National CineMedia, Inc. (NCMI) Q4 2011 Earnings Report, Transcript and Summary

Greetings, and welcome to the National CineMedia, Inc. Fourth Quarter and Full-Year 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Oddo, VP of Finance for National CineMedia Inc. Thank you, Mr. Oddo.

Good afternoon. I'd like to remind our listeners that this conference call contains 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 as amended. All statements other than statements of historical facts communicated during this conference call may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the company's expectations are disclosed in the risk factors contained in the company's filings with the SEC. All forward-looking statements are expressly qualified in their entirety by such factors. Now I'll turn the call over to Kurt Hall, CEO of National CineMedia.

Thanks, David. Good afternoon, everyone. Welcome, and thanks for joining us for our 2011 earnings call. Today, I'll provide a brief overview of our 2011 results and share some thoughts about 2012. Gary Ferrera, our CFO, will then provide a more detailed discussion of our financial performance for Q4 and all of 2011 and then I'll provide some color around our guidance for Q1 and full year 2012. And then as always, we will open the lines for questions. Despite the market headwinds that reduced available scatter spending and depressed our Q4 National Advertising CPMs and revenue, we finished well ahead of the top end of our revised guidance that we provided in mid-October with adjusted OIBDA of $224.3 million. While this is only approximately 1% higher than last year, you will recall that 2010 was an extraordinary year with adjusted OIBDA growth of 17.5% over 2009. While reports of strong revenue growth in our local advertising and Fathom consumer businesses, our National Advertising business was negatively impacted by a slower-than-expected economic recovery that went into reverse in Q3 just as we were going into our heavy selling period for Q4, and just after the TV networks have finished the largest upfront in history. Clearly, the timing of the August market recovery slowdown could not have been worse for us. While our 2011 growth was not where we wanted it to be, we view it as a short-term issue as the overall performance of our business since our IPO has been strong relative to the bottom media marketplace. Despite the impact of a deep recession in 2008 and '09, and subsequent slow recovery in 2010 and '11, our revenue and adjusted OIBDA since 2006 has grown at a compounded annual growth rate of 9.6% and 10.2%, respectively, well ahead of television and other traditional media companies. Despite a difficult market environment, our sales teams continue to make good progress towards our strategy of expanding our client base. During 2011, we added 31 first-time clients and 5 other clients that had not spent with us during the last 5 years. Our 2011 expansion was primarily in the computer hardware and software, entertainment, quick service restaurants, insurance, retail, apparel, travel and tourism and telecom categories. With these additions, we have increased our client base by approximately 44% over the past 2 years. While this is good progress, there is plenty of opportunity for future growth as we still sell no advertising to many hundreds of high-quality brands that buy TV. We have made good progress expanding and diversifying our client base, the entertainment, auto and telecom categories represented over 60% of our 2011 non-beverage national advertising revenue. This concentration level has been relatively constant over the last few years as many of our clients still only buy cinema when they have a product launch, a neat piece of creative or some other marketing priority, and thus we continue to experience some year-to-year spending volatility within certain client categories. In 2011, spending declined in the military, home video equipment, consumer package goods, video game, auto, primarily Asian, credit card and electronics categories. While 2011 spending was lower in these categories, we're having discussions with many clients for campaigns in 2012. While our current category concentrations are higher than I'd like them to be, they are not meaningfully higher than many cable networks, so I'm confident that the continued expansion of clients that use our network in their everyday marketing plans will help reduce our year-to-year revenue and adjusted OIBDA volatility, and help to expand our valuation multiple as we begin to post more consistent annual growth. Our National Ad business did not meet our growth expectations for '11, our local and regional advertising business had another great year, with an annual revenue increase of over 14% versus 2010. This growth was once again driven by an increase in regional contracts, as our average local contract value increased 23% during the year, more than offsetting a 7% decrease than the total number of contracts related to the continued impact of the slow economic recovery on smaller businesses. The growth of our regional business relates to the better geographic coverage resulting from the expansion of our network and our strategy to place more focus on larger regional clients, such as car dealers, associations, state lotteries and insurance companies. During 2012, we will continue to expand the strategy by broadening our regional focus to the QSR, casual dining and tourism categories, and selectively adding new sales and support personnel. Our online and mobile initiatives have also begun to have a more meaningful impact on our overall advertising business. While our digital revenue is still relatively small, these new marketing platforms are beginning a -- are becoming more and more important part of our selling proposition as clients begin to demand and execute more integrated marketing campaigns. In fact, during 2011, approximately 27 million of on-screen and lobby advertising contracts also included an online or mobile component, compared to 9 million in 2010. As of year-end, our online advertising network included 42 movies-related websites, with approximately 57 million unique visitors each month. And our Movie Night Out app launched in 2010 now has over 1.1 million users with sessions increasing on both Apple and Android phone. Last week, we took the first step in our strategy to directly connect our core cinema advertising business to the online and mobile worlds when we launched a new version of our Movie Night Out app that included our Cinema Sync companion app. While the Cinema Sync companion app is currently only available as part of our Movie Night Out app, and thus is not expected to have a meaningful short-term impact on digital revenue as it has only limited distribution, it will soon be available for integration into existing movie apps, many of our circuit partner and select advertising client apps, allowing clients to engage with movie patrons by offering content, coupons and other value-driven offers as it automatically connects to the audience with ads and content within the first preshow, as well as virtually any promotional items in the theater lobby. Our Fathom Consumer Events division also had another good year as revenue increased 11% versus 2010. The expansion of our live broadcast capabilities to over 700 theaters and 167 DMAs and a 41% increase in the number of Fathom Consumer Event night to a record of 104 were the primary drivers of growth. In addition to the continued success of the New York Metropolitan Opera, we expanded some existing programming categories and experimented with several new programming genres including film anniversary events, Broadway plays, live 3D sports, symphony and ballet, to name a few. Unfortunately, the growth of our Fathom Consumer programming business was almost entirely offset by a 14% decline in the Fathom Business Meeting division, as the competitive impact of upgraded meeting facilities in hotels and more robust meeting services being offered online continue to create a difficult market environment for the business meeting division. As we believe that this competitive environment will become