Chris Meyer – Vice President-Investor Relations Elizabeth A. Smith – Chairman & Chief Executive Officer David J. Deno – Chief Financial Officer & Executive Vice President.

John S. Glass – Morgan Stanley Joseph Buckley – BofA Merrill Lynch Andrew Barish – Jefferies John W. Ivankoe – JPMorgan Chase & Co Howard Penney – Hedgeye Management Matthew J. DiFrisco – Buckingham Research Group Jeffrey Andrew Bernstein – Barclays Capital Sharon Zackfia – William Blair & Company L.L.C., Michael W.

Gallo – CL King & Associates, Inc., Alton Stump – Longbow Research.

Hello and thank you for standing by. Welcome to the National CineMedia Inc. Third Quarter 2014 Earnings Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded (Operator Instructions).

At this time, I'd like to turn the conference over to David Oddo, Vice President of Finance for National CineMedia Inc. 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 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. Further, our discussion today includes some non-GAAP measures.

In accordance with Regulation G, we have reconciled these amounts back to the closest GAAP-basis measurement. 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 Q3 earnings conference call, especially given the last-minute change in the timing. Given the DOJ announcement earlier today, we thought that it was the right thing to do.

During this call I’ll provide you with a brief overview of our Q3 actual results and some color on our strong recovery in Q4 that was primarily driven by our record upfront for the media fiscal year that began on October 1st.

We also had some good tailwinds from favorable media buyer response to the improved product that will be created once the merger with Screenvision is completed. I will talk more about the status of the merger and the DOJ complaint filed today and related benefits of the merger later in my discussion.

David will then provide you with a more detailed discussion regarding our Q3 results and our Q4 guidance. And then, as always, we'll open the line for questions.

While our Q3 adjusted OIBDA finished slightly higher than the midpoint of our guidance, it was clearly a disappointing quarter as significant declines in our national advertising CPMs were only partially offset by record Q3 local and regional revenue that was up almost 16% versus Q3 2013. Our adjusted EBITDA decreased approximately 30%.

However, our margins only declined to 52% as the impact of the lower national advertising revenue was offset by higher local and regional revenue, the sale of the low-margin Fathom business, tight cost control, and the strength of our underlying business model that features a high percentage of variable operating costs.

Our Q3 national revenue was negatively impacted by a very soft TV scatter and upfront marketplace during Q2 and Q3, as media buyers evaluated the impact on their marketing plans of declining TV ratings and the overall effectiveness of TV versus other video mediums, including cinema and the many online and mobile video advertising platforms that have become a much more meaningful alternative for video advertising over the last few years.

While one quarter does not make a trend, the fact that our Q4 national revenue is expected to be up approximately 20% versus Q4 2013, and our upfront bookings for the media year beginning October 1, are up over 125% provides the strong evidence that our network was viewed favorable by media buyers during this year upfront buying process.

It is estimated that commitments made to broadcast and cable TV networks during their recent upfront decreased over $1 billion.

In addition to the shift of upfront marketing budgets, the success of our upfront this year also reflects some of the changes we have made in pricing strategy and the hard work of our national sales team who have spent the last three years building market acceptance of the idea of buying our network upfront.

While we have made progress, the Screenvision merger will create even greater benefits to our advertisers and circuit partners.

The merger will remove the issues that have made cinema less attractive than other video advertising options, including smaller audience size that has limited audience targeting and the inability to offer all the difference demo guarantees offered by TV, online, and mobile networks, and the lack of ubiquitous coverage that has made it virtually impossible for QSRs, retailers, TPG companies, and other brands to use cinema as a meaningful part of the marketing of their national store networks.

By all measures, our upfront this year was a huge success. We've received over $250 million in total upfront commitments this year related to 31 clients and an annual must-spend contract with an agency buying group that is being finalized versus 19 clients and an $110 million last year.

This years Q4 upfront commitments were up over $30 million or 44% versus Q4 of 2013. Our aggregate 2013 content partner commitments are up 16% versus 2014 commitments. 30 new clients that had never bought us made nearly $58 million of commitments and we are in the final documentation of our first-ever upfront agency commitment.

