David Oddo – SVP, Finance Kurt Hall – CEO.

Mickey Gallagher – FBR Capital Markets James Marsh – Piper Jaffray Eric Handler – MKM Partners Jim Goss – Barrington Research Ben Mogil – Stifel Mike Hickey – Benchmark Company.

Welcome to the National CineMedia Incorporated Second Quarter 2014 Earnings Conference Call. (Operator Instructions). It is now my pleasure to introduce your host, Mr. David Oddo, Senior Vice President of Finance. Please go ahead, sir..

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 the statements of historical fact 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. Further a discussion today includes some non-GAAP measures.

In accordance with Regulation G, we have reconciled these amounts back to the closet GAAP basis of measurement. These reconciliations can be found at the end of today’s earnings release or on the investor page of the website at www.ncm.com. 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 2014 Q2 earnings conference call. Today I will provide you with a brief overview of our Q2 actual results and then provide an update on the Screenvision merger and the benefits of the transaction.

David will provide you a more detailed discussion regarding our Q2 results and debt structure including the impact of the Screenvision merger and then as always we will open the line for questions. Our Q2 adjusted OIBDA finished 13% higher than the midpoint of our guidance due to a higher revenue and the positive impact of cost controls.

The higher Q2 revenue was driven primarily by some national scattered deals that shifted from Q3 to Q2 and higher local revenue excluding the Fathom business that we sold at the end of last year, Q2 and year-to-date adjusted OIBDA was approximately 20% below the same period in 2013.

While our six month actual and Q3 projected revenue performance will be lower than our internal budgets. Stronger Q4 bookings and a meaningful increase in our upfront activity indicates that the market conditions that we’re currently experiencing are not the start for the long trend for our company or Cinema advertising in general.

To the contrary while our 2014 revenue was negatively impacted by a shift in pricing strategy this change has expanded on to client base and upfront commitments for the upcoming media year that begins in Q4.

We’re also seeing increased agency and client interest surrounding the Screenvision merger and the opportunity to buy a larger, more effective and efficient network.

This increased interest in cinema may also reflect the continued erosion of TV ratings related to changes in consumer viewing habits and the fact that marketers are beginning to evaluate more closely the effectiveness of online and mobile advertising platforms.

It is important to note that 2013 was a tough comp as Q2, 2013 and the first six months of ’13 were record periods for us with total advertising revenue growth of approximately 15% over the same three and six month periods in 2012.

For our first six month advertising -- in fact our first six month advertising revenue also compares favorably to our historical performance as it was 6% higher than the average of the first six months of 2010 through ’12.

And while our national revenue has declined in ’14 our local and regional business continue to perform well with 2014 six months revenue up over 11% versus a strong first six months of 2013 that was up 18% over 2012.

From a broader cinema advertising perspective the combined 2013 NCM and Screenvision revenue excluding NCM beverage grew 6% and outperformed the TV marketplace in 2013 and was down only 5% for the first six months of ’14 which appears to be in-line with the 2014 trends of the broader TV marketplace.

While new pricing strategies have negatively impacted our national revenue over the short term as mentioned they have helped accelerate the expansion of the national client base.

Our Q2 national impression sold increased 7% as our inventory utilization increased 16 percentage points was partially offset by a 6% lower network attendance relating primarily to the softer June box office. The higher utilization reflected a 20% increase in the number of national contracts versus Q2, 2013.

This increase in national contract volume and higher inventory utilization reflects the addition of 10 new national clients during the quarter of the 28 added so far this year which is well ahead of the 2013 pace when we added 30 new clients during the entire year.

New national client additions during the quarter included businesses in the Cable TV, credit card, home audio equipment, video game, transportation, print media, prepared foods, live event, Internet, and restaurant categories. While we are able to expand our inventory utilization more than expected.

Our Q2 average national CPM was negatively impacted by our decision to take some deal that were below our historical pricing tolerances. We passed on a few unattractive 2014 deals early in the year, however as the year progressed it became apparent that the soft scatter market would require us to be more aggressive.

