7.	Investment in National CineMedia

The Company has an investment in National CineMedia, LLC (“NCM”). NCM operates a digital in-theatre network in the U.S. for providing cinema advertising and non-film events. Upon joining NCM, the Company entered into an Exhibitor Services Agreement with NCM (“ESA”), pursuant to which NCM provides advertising, promotion and event services to our theatres. As described further in Note 6 to the Company’s financial statements as included in its 2013 Annual Report on Form 10-K, on February 13, 2007, National CineMedia, Inc. (“NCM, Inc.”), an entity that serves as the sole manager of NCM, completed an initial public offering (“IPO”) of its common stock. In connection with the NCM Inc. initial public offering, the Company amended its operating agreement and the ESA. Following the NCM, Inc. IPO, the Company does not recognize undistributed equity in the earnings on its original NCM membership units (referred to herein as the Company’s Tranche 1 Investment) until NCM’s future net earnings, less distributions received, surpass the amount of the excess distribution. The Company recognizes equity in earnings on its Tranche 1 Investment only to the extent it receives cash distributions from NCM. The Company recognizes cash distributions it receives from NCM on its Tranche 1 Investment as a component of earnings as Distributions from NCM. The Company believes that the accounting model provided by ASC 323-10-35-22 for recognition of equity investee losses in excess of an investor’s basis is analogous to the accounting for equity income subsequent to recognizing an excess distribution.

Below is a summary of activity with NCM included in the Company’s condensed consolidated financial statements:


							Distributions									Other
	Investment			Deferred			from			Equity in			Other			Comprehensive			Cash
	in NCM			Revenue			NCM			Earnings			Revenue			Income			Received
Balance as of January 1, 2014	$	178,853		$	(334,429	)
Receipt of common units due to annual common unit adjustment		8,216			(8,216	)	$	—		$	—		$	—		$	—		$	—
Revenues earned under ESA ⁽¹⁾		—			—			—			—			(2,296	)		—			2,296
Receipt of excess cash distributions		(4,943	)		—			(5,987	)		—			—			—			10,930
Receipt under tax receivable agreement		(2,385	)		—			(3,510	)		—			—			—			5,895
Equity in earnings		432			—			—			(432	)		—			—			—
Equity in other comprehensive income		219			—			—			—			—			(219	)		—
Amortization of deferred revenue		—			1,741			—			—			(1,741	)		—			—

Balance as of and for the period ended March 31, 2014	$	180,392		$	(340,904	)	$	(9,497	)	$	(432	)	$	(4,037	)	$	(219	)	$	19,121

⁽¹⁾	Amount includes the per patron and per digital screen theatre access fees due to the Company, net of amounts due to NCM for on-screen advertising time provided to the Company’s beverage concessionaire of approximately $2,746.

During the three months ended March 31, 2014 and 2013, the Company recorded equity earnings of approximately $432 and $866, respectively.

Pursuant to a Common Unit Adjustment Agreement dated as of February 13, 2007 between NCM, Inc. and the Company, AMC Entertainment, Inc. (“AMC”) and Regal Entertainment Group (“Regal”), annual adjustments to the common membership units are made primarily based on increases or decreases in the number of theatre screens operated and theatre attendance generated by each Founding Member. As further discussed in Note 6 to the Company’s financial statements as included in its 2013 Annual Report on Form 10-K, the common units received are recorded at fair value as an increase in the Company’s investment in NCM with an offset to deferred revenue. The deferred revenue is amortized over the remaining term of the ESA. During March 2014, NCM performed its annual common unit adjustment calculation under the Common Unit Adjustment Agreement. As a result of the calculation, the Company received an additional 557,631 common units of NCM, each of which is convertible into one share of NCM, Inc. common stock. The Company recorded the additional common units received at fair value with a corresponding adjustment to deferred revenue of approximately $8,216. The deferred revenue will be recognized over the remaining term of the ESA, which is approximately 22 years.

As of March 31, 2014, the Company owned a total of 24,556,136 common units of NCM, representing an ownership interest of approximately 19%.

Below is summary financial information for NCM for the three months ended March 27, 2014 and March 28, 2013.


	Three Months Ended
	March 27, 2014			March 28, 2013
Gross revenues	$	70,215		$	82,219
Operating income	$	12,767		$	21,635
Net earnings (loss)	$	(2,764	)	$	5,625