Nine clients that made commitments in 2013 returned this year, with an increase in commitments of 14%, while only two clients did not return this year. Our upfront average CPM is over 7% higher than our overall projected average CPM for the full year 2014.

It should be noted that, consistent with TV upfront commitments, a portion of our upfront commitments after Q4 2014 of cancellation options. Fortunately, our cancellation experience has been very low in the past.

You should also note that some of these upfront commitments may simply be related to timing, as agencies look to secure the best inventory and integrate their annual commitment into their overall annual media plan.

While that appears to be the case in certain instances, there was approximately a 35% increase in 2004 upfront commitments from clients who also spent with us in 2013. Our participation in the TV upfront buying process as part of our strategy to expand and diversify our client base appears to be working.

In addition to the 18 new national clients added since our last call, our strong upfront resulted in 16 of these new clients spending in Q4, bringing our total new client additions for the year to 46. This is well ahead of the 2013 pace when we added 30 new clients during the entire year.

It was a particular note that the auto category, one of the categories that reduced their spending in the TV upfront was one of our largest upfront increases. This appears to be a shift in strategy to use our network to not only support new car launches, but to also use us for some of their recurring brand marketing.

In addition to increases from existing categories, new 2014 national client additions included businesses in the internet, music, health and fitness, cable TV, movie studio, pharmaceutical, prepared food, insurance, electronics store, toy store, airline, and video game categories.

Our local advertising business continued to perform very well through the third quarter as our local and regional sales teams drove increases in both the number of contracts sold and average contract value. We also continue to benefit from the steadily improving economy in many parts of the U.S.

The continued increase in network theatres and better geographic coverage of our network has helped us to create a better regional marketing product.

It also is important to note that targeting has become more of a priority to marketers with the expansion of the internet and mobile advertising platforms, our growing cinema network has provided a very effective way for small businesses to target potential customers in their local trade areas or larger businesses to target consumers across parts of DMAs, multiple DMAs, or across various states.

While our year-to-date local and regional revenue was up over 13%, we are expecting Q4 local and regional revenue growth to slow, even with the extra 53rd week. Our Q3 online revenue grew 15% versus 2013 and also had a very strong upfront with 2015 commitments already equal to 90% of 2014 projected online annual revenue.

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

As part of our overall digital strategy, we are also preparing to launch a new mobile initiative with Shazam that will allow our advertising clients a unique way to engage consumers through their smartphones with special offers, coupons, and other information about their products or brand.

Before I turn over the call to David I wanted to give you an update on the status of the Screenvision merger and DOJs who filed earlier today.

All the merger financing is in place and the management team has created a solid integration plan that will remain confident, we will provide a $30 million of annual run rate operating synergies in 2015 and potential upside in 2016 when certain longer term operating contracts and office leases are restructured or terminated.

Unfortunately, due to DOJs’ actions earlier today to block the completion of the planned merger, our integration plans will have to wait for a few months as we demonstrate the positive impact of the merger on advertising clients in on our and Screenvision exhibitor partners.

We strongly disagree with the DOJ’s claim the merger will hurt advertisers and theatre operators and their patrons.

Their claim, that merger will hurt advertisers is completely inconsistent with the reality of an increasingly competitive video advertising market environment as we not only compete against 100s of the broadcast and cable TV networks, 1000s of new online and mobile advertising platforms have emerged as competitors over the last few years.

As mentioned in our press release earlier today, we believe that the DOJ’s claims are wrong and that both advertisers and our theatre circuit partners will benefit from the completion of the merger.

In fact, we believe strongly that the DOJ’s actions will only serve to hurt the theatre circuits that will not be able to benefit from the larger more competitive network that will be created by the merger.

The benefits of more advertising impressions and better geographic covers already allow us to make significantly higher payments per attendee to our theatre affiliates and Screenvision pays its affiliates.

Bringing together the 34,000 screens and 1.1 billion annual attendees and the market coverage of the NCM and Screenvision networks will provide the ubiquitous geographic coverage and advertising impression base required to create an improved advertising product, it will allow us to increase the payment to affiliate theatre circuits.

Now I’ll turn the call over to David to provide details on our operating results and guidance..

Thanks, Kurt. For the third quarter our total revenue excluding the Fathom Events Division decreased 21% versus Q3, 2013 driven by a 29.9% decrease in national advertising revenue including beverage partially offset by a 15.6% increase in local advertising revenue.