This market environment was further exacerbated by the success of the World Cup that attracted a significant share of premium CPM budgets that we normally compete for.

In order to offset the impact of the softer scatter market it appears that many TV networks have increased the number of direct response and other low priced deals that are not included in the reported CPMs..

Our Q2 local adverting revenue decreased 3% goes up over 11% for the six months due to a very strong Q1. While Q2 local demand remained strong with a 7% increase in the number of overall local and regional contracts this was offset by a 15% decline in revenue from contracts in excess of $250,000.

This appears to be timing as many larger regional clients advertised with us in Q1 when revenue from contracts over $250,000 was over four times higher than Q1, 2013. This strength in our local and regional business reflects the great work of our sales team but it's taking full advantage of the steadily improving economy in many parts of the U.S.

The continued increase in network theaters and a better geographic coverage of our network with an individual DMAs and states.

While our online and mobile initiative may only be a small part of our overall revenue, it continues to provide a unique extension of our core in-theater advertising product as it provides additional marketing exposure for our local, regional and national clients before and after the movie.

In May, we broadened our strategy of connecting our big screens with the online and mobile worlds as we announced an exclusive strategic partnership with Shazam. We're working with Shazam to make changes to their app that has been downloaded on to over a 100 million mobile devices in the U.S.

so that will allow our FirstLook pre-show to connect to theater patrons' smart phones, providing our theater circuit partners and advertising clients with unique way to engage consumers with special offers, coupons and other information about their products or brand.

Looking ahead at the rest of the year while our local and regional business is expected to grow in the low double-digits in Q3. The weak national TV scatter market negatively impacted our Q2 national revenues continuing into Q3.

Consistent with Q2 these adverse scatter market conditions are impacting our client mix in Q3 CPMs and so while we expect to continue to make progress expanding our client and category base in Q3 but will not completely offset the meaningful decrease expected in Q3, CPMs.

In particular the soft Q3 marketplace is making it difficult to replace nearly 8 million in Q3, 2013 spending related to up from scatter commitments made by our former cell phone PSA sponsor, and a Q3 decrease of over 11 million in premium CPM content partner spending versus Q3, 2013.

Much of this decrease in content’s partner spending was an excess of their annual commitment. Given a soft July when some deals shifted into Q2 and our assumption that the third quarter scatter market will not strengthen meaningful during the remainder of the quarter.

We expect Q3 revenue and adjusted EBITDA to be below 2013 with revenue in the range of 98 million to a 108 million and adjusted OIBDA in the range of 48 million to 55 million.

While Q3 revenue is expected to be below last year, our Q4 national commitments are currently tracking ahead of Q4, ’13 and our local business will benefit from the additional 53rd week at the end of 2014.

Along with the Q4 pickup in national bookings we’re seeing much more upfront activity than in the past after a very successful upfront presentation in mid-May that included added excitement surrounding the Screenvision merger announcement in the previous week.

This year was our third year participating in the TV upfront process and we’re seeing much more client and agency interest than in the past including increased demand for our content partner packages.

While we’re being hampered somewhat by our inability to finalize future commitments related to the combined NCM Screenvision network until we receive the DOJ clearance, we currently are pacing meaningfully ahead of last year's upfront commitments with discussions in process with nearly 50 clients representing over 200 million of potential commitments versus 19 clients that committed approximately 112 million upfront last year including our content partners and cell phone courtesy PSA sponsors.

This upfront activity for us is encouraging given the recent soft TV upfront. This is the first year since 2009 that the TV upfront commitments have declined from the previous year and thus maybe a sign that media buyers are beginning to look for alternatives including cinema.

We could also set the stage for strong scatter market over the next several quarters. With the transition of our business strategy to broaden our client base and increase our upfront commitments the completion of the Screenvision merger will position us very well in the broader video advertising marketplace in which we compete.

