National CineMedia, Inc. Reports Results for Fiscal Fourth Quarter and Full Year 2017
Announces Quarterly Cash Dividend of
Provides
Full Year 2018 Outlook
Total revenue for the fourth quarter ended
Total revenue for the year ended
The Company announced today that its Board of Directors has authorized
the Company’s regular quarterly cash dividend of
Commenting on the Company’s fourth quarter and full year 2017 operating
results,
2018 Outlook
For the full year 2018, the Company expects total revenue to be flat to
up 4.5% and Adjusted OIBDA to be down 2.5% to up 4.8% from the full year
2017. The Company expects total revenue in the range of
Supplemental Information
Integration and other encumbered theater payments due from Cinemark and
AMC associated with Rave Theatres and Carmike Theatres for the quarter
ended
Conference Call
The Company will host a conference call and audio webcast with
investors, analysts and other interested parties
The replay of the conference call will be available until
About
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 2018. 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) reinvestment in our network and product offerings may
require significant funding and resulting reallocation of resources; 8)
fluctuations in operating costs; 9) changes in interest rates; and 10)
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
NATIONAL CINEMEDIA, INC. Condensed Consolidated Statements of Income Unaudited ($ in millions, except per share data) |
|||||||||||||||||
Quarter Ended | Year Ended | ||||||||||||||||
December 28, 2017 |
December 29, 2016 |
December 28, 2017 |
December 29, 2016 |
||||||||||||||
Revenue (including revenue from founding members of $7.2, $7.0, $29.9 and $29.1, respectively) |
$ | 140.7 | $ | 142.5 | $ | 426.1 | $ | 447.6 | |||||||||
OPERATING EXPENSES: | |||||||||||||||||
Advertising operating costs | 11.0 | 9.2 | 32.4 | 30.0 | |||||||||||||
Network costs | 3.9 | 4.2 | 15.8 | 17.1 | |||||||||||||
Theater access fees—founding members | 19.1 | 18.3 | 76.5 | 75.1 | |||||||||||||
Selling and marketing costs | 17.8 | 18.3 | 72.0 | 72.8 | |||||||||||||
Administrative and other costs | 9.3 | 10.9 | 37.9 | 43.8 | |||||||||||||
Depreciation and amortization | 9.4 | 9.3 | 37.6 | 35.8 | |||||||||||||
Total | 70.5 | 70.2 | 272.2 | 274.6 | |||||||||||||
OPERATING INCOME | 70.2 | 72.3 | 153.9 | 173.0 | |||||||||||||
NON-OPERATING EXPENSES: | |||||||||||||||||
Interest on borrowings | 13.4 | 12.8 | 52.8 | 54.0 | |||||||||||||
Interest income | (0.2 | ) | (0.2 | ) | (1.2 | ) | (1.5 | ) | |||||||||
Accretion of interest on the discounted payable to founding members under tax receivable agreement |
2.9 | 4.9 | 10.9 | 19.6 | |||||||||||||
Loss on early retirement of debt | — | — | — | 10.4 | |||||||||||||
(Gain) loss on re-measurement of the payable to founding members under the tax receivable agreement (1) |
(89.0 | ) | 0.3 | (93.6 | ) | 1.0 | |||||||||||
Other non-operating income | (0.1 | ) | — | (0.3 | ) | — | |||||||||||
Total | (73.0 | ) | 17.8 | (31.4 | ) | 83.5 | |||||||||||
INCOME BEFORE INCOME TAXES (1) | 143.2 | 54.5 | 185.3 | 89.5 | |||||||||||||
Income tax expense (1) | 119.8 | 7.5 | 127.5 | 7.5 | |||||||||||||
CONSOLIDATED NET INCOME (1) | 23.4 | 47.0 | 57.8 | 82.0 | |||||||||||||
Less: Net income attributable to noncontrolling interests |
28.8 | 33.6 | 56.2 | 61.6 | |||||||||||||
NET (LOSS) INCOME ATTRIBUTABLE TO NCM, INC. (1) |
$ | (5.4 | ) | $ | 13.4 | $ | 1.6 | $ | 20.4 | ||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||||||||
Basic | 75,994,932 | 59,863,068 | 65,226,817 | 59,788,026 | |||||||||||||
Diluted | 75,994,932 | 61,071,680 | 65,719,768 | 60,605,570 | |||||||||||||
NET (LOSS) INCOME PER NCM, INC. COMMON SHARE: (1) | |||||||||||||||||
Basic | $ | (0.07 | ) | $ | 0.22 | $ | 0.02 | $ | 0.34 | ||||||||
Diluted | $ | (0.07 | ) | $ | 0.22 | $ | 0.02 | $ | 0.34 | ||||||||