increasingly more difficult over time, during Q1 2012, we began to restructure our Fathom Business to focus primarily on the Fathom Consumer Event business. With its more attractive long-term growth prospects, resulting from the expansion of our 3D live broadcast capabilities and creation of a more robust programming, marketing and sponsorship operations, the Fathom Consumer Event business is a much better strategic fit with our core digital media network business. In addition, the Fathom Business division was a very low-margin business, and thus the impact on our future adjusted OIBDA is not expected to be material. As part of our strategy to broaden our advertising client base and attract more high-quality Fathom entertainment programming, it is imperative that we continue to expand and improve the quality of our digital network. In addition to integrating the consolidated theaters acquired by Regal in 2008, and expanding our relationship with 2 current network affiliates, we added 8 new circuits during 2011 and signed 5 additional circuits that will join our network during Q1 2012. These 2011 and early 2012 additions have added over 1,800 screens with approximately 57 million annual attendees. We also continue to expand the number of higher quality digital cinema projectors in our network, with over 10,600 screens installed as of last week. By the end of 2012, we were expecting that approximately 80% of our approximately 19,000 network screens will be equipped with the digital cinema projectors, and approximately 95% of our network screens will be digital. This broader national distribution and higher quality projection will further enhance our competitive positioning by improving our 2D presentation, as well as providing 3D advertising and live 3D capabilities for Fathom Entertainment programming that is unmatched even by television. 3D advertising is expected to continue to be a small but growing part of our advertising business as it will provide a unique offering for our clients at CPMs that average from 50% to 100% higher than our average 2D CPM. Looking ahead to 2012, we're off to a good start as our advertising upfront bookings are up, and the box office is on fire with year-to-date attendance up nearly 20% versus 2011. We currently have total advertising commitments of approximately 55% of total advertising revenue implicit in the midpoint of our full year guidance range, and the total dollar value of these full year advertising commitments are currently up approximately 19% versus the same time last year. This increase in bookings reflects a slight projected increase in beverage revenue, the renewal, replacement and expansion of several of our content partner relationships which extend through the end of 2013, and a renewal of our cellphone PSA that extends through September 2013. Most importantly, it reflects a 60% increase in commitments from national clients that would normally spend in the scatter market, reflecting our increasing inventory utilization in several high movie-going months and the expansion of our relationship base of clients that are making cinema a part of their core annual media budgets. While we've made progress in 2011, continuing to expand our overall client base and increasing these upfront commitments are a primary focus of our 2012 business plan. We've added one senior executive to our business development team, with a deep client relationship base in the QSR, casual dining and CPG categories, and we're planning to more aggressively participate in the TV upfront process this spring, including a presentation in New York City during upfront week in mid-May. We have also realigned our research investment to focus on providing clients, particularly those in the CPG category, with additional research including some biometric research that we will release next week. These additional metrics and analytics will better capture some of the qualitative attributes of cinema that are not reflected in the media mix modeling planning software that are used by most clients. While we have created adequate demand for several months of the year, but our increasing impression base and the upgrades to our distribution software, we will also have much more flexibility of executing some new demographic targeting strategies and experiment with more flexible pricing structures as we look for ways to increase our inventory utilization in lower demand months. As we have mentioned many times, pricing is not a primary part of our growth strategy. In fact, we expect all of our 2012 national advertising revenue growth to come from higher inventory utilization and a higher impression base as our national CPMs are expected to be approximately the same as 2011. These CPM arrivals will reflect the continued expansion of our 3D business and stronger pre-bookings offset by the expansion of our relationships with price-sensitive clients as we introduce them to cinema, and implement our plans to better utilize run rate inventory and to increase inventory utilization in months when inventory would usually go unsold. As we continue to expand our client base and sell more of our inventory upfront, over time we can begin to reduce the number of these lower-priced deals that we take each year, just the way television networks use their air playing and direct response advertising to fill in lower demand periods or day parts. At the same time that we're increasing our inventory utilization, we will also continue to expand our network and impression base through the new construction and M&A activities of our founding members and the addition of new network affiliate circuits. Our advertising network currently represents approximately 70% of the attendance in the top 10 DMAs, and 65% in the top 50, with coverage in 177 DMAs in total. And we are not done yet as our network [indiscernible] expansion targets currently include 15 to 20 smaller regional circuits with 1,500 to 2,000 screens and 60 million to 70 million annual attendees. Expanding our network will not only make us more competitive with other national advertising networks, it will also help us to create a much more robust distribution platform for our Fathom Entertainment programming business, including a more meaningful live 3D broadcast network. Lastly, you should note that the lower end of our guidance for all of 2012 assumes that there will be a slowdown in the economic recovery. Having said that, we could benefit from our higher bookings and the fact that Q2 TV upfront commitments that were recently optioned could come back into the market in Q2 and Q3 should the economy continue to strengthen. We also believe that the Q3 and early Q4 scatter markets should be stronger for us to the unprecedented set bending [ph] that is expected by the presidential campaigns and tax. While we do not expect to play a significant number of political ads due to the negative tone that the campaigns are likely to take on, we believe that we will see some indirect benefit as advertisers will need to find alternatives as they are crowded out of traditional media or may not want to be placed near all the negative political advertising. Before I turn the call over to Gary, I'd like to thank all of our investors for their support, and our employees for another year of hard work. With last week marking the fifth anniversary of our IPO, the business plan that we have executed since the beginning has produced solid growth and laid the foundation that will serve us very well in the future. During our first 5 years as a public company, we have created a unique media company that provides investors with a rare combination of growth and current income. With the continued expansion of our client base and digital network, including the ability to connect theater patrons to the mobile and online worlds, movie theaters and our unique digital network will become an increasingly attractive medium to content producers and marketers as the Internet continues to fragment the traditional forms of video entertainment and media distribution. Now here's Gary to give you some more details concerning our Q4 and overall 2011 performance and 2012 guidance.