While our strategy shifts have lowered our average CPMs to the top of the TV marketplace and reduce short term national advertising revenue with our greater national reach, new ubiquitous U.S. market coverage and the financial flexibility to invest in new technology innovations.

We will provide a more targeted and effective marketing product advertisers and generate more advertising revenue for us and our theater partners. Before I turn the call over to David, I wanted to give you an update on the status of our work to complete the Screenvision merger later this year.

The anti-trust review process is progressing as expected as we and Screenvision are nearly finished responding to a second request for information from the Department of Justice.

We also have made significant progress on the planning to integrate our two companies and we remain confident that we will achieve the 30 million or more in annual expense synergies that we mentioned on our last call.

We have also received commitments and completed the loan documentation related to the 250 million required to fund deal expenses and the cash portion of the merger. So we’re ready to close as soon as the DOJ review process is completed.

Now I will turn the call over to David to provide some additional details on our operating results capital structure and the Screenvision merger financing..

Thanks Kurt. For the second quarter, our total revenue excluding the Fathom Events Division decreased 14.5% versus Q2, 2013 driven by a 17.2% decrease in national advertising revenue including beverage and a 3.1% decrease in local advertising revenue. Total Q2 adjusted OIBDA excluding Fathom Events decreased 20.5% on an adjusted OIBDA margin of 52.1%.

This margin decrease related to lower to high margin national advertising revenue partially offset by the acquisition by our founding members of certain of our network affiliates and the resulting shift from the affiliate revenue share cost structure to the higher margin founding member theater access fee cost structure.

We recorded 600,000 of AMC and Cinemark integration payments for the second quarter, versus 900,000 for Q2, 2013.

You should note that these integration payments are added to adjusted OIBDA for debt compliance purposes but are not included in our reported revenue and adjusted OIBDA as they are recorded as reduction to net intangible assets on our balance sheet. We expect to record 500,000 to 700,000 of these integration payments for Q3.

Our Q2, 2014 advertising revenue mix shifted towards local and was 68% national, 22% local, and 10% beverage versus Q2, 2013 which was 71%, 19% and 10% respectively.

Q2 national ad revenue excluding beverage decreased 18% versus 2013 driven by a 21.8% decrease in CPMs partially offset by increase in utilization to a 122.9% compared to a 107.1% in Q2 2013. A portion of the increase in utilization related to a 3 million increase in Q2 content partner must spend allocations versus Q2, 2013.

Our make-good was 1.3 million at the end of Q2, 2014 versus 500,000 at the end of Q2, 2013 due to the softer June, 2014 box office.

For the first six months of 2014 national ad revenue excluding beverage decreased 17.6% driven primarily by a 17.6% decrease in CPMs partially offset by a slight increase in utilization to 98.7% from 97.6% on relatively flat network attendance versus the first six months of 2013.

Our Q2 local advertising revenue decreased 3.1% due to a 9.8% decrease in average contract value partially offset by a 7.4% increase in total contract volume versus Q2, 2013. The contract value decrease was primarily driven by a 15% decrease in the value of contracts over 250,000 while the number of these larger contracts remain flat versus Q2, 2013.

For the first six months of 2014 local advertising revenue increased 11.5% primarily driven by 96% increase in revenue from contracts over 250,000 and a 9.3% increase in total contract volume during the first half of 2014.

This was due in part to the increase in network theaters and better geographic coverage in many markets and states that made our network more attractive to larger regional businesses.

Q2 beverage revenue decreased 11.7% driven by a 6.4% decrease in founding member attendance that related to a weaker June film mix and the contracted 5.8% decrease in beverage CPMs.

For the first six months beverage revenue decreased 4% driven by the contracted 5.8% decrease in beverage CPMs partially offset by a 1.7% increase in founding member attendance versus the first six months of 2013. Looking briefly at diluted earnings per share, for the second quarter we reported GAAP EPS of $0.06 versus $0.17 in Q2, 2013.

