UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Earliest Event Reported: March 17, 2010
National CineMedia, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-33296 | 20-5665602 | ||
| (State or other jurisdiction of incorporation) |
(Commission file number) | (IRS employer identification no.) |
9110 E. Nichols Ave., Suite 200
Centennial, Colorado 80112-3405
(Address of principal executive offices, including zip code)
(303) 792-3600
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 210.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 3.02 Unregistered Sales of Equity Securities.
On March 17, 2010, National CineMedia, Inc. (“NCM, Inc.”), as sole manager of National CineMedia, LLC (“NCM LLC”), provided written notice outlining the determination of common membership units due to the members of NCM LLC (the “Founding Members”) as shown in the table below, pursuant to net new theatres and attendees added to NCM LLC’s network in accordance with the annual common unit adjustment provisions of the Common Unit Adjustment Agreement dated as of February 13, 2007, by and among NCM, Inc., NCM LLC, Regal Cinema Holdings, LLC (“Regal”), American Multi-Cinema, Inc. (“AMC”), Cinemark Media, Inc. (“Cinemark”), Regal Cinemas, Inc. and Cinemark USA, Inc. The common membership units will be issued on March 31, 2010, the settlement date.
| Name of Member |
Number of Units Owned Prior to 2009 Adjustment (as of Dec. 31, 2009) |
Number of Units Issued per 2009 Adjustment |
Total Number of Units Owned Post 2009 Adjustment (as of Dec. 31, 2009) | |||
| AMC |
18,821,114 | 127,290 | 18,948,404 | |||
| Cinemark |
15,188,955 | 1,757,548 | 16,946,503 | |||
| Regal |
25,425,689 | 327,381 | 25,753,070 | |||
| NCM, Inc. (1) |
42,121,747 | 0 | 42,121,747 | |||
| Total |
101,557,505 | 2,212,219 | 103,769,724 | |||
| (1) | Excludes restricted shares which have vested subsequent to December 31, 2009. |
Following the issuance of common membership units pursuant to the annual adjustment for fiscal 2009, each member’s ownership interest in NCM LLC has changed as follows:
| Name of Member |
Ownership Interest Prior to 2009 Adjustment (as of Dec. 31, 2009) |
Ownership Interest Post 2009 Adjustment (as of Dec. 31, 2009) |
Change | |||||
| AMC |
18.53 | % | 18.26 | % | - 0.27 | |||
| Cinemark |
14.96 | % | 16.33 | % | +1.37 | |||
| Regal |
25.04 | % | 24.82 | % | - 0.22 | |||
| NCM, Inc. |
41.47 | % | 40.59 | % | - 0.88 |
Pursuant to NCM, Inc’s Amended and Restated Certificate of Incorporation and NCM LLC’s Third Amended and Restated Limited Liability Company Operating Agreement, members of NCM LLC, other than NCM, Inc., may choose to have common membership units redeemed, and NCM, Inc. may elect to issue cash or shares of its common stock on a one-for-one basis. Therefore, the NCM LLC units issued to the Founding Members may be redeemable for an equal number of shares of NCM, Inc.’s common stock.
Neither NCM, Inc. nor NCM LLC received any cash consideration in exchange for the issuance of the units. In addition to the issuance of the units, cash will be issued in lieu of partial units in the amounts of $10.41, $10.46, and $6.70 to AMC, Cinemark, and Regal, respectively.
The units will be issued in reliance upon the exemption from the registration requirements of the Securities Act provided for by Section 4(2) thereof for transactions not involving a public offering. Appropriate legends have been affixed to the securities issued in this transaction. The Founding Members had adequate access, through business or other relationships, to information about NCM, Inc.
Discussion of Common Unit Adjustment Calculation
Methodology
The Common Unit Adjustment Agreement provides a mechanism for adjusting membership units held by the Founding Members, based on increases or decreases in attendance associated with theatre additions and dispositions by each Founding Member. The adjustment of membership units pursuant to this agreement are conducted annually, except that an earlier adjustment will occur for a Founding Member if its acquisition or disposition of theatres, in a single transaction or cumulatively since the most recent adjustment, will cause a change of two percent or more in the total annual attendance.
Increases in attendance associated with theatre additions are included in the unit adjustment if arising from acquisition of a theatre or opening of a newly constructed theatre, except that lease renewals and extensions are not included and acquired theatres, subject to an agreement with an alternative cinema advertising provider, will not be included until certain run out payments are made to NCM LLC by the Founding Member acquiring the theatre pursuant to its ESA or until such third party cinema advertising agreement expires.
Decreases in attendance associated with theatre dispositions are included in the unit adjustment if arising from the closure or sale of a theatre, unless the purchaser or sublessee enters into an agreement with NCM LLC similar to the ESA, the theatre is closed at the end of its lease term in effect on February 13, 2007 (the Common Unit Adjustment Agreement date), the theatre is closed at the end of an initial term of a lease entered into after February 13, 2007, or a non-digitized theatre is closed within the last three years of the term of a lease in effect on February 13, 2007.
The changes in 2009 attendance were calculated based on attendance at the relevant theatres during the twelve months prior to the acquisition or disposition date; however, if an acquired or new build theatre was not operating during all twelve months prior to the acquisition or opening date, the change in annual attendance was calculated based on 75% of the projected, year 1 annual attendance for such theatre, as determined in approving development by the Founding Members’ board of directors (or other investment committee designated by the board). Additionally, in the calculations for adjustment upon acquisition, new openings, closures or disposition, only one-half of the attendance was included for theatres that were not digitized.