Thank you, Kurt. I'll now spend some time reviewing our fourth quarter and full year 2011 financial performance in a bit more detail, as well as provide guidance for the first quarter and full year 2012. For the fourth quarter, our total revenue decreased 3% to $114.6 million, driven by a 2.4% decrease in total advertising revenue, including beverage, to $101.3 million, and a 7% decrease in Fathom Events revenue to $13.3 million. For the full year, our total revenue increased 1.8% to $435.4 million, driven by a 1.8% increase in total advertising revenue, including beverage, to $386.1 million and a 2.5% decrease in Fathom Events revenue to $49.2 million. The advertising revenue mix for the full year was 69% national, 21% local and 10% beverage versus 72%, 18% and 10%, respectively, for fiscal 2010. Total advertising revenue represented 89% of our full year revenue and is unchanged from 2010. National Ad revenue excluding beverage in Q4 decreased 7.3% versus Q4 2010 to $69.4 million, driven by a 7.8% decrease in CPM and a decrease in utilization from 114.3% to 112.1%, partially offset by a 0.4% increase in our Q4 impression base. Our Q4 CPM decline was primarily due to the very soft scatter market environment and a great number of lower-priced airplane deals and cheaper revenue and inventory deals. As Kurt alluded to, the soft scatter market was a result of the weak economic outlook going into Q4 and the record TV upfront and the fact that those commitments are firm in Q4. For the year, National Ad revenue excluding beverage decreased 1.6% versus 2010 to $267.5 million driven by utilization decrease to 100.3% from 101.5% on impressions that were up 0.1% and a slight decline in CPM of 0.4%. The addition of several network affiliates offset a decrease in theater industry attendance for the quarter and year. We entered the fourth quarter of 2011 with approximately $1.5 million of make-goods, and as of the end of the quarter, we had approximately $2.7 million of make-goods. This balance is slightly lower than the year end 2010 balance of $2.8 million, and fell comfortably within the range of our historic levels, as efficient inventory management was able to offset some of the impact of the weaker-than-expected Q4 2011 box office. As we have mentioned in the past, unexpected increases or decreases in industry theater attendance does not have a meaningful impact on our results. Our Q4 beverage revenue decreased 1.1% to $8.6 million from $8.7 million in Q4 2010, driven by a 4.3% decrease in founding member attendance, partially offset by the 6% contractual CPM increase in 2011. For the full year, beverage revenue increased 2.2% versus 2010, primarily due to the 6% contracted CPM increase partially offset by a 2% decrease in founding member attendance for the year. Our local advertising business continued to perform well as Q4 local revenue increased 15.3% to $23.3 million from $20.2 million in Q4 2010, with same screen sales increasing approximately 9.9%, and full year local same screen sales increasing approximately 11.2%. This strong performance for the full year was due primarily to the continued increase and larger value contracts for both regional clients, as well as national clients advertising in select markets as the total dollar value of contracts over $100,000 increased approximately 58%, and the number of these larger value contracts increased by over 30%. Total Q4 advertising revenue per attendee decreased 2.7% to $0.69, with our national advertising revenue per attendee excluding beverage decreasing 7.6% to $0.46 per attendee, and our local ad revenue per attendee increasing 15.3% to $0.16, both on a 0.3% decrease in Q4 theater attendance. Full year 2011 advertising revenue per attendee increased 1.8% to $0.61 with our national advertising revenue per attendee excluding beverage decreasing 1.6% to $0.42 per attendee, and our local ad revenue per attendee increasing 15.5% to $0.13, both on approximately flat 2011 theater attendance. Our combined Fathom Events business Q4 revenue decreased 7% to $13.3 million from $14.3 million. This was driven by a 43.8% decrease in Fathom business revenue, offset partially by an 11.6% increase in Fathom consumer revenue. For the full year 2011, the combined revenue for our Fathom Events consumer and business divisions increased 2.5% to $49.2 million from $48 million in 2010. The annual increase was driven by an 11.1% increase in Fathom Consumer Events revenue as a 40.5% increase in the number of event nights versus 2010 was partially offset by a 25% decline in revenue per Consumer Event site as we experimented with several new genres and expanded our network. This Fathom Consumer increase is partially offset by a 13.9% decrease in Fathom business revenue as revenue for Business Events site decreased 14.4% and was partially offset by a slight increase in Business Events sites versus 2010. Total Q4 adjusted OIBDA decreased 4% to $63 million from $65.6 million in the fourth quarter of 2010, and for the year increased 0.9% to $224.3 million versus $222.4 million in 2010. Q4 adjusted OIBDA margin was down -- was 55%, down from 55.5% in Q4 of 2010, while full year adjusted OIBDA margin was 51.5%, down from 52% in 2010. Both the quarterly and annual margin decreases were primarily due to the decreases in higher-margin national advertising revenue, as well as the increase in the percentage of our total revenue derived from our network affiliate attendance and the increase in theater access fees related to advertising network being connected to an increasing number of the higher quality digital cinema projectors. These negative impacts on our margins were partially offset by tight cost control, as well as $3.4 million less in 2011 accruals for annual performance bonuses associated with the lower-than-expected growth. Looking briefly at diluted earnings per share for the fourth quarter, reported GAAP EPS of $0.12 versus $0.22 in Q4 2010, and for the full year we reported GAAP EPS of $0.58 versus $0.62 in 2010. These decreases were driven by $12.2 million and $9.7 million of additional non-operating expenses for Q4 and full year respectively, much of which was non-cash in addition to an increase in the effective tax rate due to some non-operating expenses that were not deductible for tax purposes. We continue to expand our network. As of December 29, 2011, we had 18,670 total screens in our network, representing a 7.9% or 1,368 screen increase in total screens versus the end of 2010, and a 10.6% increase in digital screens. Approximately 95% or 17,698 of our total screens are now connected to our digital network versus approximately 93% at the end of 2010. These digital screens generate approximately 96% of our attendance versus 94% at the end of 2010. Our capital expenditures were $4.1 million for the fourth quarter and $13.7 million for the full year, up $3.3 million versus full year 2010. This is well below our annual guidance range that we provided at $15 million to $17 million, primarily due to both the timing of digitizing our recently signed network affiliates, as well as the permanent savings realized for the lower cost of connecting our network affiliates to our network. The increase in 2011 capital expenditures over 2010 was primarily due to digitizing approximately 1,300 affiliate screens during 2011 versus over 600 affiliate screens during 2010. In addition, approximately $1.6 million of tenant finishes associated with our corporate office expansion and lease renewal were capitalized during 2011 for GAAP purposes, but they were fully reimbursed by our landlord. Therefore, our actual cash capital expenditures for 2011 were approximately $12.1 million or approximately 3% of revenue versus 2% of revenue during 2010. Moving on to our balance sheet, our total debt outstanding as of December 29, 2011, was $794 million versus $776 million at the end of 2010. Our net revolver balance was approximately $35 million at the end of 2011 versus $36 million at the end of 2010. Our consolidated cash and investment balances at year end increased by approximately $15 million to $98 million from approximately $83 million as of December 30, 2010. Our short and long-term investments are comprised of marketable securities such as treasuries and commercial paper. A portion of the $89 million balance specific to NCM, Inc. is reserved for income tax payments and tax receivable