This was driven primarily by lower operating income related to the lower national advertising revenue and 1.7 million of merger related charges incurred through Q2. Excluding these merger related costs we would have reported GAAP EPS of $0.08.

You should note that these and future merger related costs are added back for purposes of calculating adjusted OIBDA and will not impact available cash distributions from NCM LLC as they will be funded by the new merger financing.

Our capital expenditures were 3.1 million for the second quarter compared to 3.5 million in Q2, 2013, or approximately 3% of total revenue for both periods. We estimate that our Q3 capital expenditures will be approximately 3 million.

Moving on to our balance sheet, our total debt outstanding at NCM LLC as of June 26, 2014 was 899 million versus 890 million at the end of 2013. This increase was due to the seasonal fluctuations in working capital needs that increased our revolver balance to 29 million versus 20 million at the end of 2013.

Our average interest rate on all debt at the end of the second quarter was 5.4% including our 270 million floating rate term loan bank debt at 2.9% and revolver at 2.1%. 67% of our total debt outstanding at the end of Q2, 2014 had a fixed interest rate.

During the second quarter we expanded our revolving debt availability by 25 million to a 149 million through the addition of a new revolver lender. A portion of this increase will form the repayment of the 14 million legacy Lehman portion of our revolving credit facility that will be paid on December 31, 2014.

While our revolver availability will drop from a 149 million to a 135 million upon payment of the legacy Lehman portion. We believe that this will be sufficient to fund the higher working capital needs that are expected as a result of the Screenvision merger.

In addition we amended our NCM LLC credit agreement in July to extend a revolver maturities by two years to November 26, 2019. The same date that our term loan matures.

The July amended also expanded the amount of incremental senior secured debt permitted to 250 million to allow for the contribution of the Screenvision assets and NCM Inc merger financing upon the approval of the contribution by the NCM Inc board and NCM LLC founding member circuits.

Our pro forma net senior secured leverage at NCM LLC as of the end of Q2, 2014 was approximately 3.3 times trailing four quarter adjusted OIBDA which is well below our senior secured leverage maintenance covenant of 6.5 times.

You should also note that while we have no NCM LLC total leverage or NCM Inc consolidated maintenance covenant, our total leverage of NCM LLC net of NCM LLC cash balances was approximately 4.2 times at the end of Q2, 2014 and our consolidated total leverage net of NCM Inc and NCM LLC cash balances was 3.9 times at the end of Q2, 2014.

Our consolidated cash and investment balances as of June 26, 2014 decreased by approximately 21 million to 74 million from the end of Q2, 2013 with 71 million of this balance at NCM Inc. The decrease was primarily driven by the payment of a $0.50 per share or 29 million special cash dividend at March 20, 2014.

Including the Q2 available cash distribution due to NCM Inc on August 25th, 2014 and excluding tax reserves and after the payment of the recently announced dividend to be paid on September 5th, 2014 we would be able to pay approximately four additional quarters of dividend even if no cash were distributed up to NCM Inc from NCM LLC.

Our annual dividend yield is currently 5.4% based on today’s closing share price of $16.36. That concludes our prepared remarks, and we will now open the lines for your question..

(Operator Instructions). Our first question comes from the line of Barton Crockett with FBR Capital. Please proceed with your question..

This is Mickey in for Barton. Thanks for taking the question. Just want to ask consolidated theater advertising market, read through Carmichael [ph] it looks like Screenvision was pretty weak 2Q as well.

Just wondering assuming some stabilization of scatter market 3Q, 4Q what you guys can see the overall industry going forward the rest of the year?.

Well obviously we have given you guidance for Q3 and we’re not giving a specific guidance for Q4 other than to say that it's quite a bit stronger and the upfront activity is quite good.

