Some of the information in this Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended. All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, certain statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations", may constitute forward-looking statements. In some cases, you can identify these "forward-looking statements" by the specific words, including but not limited to "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of those words and other comparable words. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these statements as a result of certain factors as more fully discussed under the heading "Risk Factors" contained in our annual report on Form 10/K-A filed with the SEC on November 5, 2009 for the Company's fiscal year ended January 1, 2009. The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included herein and the audited financial statements and other disclosure included in our annual report on Form 10/K-A filed with the SEC on November 5, 2009 for the Company's fiscal year ended January 1, 2009. In the following discussion and analysis, the term net income refers to net income attributable to NCM, Inc.

Overview

NCM operates the largest digital in-theatre network in North America, for the distribution of advertising, business communications, and entertainment events. Our revenue is principally derived from the sale of advertising and, to a lesser extent, from our Fathom entertainment and corporate marketing events division. We have long-term ESAs with NCM LLC's founding members through 2037 and multi-year agreements with several other non-owner theatre operators, whom we refer to as network affiliates. The ESAs with the founding members and network affiliate agreements grant us exclusive rights, subject to limited exceptions, to sell advertising and meeting services and distribute entertainment programming in those theatres. Our advertising and Fathom events are distributed via satellite or landline to theatres that are digitally equipped with our proprietary digital content network ("DCN") technology. Approximately 93% of our theatre attendance is included in our digital network.

Management focuses on several measurements that we believe provide us with the necessary ratios and key performance indicators for us to manage our business and to determine how we are performing versus our internal goals and targets, and against the performance of our competitors and other benchmarks in the marketplaces in which we operate. Senior executives hold monthly meetings with managers and staff to discuss and analyze operating results and address significant variances to budget in an effort to identify trends and changes in our business. We focus on many operating metrics including changes in operating income before depreciation and amortization ("OIBDA"), Adjusted OIBDA and Adjusted OIBDA margin, as defined and discussed in "-Non-GAAP Financial Measures" below, as some of our primary measurement metrics. In addition, we pay particular attention to our monthly advertising performance measurements, including advertising inventory utilization, pricing (CPM), local and total advertising revenue per attendee and the number of entertainment programming and corporate marketing event locations and revenue per location. Finally, we monitor our operating cash flow and related financial leverage (see Note 3 to the unaudited condensed consolidated financial statements) and revolving credit facility availability and cash balances to ensure that debt obligations and future declared dividends can be met and adequate cash reserves are maintained.

Our operating results may be affected by a variety of internal and external factors and trends described more fully in the section entitled "Risk Factors" in our Form 10/K-A filed with the SEC on November 5, 2009 for the Company's fiscal year ended January 1, 2009.

Summary Historical Financial and Operating Data

The following table presents operating data and Adjusted OIBDA from our
unaudited financial statements included elsewhere in this document. See
"-Non-GAAP Financial Measures" below for a discussion of the calculation of
Adjusted OIBDA and reconciliation to operating income.



                                         Quarter         Nine Months           Quarter            Nine Months
                                          Ended             Ended               Ended                Ended
                                       October 1,        October 1,         September 25,        September 25,
(In millions, except per share data)      2009              2009                2008                 2008
Revenue                                $      95.7      $       262.1      $         107.7      $         257.1
Operating income                       $      46.3      $       108.5      $          57.2      $         114.0
Adjusted OIBDA                         $      51.8      $       124.0      $          62.0      $         125.5
Adjusted OIBDA margin                         54.1 %             47.3 %               57.6 %               48.8 %
Net Income                             $       6.6      $        14.9      $          10.9      $          14.8
Net Income per Basic Share             $      0.16      $        0.35      $          0.26      $          0.35
Net Income per Diluted Share           $      0.16      $        0.35      $          0.26      $          0.35

The following table presents total advertising revenue and total advertising revenue per attendee for the periods presented, which will be discussed further below (in millions, except for per attendee metrics).