agreement payments for the founding members. Excluding these tax-associated reserves, at our current dividend rate at the end of 2011, we'd be able to pay over 4 quarters of dividend even if no additional cash were distributed up to NCM, Inc. from NCM LLC. The entire $550 million balance of our term loan is fixed under interest rate swap agreements at approximately 6.5% with interest payments due quarterly. Our $200 million ten-year notes have an interest rate of 7 7/8% [ph] with interest payments due each January 15 and July 15 beginning in 2012. The interest rate at our revolver borrowings was 3.7% in Q4 of 2011 versus 2.8% in Q4 2010, and 2.8% for the full year 2011 versus 2.4% for the full year 2010. This increase was related primarily to higher average unused revolver balances and a slightly higher commitment fee rate, both resulting from the July 5th amendment of our credit facility that significantly increased our liquidity. As of December 29, 2011, our NCM LLC cash balance was $9 million and we had $75 million of availability under our $119 million revolver for a total of $84 million in NCM LLC liquidity, versus $44 million of liquidity at the end of 2010. In addition, we had $89 million of cash and investment balances at NCM, Inc. on December 29, 2011, versus $69 million at the end of 2010, including our consolidated cash and investment balances and availability under our revolver, we had $173 million of liquidity on December 29, 2011, versus $113 million at the end of 2010. Our pro forma net senior secured leverage at NCM LLC as of December 29, 2011, is 2.7x trailing fourth quarter adjusted OIBDA, including $1.9 million of Regal consolidated integration payments, which is well below our financial covenant of 6.5x as of December 29, 2011. You should also note that while we have no total leverage maintenance covenants that include our senior unsecured notes, our total leverage at NCM LLC was just under 3.6x. We also announced a regular quarterly dividend of $0.22 per share. This dividend represents an annual yield of approximately 6% based on recent trading levels. The dividend will be paid on March 22, 2012, to shareholders of record on March 8, 2012. Shifting to our 2012 guidance. We are currently expecting that our Q1 2012 total revenue will be in the range of $71 million to $74 million, or approximately flat to up 5% over 2011. With adjusted OIBDA on the range of $20 million to $23 million or a decline of 3% to 15%. Unfortunately, expected growth in total Q1 revenue over 2011 will not upset the 8% increase in the per attendee part of the theater access fee that occurs every 5 years, and the increase in digital cinema maintenance fees related to ramp-up in digital cinema projectors in our network. As the portion of these increase costs are somewhat fixed and our revenue levels are historically higher in Q2 through Q4, these increased costs are not expected to impact quarterly growth as significantly during the remainder of the year. For the full year 2012, we expect total revenues to be in the range of $460 million to $470 million, 6% to 8% over 2011 revenue with adjusted OIBDA in the range of $225 million to $235 million. Approximately flat to up 5% from 2011. While we're expecting revenue growth in every quarter this year, the majority of our adjusted OIBDA growth is currently expected to be in Q2 and Q4, as the expense headwinds affecting Q1 in the existing high-inventory utilizations that make revenue growth more difficult in Q3, is expected to limit growth potential in those quarters. Some of the more significant assumptions that we are making regarding our 2012 guidance include the following: In 2011, our content partner revenues were allocated approximately 45% in the first half and 55% in the second half of the year. We are currently projecting a 2012 allocation of approximately 55% in the first half of the year, much of it in Q2, and 45% in the second half of the year. However, a future shift in our annual Mustang [ph] commitment between quarters is possible as film and DVD release dates or TV program schedules shift throughout the year. We expect both our national and local advertising revenue to increase in the low double-digit range for the year with a national increase, driven primarily by increased utilization on a higher impression base that is related primarily to the addition of network affiliates. Our full year national CPMs are expected to be approximately flat versus 2011. However, we currently anticipate a CPM decline in Q1, due in part to the impact of the softer scatter market environment in late 2011 when we began booking our Q1 revenue, as well as the addition of more price-sensitive clients related to our effort to increase Q1 inventory utilization. We will continue to use our standard 11 30-second units as a denominator in our utilization calculations to ensure period-to-period comparability. As we mentioned before, we can expand the show to a total of 14 30-second units or potential utilization of 127% if there is sufficient market demand. The local revenue increase is driven by expected improvement in the economy, continued expansion in a number of larger regional client contracts and the impact of the additional saleable screens in our network for 2012. Beginning in 2012, the EFA provides that our annual beverage CPM will increase or decrease by the same annual percentage change as our actual segment 1 national advertising CPM during the previous year. As such, our 2012 beverage CPM will increase about 1%. The Fathom Consumer Entertainment division is expected to grow in the mid-single-digits during 2012 due to an increase in the consumer revenue offset by the wind-down of the business meetings division. While the number of live metropolitan events will be down versus 2011, primarily due to the timing of events during the spring season schedule, this impact is expected to be more than offset by a focus on higher quality non-met events during 2012 and expanded 3D events. As Kurt mentioned, we are restructuring the Fathom business to focus on the higher growth consumer business. We'll continue to operate the Fathom Business division for a portion of Q1 2012, but will no longer actively market the business. However, going forward, we may occasionally facilitate a small number of meetings across our network on an opportunistic basis. As such, we expect the Fathom Business meeting division to now generate revenue of approximately $2 million to $3 million during both the first quarter and full year 2012 compared to $3.8 million in Q1 2011 and $14.2 million for the full year 2011. Our adjusted OIBDA margins for 2012 are expected to decrease slightly versus 2011, due primarily to the 8% increase in the attendance base portion of our theater access fee, increasing from $0.07 per founding member attendee to $0.0756. This attendance base increase only increases 8% every 5 years, therefore the next increase will not incur until 2017. Additionally, the incremental digital cinema maintenance fee will increase over the near-term as we expect to ramp up in installations to continue through the end of 2012. Lastly, based on deals signed to-date, we expect our lower margin network affiliate attendance base to grow to 16% of our total attendance in 2012 versus 13% in 2011. And this should have a slight impact on margins as a higher percentage of advertising revenue will be applied to our affiliates which are paid under our revenue share structure. We expect 2012 CapEx levels to be lower than 2011 and fall in the $10 million to $12 million range. This expected range includes the digitization of a portion of our currently contracted network affiliate screens and assumes that no additional network affiliate agreements are signed. And lastly, consistent with 2011, our fiscal 2012 calendar includes 52 weeks. Before we open the line for questions, I'd like to provide tax status information for our 2011 dividends. Of these dividends paid in 2011, 71.8% are to be treated as non-dividend cash distribution for federal income tax purposes and the remaining 28.2% are to be treated as an ordinary dividend. This information is posted on the Investor Relations section of our website and stockholders should receive a Form 1099 due in the next few weeks for the 2011 tax year. That concludes our prepared remarks, and we'll now open up the lines for any questions you might have.