In fact we’re working on a bunch of as I mentioned in my call, a bunch of upfront deals about 14 or 15 of those actually have spending in Q4 that aren’t in our numbers yet and our actual book yet, so that obviously gives us some optimism. So I would rather not comment on sort of percentage question that you’re asking..

And then regarding approval of the deal.

Have you guys heard of any -- we haven't heard of any in our end, theater operator push back?.

No I think it's been pretty muted. Think there has actually been some surprise from people we have heard from even at the justice department maybe that there hasn’t been as much push back as you might have thought.

I think generally people’s feeling is that it's a good thing, it improves the product and hopefully overtime increases the revenue that they have a share in and that’s the whole idea..

Thank you. Our next question comes from the line of James Marsh with Piper Jaffray. Please proceed with your question..

I just had a theoretical question. I just wondered why anybody would commit to upfront when scatter is so weak. It just seems to me that why not just write out the weak scatter market rather than to commit upfront.

I would think that typically you would want to commit when pricing is stable, pricing is operative -- kind of lack supply, there is some scarcity value -- just question why anybody would lock up, I would write it in the scatter market..

Well if you’re a brand manager and you’re the buyer for that brand manager you may feel differently about that, they still got a market for brands and they have still got to take some comfort in the fact that they have got GRPs or other marketing coverage that they need and you may want to know that the upfronts for some of the digital platforms is actually up and so we’re up, they are up, what you may conclude is what I said in my remarks that maybe there is some questioning going on about TV right now and maybe the drop in rating points that we have been seeing over the last few years has finally caught up or maybe some of the statistics that people are seeing about time shifting and the amount of ads that are being skipped on TV now.

Maybe all that’s starting to have an impact so what you’re seeing by digital being up, us being up in the upfront discussions is exactly that. People are looking for alternatives and you look at some of the data, looking at stuff that came out in the Wall Street Journal on Friday.

Shows like Mad Men and some of the other most popular shows on TV, the shifting is as high as 60% or 70% of the ads are being, or the shows being time shifted and ads not being watched. So maybe you’re seeing the start of all that..

And then as you guys look at deeper down on your balance sheet at the expense side, is there anything that you can do there this week in terms of hang around a little bit longer than you expect?.

Yes we’re doing everything we can. High EBITDA margin businesses are a blessing and a curse. Obviously when revenue is growing and going well you’ve very high margins and unfortunately the opposite happens, you can’t really offset the revenue decline with significant expense savings.

The good news is because of the variable and fixed nature of our business our margins aren’t been affected that much by the lower revenue not as much as you would -- that you would have expected.

So I think that shows again the design of our operating structure given the amount of variable cost in it along with fixed cost creates a really good offset or hedge if you will to declining revenue. We can still maintain our margins..

Thank you. Our next question comes from the line of Eric Handler with MKM Partners. Please proceed with your question..

I’m just curious with a bunch of new advertisers coming into the mix and the success we’re seeing in the upfront for the possible deals.

I’m just curious if you’re -- when you look at the advertising by vertical for the back half of the year, are you seeing any significant shift in whose advertising?.

No I think just more. Clearly our mix is changing a little bit as we mentioned some of our core auto and telecommunications and entertainment, the percentage share of that is dropping but that’s exactly what we want as you expand some of these other categories, the percentage of those goes down and the autos are still spending well.

We still have a lot of interest from them and so on. So I just think you’re seeing in the numbers Eric, what’s going on with the expansion of our network and the clients that are buying the network. So, I suspect you will continue to see some of the same..

And just as a follow-up, when you look at your 2Q numbers, can you maybe give like your top 3 or 5 verticals and how that compared year-over-year?.

Yes, our top for the second quarter were movie studios, confectionary, snacks and computer hardware. And the ones that have declined most were telecommunications and military..

The big change for us in telecommunications obviously losing Sprint as our cell phone PSA sponsor. Well Sprint is still spending with us, it was obviously not at the levels when they were the PSA sponsor..