                                      Quarter         Nine Months          Quarter           Nine Months
                                       Ended             Ended              Ended               Ended
                                     October 1,       October 1,        September 25,       September 25,
                                        2009             2009               2008                2008
Total advertising revenue           $       88.3     $       231.8     $         100.3     $         228.8
Total advertising revenue
excluding beverage                  $       79.7     $       204.9     $          88.6     $         196.3
Total theatre attendance                   157.0             495.5               178.8               477.7
Total advertising revenue per
attendee                            $       0.56     $        0.47     $          0.56     $          0.48

Non-GAAP Financial Measures

Operating Income before Depreciation and Amortization (OIBDA), Adjusted OIBDA and Adjusted OIBDA margin are not financial measures calculated in accordance with generally accepted accounting principles (GAAP) in the United States. OIBDA represents operating income (loss) before depreciation and amortization expense. Adjusted OIBDA excludes from OIBDA non-cash severance plan costs, share based payment costs and deferred stock compensation. Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. These non-GAAP financial measures are used by management to evaluate operating performance and to forecast future results. The Company believes these are important supplemental measures of operating performance because they eliminate items that have less bearing on its operating performance and so highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes the presentation of these measures is relevant and useful for investors because it enables them to view performance in a manner similar to the method used by the Company's management, helps improve their ability to understand the Company's operating performance and makes it easier to compare the Company's results with other companies that may have different depreciation and amortization policies, and non-cash share based compensation programs or different interest rates or debt levels or income tax rates. A limitation of these measures, however, is that they exclude depreciation and amortization, which represent a proxy for the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's business. In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company's non-cash severance plan costs, share based payment costs and deferred stock compensation. OIBDA or Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as indicators of operating performance, nor should they be considered in isolation of, or as substitutes for financial measures prepared in accordance with GAAP. The Company believes that operating income is the most directly comparable GAAP financial measure to OIBDA. Because not all companies use identical calculations, these presentations may not be comparable to other similarly titled measures of other companies.

OIBDA and Adjusted OIBDA do not reflect the AMC Loews or Regal Consolidated Theatres integration payments. The integration payments received are added to Adjusted OIBDA to determine our compliance with financial covenants under our senior secured credit facility. AMC made Loews payments to NCM LLC pursuant to the AMC Loews screen integration agreement through April 2009, which were $0.1 million, $0.4 million and $4.4 million for the nine months ended October 1, 2009, the quarter ended September 25, 2008 and the nine months ended September 25, 2008, respectively. Regal made Consolidated Theatre payments to NCM LLC pursuant to the revised ESAs, which was $0.9 million, $2.0 million, $1.1 million and $1.6 million for the quarter and nine months ended October 1, 2009 and the quarter and nine months ended September 25, 2008, respectively.

The following table reconciles operating income to OIBDA and Adjusted OIBDA for the periods presented (dollars in millions):

                                        Quarter          Nine Months            Quarter             Nine Months
                                         Ended              Ended                Ended                 Ended
                                      October 1,         October 1,          September 25,         September 25,
                                         2009               2009                 2008                  2008
Operating income                      $      46.3       $       108.5       $          57.2       $         114.0
Depreciation and amortization                 4.0                11.4                   3.8                   8.5

OIBDA                                        50.3               119.9                  61.0                 122.5
Severance plan costs                           -                   -                    0.1                   0.4
Share-based compensation costs (1)            1.5                 4.1                   0.9                   2.6

Adjusted OIBDA                        $      51.8       $       124.0       $          62.0       $         125.5

Total Revenue                         $      95.7       $       262.1       $         107.7       $         257.1

Adjusted OIBDA margin                        54.1 %              47.3 %                57.6 %                48.8 %

(1) Share-based payment costs are included in network operations, selling and marketing, and administrative expense in the accompanying unaudited condensed consolidated financial statements.

Basis of Presentation

The results of operations data for the quarter and nine months ended October 1, 2009 and for the quarter and nine months ended September 25, 2008 were derived from the unaudited condensed consolidated financial statements and accounting records of NCM, Inc. and should be read in conjunction with the notes thereto.

