 $ 6.0 $ 7.0
_____________
(1)
Represents the total screens within NCM LLC’s advertising
network.
(2)
Represents the total founding member screens.
(3)
Represents the total number of screens that are connected to the
Digital Content Network.
(4)
Represents the total attendance within NCM LLC’s advertising
network.
(5)
Represents the total attendance within NCM LLC’s advertising
network in theaters operated by the founding members.
(6)
Excludes screens and attendance associated with certain AMC
Carmike, AMC Rave and Cinemark Rave theaters for all periods
presented.
NATIONAL CINEMEDIA,
INC.Operating DataUnaudited(In millions,
except advertising revenue per attendee, margin and per share
data)
Quarter Ended Six Months Ended
June 29,2017
June 30,2016
June 29,2017
June 30,2016
Revenue breakout: National advertising revenue $ 66.0 $ 83.0
$ 110.4 $ 133.2 Local and regional advertising revenue 23.5
25.3 42.6 44.1
Total advertising revenue (excluding beverage) $ 89.5 $
108.3 $ 153.0 $ 177.3 Total revenue $
97.1 $ 115.4 $ 169.0 $ 191.6
Per attendee data:
National advertising revenue per attendee $ 0.413 $ 0.482 $ 0.323 $
0.387 Local and regional advertising revenue per attendee $ 0.147 $
0.147 $ 0.125 $ 0.128
Total advertising revenue (excluding
beverage) per attendee
$ 0.559 $ 0.629 $ 0.448 $ 0.515 Total revenue per attendee $ 0.607
$ 0.670 $ 0.495 $ 0.556 Total attendance (1) 160.0 172.2 341.5
344.5
Other operating data: Operating income $ 28.3 $
46.5 $ 33.4 $ 52.3 OIBDA (2) $ 37.5 $ 55.4 $ 52.2 $ 69.9 Adjusted
OIBDA (2) $ 42.3 $ 59.4 $ 59.9 $ 83.4 Adjusted OIBDA margin (2)
43.6 % 51.5 % 35.4 % 43.5 % Income (loss) per share – basic
$ 0.02 $ 0.11 $ (0.06 ) $ 0.04 Income (loss) per share – diluted $
0.02 $ 0.11 $ (0.06 ) $ 0.04 Adjusted income (loss) per
share – basic (2) $ 0.03 $ 0.12 $ (0.05 ) $ 0.07 Adjusted income
(loss) per share – diluted (2) $ 0.03 $ 0.11 $ (0.05 ) $ 0.07
_____________
(1)
Represents the total attendance within NCM LLC’s advertising
network. Excludes screens and attendance associated with certain
AMC Carmike, AMC Rave and Cinemark Rave theaters for all periods
presented.
(2)
OIBDA, Adjusted OIBDA, Adjusted OIBDA margin and adjusted loss per
share are not financial measures calculated in accordance with GAAP
in the United States. See attached tables for the non-GAAP
reconciliations.
NATIONAL CINEMEDIA, INC.Non-GAAP
ReconciliationsUnaudited
OIBDA, Adjusted OIBDA and Adjusted OIBDA Margin
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
compensation cost, Chief Executive Officer transition costs and
early lease termination expense. Adjusted OIBDA margin is
calculated by dividing Adjusted OIBDA by total 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 operating performance because they
eliminate items that have less bearing on its operating performance
and so 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,
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 resignation of the company’s
former Chief Executive Officer and an 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.
The following tables reconcile operating income to OIBDA and
Adjusted OIBDA for the periods presented (dollars in millions):
Quarter Ended
Six Months Ended Year Ended June 29,
2017
June 30,
2016
June 29,
2017
June 30,
2016
December 29,
2016
Operating income $ 28.3 $ 46.5 $ 33.4 $ 52.3 $ 173.0 Depreciation
and amortization 9.2 8.9 18.8
17.6 35.8 OIBDA $ 37.5 $ 55.4 $
52.2 $ 69.9 $ 208.8 Share-based compensation costs (1) 2.8 3.7 5.5
10.3 18.3 CEO transition costs (2) 0.2 0.3 0.4 3.2 3.6 Early lease
termination expense (3) 1.8 —
1.8 — — Adjusted OIBDA $ 42.3
$ 59.4 $ 59.9 $ 83.4 $ 230.7
Total revenue $ 97.1 $ 115.4 $ 169.0 $ 191.6
$ 447.6 Adjusted OIBDA margin 43.6 %
51.5 % 35.4 % 43.5 % 51.5 % Adjusted
OIBDA $ 42.3 $ 59.4 $ 59.9 $ 83.4 $ 230.7
Carmike and Rave Theatres integration
payments
4.3 0.7 4.7 0.8
2.6
Adjusted OIBDA after integration
payments
$ 46.6 $ 60.1 $ 64.6 $ 84.2 $ 233.3
_____________
(1)
Share-based compensation costs are included in network
operations, selling and marketing and administrative expense in the
accompanying financial statements as shown in the following table
(dollars in millions).