And then just one last follow-up, when you think about the combined entity with Screenvision, that’s a lot more GRPs to sell.

Is that going to change anything at all with regards to commitments from your content partners and maybe adding more content partners or how you look at that?.

Yes it's actually going to be a pretty significant benefit, we’re going to go from basically six content partner’s maybe as many as 9 or even 12. We’re working on reorganizing the way that content partners are spread across the networks. We have basically two identical national networks call them A Net and B Net.

We could have as many as six identical national networks under the new structure which could create the possibility for 12 content partner spots or maybe even more. So, it's one of the reasons that I’m very happy with the way the upfront is progressing.

We’re having a lot of interest in those upfronts, in those content partner segments not just from the traditional guys, the broadcasters and the studios and so on but we’re starting to see like we did couple of years ago, Microsoft came in.

We’re starting to see the technology companies that are morphing into media companies have a significant interest in it and we’re starting to see even some agencies and brands be interested in the model. One of the things that’s happening is there is a lot of long form is being created for the web and for all the online video stuff.

And there is no other place to put the long form, it doesn’t fit on TV very well and so our content segments all of a sudden are becoming an attractive place for these folks that are kind of making them if you will for online and it's hard online to create broad awareness or to brand.

So maybe we’re going to become a better spot for them to use from as an awareness vehicle to send people to the online if you will and also as a branding vehicle..

Thank you. Our next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question..

Kurt I was wondering as you -- you're talking about pricing getting near the top end of broadcast and CPMs.

How are you structuring the deals in upfront? Are they with guarantees and cancellations and time frames and all of the other issues that the broadcasters get into or is the structure somewhat different in your particular frame work?.

The structure is pretty much the same Jim, there are cancellation rights although I think our lead times for the cancellation or the amount of days or months they have to give us in advance in account of a cancellation is probably a little bit longer than TV.

Clearly the number of units they are buying on TV is significantly more than they are buying on us because the price per unit on us is much higher. So you’ve got really three kinds of upfront commitments that are being made right now, you’ve got our longer term content partner deals which are generally two years.

You’ve got our PSA sponsorship and so on those are one year generally in some cases two year deals. And then you’ve got the multi-flight upfront deals which is where we have seen most of the increase. I quoted some numbers in my comments.

If you took the weighted average book or the weighted book if you took what our guys are waiting the percentage that this will close and you added it up we have got something like a 37% increase over where we were -- what we actually did last year and I think in my comments I said a little over 112 million.

So somewhere in the neighborhood of mid-150 million of weighted proposals obviously the gross proposals are a lot more. And a lot of those are the sort of 90% to 75% certainty frames that our sales people would view.

So I look at all that and it just feels really good and to somebody’s comment earlier I think it's James’ comment, why are they committing upfront? You never really know but the activity would seem to indicate that there is something going on in the broader marketplace where advertisers and agencies are looking for alternatives because the last thing they want to do is get stuck with not having a place to actually market the brands that they responsible for..

There is your effort to go longer term sort of caused the I would imagine the lower CPMs you’re getting and do you think that turns at some point or do you need to really get a lot more demand to get against your supply to get the pricing power you require?.

Jim, it's not really the length of commitment that creates CPM changes or variation. The months in which they are going to commit and one of the things that we’re talking to a lot of people about is committing a dollar amount, some of that dollar amount will get allocated to lower demand months.

There will obviously be a much lower CPM associated with that higher demand months, say July, August the November, December. Those will have higher CPM. So this whole process of bundling different months together, a little different than TV they generally bundle dayparts we bundle -- or shows, that are part of different dayparts.

We bundle months or different flights and so it's a little bit different but that’s really the way we have approached and so where they are placed in the year, what month of the year? Generally has more to do with the CPM than the length of time if you will they are committing to.

Now clearly if somebody comes to us with a lot of dollars there is generally “volume discount” associated with that clearly getting those dollars locked up in some sort of upfront commitment.