[Operator Instructions] Our first question comes from the line of Eric Handler with MKM Partners.

Maybe you can give us a sense about your advertising business right now. I mean, what's the tone that you're getting from advertisers, maybe in terms of request for proposals? Are you seeing a lot of new categories starting to come in, requests for proposals now, a lot of returning advertisers? Just a general tone of the business environment right now.

This is Kurt. I think the tone has considerably improved from what we saw, obviously, in late third and early fourth quarter. And I think there is still some caution out there. I think every week that goes by that we get better and better economic data. I think there's more and more believers out there, if you will. So I think the tone of the advertising market is sort of following the tone of the broader economic recovery. I think on a client-specific basis, as we said in our comments, we continue to get a lot of inbound interests from various new clients, a lot of existing clients obviously are coming back. For instance, we're even talking to the military again, the Army National Guard again, that went away last year. So I would just characterize the overall tone as pretty positive, but it wouldn't take much for that to turn a little bit.

And then as a follow up, since you're expecting CPMs to remain relatively flat, in order to get to the midpoint of your guidance, where do you think your inventory utilization can get to?

Well, we don't actually put a projection out there for inventory utilization, we want to leave a little bit of work for you guys to do. But you guys can kind of figure out the math. We told you what the impression base is growing by and so on. So you can kind of back into it.

Our next question comes from the line of James Marsh with Piper Jaffray.

I just wanted to discuss with you guys your goals for this upcoming upfront. Is it just to sell more upfront and have less exposure to the scatter market? Or you're trying to increase business with categories that you don’t typically use, Cinema? Can you just kind of frame out what you're trying to accomplish there and how you define success?

Yes. Clearly, all of the above. This is the first time that it's ever been done. So we are clearly putting our stake in the ground. And if you look at us as a network, on the weekends, we're #1 and during the whole week, we're somewhere in the top 10 all the time. And in the worst case, we're top 15. So we just felt that we sort of deserved a seat at the table, if you will. Clearly, the goal, if you will, will be to try to book more stuff upfront and not get caught the way we did in the fourth quarter of 2011, because clearly, the success of the TV upfront in '11 and the fact that those commitments are firm in Q4, which is the first quarter of the media calendar, impacted us negatively. So we'd like to get a little bit of that money so we're not quite as exposed. And hopefully, along the way, we will, as you indicated, get some exposure to a new bunch of clients. I don't know if you picked up any other coverage, we actually put a press release out a couple of days ago on this subject and it even surprised us, the number of pickup, the amount of pickup that it got. It got pickup in pretty much all the trades, all the movie trades and pretty much all throughout the media world. So it was viewed pretty positively by everybody and we got a lot of notes from clients and from other people that are associated with the business. So we're pretty excited about it. It's a lot of work, but we think it's going to be worth it.

I just have one quick question about the dividend. And maybe it's just more, just if you can give me some insight into what the board thinks when they hear about the administration talking about tripling taxes on ordinary dividends. And obviously there's a component of both in your dividend. But I think they look at returning shareholder -- of returning capital to shareholder differently when you hear about those types of items?

Yes. It really hasn't been a topic of discussion, mostly because who the hell knows? I mean, this subject is all over the board. We're not going to have any certainty of any kind until we get through the elections. And then even then, it's going to be likely years before anything gets approved. And so it's one of those topics that, yes, it's kind of interesting. But it's a big fat waste of time as far as I'm concerned to spend a lot of energy around until we get more certainty. Having said that, as Gary indicated at the end of his statements, a lot of our dividend, in fact over 70% of our dividend, wouldn't be impacted by any new dividend rules because only give-or-take 25% to 30% is a true dividend, the rest is returning capital.

Our next question comes from the line of Townsend Buckles of JPMorgan.

On your ad outlook for Q1 and further out, Kurt, I think you mentioned this but are you seeing those advertisers that didn't materialize at the start of Q4 coming back now? Or is it more just drawing in new and different clients? Sorry, I'll add one more to that. And along those lines, do you have a sense of whether this improved spending is dollars that had been held back at the start of Q4 or rather being reallocated maybe from TV?

Well, all of the Q4 commitments were firm, and they all got played out, obviously. There will probably be some carryover make-goods and some other stuff from TV under delivering, from a ratings standpoint, in fourth quarter that will carryover and who knows whether that will ever show up in the scatter market. For us, we did see actually some of the clients that would delay their spending after the Japanese tsunami. We did see some of that money come back into first quarter and we're talking to some others about second quarter, third quarter deals. So we are seeing some of that money come back into the market, mostly with Asian autos, so I think it's a little bit of both.

Okay. And just another on your event during the TV upfronts. Are you holding back specific blocks of maybe more premium inventory to sell that only you might otherwise be trying to sell before then? Or is it just to try to draw more interest, earlier interest?

We'll, we aren't releasing any specifics about the deals that we're going to be giving people, but we'll obviously be trying to create some sort of incentive for people to book upfront for us. So you can assume there will be incentives of one sort of another. And we'll just have to get into that when we've got more clarity around it. We're obviously not going to tip our hands this early in the process.

Our next question comes from the line of Barton Crockett with Lazard Capital Markets.

I was wondering if you could talk a little bit about the tone of the environment for you guys versus Screenvision at this point? And one thing in particular I'm wondering about is I think one of their aspirations over time is to do more with content segments, something you guys have pioneered. Do you think that has any potential kind of effect to your content business positively or negatively? And in general, how competitive do you see them and your ambition to potentially kind of combine with them over time, how do you see that at this point?

There's a number of questions in there, Bart. Let me try the first one. The content partner one -- our content deals are 2 years in waiting. So as I mentioned, a lot of our deals are locked up through the end of 2013. And I also think that we are able to provide things that the content partners want, the broader distribution, the heavier distribution and the top 10 markets. And the higher percentage of digital, both overall digital and, as we mentioned, the increasing digital cinema, the quality of all of that. So I think just overall quality of our network and the technical capabilities we have, I think we're going to be more attractive to the content partners. And then some of the things that we're doing with our Cinema Sync app and some of the other things that we're doing that will create some integrated programs for these content partners, I think, is important as well. So, hard to tell what the competitive impact will be, hard to tell what their strategy is going to be, as far as their preshow, obviously at least what I know about their preshow right now, it doesn't lend itself to the same strategy. I assume they've seen ours work and they will go in that direction. But nothing to report on that right now. The second part of your question, I think, was sort of angling towards the prospect of a deal with them. And I'll say exactly what I said in the past, I'm always interested in exploring an accretive deal for us. And I think it makes loads of sense, there's lots of expense synergies, and other reasons, financial reasons that the deal makes sense. And so we'll just have to play it out as it comes.