Results of Operations

Quarter ended October 1, 2009 and September 25, 2008

Revenue. Total revenue of the Company for the quarter ended October 1, 2009 was $95.7 million compared to $107.7 million during the quarter ended September 25, 2008, a decrease of $12.0 million, or 11.1%. The decrease in total revenue was the result of a decrease in advertising revenue of 12.0% (which includes revenue from our founding member beverage concessionaire agreements, or "beverage revenue") offset by a slight increase of 1.4% in Meetings and Events revenue.

National advertising revenue of $70.7 million (including $8.6 million of beverage revenue) for the quarter ended October 1, 2009 decreased 13.5% compared to $81.7 million (including $11.7 million of beverage revenue) for the quarter ended September 25, 2008. The 11.4% decrease in national advertising revenue (excluding beverage revenue) was due primarily to a $3.7 million decrease in the annual content partner spending allocation for the third quarter of 2009 as compared to the third quarter of 2008 and a 12.2% decrease in attendance in our network theatres for the quarter, coupled with the shift in annual spending for certain of our advertising clients, as compared to third quarter of 2008. Third quarter revenue was also adversely impacted by a 7.1% decrease in CPM as compared to the comparable quarter of 2008 due to a soft marketplace and the mix of clients that advertised during the quarter. These negative factors were offset by a strong sales effort that resulted in an increase in national inventory utilization to 96.5% from 92.9%. The $3.1 million decrease in beverage revenue was primarily due to a reduction in the amount of beverage advertising time acquired by two of our founding members from 90 to 60 seconds as compared to the 90 seconds acquired during the quarter ended September 25, 2008, as well as a decrease in founding member attendance, offset slightly by a contractual annual 8% increase in beverage advertising CPM and the additional attendance increase associated with the Consolidated Theatres acquired by Regal in the second quarter of 2008.

Local advertising revenue decreased $1.4 million or 7.5% to $17.2 million for the quarter ended October 1, 2009 compared to $18.6 million for the quarter ended September 25, 2008. The decrease is primarily due to the current economic conditions and its effect on local and regional businesses. Local revenue per theatre attendee in the third quarter of 2009 increased 5.3% to $0.11 per attendee compared to $0.10 for the third quarter of 2008 due primarily to the overall attendance decrease noted above.

Total advertising revenue per attendee remained flat at $0.56 per attendee for the quarter ended October 1, 2009 and for the quarter ended September 25, 2008 due to the lower revenue and lower quarterly theatre attendance.

Meetings and Events revenue increased slightly by $0.1 million, or 1.4%, to $7.4 million for the quarter ended October 1, 2009 compared to $7.3 million for the quarter ended September 25, 2008 reflecting continued growth in our Fathom entertainment programming business, offset by a decrease in our corporate marketing events which appears to be adversely impacted by the soft economy as larger corporate clients delayed their marketing and employee communication events. Our Fathom revenue benefited from the continued expansion of our network and broadening of programming distributed over our theatre network.

Operating expenses. Total operating expenses for the quarter ended October 1, 2009 were $49.4 million compared to $50.5 million for the quarter ended September 25, 2008. The decrease of 2.2% for the third quarter of 2009 versus total operating expenses for the third quarter of 2008 was primarily the result of the impact of lower advertising revenues on our advertising operations costs and lower theatre access fees due to decreases in attendance levels, offset by an increase in sales and marketing expenses during the quarter. Set forth below is a discussion of the more significant operating expenses:

Advertising operating costs. Advertising operating costs, which were $4.9 million for the quarter ended October 1, 2009, decreased 14.0% over the $5.7 million for the quarter ended September 25, 2008. This decrease was primarily the result of a 10.5% decrease in payments made to our network affiliate theatre circuits pursuant to our contractual agreements that require the payment of a specified percentage of the advertising revenue displayed in their theatres. The overall decrease was due to a combination of lower advertising revenues and the loss of one advertising affiliate circuit in early 2009.

Meetings and Events operating costs. Fathom operating costs of $4.6 million for the quarter ended October 1, 2009 decreased 4.2% compared to $4.8 million for the quarter ended September 25, 2008 due primarily to a change in the mix of event type and the associated content split for those events.