Dividends declared per common share | $ | 0.22 | $ | 0.22 | $ | 0.88 | $ | 0.88 | |||||||||
___________________ |
(1) |
These 2016 balances have been adjusted to reflect the correction of an error to the Company’s payable to founding members under the tax receivable agreement and related accounts. This correction resulted in a $0.02 and $0.08 decrease in diluted earnings per share for the three months and year ended December 29, 2016, respectively. Refer to the Company’s Form 10-K for the year ended December 28, 2017, expected to be filed with the SEC on March 13, 2018, for further discussion of the nature and amount of the adjustment. | |
NATIONAL CINEMEDIA, INC. Selected Condensed Balance Sheet Data Unaudited ($ in millions) |
||||||||
As of | ||||||||
December 28, 2017 | December 29, 2016 | |||||||
Cash, cash equivalents and marketable securities | $ | 59.5 | $ | 68.7 | ||||
Receivables, net | 160.6 | 160.5 | ||||||
Property and equipment, net | 30.7 | 29.6 | ||||||
Total assets (1) | 1,147.0 | 1,142.5 | ||||||
Borrowings, gross | 932.0 | 935.0 | ||||||
Total equity/(deficit) | 2.0 | (116.7 | ) | |||||
Total liabilities and equity (1) | 1,147.0 | 1,142.5 | ||||||
___________________ |
(1) |
These 2016 balances have been adjusted to reflect the correction of an error to the Company’s payable to founding members under the tax receivable agreement, deferred tax assets and liabilities, APIC and retained earnings. Refer to the Company’s Form 10-K for the year ended December 28, 2017, expected to be filed with the SEC on March 13, 2018, for further discussion of the nature and amount of the adjustment. | |
NATIONAL CINEMEDIA, INC. Operating Data Unaudited |
|||||||
Quarter Ended | |||||||
December 28, 2017 | December 29, 2016 | ||||||
Total Screens (100% Digital) at Period End (1)(6) | 20,850 | 20,548 | |||||
Founding Member Screens at Period End (2)(6) | 16,808 | 17,022 | |||||
DCN (Digital Content Network) Screens at Period End (3)(6) | 20,419 | 20,080 |
Quarter Ended | Year Ended | |||||||||||||||
(in millions) | December 28, 2017 |
December 29, 2016 |
December 28, 2017 |
December 29, 2016 |
||||||||||||
Total Attendance for Period (4)(6) | 163.7 | 164.7 | 655.8 | 688.8 | ||||||||||||
Founding Member Attendance for Period (5)(6) | 135.4 | 140.3 | 545.6 | 586.2 | ||||||||||||
Capital Expenditures | $ | 4.3 | $ | 3.9 | $ | 12.3 | $ | 13.3 | ||||||||
___________________ |
(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 Data Unaudited (In millions, except advertising revenue per attendee, margin and per share data) |
|||||||||||||||||
Quarter Ended | Year Ended | ||||||||||||||||
December 28, 2017 |
December 29, 2016 |
December 28, 2017 |
December 29, 2016 |
||||||||||||||
Revenue breakout: | |||||||||||||||||
National advertising revenue | $ | 101.4 | $ | 96.4 | $ | 296.3 | $ | 311.9 | |||||||||
Local and regional advertising revenue | 32.1 | 39.3 | 99.9 | 107.0 | |||||||||||||
Total advertising revenue (excluding beverage) | $ | 133.5 | $ | 135.7 | $ | 396.2 | $ | 418.9 | |||||||||
Total revenue | $ | 140.7 | $ | 142.5 | $ | 426.1 | $ | 447.6 | |||||||||
Per attendee data: | |||||||||||||||||
National advertising revenue per attendee | $ | 0.619 | $ | 0.585 | $ | 0.452 | $ | 0.453 | |||||||||
Local and regional advertising revenue per attendee |
$ | 0.196 | $ | 0.239 | $ | 0.152 | $ | 0.155 | |||||||||
Total advertising revenue (excluding beverage) per attendee |
$ | 0.816 | $ | 0.824 | $ | 0.604 | $ | 0.608 | |||||||||
Total revenue per attendee | $ | 0.859 | $ | 0.865 | $ | 0.650 | $ | 0.650 | |||||||||
Total attendance (1) | 163.7 | 164.7 | 655.8 | 688.8 | |||||||||||||
Other operating data: | |||||||||||||||||
Operating income | $ | 70.2 | $ | 72.3 | $ | 153.9 | $ | 173.0 | |||||||||
OIBDA (2) | $ | 79.6 | $ | 81.6 | $ | 191.5 | $ | 208.8 | |||||||||
Adjusted OIBDA (2) | $ | 82.6 | $ | 86.4 | $ | 205.1 | $ | 230.7 | |||||||||
Adjusted OIBDA margin (2) | 58.7 | % | 60.6 | % | 48.1 | % | 51.5 | % | |||||||||