Our next question comes from the line of Ben Mogil from Stifel, Nicolaus.

It's Adam Kepecs in for Ben Mogil. I just want to ask the trends that you had mentioned in the fourth quarter about higher National Advertising, and just obviously lower expenses due to lower accruals and bonuses. Can you tell me how that will trend into the next quarter and next year?

Well, the way our -- we gave you some, I think, data on where our commitments were trending, so they're up quite a bit relative to last year. And we're still not where we'd like to be. As I mentioned in my comments, we're at about 50% -- 55% rather, of the midrange of our guidance. Most cable companies are in the 65% range of their total budget for the year. The broadcasters are 70%, 80%. So clearly, I'd like to be up where the cable companies are which is sort of in the mid-60s, so that's sort of the goal. And as far as the bonuses, the way our bonus program works is that we are tied, we, myself, in particular, but others, Gary and other key officers, are tied to our internal budgets, which have implied growth in them. And in 2011, we didn't grow the company as much as our budgets would have implied, and so we didn't get -- we didn't achieve our full bonus potential. And the numbers were relatively significant, I think there's going to be an 8-K that's going to be filed in the next couple of days, and it's going to talk about the top 5 officers and the bonuses that we're getting and so on.

Okay. And in the fourth quarter, the percentage of National Advertising, you said that was higher. Do you see that continuing into the next quarter?

Well, as we've guided for the first quarter, there's still a little bit of headwinds in the first quarter as with the case with the fourth quarter, there were not any or any significant options taken in the National TV business. And so that kind of carried over into the first quarter. As I mentioned, there apparently has been quite a few options hit for second quarter commitments, and so we would hope that, that would make for a more robust scatter market.

Our next question comes from the line of James Dix with Wedbush.

I just got a couple of questions. Just on the first quarter, I know you had the cancelation of the military spending which impacted the comparison for first quarter last year, but I'm just wondering, is there anything else going on as to like why the growth isn't maybe a little bit stronger. You already mentioned a little bit about not a lot of options cancelation activity freeing up money, but if there's anything else I'd be interested in? And then any more color you could give on the outlook for the military category for the year. Kurt, you mentioned in your remarks that there were some discussions going on, but just wondering how you might try to handicap that, at least. And then second, on the local regional business, any color you have in terms of your expectations? What kind of the local, local business, kind of the non-regional or the smaller contract business, is that improving at all from the trends you saw or do you continue to see the clients there? And then I have one follow up for that.

I think we'll go in reverse order. The local, actually the smaller contract is getting a little bit better. It seemed to have bottomed out sort of in the first quarter of 2009, and it sort of gotten a little bit better each quarter. But it clearly still isn't back there. And if you look at a spread of the individual contract sizes, the real tiny ones actually have picked up a little bit. The contracts that are a little bit bigger, what's the next? Sort of a $1,000 and $5,000 contracts, still a little weak. And then once you get bigger than that, it starts to get quite a bit better. And then when you get up over the $50,000, $100,000 contracts, that's where we see the really big pickup. And as we've mentioned, that's really about the more larger regional client. The outlook for the military, we continue to talk to all the military. In fact, we did a pretty big deal in '11 with the Army and we're continuing to talk with them. The big client we lost in 2011 was the Army National Guard, and my comment earlier was specifically about them coming back and saying they may have a little bit of money for us in 2012. I don't think the Army National Guard spending will ever get back to the level, unless we get back into a big war or something dramatic in the world happens, I don't see that coming back for quite some time. And the unemployment rate has an impact on that as well because as the unemployment rate continues to be high, their recruiting needs are met just for the fact that people can't find jobs anywhere else, they go into the military. So there's actually an inverse relationship for us there. And then your first question about Q1. Obviously, I'd love Q1 growth to be higher than what we're guiding. As we said, as we implied in some of our contracts, Q2 looks to be pretty strong for us. And so there is some spending that looks to be shifting between Q1 and Q2. Our content partner money is really strong in Q2 as well. We brought in some new clients this year, our new content partners that are television guys. So Q2 with the sweeps and other things that are going on primarily in May is shifting a little bit of our content money into Q2.

Okay, that's helpful. And then my one follow up was, just bigger picture. When you look at the most likely category to really make meaningful stride to cracking into your top 3: the entertainment, auto, telecom triumvirate, I guess. I mean which ones do you think we should be thinking about most in terms of really moving up to have substantial haps once you got beyond those top 3 categories?

Well, I think it's a little more complicated or detailed, so I'll go into a little more detail in the question that you actually asked. I think it really comes down to finding clients that will spend with us in 4 or 5 months of the year. Those being January through April and October. If you look at our utilization, those are the months that we have some of the biggest issues from the utilization standpoint. So what we're really focused on is finding clients that will spend in those months. And if you start -- and so that's sort of one cut at the problem. The other cut at the problem is finding clients that are interested in G and PG inventory. And we started to have very meaningful conversations with toy manufacturers and other people that will really focus on G and PG inventory because that inventory doesn't have as high a utilization as our PG-13 and R. As far as the January through April and October issue, it's really I think the categories that are going to be most -- have the most opportunity for us continue to be the CPG, QSR, retailers and other clients that spend money every month of the year. The other initiative that's been successful for us is to try to go out and create programs around events that happened in the first quarter. There are an awful lot of big TV events, the Super Bowl being the biggest, where we go out and try to get clients to advertise us -- with us that are also advertising around those events. The Academy Awards is another one that obviously is coming up this weekend that we've been successful in getting clients to get involved with. We actually had one client this year, the car company. I can't remember. It was an Asian car company that released their Super Bowl ad with us before, I think it was Kia, before the Super Bowl. And so that was a big first quarter deal for us. So if we can get more of that kind of stuff going on, that will help us fill those holes.

Our next question comes from the line of Bo Tang with Barclays Capital.

I want to follow up on the question on the upfronts. Are you able to quantify or frame roughly how much you would like to book in this year's upfront? Is it closer to, say, 1/4 of your inventory, 1/2 or?