It's a good thing for us, you do have to create incentives for people to book upfront and that’s usually, people are buying TV upfront because they think they are going to be able to buy it cheaper there than they wouldn’t at scatter market and so it's sort of the same here..

What is the share had sold upfront right now? And how many months do you feel you’ve assembles of pricing power? I know there are two or three of them summer months but do you’ve others that are getting to that point also?.

Yes. I think it's the same as it's traditionally been, you know it's going to be the June, July, August, November, December when the reach or the number of impressions attendance is highest.

Look there also could be 15 is being talked about as a record year in the theater business, it's been talked about for several months now and so it could be that maybe the excitement around all of that is helping us a little bit. I know that does help us for sure on the local business and regional business.

Historically it hasn’t been a big driver in the national business. There has been so much press about how big ’15 could be theatrically that maybe that’s we’re getting a little bit of tailwind from that as well..

Thank you. (Operator Instructions). Our next question comes from the line of Ben Mogil with Stifel. Please proceed with your question..

Remind us again in terms of the upfront that you just would have gone through, do we see that start to kick in the fourth quarter or is it really more of a January event?.

It's both, Ben, what I mentioned a few minutes ago, off the 50 or so deals that we’re talking about right now one of them actually closed that had some fourth quarter money in it and there are 14 more that we’re working on that have fourth quarter money in it.

So we’re talking to people generally about the same calendar which is October 1 through September 30 that the TV guys are planning for. Although there are some clients that plan on a calendar year basis, so there is some that we’re dealing with just the calendar..

And then we think about Screenvision, clearly you guys have gone about the business differently. That will obviously end.

How much into 4Q should we expect this pricing discrepancy between two of you to be there? Is this going to be sort of prevalent in 4Q the way there has been all year long or are there mechanisms in the deal that kind of prevents selling into November and December on their inventory even though the deal very well may have closed by then?.

There is no mechanism in the deal that requires or has them operating sort of outside the ordinary course of business. The only thing I can hope for is that they are owners because they are going to be shareholders in our company after the deal closes that they have done whatever they think is good for the combined company after it closes.

I suspect there will be some deals that we inherit as of closing that will have CPMs that maybe different than what we might have done but those will run-off fairly quickly I hope and we can’t right now really influence their business in any way.

The only thing that we have really been able to talk to them about our integration matters nothing to do with operating the business or anything competitively sensitive we have been able to talk about it at all..

Do you have a sense of some of the what share you think of their ad revenue is very, very price sensitive so that in the event that you went to some kind of rate card harmonization, that may actually go away? Do you have a sense of how fickle their customer is supposed to see your customer who appears to be much less fickle?.

I don’t think the customer make up necessarily as the driving force. I think it's the tactics you use when you make your initial proposal. You know where you start out the bidding if you will or where their pricing tolerances are. I don’t think there is any secret that their pricing tolerance is over the years have been lower.

I think that’s completely consistent with what you see in the TV business where a low reach smaller cable networks price is going to be significantly lower than an ESPN or a Discovery or any of the Top Tier cable networks or a broadcast network and it many respects the comparison between us and Screenvision because of the differences in our network and our reach and market coverage’s and so on is not dissimilar to comparing a broadcast network to a mid or smaller sized cable network.

The pricing differentials are probably in the neighborhood of being the same. Now to your question of whether those get I liked your word harmonized, I think I will use that from now on. I would hope overtime because our strategy that that would happen. Our strategy all along has been to try to -- to get the pricing at the top of the TV marketplace.

Think of sports, or any of the other TV highly rated TV shows that’s kind of where we belong on an average basis. Clearly there will ones below that, at certain times of the year there will be one above that at certain times of the year.

But if we can get priced in that sort of sports range and grow from there and harmonize around that rate if you will I think that puts us in a pretty good place and it puts us in a place where we can argue from a competitive standpoint with buyers to move some of those TV GRPs to us because fundamentally for us to grow that’s what has to happen is that we do have to continue to shift market share from the TV marketplace and now from the digital online and mobile marketplace as well because clearly they have become a part of this competitive set.