(Loss) income per share – basic | $ | (0.07 | ) | $ | 0.22 | $ | 0.02 | $ | 0.34 | ||||||||
(Loss) income per share – diluted | $ | (0.07 | ) | $ | 0.22 | $ | 0.02 | $ | 0.34 | ||||||||
Adjusted income per share – diluted (2) | $ | 0.27 | $ | 0.22 | $ | 0.40 | $ | 0.36 | |||||||||
___________________ |
(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 income per share are not financial measures calculated in accordance with GAAP in the United States. See attached tables for the non-GAAP reconciliations. | |
Non-GAAP Reconciliations
Unaudited
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 following tables reconcile operating income to OIBDA and Adjusted OIBDA for the periods presented (dollars in millions):
Quarter Ended | Year Ended | ||||||||||||||||
December 28, 2017 |
December 29, 2016 |
December 28, 2017 |
December 29, 2016 |
||||||||||||||
Operating income | $ | 70.2 | $ | 72.3 | $ | 153.9 | $ | 173.0 | |||||||||
Depreciation and amortization | 9.4 | 9.3 | 37.6 | 35.8 | |||||||||||||
OIBDA | $ | 79.6 | $ | 81.6 | $ | 191.5 | $ | 208.8 | |||||||||
Share-based compensation costs (1) | 2.9 | 4.6 | 11.2 | 18.3 | |||||||||||||
CEO transition costs (2) | 0.1 | 0.2 | 0.6 | 3.6 | |||||||||||||
Early lease termination expense (3) | — | — | 1.8 | — | |||||||||||||
Adjusted OIBDA | $ | 82.6 | $ | 86.4 | $ | 205.1 | $ | 230.7 | |||||||||
Total revenue | $ | 140.7 | $ | 142.5 | $ | 426.1 | $ | 447.6 | |||||||||
Adjusted OIBDA margin | 58.7 | % | 60.6 | % | 48.1 | % | 51.5 | % | |||||||||
Adjusted OIBDA | $ | 82.6 | $ | 86.4 | $ | 205.1 | $ | 230.7 | |||||||||
Carmike and Rave Theatres integration and other encumbered theater payments |
9.3 | 1.1 | 20.9 | 2.6 | |||||||||||||
Adjusted OIBDA after integration and other encumbered theater payments |
$ | 91.9 | $ | 87.5 | $ | 226.0 | $ | 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 | Year Ended | |||||||||||||||
December 28, 2017 |
December 29, 2016 |
December 28, 2017 |
December 29, 2016 |
|||||||||||||
Share-based compensation costs included in network costs |
$ | 0.3 | $ | 0.2 | $ | 1.0 | $ | 1.1 | ||||||||
Share-based compensation costs included in selling and marketing costs |
1.0 | 1.7 | 4.1 | 6.0 | ||||||||||||
Share-based compensation costs included in administrative and other costs (a) |
1.6 | 2.7 | 6.1 | 11.2 | ||||||||||||
Total share-based compensation costs | $ | 2.9 | $ | 4.6 | $ | 11.2 | $ | 18.3 | ||||||||
___________________ |
(a) |
Includes $2.3 million of expense associated with the modification of certain former executive equity awards during the year ended December 29, 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 an 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 27, 2018 |
|||||||
NCM, Inc. | |||||||
Low | High | ||||||
Operating income | $ | 156.0 | $ | 163.0 | |||
Depreciation and amortization | 36.0 | 40.0 | |||||
OIBDA | 192.0 | 203.0 | |||||
Share-based compensation costs (1) | 8.0 | 12.0 | |||||
Adjusted OIBDA | $ | 200.0 | $ | 215.0 | |||
Total revenue | $ | 425.0 | $ | 445.0 | |||
___________________ |
(1) |
Share-based compensation costs are included in network operations, selling and marketing and administrative expense in the accompanying financial statements. | |
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 following table reconciles net income as previously reported to net income as reported reflecting the impact of the correction of the error. In addition, as reported net income and income per share are reconciled to adjusted net income and income per share excluding the CEO transition-related costs, early lease termination expense, loss on early retirement of debt, the reversal of a reserve for uncertain tax positions and certain impacts of the Tax Cuts and Jobs Act, including a gain on re-measurement of the payable to founding members under the tax receivable agreement, income tax expense related to re-measurement of deferred tax balances and adjusting for the impact to the measurement of dilutive securities for the periods presented (dollars in millions):