Well, I think it's more about just trying to create long-term relationships with people. And what we do this year, if we're successful, it will only really affect fourth quarter of this year because as you all know, the upfronts that will be held with all the meetings and then the actual presentations in May are for the media year that start in the fourth quarter of this year. So that's really where the focus will be, and the impact of that will be primarily. Although we're hoping that just the meetings themselves and their upfront presentation, maybe it does attract more scatter money for us this year. So there's no real specific target within any given quarter. It's consistent with our overall strategy of expanding our overall client base, and that's the real goal of this.

Got it, great. And then also just a question on make-goods. The box office is currently off to a strong start this quarter. But the 4Q was pretty challenging. And so I'm curious where you do have weakness at the box office and your true make-goods. How much of an impact do the make-goods have on your revenue? Are you able to kind of take those make-goods and put them in slower periods where your sellout levels are not maxed out?

Yes. As we said a lot of times, the big impact for us is if the box office disappoints in the last month or last even 2 or 3 weeks of the quarter. Because if it disappoints earlier than that, we can usually find inventory throughout the rest of the quarter to make good on those contracts. So it doesn't have a significant impact. And you saw that this last fourth quarter was obviously very weak. Most of that weakness was in the front half of that quarter around Thanksgiving, and then into early December. The last week of the year was actually quite strong. That helped us, that helped bring the make-goods down a bit. So our make-good has averaged between just under $1 million to around $4 million, I think is the highest make-good we've ever had. So that's the range of good and bad, if you will.

Our next question comes from the line of Ben Swinburne with Morgan Stanley.

Kurt, I was wondering if you could help us just think about your visibility here and the guidance for basically accelerating revenue growth in the back half. How would you compare it to prior years? The national scatter market has been kind of soft in Q4 and Q1 depending on who you ask. One of the agencies would tell you it's soft. I'm just curious when you think about that acceleration particularly in the National Ad business, how do you think about your visibility there? And particularly on the impression front, I don't know if you want to give us the number of affiliate screens you plan to add in '12, whether it's baked into your guidance, that might help us think about it as well.

Yes. There's no new affiliates baked in. So the number, and Gary talked about the numbers. But the numbers all include contracts that are in place as of the first of the year. So from an impression standpoint, there could be some upside there. But there always is a little bit of a delay between the time you sign somebody up and the time you get it integrated into your rate card and into your contracts. So it would be later half of the year for sure at this point to have any significant impact if we signed up other guys. As far as our visibility goes, as I said in my comments, higher percentage of our higher number for the years has been booked already this year. So that's good news. The amount of money that we would usually have to compete for in the scatter has been booked upfront. You never know whether that's just scatter money that's prebooked or whether you're going to be able to add on to that. So that obviously is part of the science here, if you will. And so it's a little hard to say on that, but I'm feeling better right now about where we are than I did last year at this time. And I think the economic recovery, although it feels about the same right now as it did last year at this time, I do actually think it's got stronger underpinnings. There clearly are some macro issues like Greece and Europe and other things going on outside the U.S. that could derail that again. But I think that the economy feels like it has a stronger base, the employment numbers are stronger, and there's a lot of things going on right now that just gives me comfort that this recovery is actually going to get a little bit better. And so I feel a little bit better right now than I did last year given our bookings and given the sort of macro environment.

I know you guys gave us a range in Q1 and the dollar amount is pretty narrow, but I wonder if you're willing to talk about how much of your Q1 business is already booked, obviously pretty late in February at this point?

A lot of it. At this point for us to over perform, it's going to have be March business. And if we're sitting here a few months from now and you guys are calling us sandbaggers, it will be because business has come in, in March. And it's been kind of last-minute scatter money that's come in.

Okay. And then my last question is going back to auto. There was a lot of press coverage about General Motors canceling upfront commitments. This was in early January. The buyers were saying that, that money was just not being put back in the TV scatter, it was going back to GM for other purpose. I don’t know if any of that auto money flowed your way or if you saw anything impact you along those lines either good or bad in Q1 that you then expect to kind of change over the course of the year?

As I said in my comments, I don’t expect that to have a big impact in Q1. Could we pick up a week or 2 in March, maybe, I don’t -- you never know. But I think it's more really a Q2, Q3. And I think it's only going to come back into the scatter market, in particular to GM, if the economy starts to strengthen. Obviously if their sales levels start to pick up, they'll put money back into the marketplace. They've also got a big commitment around the Olympics in late July and early August, they're one of the Olympics sponsors. So it may be that they've put more money around that, which could be good for us, they could do some campaigns around that time.

Our next question comes from the line of Marla Backer with Hudson Square.

I have a couple of questions. First of all, on the upfront, Kurt, I think you characterized it that you want your place at the table now. Do you have a sense from looking at other, let's called them emerging platforms -- we'll go past the stage of being emerging, but other relatively new platform, do you have a sense for what the initial conversion rates might be? I guess what I'm asking is, if you invite a lot of people to sample cinema advertising just to see what it's like, do you have a sense for what how many of those can actually convert in your first upfront?

Yes. We don't actually look at it that way, Marla. But our conversion rates when somebody tests cinema have been pretty high. We have very few, if any, clients that come back and said we had a terrible experience, it didn't deliver the way we wanted. And our biggest challenge is getting people to try it more on an everyday basis, if you will, because we continue to be a predominantly priority-based marketing platform either for product launches or other things like that. So it's really getting people on board to think about cinema more like they think about television. It's one of the reasons that we have chosen to do this is that we want people to think of us just like they do, think about television. We're just bigger and better.

Okay. And then you've added a number of affiliates, you gave some really impressive metrics. Are you seeing any kind of backlash in terms of competitor -- competitive pressure as a result of those additions?

You mean Screenvision not being happy with us? Well I can't imagine they like seeing the affiliates come to us. But we get along quite well with those guys, we know them well, they do a great job. It's part of the business.

Push any other levers. You're not seeing any potential for CPM pressure as a result of this?

The CPM pressure has been there for quite some time and I haven't seen that change dramatically. And we continue to fight it out on certain accounts. We're actually talking about maybe presenting to certain accounts together that need universal coverage. So I view that as positive, especially true in some of the categories that need total ubiquitous national coverage. So it's obviously, we're in competition with them in some cases and then in other cases, we're cooperating. I mean, some of the research that they've done recently has been very good for the industry. I mentioned some research we're actually going to put a release out next week about it. It's biometric stuff that's very compelling, getting some great response from clients. Those are things that make the whole -- this whole thing that we call cinema advertising better and in sort of an all boats rise theory.