So that’s the plan and to your point I would hope there would be some stabilization. I do know that there are several deals in Q3 that we choose to just not do..

Thank you. Our next question comes from the line of Mike Hickey with Benchmark Company. Please proceed with your question..

Kurt, I missed your prepared comments I apologize if I have something you’ve covered. Obviously you’ve had some time here to think about the Screenvision deal and how this is not complete and I think you reiterated 30 million in potential savings or synergies there.

Can you give some upside to that number now that you’ve kind of had a longer look at the deal?.

I do. There are some contracts they have in place that we hope overtime we will be able to get rid of.

So like all these things there will be a very high percentage sort of in the 70% range of our total synergies we will be able to get within the first sort of even a closing through the first 50 days and there will be some that because of existing contracts whether it's building leases or office space leases or other longer term contracts that will take a little bit longer period of time but I do think there is upside from the 30 over, the first 180 days to a year..

And on your dividends I’m assuming you’ve a fair amount of cash to continue to pay that but just how do you think about it moving forward in sort of a lower cash flow type environment?.

As we have continued to say our dividend has got a pretty big cash cushion sitting up at our parent company as David mentioned in his comments, even if there was no cash they got distributed up to the parent company which is almost impossible to happen but even if no cash went up we would still be able to pay quarters for a year or pay dividend for a year, four quarters.

We have done all sorts of sensitivity analysis and we did it in combination with that special dividend we did last quarter. All of that would tell us that we have several years at our current dividend rate and so we felt there was a plenty of cushion there.

Even if our cash flow stated flat for several years there is lots and lots of cushion because of our high margin business..

Last question, it's kind of hard to ask I’m not sure if you can actually answer it too much, but looking at ‘15, obviously the theatrical slate looks compelling and your deal with Screenvision is not complete obviously and you can’t sell a deal that or a theatrical network that’s not been -- just curious any feedback with some of your media buyers or maybe looking outside of ’14 into ’15 compelling slate and of course deal is not done but it's no secret either though it's working to be done.

I mean is there, any positive feedback that with the scale of your new national theatrical, your new national theatrical and a strong slate that there is perhaps more incentive than normal to look to put money to your platform?.

Yes. I don’t think there is any question that a lot of our conversation upfront conversations are being motivated by the potential of being able to buy the whole network. Clearly we can’t contract today but it's no secret what the combined network number of impressions and reach and rating points, however you want to look at it will result in.

You were at our upfront meeting, so you saw how we positioned that. It increases our ratings by give or take 60%, that’s not lost on anybody.

The one that’s most complicated is our content partner structure because we will completely restructure the way our content partner commitments lay out against the new network and so those we have not made specific commitments to we can’t but clearly there has been some discussion that okay we’re going to commit to the NCM network but just know that as soon as this deal closes we’re probably going to be changing that agreement so that it fits our current network and they will actually get some benefits for that and some incremental reach.

So all those discussions are being had and again I do think that the excitement associated with this is compelling to these guys because they have never been able to buy the combined network effectively or efficiently before and clearly that’s one of the benefits of this transaction to the advertising world and look I don’t know why specifically more people are talking to us, I can only speculate but I know that’s probably one of the reasons..

Thank you. Ladies and gentlemen I would now like to turn the conference back to management for closing comments..

Okay. Thanks everyone for joining us today. Obviously I wish that the numbers were a little bit stronger but I do have to tell you that I have probably never been as excited about the opportunity that we have going forward.

I think the timing of this transaction is very well timed given what’s going on in the broader marketplace with TV and some of the networks that we compete against, some of the mediums that we compete against and I really do believe that we have got a great opportunity ahead of us. So thanks for all your continued support.

And we will talk to you soon, I’m sure..

Thank you. Ladies and gentlemen this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation..