Related-Party Transactions | 3 Months Ended |
Mar. 27, 2014 |
Related-Party Transactions [Abstract] | ' |
Related-Party Transactions | ' |
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4. RELATED PARTY TRANSACTIONS |
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Founding Member Transactions –Following is a summary of the transactions between the Company and the founding members (in millions): |
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| Three Months Ended | | | | | | | |
Included in the Condensed Consolidated Statements of Income: | 27-Mar-14 | | 28-Mar-13 | | | | | | | |
Revenue: | | | | | | | | | | | | |
Beverage concessionaire revenue (included in advertising revenue) (1) | $ | 9.4 | | $ | 8.9 | | | | | | | |
Advertising inventory revenue (included in advertising revenue) (2) | | 0.1 | | | - | | | | | | | |
Operating expenses: | | | | | | | | | | | | |
Theatre access fee (3) | | 17.4 | | | 15.6 | | | | | | | |
Revenue share from Fathom Events (included in Fathom Events operating costs) (4) | | - | | | 0.9 | | | | | | | |
Purchase of movie tickets and concession products (included in selling and marketing costs) (5) | | 0.2 | | | 0.2 | | | | | | | |
Non-operating expenses: | | | | | | | | | | | | |
Interest income from notes receivable (included in interest income) (6) | | 0.3 | | | - | | | | | | | |
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| -1 | | For the three months ended March 27, 2014 and March 28, 2013, the founding members purchased 60 seconds of on-screen advertising time (with a right to purchase up to 90 seconds) from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a rate specified by the ESA at a 30 second equivalent cost per thousand (“CPM”). | | | | | | | | | |
| -2 | | The value of such purchases is calculated by reference to NCM LLC’s advertising rate card. | | | | | | | | | |
| -3 | | Comprised of payments per theatre attendee, payments per digital screen with respect to the founding member theatres included in the Company’s network and payments for access to higher quality digital cinema equipment. | | | | | | | | | |
| -4 | | Prior to the sale of Fathom Events on December 26, 2013, these payments were at rates (percentage of event revenue) included in the previous ESAs based on the nature of the event. | | | | | | | | | |
| -5 | | Used primarily for marketing to NCM LLC’s advertising clients. | | | | | | | | | |
| -6 | | On December 26, 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability company (AC JV, LLC) owned 32% by each of the founding members and 4% by NCM LLC. In consideration for the sale, NCM LLC received a total of $25.0 million in promissory notes from its founding members (one-third or approximately $8.3 million from each founding member). The notes bear interest at a fixed rate of 5.0% per annum, compounded annually. Interest and principal payments are due annually in six equal installments commencing on the first anniversary of the closing. | | | | | | | | | |
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| | As of | | | | | | | |
Included in the Condensed Consolidated Balance Sheets: | | March 27, | December 26, | | | | | | | |
2014 | 2013 | | | | | | | |
Purchase of movie tickets and concession products (included in Prepaid expenses) (1) | | $ | 0.2 | $ | - | | | | | | | |
Current portion of notes receivable - founding members (2) | | | 4.2 | | 4.2 | | | | | | | |
Long-term portion of notes receivable - founding members (2) | | | 20.8 | | 20.8 | | | | | | | |
Interest receivable on notes receivable (2) | | | 0.3 | | - | | | | | | | |
Common unit adjustments and integration payments, net of amortization (included in intangible assets) (3) | | | 474.7 | | 463.4 | | | | | | | |
Current payable to founding members under tax receivable agreement (4) | | | 9.8 | | 28.6 | | | | | | | |
Long-term payable to founding members under tax receivable agreement (4) | | | 148.5 | | 144.0 | | | | | | | |
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| -1 | | Used primarily for marketing to NCM LLC’s advertising clients. | | | | | | | | | |
| -2 | | Refer to the discussion of notes receivable from the founding members above. | | | | | | | | | |
| -3 | | Refer to Note 3—Intangible Assets for further information on integration payments. | | | | | | | | | |
| -4 | | The Company paid the founding members $25.1 million in the first quarter of 2014, of which $6.7 million was net operating loss carrybacks for the 2009, 2010 and 2011 tax years and $18.4 million was for the 2013 tax year. | | | | | | | | | |
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We have been granted a perpetual, royalty-free license from NCM LLC’s founding members to use certain proprietary software for the delivery of digital advertising and other content through our DCN to screens in the U.S. We have made improvements to this software since the IPO date and we own those improvements, except for improvements that were developed jointly by us and NCM LLC’s founding members. |
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Pursuant to the terms of the NCM LLC Operating Agreement in place since the completion of the Company’s Initial Public Offering (“IPO”), NCM LLC is required to make mandatory distributions on a proportionate basis to its members of available cash, as defined in the NCM LLC Operating Agreement, on a quarterly basis in arrears. Mandatory distributions for the three months ended March 27, 2014 and March 28, 2013 are as follows (in millions): |
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| Three Months Ended | | | | | | | | |
| 27-Mar-14 | 28-Mar-13 | | | | | | | | |
AMC | $ | 1.7 | $ | 2.5 | | | | | | | | |
Cinemark | | 2.2 | | 2.4 | | | | | | | | |
Regal | | 2.3 | | 3.1 | | | | | | | | |
NCM, Inc. | | 5.3 | | 7.1 | | | | | | | | |
Total | $ | 11.5 | $ | 15.1 | | | | | | | | |
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The mandatory distributions of available cash by NCM LLC to its founding members for the three months ended March 27, 2014 of $6.2 million is included in amounts due to founding members on the unaudited Condensed Consolidated Balance Sheets as of March 27, 2014 and will be made in the second quarter of 2014. |