Our next question comes from the line of Mike Hickey with the National Alliance Capital Markets.

Gary, really quick on your content partner spend. You were 45% the first half of last year, 55% this year. I think you said that in dollar terms, it's expected to be higher this year, but can you quantify for us the Q2 impact as you see it?

Q2 specifically?

No. Most of it is not in Q1, if I heard you correct right?

Well, more of it's in Q2, yes. And no, we probably aren't going to give that kind of detail and all we can say is that the overall content spend is up for this year, which is good.

Okay. And then the film slate, maybe it's just me, but it looks like there's a lot more excitement this year for some movies coming out. And I'm certain media buyers probably noticed that as far as they go to movies as well. Are you seeing the buzz for the film slate this year creating any sort of extra activity? And then also a lot of content is clearly 3-D, and looks like really compelling 3-D. So is that getting any impact on your 3-D ad activity, especially now that your network is so much larger?

Now look, I think the tailwinds clearly have come back to the movie business. It's just amazing, you go through enough of these cycles to sort of laugh at the way the press handles the fourth quarter. It was like the world came to an end. And the thing that's frustrating for me is there hasn't been all these articles written recently about how we're up 20% now. So like has been the case for as long as I've been in this business, it's all about the films, and it's all about the variation of the film. And I think right now, one of the things we've got going for us is there's a lot of very creative stuff out there and stuff that hits all different demographic groups. One of the traps we got into as an industry in the fourth quarter is that you had an awful lot of stuff, kids films in particular, that were focused on one demographic and they were cannibalizing each other. And so that really impacted the overall business negatively. Right now, I think we're on a real good roll where you've got a lot of very interesting, creative stuff that hits all the different demos, and I think that's really what's driving the business right now. I also think there's this concept of a wave that once the business goes into a negative wave, if you will, or negative period, people stop going to the movies because there's nothing that excites them, they sort of lose the movie-going habit, if you will. And then once there's a few exciting movies in the market, people go back, they have a good time, they say, "Wow, this was fun. We got to do this next week." And then the wave goes back up. And I think we're in one of those wave-building-back-up periods right now. And with the film schedule for the summer, which I think has got a good mix of new stuff and some very high-quality sequel stuff, Spiderman, Batman and so on, I think there's a lot of excitement. In our business, the local business probably rotates more around the film schedule than the national business. Our marketing pitches and our books and so on really focus on the film schedule because as you know, the local clients' ads are further from the advertised show time. With the bigger films and the higher attended films, people are in their seats earlier, so the local ads are more valuable, in effect, or there's more value associated with those ads because more people are in their seats. So it tends to -- film schedules tend to impact over the short-term or medium-term on local business more. However, I will tell you that every national meeting during the fourth quarter we had, the first question is, what's going on with the box office? And so you had to spend the first 10 or 15 minutes of the meeting talking about the film schedule and how we're just in a bit of a down period right now and they're cycles and it'll come back. I'm sure the meetings we're having right now, it's not a very heavy topic of discussion because the business is doing really, really well.

And last question. That's very helpful. It seems like you can make the case, and I think you have, that the relative scatter market this year should be stronger. And it sounds like that you don't expect necessarily the economy to fall down like it did in the second half of 2011. And so do you think that being aggressive on the upfront that you're giving up some scatter opportunity this year?

I don’t think we're giving up anything. I think the opportunity to have meetings, and everybody focuses on the upfront presentations which happen for the broadcasters and cable guys during that one week in mid-May, but the upfront process is really going on starting right now. And it's hundreds of meetings leading up to that one presentation week. So participating in this process isn't about just that one presentation that lasts for an hour or 2. It's about all of the meetings leading up to that. And as I said before, what this does is it puts our stake in the ground, gives us a seat at the table, and I think introduces or reintroduces us as a real network because we find that a lot of clients still don't think about us the way we think about television as far as us being a broad network. And if you look at the data now with as big as we've gotten in an unduplicated impression basis on Saturday and Sunday we're #1, and the whole week we're somewhere between #4 during the high moviegoing period, and clearly in the top 15 during the low moviegoing period. So there's no reason we shouldn't have a seat at the table and be treated and thought about in the same way. And more and more media buyers are buying us out of their television groups, that's a good thing for us. And so just getting into the television ecosystem that rotates around these billions of dollars of expenditures is a good thing for us.

[Operator Instructions] Our next question comes from the line of Anil Gupta with Imperial Capital.

So 2 quick ones. One is, have you -- what sort of impact have you seen from political in prior presidential years? When do you anticipate the bump will start impacting the business? And is there any sort of meaningful impact to the political cycle based into your guidance for the year?

Well, I said in my comments, if it's going to happen, it's going to be sort of late third and early fourth. Obviously the elections are the first Tuesday of November, I believe, so it will affect October and maybe that first week of November. The only real reference point we have is 2010. And if you recall 2010, we had this monster third quarter, and we don't know whether that was because a lot of brands moved away from television and looked for alternatives, which we're a perfect alternative, obviously. You never really know why somebody moves money over. We can only theorize that it's because there's no room left in television, all the premium or good inventories have been taken, or people just don't want to be next to a negative ad. I mean if your selling this uplifting wonderful product and you just listen into the 60 seconds or even maybe 2 pods or 2 units of negative political advertising, do you want to be that next ad? I know I don’t want to be. And so, I think the impact of the crowding-out effect, along with being placed next to all the negativity, I think may push some money our way. We are talking to the political campaigns about the possibility of using cinema. My theory on this is that we will only allow them to use cinema if it's a very positive uplifting ad. That condition alone may keep us out in taking any of those ads because there may not be any of those kind of ads. So we'll see. I think net, net it's a positive for us any way you slice it, and there seem to have been some positive impact in 2010, primarily in this sort of August, September, October timeframe.

Okay, thanks. And then one quick question on the financials. You just had an impairment and loss of $6.7 million in the quarter. Could you just elaborate on what that was and whether we should be seeing something like that again?

No. You shouldn't see anything significant like that again. It was an investment in a company called Reach Media that we have, that's being restructured right now, and we took down our holding value in that.

Okay. And then quick reminder, can you break out the cash balance between LLC and NCMI Inc. for us.

It's $9 million at LLC and $89 million at Inc.

There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Great. Thank you very much. Thank you, everyone, for all your support. And as always, we'll be hanging around for a while if anybody has any follow-up questions. See you soon. Bye.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.