Quarter Ended | Year Ended | |||||||||||||||
December 28, 2017 |
December 29, 2016 |
December 28, 2017 |
December 29, 2016 |
|||||||||||||
Net income as previously reported | $ | 14.7 | $ | 25.4 | ||||||||||||
Correction of prior period error | (1.3 | ) | (5.0 | ) | ||||||||||||
Net (loss) income as reported | $ | (5.4 | ) | $ | 13.4 | $ | 1.6 | $ | 20.4 | |||||||
CEO transition costs (1) | 0.1 | 0.2 | 0.6 | 3.6 | ||||||||||||
Stock-based compensation expense for modified equity awards (2) |
— | — | — | 2.3 | ||||||||||||
Early lease termination expense (3) | — | — | 1.8 | — | ||||||||||||
Loss on early retirement of debt (4) | — | — | — | 10.4 | ||||||||||||
Reversal of reserve for uncertain tax positions (5) | — | — | (1.7 | ) | (2.9 | ) | ||||||||||
Effect of noncontrolling interests (50.5%, 56.3%, 55.8% and 56.3%, respectively) |
(0.1 | ) | (0.1 | ) | (1.3 | ) | (9.2 | ) | ||||||||
Effect of provision for income taxes (104.7%, 38%, 98.8%, 38% effective rate, respectively) | — | — | (1.1 | ) | (2.7 | ) | ||||||||||
Gain on re-measurement of the payable to founding members under the tax receivable agreement (6) |
(87.6 | ) | — | (87.6 | ) | — | ||||||||||
Income tax expense related to re-measurement of deferred tax balances and TRA payable to founding members (6) |
113.9 | — | 113.9 | — | ||||||||||||
Net effect of adjusting items | 26.3 | 0.1 | 24.6 | 1.5 | ||||||||||||
Diluted net income excluding adjusting items | $ | 20.9 | $ | 13.5 | $ | 26.2 | $ | 21.9 | ||||||||
Weighted Average Shares Outstanding as reported and as adjusted (7) |
||||||||||||||||
Diluted | 75,994,932 | 61,071,680 | 65,719,768 | 60,605,570 | ||||||||||||
Diluted (loss) income per share as reported (8) | $ | (0.07 | ) | $ | 0.22 | $ | 0.02 | $ | 0.34 | |||||||
Net effect of adjusting items | 0.34 | — | 0.38 | 0.02 | ||||||||||||
Diluted income per share excluding adjusting Items |
$ | 0.27 | $ | 0.22 | $ | 0.40 | $ | 0.36 | ||||||||
___________________ |
(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 an expense recorded upon the early termination of the lease of our corporate headquarters where the early termination payment made by the Company was reimbursed by the landlord of the new building. | |
(4) |
Loss on early retirement of debt represents the redemption premium and the write-off of unamortized debt issuance costs related to the redemption of senior unsecured notes in 2016. | |
(5) |
During the third quarter of 2016 and 2017, NCM, Inc. reversed a portion of its contingency reserve for material, known tax exposures, including accrued interest and penalties due to the expiration of certain statutes of limitations. The reserve reversal has no noncontrolling interest effect because it is only recorded at NCM, Inc. | |
(6) |
The gain on the re-measurement of the payable to the founding members and the income tax expense related to the re-measurement of the deferred tax balances were due to the reduction of the U.S. federal corporate tax rate from 35 percent to 21 percent by the Tax Cuts and Jobs Act enacted on December 22, 2017. | |
(7) |
Basic and Diluted weighted average shares outstanding for the quarter and year ended December 28, 2017 include the impact of 1,000,000 shares and 15,600,000 shares, respectively, issued on September 7, 2017 and October 20, 2017, respectively, as a result of redemptions by AMC of NCM LLC common membership units. | |
(8) |
The impact of the correction of the error was a decrease of $0.02 and $0.08 to diluted earnings per share for the three months and year ended December 29, 2016, respectively. | |
View source version on businesswire.com: http://www.businesswire.com/news/home/20180312006126/en/
Source:
National CineMedia, Inc.
INVESTOR CONTACT:
Ted
Watson, 800-844-0935
investors@ncm.com
or
MEDIA
CONTACT:
Amy Jane Finnerty, 212-931-8117
amy.finnerty@ncm.com