Total Q3 adjusted OIBDA excluding Fathom Events decreased 31% on an adjusted OIBDA margin of 51.8%. This margin decrease related to the lower high margin national advertising revenue. We recorded 600,000 of AMC and Cinemark integration payments for the third quarter versus $1 million for Q3, 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 reported as a reduction to net intangible assets on our balance sheet.

With the decrease in national and local and regional growth our Q3 2014 advertising revenue mix shifted to 52% national, 29% local and 9% beverage versus Q3 2013 which was 71%, 20% and 9% respectively. Q3 national ad revenue excluding beverage decreased 31% versus 2013, driven by a 27.2% decrease in CPMs and a 9.3% decrease in impressions sold.

This decrease in utilized impressions was driven by a decrease in network attendance of 14.8% partially offset by an increase in utilization rate to a 125.3%, compared to a 117.6% in Q3 2013.

The decreases in both CPM and impressions sold were impacted by $9 million decrease in Q3 content partner spending versus Q3 2013 primarily related to an increase in content partner spending in excess of their annual commitments in 2013 and a $6 million decrease in scatter spending by our previous cell phone PSA client versus Q3 2013.

Our make-good was $1.8 million at the end of Q3 2014 versus $500,000 at the end of Q3 2013 due to the softer summer box office. For the first nine months of 2014 national ad revenue excluding beverage decreased 23% driven primarily by a 21.5% decrease in CPMs and a 3.2% decrease in impressions sold.

This decrease in utilized impressions was driven by a decrease in network attendance of 5.3% partially offset by an increase in utilization rate to 107.3% compared to a 104.9% during the first nine months of 2013.

Our Q3 local advertising revenue increased 15.6% due to a 9.5% increase in total contract volume and a 4.5% increase in average contract value versus Q3 2013. The contract value increase was primarily driven by a $3.6 million where 131.6% increase in the value of contracts over $250,000.

While the number of these larger contracts increased to 13 from four in Q3 2013. For the first nine months of 2014, local advertising revenue increased 13.2% primarily driven by a $8.3 million or 107.2% increase in the revenue from contracts over $250,000 and a 9.6% increase in total contract volume during the first nine months 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.

Q3 beverage revenue increased 21.7% driven by a 16.4% increase in founding member attendance that related to a weaker summer film mix and the contracted 5.8% decrease in beverage CPMs.

For the first nine months, beverage revenue decreased 10.5% driven by the contracted 5.8% decrease in beverage CPMs and a 4.9% decrease in founding member attendance versus the first nine months of 2013.

These three and nine month revenue declines did not have a significant impact of adjusted OIBDA, because the lower founding member attendance reduced the attendance base component of our theatre access fees. This variable revenue and cost structure is one of important strength of our business model that Kurt mentioned.

Looking briefly at diluted earnings per share, for the third quarter we reported GAAP EPS of $0.08 versus $0.24 in Q3 2013. This was driven primarily by lower operating income related to the lower national advertising revenue and $2 million of merger-related costs incurred during Q3 2014. Excluding these costs, we reported GAAP EPS of $0.11.

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

Our capital expenditures were $1.7 million or 2% of total revenue for the third quarter compared to $2 million or approximately 1% of total revenue for Q3 2013. We estimate that our Q4 capital expenditures will be approximately $3 million.

Moving on to our balance sheet, our total debt outstanding at NCM LLC as of September 25, 2014 was $895 million versus $890 million at the end of 2013. This increase was due to the seasonal fluctuations that working capital needs that increased our revolver balance to $25 million versus $20 million at the end of 2013.

Our average interest rate on all debt at the end of the third quarter were 5.4%, including our $270 million floating-rate term loan bank debt at 2.9% and revolver at 1.9%. 57% of our total debt outstanding at the end of Q3 2014 had a fixed interest rate. As Kurt mentioned, our merger financing is fully committed and documented and ready to close.