Network costs. Network costs of $4.7 million for the quarter ended October 1, 2009 increased 4.4% compared to $4.5 million for the quarter ended September 25, 2008 due to the increase in the size of our digital network and increased maintenance expenses related to aging equipment.

Theatre access fees. Theatre access fees for the quarter ended October 1, 2009 were $12.7 million compared to $13.5 million for the quarter ended September 25, 2008. The decrease for the third quarter of 2009 versus the third quarter of 2008 was primarily the result of a 10.9% decrease in founding member attendees as compared to the quarter ended September 25, 2008.

Selling and marketing costs. Selling and marketing costs increased to $12.7 million for the quarter ended October 1, 2009 compared to $11.8 million for the quarter ended September 25, 2008, an increase of 7.6%. Selling and marketing costs increased due primarily to increased costs related to our internet business, an increase in bad debt expense primarily related to our local advertising business, and an increase in advertising research costs, offset by decreases in local sales commissions associated with lower sales levels.

Administrative and other costs. Administrative and other costs decreased to $5.8 million, or 7.9% for the quarter ended October 1, 2009 versus $6.3 million for the quarter ended September 25, 2008 primarily due to certain reduced professional service fees and reduced accrued bonuses.

Depreciation and amortization. The increase of $0.2 million in depreciation and amortization expense for the quarter ended October 1, 2009 to $4.0 million as compared to $3.8 million for the quarter ended September 25, 2008 was primarily due to recognizing depreciation on capital expenditures made to support the growth of our network, including network equipment installed in network affiliate theatres and the amortization expense recognized on additional intangible assets associated with new founding member theatres added to our network in accordance with the Common Unit Adjustment agreement.

Net income. Net income generated for the quarter ended October 1, 2009 was $6.6 million compared to $10.9 million during the quarter ended September 25, 2008, a decrease of 39.4%. This decrease related to lower operating income and higher net interest expense, slightly offset by lower noncontrolling interest charges. The increase in net interest expense is primarily due to a non-cash charge of $2.4 million to interest expense in the third quarter of 2009 compared to a non-cash credit of $2.1 million for the third quarter of 2008, related to the change in the fair value of our interest rate swap with Lehman as discussed in Notes 3 and 6 to the unaudited condensed consolidated financial statements, offset by lower market interest rates on the unhedged portion of our debt. The lower net noncontrolling interest charge is primarily due to the lower operating income offset by the impact of additional common membership units issued in 2009.

Nine Months Ended October 1, 2009 and September 25, 2008

Revenue. Total revenue of the Company for the nine months ended October 1, 2009 was $262.1 million compared to $257.1 million for the nine months ended September 25, 2008. The increase of the 2009 period over the 2008 period of 1.9% was primarily the result of an increase of 1.3% in advertising revenues (which includes beverage revenue) as discussed more fully below, and a 7.1% increase in Meetings and Events revenue.

National advertising revenues of $190.3 million (including $26.9 million of beverage revenue) for the nine months ended October 1, 2009 increased 4.2% from $182.7 million (including $32.5 million of beverage revenue) for the 2008 period. National advertising revenue (excluding beverage revenue) for the nine months ended October 1, 2009 increased 8.8% compared to the 2008 period, primarily due to an increase in national advertising inventory utilization (excluding beverage revenue) to 81.8% from 73.6% offset by a decrease in CPMs of 5.6% (excluding beverage revenue). The increase in utilization is due primarily to a broadening of our overall client base and an increase in the allocation of the annual spending commitment by our content partners for the nine month period in 2009 as compared to the same nine month period in 2008. The increase in inventory utilization was achieved despite a 6.9% increase in our salable advertising impressions in the first three quarters of 2009 compared to 2008. This revenue increase was offset by a $5.6 million decrease in beverage revenue, primarily due to a reduction in the beverage advertising time acquired by two of our founding members, as discussed above, in the nine month period of 2009 compared to 2008, partially offset by a contractual annual 8% increase in beverage CPM.

