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 2015 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
	Investment			Deferred			from			Equity in			Other			Cash
	in NCM			Revenue			NCM			Income			Revenue			Received
Balance as of January 1, 2016	$	183,755		$	(342,134	)
Receipt of common units due to annual common unit adjustment		11,111			(11,111	)	$	—		$	—		$	—		$	—
Revenues earned under ESA ⁽¹⁾		—			—			—			—			(8,345	)		8,345
Receipt of excess cash distributions		(6,895	)		—			(7,176	)		—			—			14,071
Receipt under tax receivable agreement		(2,765	)		—			(2,941	)		—			—			5,706
Equity in earnings		7,660			—			—			(7,660	)		—			—
Amortization of deferred revenue		—			6,953			—			—			(6,953	)		—

Balance as of and for the nine month period ended September 30, 2016	$	192,866		$	(346,292	)	$	(10,117	)	$	(7,660	)	$	(15,298	)	$	28,122

⁽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 $8,002.

During the three months ended September 30, 2016 and 2015, the Company recorded equity in earnings of approximately $5,815 and $6,263, respectively. During the nine months ended September 30, 2016 and 2015, the Company recorded equity in earnings of approximately $7,660 and $6,672, respectively.

The Company made payments to NCM of approximately $41 and $39 during the nine months ended September 30, 2016 and 2015, respectively, related to installation of certain equipment used for digital advertising, which is included in theatre properties and equipment on the condensed consolidated balance sheets.

On March 16, 2015, NCM, Inc. announced that it had agreed with Screenvision, LLC (“Screenvision”) to terminate a merger agreement under which it would have acquired Screenvision. 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 paying reduced excess cash distributions to its shareholders for the first quarter of 2015 and the second quarter of 2016, as required by NCM’s Amended and Restated Operating Agreement.

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 2015 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 2016, 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 753,598 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 $11,111. The deferred revenue will be recognized over the remaining term of the ESA, which is approximately 20 years.

As of September 30, 2016, the Company owned a total of 26,384,644 common units of NCM, representing an ownership interest of approximately 19%. The estimated fair value of the Company’s investment in NCM was approximately $388,382 as of September 30, 2016, using NCMI’s stock price as of September 30, 2016 of $14.72 per share.

Below is summary financial information for NCM for the three and six months ended June 30, 2016 (the financial information for the three and nine months ended September 29, 2016 is not yet available) and the three and nine months ended October 1, 2015:


	Three Months Ended		Six Months Ended		Three Months Ended		Nine Months Ended
	June 30, 2016		June 30, 2016		October 1, 2015		October 1, 2015
Gross revenues	$	115,383	$	191,625	$	111,662	$	310,061
Operating income	$	46,679	$	52,430	$	47,685	$	78,961
Net earnings (loss)	$	33,220	$	25,710	$	34,844	$	38,519