Our pro forma net senior secured leverage at NCM LLC as of the end of Q3 2014 was approximately 3.6 times trailing fourth quarter adjusted OIBDA which is well below our senior secured leverage maintenance covenant of 6.5 times. We should also note that while we have no NCM LLC total leverage or NCM Inc.

consolidated maintenance covenant our total leverage at NCM LLC net of NCM Inc. cash balances was approximately 4.6 times at the end of Q3 2014 and our consolidated total leverage net of NCM Inc. and NCM LLC cash balances was 4.3 times at the end of Q3 2014.

With the expected growth in Q4 adjusted OIBDA, our leverage is projected to decline to approximately 4.5 times at year-end. Our consolidated cash and investment balances as of September 25, 2014 decreased by $42 million from the end of 2013 to $84 million 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 on March 20, 2014 and $27 million of our annual tax payments being made during the first quarter.

Including the Q3 available cash distribution due to NCM Inc on November 24 and excluding tax reserves and after the payment of the recently announced dividend to be paid on December 5, 2014 we would be able to pay over three additional quarters of dividend even if no cash were distributed up to NCM Inc from NCM LLC.

Our dividend yield is currently 7.1% based on today’s closing share price. Turning to our fourth quarter guidance, excluding the impact of Fathom Events in 2013, we expect Q4 revenue to be in the range of $118 million to $128 million or a 9% to 18% increase over 2013.

And adjusted OIBDA to be in the range of $65 million to $75 million or a 10% to 26% increase over 2013. This will result in annual revenue in the range of $389 million to $399 million and adjusted OIBDA range of $192 million to $202 million.

The Q4 guidance assumes an approximate 20% increase in national ad revenue driven by a meaningful increase in utilized impressions partially offset by a high single-digit decline in CPMs. As CPMs appear to be stabilizing due to the higher Q4 and upfront demand. We currently expect our full year 2014 local revenue to grow approximately 7%.

That concludes our prepared remarks, I’ll now open up the lines for questions..

Thank you. (Operator Instructions) First question today is from Eric Handler of MKM Partners. Please go ahead..

Yes. Thanks for taking my question. So, Kurt, just curious, you sound very confident that this deal can still go through.

And, while I think a lot of people are surprised that it didn't get approved, what gives you great confidence that, on appeal, you can get the DOJ decision reversed? And secondly, can you walk us through the steps of the appeal process, how long this could take, and just some of the points along the way that need to happen?.

Yes, Eric, it’s not technically an appeal, I mean we have been sued and we have to go through the process of defending ourselves in that lawsuit and we feel very confident that our arguments are continue to be strong I think clearly some of the claims at the DOJ has made, I think can be proven incorrect or misguided and that will be our job over the next several months.

As far as the process itself as these things go, it’s reasonably quick, but you can count on somewhere in the neighborhood of four months or possibly more, does that answer all your questions, or…?.

Well, yes.

And as far as in the decision that came up or discussions that you had with the DOJ prior to this announcement, was there any type of concessions that they asked you to make that you weren't willing to make? Or what can be done to maybe remedy the situation?.

No we didn’t talk about any concessions at all, and again, we weren’t asked to make any, we didn’t offer any, we have gone back to theater circuits over the last few months and offer them extensions to their contracts which I think a good thing for them, but that’s really the only thing that comes close to something that could be adjusted as part of this..

Okay. And then one last thing. In terms of the people that might have sent letters to the DOJ saying this was not a good idea, do you get a – was there a much pushback from advertiser or theatre partners to that end? I'm just trying to get a sense of..

Yes. We weren’t actually aware of any pushback and we saw several letters that came from advertising clients or agency in support of the deal we saw several letters from theater circuits that were support of the deal, so honestly it was a little bit of a surprise it came out this way..

Okay, thank you..

Yes..

The next question is from James Dix of Wedbush Securities, please go ahead..

Hey, good afternoon, guys. I guess the first question, just shifting to fundamentals. What appears to be your outlook now for CPMs next year given that it seems like you're upfront sales were kind of at a premium to where you think 2014 is finishing up and it sounds like things could be stabilizing.

So, it seems like that might be a headwind that's finally lifting. But, I just wanted your perspective on that. Go ahead. I had two others..

Yes, that’s clearly the case, clearly we got a much lower benchmark, the comps are much easier for next year on a CPM basis and as we mentioned we’re starting to see the benefit of that in fourth quarter. But a lot of it is just supply-demand economics that we're benefitting from. As we said in my comments, we had a lot of demand for upfront.

