Below is a summary of activity with NCMI and NCM included in each of Holdings' and CUSA's condensed consolidated financial statements:


	Investment in NCMI/NCM			NCM Screen Advertising Advances			Equity in Loss (2)			Other Revenue (3)			Interest Expense - NCM


Balance as of January 1, 2023	$	9.6		$	(338.2	)	$	—		$	—		$	—
Screen rental revenue earned under ESA (1)		—			—			—			(4.8	)		—
Interest accrued related to significant financing component		—			(5.7	)		—			—			5.7
Equity in loss (2)		(3.2	)		—			(3.2	)		—			—
Redemption of common units of NCM for common stock of NCMI. See Investment in National CineMedia below.		—			—			—			—			—
Impairment of investment in NCMI		(0.7	)		—			—			—			—
Amortization of screen advertising advances		—			8.1			—			(8.1	)		—
Balance as of and for the three months ended March 31, 2023	$	5.7		$	(335.8	)	$	(3.2	)	$	(12.9	)	$	5.7

(1)

Amounts include the per patron and per digital screen theatre access fees, net of amounts due to NCM for on-screen advertising time provided to the Company's beverage concessionaire of approximately $1.8.

(2)

Equity in loss is recorded one month in arrears.

(3)

The Company had a receivable from NCM of $4.8 as of March 31, 2023.

NCM operates a digital in-theatre network in the U.S. for providing cinema advertising. The Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM primarily provides advertising to our theatres.

On February 17, 2023, the Company delivered a redemption notice to NCM pursuant to the redemption right under its operating agreement with NCM to redeem approximately 42.0 of the Company’s 43.7 common units in NCM in exchange for approximately 42.0 newly issued shares of National Cinemedia, Inc. (“NCMI”) common stock, with a redemption date of February 23, 2023 (the “Redemption”). On March 20, 2023, the Company delivered a second redemption notice to NCM to redeem the Company’s remaining 1.7 common units in NCM in exchange for 1.7 newly issued shares of NCMI common stock, with a redemption date of March 23, 2023 (collectively with the February 23, 2023 redemption, the “Redemptions”). NCMI is a holding company and the sole manager of NCM. NCM comprises approximately the entire balance of NCMI’s assets, liabilities and operating cash flows. The Company has the same rights and level of influence through its ownership of NCMI common stock following the Redemptions as it did through its previous ownership of common units in NCM and therefore continued to account for its investment in NCMI under the equity method of accounting for the first quarter of 2023. See Note 19 for discussion of subsequent event related to NCMI.

See Note 9 to the Company’s Annual Report on Form 10-K filed February 24, 2023 for additional discussion of the Company's investment in NCM as well as the accounting for its original NCM membership units and subsequent common unit adjustments.

The Company periodically receives consideration in the form of common units from NCM. Annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and the impact of these theatres on total attendance. The common units received are recorded at estimated fair value as an increase in the Company's investment in NCM with an offset to NCM screen advertising advances.

During March 2023, NCM performed the annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company will receive an additional 4.8 common units of NCM during the second quarter of 2023. The Company will record the additional common units received in the second quarter of 2023 at their estimated fair value with a corresponding adjustment to NCM screen advertising advances.

As of March 31, 2023, the estimated fair value of the Company’s investment in NCMI, was approximately $5.7 based on NCMI's stock price as of March 31, 2023 of $0.13 per share (Level 1 input as defined in FASB ASC Topic 820). Because the share price of NCMI was significantly below the Company’s carrying value of NCMI per common share and due to the lag in the recovery pace of NCM’s business from the COVID-19 pandemic compared to that of the Company and the movie theatre industry, the Company wrote down its investment in NCMI to its estimated fair value as of March 31, 2023. The Company recorded an impairment charge of $0.7 on its investment in NCMI during the three months ended March 31, 2023.

As discussed above, the Company’s domestic theatres are part of the in-theatre digital network operated by NCM, the terms of which are defined in the ESA. NCM provides advertising to its theatres through its branded “Noovie” pre-show entertainment program and also handles lobby promotions and displays for our theatres. The Company receives a monthly theatre access fee for participation in the NCM network and also earns screen advertising or screen rental revenue on a per patron basis. See Note 9 to the Company’s Annual Report on Form 10-K filed February 24, 2023 for further discussion of the accounting for revenue earned under the ESA as well as the accounting related to NCM screen advertising advances.

The recognition of revenue related to the NCM screen advertising advances is recorded on a straight-line basis over the term of the amended ESA through February 2041. The table below summarizes when the Company expects to recognize this revenue:


	Twelve Months Ended March 31,
Remaining Maturity	2024		2025		2026		2027		2028		Thereafter		Total
NCM screen advertising advances (1)	$	10.0	$	10.6	$	11.4	$	12.2	$	13.0	$	278.6	$	335.8

As discussed in Note 9 to the Company’s Annual Report on Form 10-K filed February 24, 2023, the Company’s ESA with NCM includes an implied significant financing component, as per the guidance in ASC Topic 606, Revenue from Contracts with Customers. As a result of the significant financing component, the Company recognized incremental screen rental revenue and interest expense of $8.1 and $5.7, respectively, during the three months ended March 31, 2023 and incremental screen rental revenue and interest expense of $8.0 and $5.8, respectively, during the three months ended March 31, 2022. The interest expense was calculated using the Company's incremental borrowing rates at the time when the cash and each tranche of common units were received from NCM, which ranged from 4.4% to 8.3%.

Below is summary financial information for NCMI for the periods indicated:


	Twelve Months Ended			Three Months Ended
	December 29, 2022 (1)			March 31, 2022
Gross revenue	$	249.2		$	35.9
Operating income (loss)	$	6.9		$	(22.5	)
Net loss	$	(66.2	)	$	(46.0	)
Net loss attributable to NCMI	$	(28.7	)	$	(25.2	)

(1)

Financial information for NCMI for the quarter ended ended March 31, 2023 was not available at time of this filing.


	As of
	December 29, 2022 (1)
Current assets	$	164.4
Noncurrent assets	$	628.0
Current liabilities	$	1,203.1
Noncurrent liabilities	$	53.3
Noncontrolling interests	$	51.3
Total deficit	$	(464.0	)

(1)

Financial information for NCMI as of March 31, 2023 was not available at time of this filing.