Quarter Ended
Six Months Ended Year Ended
June 29,2017
June 30,2016
June 29,2017
June 30,2016
December 29,2016
Share-based compensation costs included in
network costs
$ 0.2 $ 0.3 $ 0.5 $ 0.6 $ 1.1
Share-based compensation costs included
in selling and marketing costs
1.3 1.5 2.2 3.1 6.0
Share-based compensation costs included
in administrative and other costs (a)
1.3 1.9 2.8 6.6 11.2 Total
share-based compensation costs $ 2.8 $ 3.7 $ 5.5 $ 10.3 $ 18.3
_____________
(a)
Includes $2.3 million of expense associated with the
modification of certain former executive equity awards during the
six months ended June 30, 2016.
(2)
Chief Executive Officer transition costs represent severance,
consulting and other costs and are included in administrative
expense in the accompanying financial statements.
(3)
Early lease termination expense represents a non-cash expense
recorded upon the early termination of the lease of our corporate
headquarters because the early termination payment made by the
Company was reimbursed by the landlord of the new building. This
expense is included in administrative expense in the accompanying
financial statements.
Outlook (in millions)
Year Ending
December 28, 2017
NCM, Inc. Low High
Operating income $ 152.5 $ 166.8 Depreciation and amortization
35.4 35.6 OIBDA 187.9 202.4 Share-based compensation
costs (1) 12.0 12.5 CEO transition costs (2) 0.3 0.3 Early lease
termination expense (3) 1.8 1.8 Adjusted OIBDA $
202.0 $ 217.0 Total revenue $ 422.0 $ 442.0
_____________
(1)
Share-based compensation costs are included in network
operations, selling and marketing and administrative expense in the
accompanying financial statements.
(2)
Chief Executive Officer transition costs represent primarily
consulting costs.
(3)
Early lease termination expense represents a non-cash expense
recorded upon the early termination of the lease of our corporate
headquarters because the early termination payment made by the
Company was reimbursed by the landlord of the new building.
Adjusted Net Income and Income per Share
Adjusted net income and income per share are not financial
measures calculated in accordance with GAAP in the United States.
Adjusted net income and income per share are calculated using
reported net income and income per share and exclude CEO
transition-related costs and early lease termination costs shown in
the below table. Our management uses these non-GAAP financial
measures as an additional tool to evaluate operating performance.
The Company believes these are important supplemental measures of
operating performance because they eliminate items that have less
bearing on its operating performance and so 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
a method used by the Company’s management and helps improve their
ability to understand the Company’s operating performance. Adjusted
net loss should not be regarded as an alternative to net income and
should not be regarded as an alternative to loss per share 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 net income and
income per share are the most directly comparable GAAP financial
measures. Because not all companies use identical calculations,
these presentations may not be comparable to other similarly titled
measures of other companies.
The following table reconciles net income and income per share
as reported to adjusted net income and income per share excluding
the CEO transition-related costs and early termination expense for
the periods presented (dollars in millions):
Quarter Ended Six Months Ended June
29,
2017
June 30,
2016
June 29,
2017
June 30,
2016
Net income (loss) as reported $ 1.5 $ 6.8 $ (3.5 ) $ 2.5 CEO
transition costs (1) 0.2 0.3 0.4 3.2
Stock-based compensation expense for
modified equity awards (2)
— — — 2.3 Early lease termination expense (3) 1.8 — 1.8 —
Effect of noncontrolling interests (60.7%,
56.4%, 60.7% and 56.4%, respectively)
(1.2 ) (0.2 ) (1.2 ) (3.1 )
Effect of provision for income taxes (38%
effective rate)
(0.3 ) — (0.4 ) (0.9 ) Net
effect of adjusting items 0.5 0.1
0.6 1.5 Net income (loss) excluding
adjusting items $ 2.0 $ 6.9 $ (2.9 ) $ 4.0
Weighted Average Shares Outstanding as
reported and as adjusted
Basic 60,609,975 59,831,675 60,459,531 59,721,270 Diluted
60,899,177 60,556,539 60,459,531 60,314,112 Basic income
(loss) per share as reported $ 0.02 $ 0.11 $ (0.06 ) $ 0.04 Net
effect of adjusting items 0.01 0.01
0.01 0.03 Basic income (loss) per share
excluding adjusting items $ 0.03 $ 0.12 $ (0.05 ) $
0.07 Diluted income (loss) per share as reported $
0.02 $ 0.11 $ (0.06 ) $ 0.04 Net effect of adjusting items
0.01 — 0.01 0.03
Diluted income (loss) per share excluding adjusting items $ 0.03
$ 0.11 $ (0.05 ) $ 0.07
_____________
(1)
Chief Executive Officer transition costs represent
severance, consulting and other costs.
(2)
Consists of non-cash stock-based compensation expense associated
with modifications to the former CEO’s equity awards pursuant to
his Separation and General Release Agreement.
(3)
Early lease termination expense represents a non-cash expense
recorded upon the early termination of the lease of our corporate
headquarters because the early termination payment made by the
Company was reimbursed by the landlord of the new building.
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version on businesswire.com: http://www.businesswire.com/news/home/20170807005940/en/
National CineMedia, Inc.INVESTOR CONTACT:Ted
Watson, 800-844-0935investors@ncm.comorMEDIA CONTACT:Amy
Jane Finnerty, 212-931-8117amy.finnerty@ncm.com
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