In the case of acquired or new build theatres in which the 75% of projected, year 1 annual attendance was used in prior Common Unit Adjustments, an additional adjustment or “true-up” was made to the net increases and decreases in attendance. This adjustment was calculated as the variance between the attendees applied in the prior Common Unit Adjustment and the actual, year 1 attendance for such theatres.
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Discussion of the net attendance adjustment:
| • | The aggregate net attendance adjustment used in calculating the Common Unit Adjustment was an increase of 10,273,525 attendees. |
| • | The total attendance increase was 9,328,445 attendees, of which 3,672,527 attendees related to newly opened theatres (projected attendance of 4,896,703 weighted at 75%) and 5,655,918 attendees related to acquired theatres. All of these attendees were added on digital screens. A total of 200 screens (118 new and 82 acquired) were added resulting in an average attendance per added screen of approximately 46,642 (31,123 per new screen and 68,975 per acquired screen). |
| • | The total attendance decrease due to dispositions was 1,595,658 attendees, of which all attendees were from digital screens. A total of 100 screens were disposed of resulting in an average attendance per disposed screen of approximately 15,957. |
| • | The total attendance increase due to an adjustment between the projected, year 1 attendance of 22 new builds included in the prior Common Unit Adjustment and the actual, year 1 attendance for these 22 new build theatres was 2,540,738 attendees. |
| • | Though excluded from the calculation, it is important to note that the decrease in attendance due to end of lease screen closures was 2,788,177 attendees, of which 2,184,721 attendees were from digital screens and 603,456 attendees were from non-digital screens (attendance of 1,206,912 weighted at 50%). A total of 165 screens were closed due to end of lease screen closures resulting in an average attendance per excluded screen of approximately 16,898. These attendees are approximately 64% of the total attendance loss from dispositions and end of lease closures. |
Calculation of the Common Unit Adjustment (1): (as of and for the fiscal year ended December 31, 2009, except as noted)
| Outstanding Equity Equivalents (2) |
101,771,634 | |||
| Times – NCM, Inc. Share Price (3) |
$ | 15.6726 | ||
| Company Equity Value |
$ | 1,595,026,111 | ||
| Long-Term Funded Debt |
$ | 799,000,000 | ||
| Less Company Cash and Cash Equivalents |
$ | (91,102,089 | ) | |
| Company Enterprise Value |
$ | 2,302,924,022 | ||
| Divided by – Attendance Total (4) |
682,385,202 | |||
| Company Enterprise Value per Attendee |
$ | 3.3748153 | ||
| Times – aggregate Net Attendance Adjustment (for the period January 2, 2009 through December 31, 2009) |
10,273,525 | |||
| Value of aggregate Net Attendance Adjustment |
$ | 34,671,249 | ||
| Divided by – NCM, Inc. Share Price (3) |
$ | 15.6726 | ||
| Common Unit Adjustment (in whole units) |
2,212,219 | |||
| Cash in lieu of partial units issued Founding Members |
$ | 27.57 | ||
| (1) | Terms as defined in the Common Unit Adjustment Agreement dated as of February 13, 2007. |
| (2) | Includes 42,119,947 60-day weighted average shares of NCMI outstanding common stock, 59,435,758 60-day weighted average NCM LLC units held by the Founding Members. |
| (3) | Represents the 60-day weighted average share price of NCM, Inc. |
| (4) | Includes attendees from network affiliates, AMC Loews/Stars, and Regal Consolidated theatres. |
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| Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits
| Exhibit No. |
Description | |
| 3.1 | Amended and Restated Certificate of Incorporation. (Incorporated by reference to Exhibit 4.1 from the Registrant’s Registration Statement on Form S-8 (File No. 333-140652) filed on February 13, 2007.) | |
| 10.1 | National CineMedia, LLC Third Amended and Restated Limited Liability Company Operating Agreement dated as of February 13, 2007, by and among American Multi-Cinema, Inc., Cinemark Media, Inc., Regal CineMedia Holdings, LLC and National CineMedia, Inc. (Incorporated by reference to Exhibit 10.1 to NCM, Inc.’s Current Report on Form 8-K (File No. 001-33296) filed on February 16, 2007.) | |
| 10.2 | Common Unit Adjustment Agreement dated as of February 13, 2007, by and among National CineMedia, Inc., National CineMedia, LLC, Regal CineMedia Holdings, LLC, American Multi-Cinema, Inc., Cinemark Media, Inc, Regal Cinemas, Inc. and Cinemark USA, Inc. (Confidential treatment granted as to certain portions, which portions were omitted and filed separately with the Commission.) (Incorporated by reference to Exhibit 10.6 to NCM, Inc.’s Current Report on Form 8-K (File No. 001-33296) filed on February 16, 2007.) | |
| 10.3 | Registration Rights Agreement dated as of February 13, 2007, by and among National CineMedia, Inc., American Multi-Cinema, Inc., Regal CineMedia Holdings, LLC and Cinemark Media, Inc. (Incorporated by reference to Exhibit 10.11 to NCM, Inc.’s Current Report on Form 8-K (File No. 001-33296) filed on February 16, 2007.) | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, NCM, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| NATIONAL CINEMEDIA, INC. | ||||||
| Dated: March 19, 2010 | By: | /s/ Ralph E. Hardy | ||||
| Ralph E. Hardy | ||||||
| Executive Vice President, General | ||||||
| Counsel and Secretary | ||||||