Greetings, and welcome to the National CineMedia Fourth Quarter and Full Year 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Oddo, Vice President of Finance for National CineMedia. Thank you. Mr. Oddo, you may begin.

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 2012 earnings call. Today, I'll provide a brief overview of our 2012 results and provide some thoughts about 2013. Gary Ferrera, our CFO, will then provide a more detailed discussion of our financial performance for Q4 and all of 2012 and provide some color around our guidance for Q1 and full year 2013 and then as always, we'll open the lines for questions. Before I get started, I wanted to say a few things about Gary. As you know, he'll be leaving us on March 1. Gary has done a great job as our CFO over the last 7 years as he has built a strong financial team and leaves our company with a low-cost, long-term debt structure that provides us with ample liquidity to grow our business for many years to come. While I hate to see Gary go, we wish him luck on his new adventure. He will be missed, especially by me. While it's always difficult to replace a great CFO, we have had a very active interview schedule over the last several weeks, and I'm confident that we will be announcing a high-quality new CFO before the end of Q1. Now onto our 2012 results and our outlook for '13. We had another great year of growth from our national advertising group and despite a slow start to the year, our local ad business had a record Q4 with growth of 19%, primarily due to an increase in regional contracts. The year could've been even better if it were not for several macro headwinds in November and December and the negative impact of Sandy in our local ad business in the all-important Northeast region. In fact, through October, national revenue was on plan…

Thank you, Kurt, for the kind words. I'll do my best not to mess up. For the fourth quarter, our total revenue increased 1.1% to $115.9 million, driven by a 2.6% increase in total advertising revenue, including beverage, to $103.9 million, partially offset by a 9.8% decrease in Fathom Events revenue to $12 million. For the full year, our total revenue increased 3.1% to $448.8 million, driven by a 6% increase in total advertising revenue, including beverage to $409.5 million, offset by a 20.1% decrease in Fathom Events revenue to $39.3 million. The advertising revenue mix for the full year was 70% national, 20% local and 10% beverage, versus 69%, 21% and 10%, respectively, for fiscal 2011. Total advertising revenue represented 91% of our full-year revenue versus 89% in 2011. National ad revenue, excluding beverage, in Q4 decreased 4.5% versus Q4 2011 to $66.3 million, driven by a decrease in utilization from 112.1% to 91%, partially offset by a 15.9% increase in our Q4 attendance base while CPMs were approximately flat. As Kurt mentioned, our Q4 utilization was affected by the overall advertising market being impacted negatively by the broader economic slowdown during the quarter. For the year, national ad revenue, excluding beverage, increased 7.9% versus 2011, to $288.7 million, driven by utilization increase to 98.8% from 96.7% on attendance that was up 8.4%, partially offset by a decline in CPMs of 2.5%. Our attendance increase was the result of the addition of several new network affiliates and a modest increase in organic theater industry attendance. We entered the fourth quarter of 2012 with approximately $1.8 million of make-goods and as of the end of the year, we had approximately $1.2 million of make-goods. This balance is lower than the year end 2011 balance of $2.7 million and sell to…

[Operator Instructions] Our first question is from James Dix of Wedbush Securities.

Three things. Just looking a little bit at this kind of strong pacings or -- I know you don't use the term, but just some of the bookings that you have in the national and local market for the full year. And just trying to reconcile that to kind of the full-year guidance of kind of 1% to 4% growth, as opposed to kind of your national bookings. Looks like they're up like 10% go into the year, local up 13%. Just want to make sure I'm understanding that. I know you have a 3Q comp which is pretty challenging, so that's probably one part of it. But any other color that you have on that would be helpful, and then I have 2 follow-ups.

Yes, I think, clearly, James, the Q3 deal that we discussed is something that we're somewhat worried about. Although I'm a lot less worried about it than we were a few years ago, when we had that Army National Guard contract sitting in the first quarter, and trying to replace that proved to be pretty difficult. Third quarter is pretty robust for us, as I mentioned in my comments, we turned a lot of money away in Q3. And so I'm hopeful that with the demand in Q3 being really, really strong the last, really, 3 years, Q3 has turned into our biggest quarter of the year, that we'll be able to replace it. I think creating a little hedge against that, I think, was prudent. The other thing is we've been burned the last 2 years by some sort of economic turmoil in the marketplace. And, I think, with the uncertainty that we have out there, in the general business environment, and the guys in Washington not getting their act together anytime soon, at least from my view, I think it's prudent for every company to be reasonably conservative.

Okay, great. You mentioned the National Guard. I guess, just more broadly, on that government spending category. I mean, that used to be I think in your top 3. Obviously there had been some changes there. Any outlook for that to potentially surprise the upside and any color you have, potentially, I don't know, on Affordable Care Act marketing spending. I'm hearing that from some guys in the TV market, and potentially that's a demo which could be attractive to you. But just any color on that category because it's been important to you in the past.

Yes. Well, the last 2 years, '11 and '12, were pretty slow from a military spending standpoint. In fact, I don't think we did any business, very little anyway, with the Army National Guard. So I don't think that -- the comps are particularly difficult in the government spending category for us, and we do have some stock already booked for this year. So there could be some upside in that category as a whole. As far as the Affordable Care Act spending, as we've mentioned before, pharma in general is a pretty weak category for us. The creative doesn't work very well, especially with all the information that you have to include on the ad as a matter of law. So I'm not going to say that it isn't something that may surprise us, and that we can come up with creative solutions that could work, but it's not something that we've built into our plans, clearly.