There were even a few clients that we cut off. They didn't make it in by the deadline that was at the end of September and we actually cut them off. Lot of it is just driven by the supply-demand economics.

As we said before, we think cinema pricing should be sort of pegged by the market at the top end of the TV pricing, sort of where prime broadcast is or sports, in that neighborhood. I think that's where the proper clearing price is. .

And that's kind of where you're at now..

Yes, I think it's plus or minus a couple bucks either way, we are in that range, yeah..

Okay, great.

And then, second, what is the importance of being able to sell more by demo than you do now? I mean if you could just give a little bit of an outline as to how you're selling at the moment and then what the potential impact could be and what the timing of that impact could be as you move more to selling, I guess a little bit more like how other TV networks sell.

.

Yes. I mean one of the big benefits of the merger that clearly wasn't understood fully was the fact that we just don't have enough impressions right now to be able to provide all the demo targeting and related guarantees, because they kind of go hand in hand, that TV does.

TV right now sells 78 different demo groups between male and female and all the different age groups, there's 78 of them. We've just barely started selling two or three or four in addition to total audience or two-plus.

And so when you think about product definition, we're at a significant handicap on the definition of the product as it relates to targeting. So, with the 16%-plus increase in impressions that the Screenvision merger results in, it gave us the ability to increase the number of demo groups that we could actually provide an efficient guarantee against.

The problem is – we can always target. The problem is there is so much waste that it makes it very inefficient for us to even offer that product because of that waste. I’ll just give you an example, 25 to 54 year old women demo, only about 20% to 22% of the theatre audience fits that demo. So, said another way, there's 78% waste.

And the ability to be able to create film genres groups against that specific demo and pick films a little bit better and come up with a demo group at the end that has a big enough level of attendance to make it worth the while of the advertiser; that's what we’re really working on here.

We could demo it now but, by the time you're done targeting the audience, you've got such a small buy the advertiser really doesn’t share. So for us it’s a combination of putting some new software in place that we’re in the process of developing and having a bigger audience to begin with to use that software against..

So, I mean to some extent, if for some reason the merger did not go through, is that something which you're really kind of handicapped in pursuing?.

We’re still going to do it, but we’re not going to be able to offer as many demo groups because there is going to be some demos that we just can’t offer because the waste is too high and the group of the audience size that we can offer just isn’t big enough..

Okay..

Meaning 60% of – 60% increase is a fairly significant increase..

Right. No, I understand. And then just one last one, I had this question from an investor so I figured I would just raise it. Any issue with the security of the dividend one way or the other? I know David gave kind of what's on the balance sheet now.

But, anything that's going on that would affect, really, that in any way?.

Nothing at all..

Okay, thanks very much..

The next question is from Townsend Buckles of JPMorgan. Please go ahead..

Thanks. Kurt, on your outlook for the strong rebound in national ad revenue, going from your toughest third quarter in five years to what looks like could be a record fourth quarter, you mentioned your upfront selling efforts and advertiser dissatisfaction with TV.

So, would you say this is really a turn, this turn is about flipping to the new broadcast year to free up spending from TV? Or is there anything else unique going on that’s driving this sort of abrupt upturn in demand?.

Well, we never know where the money is coming from, but the coincidence of timing where there was over $1 billion not committed to TV upfronts and then our upfronts ended a month and a half or so later, and we didn’t really see the pickup until people came back from Labor Day.

And the bookings that we had between the second week of September and second week of October were some of the biggest weeks we’ve ever had in our history. So something was going on and what I’ve said for years now is that I think you know eventually people are going to start looking for other opportunities and we’re one of those other opportunities.

Obviously, the big winner from all of this market share shift or whatever you want to call it has been the online and mobile guys as well..

And keeping in mind the fourth quarter has been tough the last couple years with revenues sometimes not coming in quite as strong as expected originally, are you far enough along at this point in November that you feel this outlook is pretty well booked, given your commitments?.

Yes, we’re pretty confident about it and we still got two months worth of booking time left and an extra week between Christmas and New Year’s. So we’re pretty confident with the numbers..