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Amounts due to founding members as of March 27, 2014 were comprised of the following (in millions): |
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| | AMC | | Cinemark | | Regal | | Total |
Theatre access fees, net of beverage revenues | | $ | 0.7 | | $ | 0.8 | | $ | 1.2 | | $ | 2.7 |
Cost and other reimbursement | | | -0.1 | | | -0.2 | | | - | | | -0.3 |
Distributions payable | | | 1.7 | | | 2.2 | | | 2.3 | | | 6.2 |
Total | | $ | 2.3 | | $ | 2.8 | | $ | 3.5 | | $ | 8.6 |
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Amounts due to founding members as of December 26, 2013 were comprised of the following (in millions): |
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| | AMC | | Cinemark | | Regal | | Total |
Theatre access fees, net of beverage revenues | | $ | 0.6 | | $ | 0.7 | | $ | 1.1 | | $ | 2.4 |
Cost and other reimbursement | | | -2 | | | -0.7 | | | -0.6 | | | -3.3 |
Distributions payable, net | | | 8.7 | | | 10.9 | | | 11.4 | | | 31.0 |
Total | | $ | 7.3 | | $ | 10.9 | | $ | 11.9 | | $ | 30.1 |
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AC JV, LLC Transactions –Following is a summary of the transactions between NCM LLC and AC JV, LLC (in millions): |
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| Three Months Ended | | | | | | | |
Included in the Condensed Consolidated Statements of Income: | 27-Mar-14 | | 28-Mar-13 | | | | | | | |
Transition services (included in network costs) (1) | $ | 0.1 | | $ | - | | | | | | | |
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| -1 | | In connection with the sale of Fathom Events, NCM LLC entered into a transition services agreement to provide certain corporate overhead services for a fee and reimbursement for the use of facilities and certain services including creative, technical event management and event management for the newly formed limited liability company for a period of nine months following the closing. These fees received by NCM LLC are included as an offset to network costs in the unaudited Condensed Consolidated Statements of Income. | | | | | | | | | |
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| | As of | | | | | | | |
Included in the Condensed Consolidated Balance Sheets: | | 27-Mar-14 | 26-Dec-13 | | | | | | | |
Amounts due from AC JV, LLC (included in other current assets) (1) | | $ | 0.6 | $ | - | | | | | | | |
Investment in AC JV, LLC (included in other investments) (2) | | | 1.1 | | 1.1 | | | | | | | |
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| -1 | | As described above, NCM LLC entered into a transition services agreement with AC JV, LLC for reimbursement of certain expenses and NCM LLC continued to perform back office accounting and as such, these amounts primarily represent the settlement of AC JV, LLC’s revenue and expenses. | | | | | | | | | |
| -2 | | The Company accounted for its investment in AC JV, LLC under the equity method of accounting in accordance with ASC 970-323, Investments—Equity Method and Joint Ventures (“ASC 970-323”) because AC JV, LLC is a limited liability company with the characteristics of a limited partnership and ASC 970-323 requires the use of equity method accounting unless the Company’s interest is so minor that it would have virtually no influence over partnership operating and financial policies. The Company concluded that its interest was more than minor under the accounting guidance despite the fact that NCM LLC does not have a representative on AC JV, LLC’s Board of Directors or any voting, consent or blocking rights with respect to the governance or operations of AC JV, LLC. The Company’s proportional share of equity in the earnings of AC JV, LLC is recorded within other non-operating income (expense) in the unaudited Condensed Consolidated Statements of Income. | | | | | | | | | |
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Related Party Affiliates — NCM LLC enters into network affiliate agreements with network affiliates for NCM LLC to provide in-theatre advertising at theatre locations that are owned by companies that are affiliates of certain of the founding members or directors of NCM, Inc. Related party affiliate agreements are entered into at terms that are similar to those of the Company’s other network affiliates. |
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Following is a summary of advertising operating costs in the unaudited Condensed Consolidated Statements of Income between the Company and its related party affiliates (in millions): |
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| | Three Months Ended | | | | | | |
Related Party Affiliate | | 27-Mar-14 | | 28-Mar-13 | | | | | | |
Starplex (1) | | $ | 0.5 | | $ | 0.5 | | | | | | |
Other | | | - | | | 0.1 | | | | | | |
Total | | $ | 0.5 | | $ | 0.6 | | | | | | |
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Following is a summary of the accounts payable balance between the Company and its related party affiliates included in the unaudited Condensed Consolidated Balance Sheets (in millions): |
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27-Mar-14 | | | | | | |
Related Party Affiliate | | 27-Mar-14 | | 26-Dec-13 | | | | | | |
Starplex (1) | | $ | 0.7 | | $ | 0.7 | | | | | | |
Other | | | - | | | 0.1 | | | | | | |
Total | | $ | 0.7 | | $ | 0.8 | | | | | | |
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| -1 | | Starplex Operating L.P. (“Starplex”) is an affiliate of one of NCM, Inc.’s directors. | | | | | | | | | |
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Other Transactions – NCM LLC has an agreement with an interactive media company to sell some of its online inventory. One of NCM, Inc.’s directors is also a director of this media company. During the three months ended March 27, 2014 and March 28, 2013, this company generated approximately $0.1 million and $0.1 million, respectively, in revenue for NCM LLC and there was approximately $0.6 million and $0.6 million of accounts receivable due from this company as of March 27, 2014 and December 26, 2013, respectively. |
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