Local advertising revenue decreased $4.6 million or 10.0% to $41.5 million for the nine months ended October 1, 2009 compared to $46.1 million for the nine months ended September 25, 2008. The decrease is due to the continued difficult economic conditions and the impact on local and regional businesses. Local revenue per theatre attendee for the nine months ended October 1, 2009 declined approximately 13.2% to $0.08 per attendee compared to $0.10 for the 2008 nine month period due to lower revenue and increased attendance.

Total advertising revenue per attendee for the nine months ended October 1, 2009 was $0.47 per attendee, which represents a decrease of 2.3% compared to the 2008 period. The slight decrease in the advertising revenue per attendee was primarily due to lower local and beverage revenue and increased attendance. Excluding beverage revenue, advertising revenue per attendee was consistent at $0.41 in the 2009 nine month period and the same period in 2008.

Meetings and Events revenue increased $2.0 million, or 7.1%, to $30.2 million for the nine months ended October 1, 2009 compared to the 2008 period as a result of a 28.9% increase in the number of event sites driven by the success of the Fathom entertainment events, offsetting a decrease in our corporate marketing events, which have been impacted by the difficult economic environment and its impact on the spending of our larger corporate clients.

Operating expenses. Total operating expenses for the nine months ended October 1, 2009 were $153.6 million compared to $143.1 million for the 2008 period through September 25, 2008. The 7.3% increase in 2009 compared to the 2008 period was primarily the result of an increase in advertising operating costs and selling and marketing costs, related to the increase in the size of our network and the increase in overall advertising revenue levels, an increase in Meetings and Events operating costs which are the result of the increase in the number of events, and an increase in depreciation and amortization also due to the growth in the size of our network.

Advertising operating costs. Advertising operations costs of $13.9 million for the nine months ended October 1, 2009 increased 13.9% over the $12.2 million for the 2008 period. This increase was primarily the result of the payments made to our network affiliate theatre circuits pursuant to our contractual agreements for advertising revenue displayed in their theatres. This increase is related to the net addition of affiliate circuits to our network since 2008 as well as higher national advertising revenues (excluding beverage).

Meetings and Events operating costs. Fathom operating costs of $19.2 million for the nine months ended October 1, 2009 increased 4.3% compared to $18.4 million during the 2008 period due to a 28.9% increase in the number of events and the related increase in revenue.

Network costs. Network costs of $13.9 million for the nine months ended October 1, 2009 increased 11.2% compared to $12.5 million for the 2008 period due primarily to the increase in costs associated with aging equipment, as well as costs associated the increase in the size of our digital network and our internet initiative.

Theatre access fees. Theatre access fees were $39.1 million for the nine months ended October 1, 2009 compared to $37.1 million for the comparable 2008 period. The 5.4% increase for the first nine months of 2009 versus the 2008 period was primarily the result of an increase in the contractual rate per digital screen and acquisitions, a 3.7% increase in founding member attendees, the addition of AMC Loews acquisition to our venture and new theatre construction and acquisitions by our founding members.

Selling and marketing costs. Selling and marketing costs increased to $36.8 million for the nine months ended October 1, 2009 compared to $35.3 million for the 2008 period, or an increase of 4.2%. Selling and marketing costs have increased due primarily to increased marketing and business development expenses to support our broader client base and internet business, as well as our Fathom events business, offset by decreases in local sales commissions associated with lower local advertising sales.

Administrative and other costs. Administrative and other costs for the nine months ended October 1, 2009 were $19.3 million compared to $18.7 million for the 2008 period, an increase of 3.2% primarily due to increased professional service fees.

Depreciation and amortization. Depreciation and amortization expense increased $2.9 million for the first nine months of 2009 compared to the same period in 2008 primarily as a result of increased depreciation on prior years' capital expenditures made to support the growth of our network, including network equipment installed in new network affiliate theatres and the amortization expense recognized on additional intangible assets associated with net new founding member theatres added to our network in accordance with the Common Unit Adjustment agreement.

Net income (loss). Net income generated for the nine months ended October 1, 2009 was $14.9 million compared to net income for the nine months ended September 25, 2008 of $14.8 million. The decrease in operating income as discussed above was offset by lower net interest expense and the non-operating . . .