How much of a lift do you expect from that from that extra week?.

It’s hard to tell. The national business it will undoubtedly reduce your make-good because you’ve got one really big week that would have normally fall into January. So it obviously helps there. But it’s a little hard to tell, because, again it’s almost two months out right now. On the local business it should be a little bit more liner.

As I mentioned the local business we’re not expecting the growth in the fourth quarter that we saw in the first three quarters of the year, especially third quarter. And it could be just a matter of timing. It could be that a lot of the uptick we saw in the third quarter was just people moving forward.

But again that continue to pretty quickly as people start to loosen up their budgets for the Christmas holiday shopping season..

Okay thank you..

Yes..

The next question is from Barton Crockett of FBR Capital Markets. Please go ahead..

Okay, great. Thanks for taking the question.

How much of the growth that you’re seeing in your upfront for next year and your trend for the fourth quarter is you think new people coming into theatre advertising versus share gain from Screenvision?.

Well, I can't tell you about the share gain from Screenvision because I have no clue what their upfront bookings have been. But what I can tell you is there were a number of new clients that are spending with us for the first time and they're spending in the upfront. I'm just looking from my notes. I've got it here, just a sec.

I think in my comments, I said there were 13 new clients that committed for $58 million, we know that's all incremental. And there were a bunch of clients that returned that both made commitments in 2013 and 2014 and the overall commitments for those nine clients were up 14%.

So, we not only got new people to come in, we also got our existing people to spend more. And as I mentioned, our content partner commitments were up 16% as well..

It's not really clear.

Those new people, are they new to you or are they new to the theatre advertising? Or do you know?.

Well, again, I can't tell you every single Screenvision client so I can't tell you it's new to – I can only tell you what's new to us..

Okay..

So they may have bought Screenvision before. I can’t tell..

But does your gut tell you that it's more kind of new money coming in or people kind of switching over?.

Yes. I mean you don't go from $110 million of upfront to $250 million without there being money switching over from somewhere. So as I said before in one of the previous questions, the fact that the TV upfronts were down reasonably, significantly, $1 billion or more and ours are up pretty significantly.

You draw your own conclusions from that, but it looks like some money shifted over..

Okay.

And can you remind us on your merger agreement, and what are the penalties if the deal doesn't go through if the government blocks it? What gets paid, if anything?.

Well, we have to completely go through the whole process and if we and Screenvision collectively decide that it's not going to go through, then the merger agreement has a reverse breakup fee of $28.5 million that we would pay. But we're a long ways from that..

Okay. And in terms of the process, you said about four months. This is a courtroom process, right? There's a judge, discovery. .

Yes..

Is there a jury?.

There's a lot of work to be done before you'll ever be in a courtroom; a lot of discovery, as you point out, and a lot of other work to do. We just got the complaint today so we're still reviewing it..

Okay.

But the four months, is that just based on what you're seeing with other antitrust challenges or how did you come up with that?.

Yes. I mean they try to move these processes along fairly quickly because they know there are two companies kind of hung up in the middle, if you will. And so, there's already been a judge put on the case. So these things move along reasonably quickly compare to other litigation situation..

Okay. That's great. Thank you..

Yes..

The next question is from James Marsh of Piper Jaffray. Please go ahead..

Great, thanks. Two quick questions here. Just, first, to circle back on that breakup fee.

Are there any conditions that would allow you guys to avoid paying it or any offsets or remedies, those types of things that might mitigate the out-of-pocket cost there? And then, secondly, I was wondering if you guys were aware of any examples of the Department of Justice suing to stop a merger and then eventually being unsuccessful? What's the template for you guys?.

Yes. There's plenty of situations where suits are brought and they're settled in one form or another. There have actually been very few merger cases that have gone completely through the trial process. So, there's a long process of trying to work through this.

So I'm hopeful that, as more in more fax come out, there’s an education process that ensues, that we'll get to the right answer..

Okay and then just the offsets and any remedies available that would help mitigate that?.

Yes, the only way that would happen is if there was certain covenants that weren't followed by Screenvision..

Okay. Alright, thanks very much..

Yes, you’re welcome..

Next question is from Mike Hickey with Benchmark Company. Please go ahead..

