6.	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. 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 2014 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:


	Investment in NCM			Deferred Revenue			Distributions from NCM			Equity in Earnings			Other Revenue			Other Comprehensive Loss		Cash Received
Balance as of January 1, 2015	$	178,939		$	(335,219	)
Receipt of common units due to annual common unit adjustment		15,421			(15,421	)	$	—		$	—		$	—		$	—	$	—
Revenues earned under ESA ⁽¹⁾		—			—			—			—			(8,478	)		—		8,478
Receipt of excess cash distributions		(9,763	)		—			(10,859	)		—			—			—		20,622
Receipt under tax receivable agreement		(1,872	)		—			(2,241	)		—			—			—		4,113
Equity in earnings		6,672			—			—			(6,672	)		—			—		—
Equity in other comprehensive income		(2,734	)		—			—			—			—			2,734		—
Amortization of deferred revenue		—			6,327			—			—			(6,327	)		—		—

Balance as of and for the nine month period ended September 30, 2015	$	186,663		$	(344,313	)	$	(13,100	)	$	(6,672	)	$	(14,805	)	$	2,734	$	33,213

⁽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 $7,338.

On May 5, 2014, NCM, Inc. announced that it had entered into a merger agreement to acquire Screenvision, LLC. On November 3, 2014, the U.S. Department of Justice (“DOJ”) filed an antitrust lawsuit seeking to enjoin the proposed merger between NCM, Inc. and Screenvision, LLC. On March 16, 2015, NCM, Inc. announced that it had agreed with Screenvision, LLC to terminate the merger agreement. The termination of the merger agreement resulted in a $26.8 million termination payment to Screenvision by NCM, Inc. NCM indemnified NCM, Inc. for the termination fee. The impact of the termination payment and related merger costs resulted in NCM not making an excess cash distribution to its shareholders during the second quarter of 2015.

During the three months ended September 30, 2015 and 2014, the Company recorded equity in earnings of approximately $6,263 and $5,389, respectively. During the nine months ended September 30, 2015 and 2014, the Company recorded equity in earnings of approximately $6,672 and $5,746, 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 2014 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 2015, 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 1,074,910 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 $15,421. The deferred revenue will be recognized over the remaining term of the ESA, which is approximately 21 years.

As of September 30, 2015, the Company owned a total of 25,631,046 common units of NCM, representing an ownership interest of approximately 20%.

Below is summary financial information for NCM for the three and nine months ended September 25, 2014 and the three and six months ended July 2, 2015 (the financial information for the period ended October 1, 2015 is not yet available):


	Three Months Ended July 2, 2015		Six Months Ended July 2, 2015		Three Months Ended September 25, 2014		Nine Months Ended September 25, 2014
Gross revenues	$	121,532	$	198,399	$	100,738	$	270,911
Operating income	$	16,658	$	31,276	$	42,858	$	97,756
Net earnings	$	42,404	$	3,675	$	26,909	$	50,612