Hey guys. Thanks for taking my questions. Kurt, just curious if you have an impression at this point, sort of the crux of the DOJ's argument because it seems like they kind of have an issue or feel like everyone is sort of harmed by this deal. Do you see any sort of focus point beyond any of the others or….

No, I think they went after all the different parts of the marketplace that we operate in and even threw in theatre patrons, to boot. So, I can't tell you what the strategy there is. I can't speak for the Department of Justice so I really can’t comment on that..

When is it that – I mean I mean obviously I'd imagine that you had a fair amount of evidence going in that this deal was constructive and positive and, obviously they saw it differently.

I mean, is it about offering more evidence to support your case? Or is it just getting a different person to hear the same argument?.

Look I think it's a review process. You've got to go through all the evidence and, obviously, they see it a different way than we do. I think at this point, Mike, it's probably best that I don't comment any further on the case. Again, we just got the complaint today so we've still got a lot of work to do. .

Alright, fair enough. I think you talked about your core business, but just curious sort of your perspective on 2015 and your confidence in growth there.

And I don't know if I missed this or not, but if you can give us a look at your sort of bookings to date for 2015, maybe how that compares to prior year?.

Well, the only thing we talked about today, Mike, is the upfront and, except for the money that's in Q4 which I talked about, the rest of it is all in 2015. So, we've got a heck of a good head start. We'll be a lot further ahead of making our budget for the year than we've ever been in our history.

So, that was part of the whole upfront strategy was to get more money on the books. It gives us a lot more flexibility in the scatter market and we don't have to rely as much on the healthiness of the scatter market. So, I think, it's good news for us all the way around..

I think the Screenvision had some affiliate contracts coming up for renewal.

I'm not sure of the timing of those, but is that sort of any conflict with the review process that you have with the DOJ at this point?.

No, I don't think so. .

Okay. Last one. Obviously, there's some enthusiasm for the box office in 2015 and 2016.

Do you think that offers any sort of tailwind from a media buyers perspective about wanting to put money in that space or to work in the vertical?.

Yes, I don’t think there is any question that it provides a tailwind for our national product. Our local and regional products are a little more sensitive to the film release schedule. So I suspect once we get closer to the actual films being released that that will have some positive impact on our local business. It always seems to be very good.

Clearly, one of the issues that is affecting the TV business right now are rating declines.

And one of the things that I think has been good for progress and it’s over the last two or three years our ratings have been, the increase in 2012 and 2013 because the film business was very good, 2014 is going to be down a bit, but we’re strong attendance projections for 2015 and 2016 I think that’s clearly good news, because stability of impressions and rating points and all that, I think it’s something that advertisers really value and so, that is something I think that will benefit us next year..

All right guys, thanks. Best of luck..

Yeah, thank you..

Next question is from Ben Mogil with Stifel, please go ahead..

Hi, guys. Good afternoon. Thanks for taking my questions. So, Kurt, over the last couple calls you've talked a lot about how Screenvision was being very price disruptive in the market and that was obviously impacting you given the guidances you were giving as the quarters went on.

So, now you look at 4Q, which I know has a much bigger upfront contribution awaiting than normal, so that sort of insulates a little bit the Screenvision disruption.

Are you still seeing them be disruptive state, from the last time that we talked?.

I don’t think I’d ever actually characterize their activities has been disruptive, I think there was clearly a need for cinema we get much more creative and flexible around pricing, we have been doing that in various forms for the last couple of years, we have always known in order to attract QSRs and a number of other, big, big client spending category we had to be more flexible and we had to also start providing demo guaranteed, because that was something that advisors valued and it is something TV guys obviously did and if we are going to compete in that market place we had to start doing it, and as I mentioned before unfortunately we can’t do as much of it as we would want.

And so, that was one of the clear benefits of the merger, so what we’re seeing I think in Q4 that was clearly from supply demand economic benefits that helped us we also moving into now quarters that have got easier CPM comps and all I can tell you is what I said before, as I think cinema pricing has come down into the top range of broadcast TV sort of event sports and other event programming pricing and that probably appropriate for us and we’re hopeful from that sort of stable base if you will, we will be able to price up from there based on supply and demand and to the extent that we need to go down from there to attract QSRs and other companies that need more pricing flexibility will be able to do it..

Okay, that's great. Thanks, Kurt..

Next question is from Jim Goss of Barrington Research, please go ahead..

Thanks.

First, I was wondering if you could remind me of the initial targeted date of closing versus what might be sort of an earliest opportunity at this stage?.

Yes. What we’d hope for Jim is sometime in the middle of the fourth quarter give or take around where we are now, maybe a little bit later. So this is obviously going to push us into 2015 unless something really great happens. But so like I said before, you know, it’s a four to six months process, so we’re clearly into early next year..

Okay. And if it turned out that there was no deal closing, is there some timeframe over which you feel you can achieve your targets without Screenvision? Because I'm expecting that you think you could, but I bet this would have accelerated the process..

When you say targets, Jim, what are you referring to?.

Well, in terms of getting into other ad categories. For example, are there ad categories that Screenvision might have served that you haven't and things that you might be able to exploit on your own or other financial targets? You talk about the $30 million of synergies you could create.

But, aside from that, I would imagine there are goals that you think you could achieve on your own. This would just help things along more..

Look really what the Screenvision deal was all about is the product redefinition. It was actually us creating in many ways a different and more effective product in the new advertising marketplace that we’re all faced with.

And that doesn’t mean that our product today is terrible, it obviously isn’t as we’ve talked about in the Q4 and the upfronts for next year. Clearly, versus all the other alternatives we compete against out there, it’s still a very attractive product.

The question is how much more improvement could we have made in the product to increase the number of ads that we sell and then increased obviously the payments to our theatre circuits.

And as I said in my comments, I think the biggest – the group that’s being hurt the most by the DOJ’s actions here are the theatre circuits themselves because there is lots and lots of upside. And if you look at our relationship with our theatre circuit, it’s a very much a partnership. If we win and we do better, they do better.

And that’s the case really since the formation of this business and we really do need each other. There are certain things that it’s harder for them to do, sell national advertising for instance and there are certain things we can’t do at all.

And one of the things I thought was interesting is that we’re completely out of business without their attendance and auto revenue is really only represents I don’t know 2% or 3% of their revenues.

So I know there is a concern about the sort of balance of power, if you will there, but it’s really a symbiotic relationship that has worked very, very well in this revenue share world that we’ve dealt with.

And I really think it’s unfortunate that we’re not going to be able to do as quickly as we otherwise would have likely to create a better product and bring more sales immediately to these theater circuits..

One last thing. Were some of your ad sales agreements already envisioning the merger and are there adjustments that may be required in anticipation or with pushback….

Jim yes, nothing was contingent per se on the merger itself. There was no way for us to have access to any of the Screenvision inventory. So we could only tell the inventory that we have..

Okay. I didn’t know if like some of the pricing metrics might have been more favorable because of that anticipation or not..

Look, clearly, as I said in my comments there was some very positive and enthusiastic tailwind created by the talk of the merger. As you may remember I don’t know if you went for our upfront presentation, but it was one of the centerpieces of our upfront presentation.

And as I mentioned before, we have gotten many, many very positive letters from advertisers and advertising agencies about the benefits that it will create for them, because it creates a much better and easier product for them to buy and a much better targeted product for them to buy. So I think clearly, they were very enthusiastic about it.

But none of the numbers that I talked about were necessarily contingent on the Screenvision merger. And so there was just no way for us to actually do that..

All right. Thanks, Kurt..

Yes, thank you..

This concludes the time allocated for questions on today’s call. I’ll hand the call back over to Mr. Hall..

Yes. Thank you everyone for joining us on short notice. And I also apologize for the timing of the events today, obviously we couldn’t control when the government send their press release out. It was very unfortunate that it happened in the middle of the trading day.

We did delay trading for several hours in order to make sure that we could get some information into the marketplace. So I do apologize with the way this came down, but again, there is nothing that I could really do about it, we did the best we can.

And I think moving this call up to tonight at least tomorrow everybody will have all the positive information that we talked about on this call about how our core business is doing. And so, stay tuned. We will continue to keep you all updated on how the process goes with the DLG. And thanks so much for your patience and your support..

This concludes today’s conference call. You may disconnect your lines. Thank you for participating. Have a pleasant day..