Okay, and then one last one, then I'll leave it to others. Are you working to experiment, at all, with the structure of the preshow, in terms of bringing in new advertisers? It just looks like, from some of the preshow's recently, you have some pretty long ads from some sponsors who are outside of the 3 main content partner segments. So I was curious as to whether there's any strategy to try to bring in some new formats in, outside of the content partners, to maybe attract some new advertisers. And are there any limitations on what you can do with the structure of the preshow, vis-a-vis, those 3 content partner segments?

Well I think the content partner structure has served us very well. It, obviously, provides a big chunk of upfront money in addition to providing some entertainment content, if you will, to break up the ad, and to make it better for theater patrons. That's always been one of our strategic goals. So I don't see anything changing necessarily. I think the mix of content partners is continuing to change. We've added Microsoft, this year, as a content partner. That's been something that was a big breakthrough. Content partners, in the past, have generally been related to entertainment companies of one sort or another, either movie studios or television networks, either cable or broadcast. So I think moving into this world where we now have a big technology provider onboard, I think, opens a whole new set of categories that could make our content partner model even more robust than it already is. And the other thing that we've really try to stress over the years, which you noted, is to try to create longer form advertisements that I think play much better in the theater environment. I think 30-second ads are on the short end. For us, I would much rather see 60s or are 90s. And we're see a lot more of that. I think as people start to get comfortable with producing for cinema, the 30-second format is not as productive, if you will, or effective. So we're going to continue to push on that. We've also started to work a little bit with regional clients, especially the ones that are more national in orientation. We have a lot of companies, now, that are buying us regionally, as opposed to nationally, because I want to target certain markets are certain theaters. And so we've allowed, in some cases, them to move the content up a little bit, into our segment, too. And so that, I think, has helped a bit. But other than that, the preshow format that we've used has worked pretty well and I'm sort of, of the mind of if something is not broke, don't fix it.

The next question is from Townsend Buckles with JPMorgan. Townsend Buckles - JP Morgan Chase & Co, Research Division: Just another on your revenue guidance for 2013. It sound like you've built a fair amount of conservatism, even at the high-end. So is it safe to say that your view, being a share gainer in the ad market, hasn't changed? And if so, if you can frame how you see your growth potential, I guess, on a more normalized basis.

I mean on the high-end, we're obviously, twice or 3x depending on who you want to listen to, the growth is being projected for the broader ad market. So, your comment on us being a share gainer is obviously, clearly, in play. There are some things this year that could benefit us, there isn't an Olympic sucking up a ton of money. We've already seen some positive impact from that, because as you know, a lot of Olympic sponsors had to dedicate most, if not all of their budgets, to the Olympics so that could be a positive thing. We don't get much of a tailwind from the elections, so we really don't have a comp issue like most networks are going to have associated with the elections. So that doesn't impact our business all that much. There could be some impact in the third and fourth quarter, around that, I think, in the television marketplace, which messes up their growth rates a little bit. So, like I said in my comments previously, there's a few things that are in the world right now that are a bit outside our control and I just think it's important for companies to guide conservatively. Townsend Buckles - JP Morgan Chase & Co, Research Division: Got it. And on your CPM guidance to potentially be down in 2013. You talked, in the past, about being more aggressive to get those more price-sensitive advertisers like CPG. So if you could give a sense of how much demand your sales team sees among those advertisers that stay away due to pricing, and also how you balance maintaining your higher rates elsewhere.

Well, it's always a balancing act and I'm not going to get into too much detail on our specific tactics around this, for obvious reasons. But I think it's safe to say that television allows pricing structures for CPG and certain other client categories that are different than other categories, which happen to be the more traditional cinema advertising category. So in many respects, what we're trying to emulate is what goes on in television, where you try to differentiate pricing based on the type of client. And more importantly, how big a commitment that client is willing to make and are they willing to advertise during periods of time where our demand is not as high. I'd mentioned, in the past, January through April and October are times of the year where demand is generally lower. Theater attendance is lower generally. So all of those things will come into play. And as I mentioned in my comments, as our network gets bigger and bigger, we have a lot more flexibility to do certain things around targeting. Clearly, one of the challenges with cinema versus television is our inability to target quite as well as television does on a 18 to 49 or other demographic groupings. So we're spending a lot of time improving our technology and creating various targeting strategies to try to create a better targeted demo, if you will, for advertisers. And so those are just some of the things that we're thinking about. Townsend Buckles - JP Morgan Chase & Co, Research Division: And any sense of how much those prices tend to fluctuate or need to fluctuate to really pull in a critical mass?

Well it just depends on the client. It's all over the board and it does depend on the time of year. As we've mentioned in the past, the difference in our CPMs, between our highest month and our lowest month, can be as high as 30% to 35%. So you've got a lot of leeway, just within our existing pricing structure, to work in a client's needs. Clearly, our upfront strategy is designed around some of this, because if we can sit down with a client and layout all the variables and our pricing flexibility, month by month, throughout the year and try to match that up with a clients marketing needs, it provides a much easier match. And that's been one of the emphasis we've had on our whole upfront strategy.

The next question is from James Marsh of Piper Jaffray.

It's Stan on behalf of James. Can you guys clarify, and you sold inventory of 61%, if that's for Q1 only or more longer term? And where do you expect to be by May?

Well the 61% is for our whole year. So the denominator in that calculation is our target for the year, and the numerator is how much we've booked. So that's how that calculation is done. We don't usually give precise predictions about where we're going to be in May or June. And even if I had to, it'll probably be challenging at this point.

The next question is from Eric Handler of MKM Partners.

Just on the upfront inventory that you sold from your May presentation, are CPMs for those deals down versus what you were -- how do those CPMs compare versus what you're doing in the scatter last year? I'm just trying to get a sense of the scatter pricing versus upfront pricing. And secondly, when you look at your regional business now, maybe you talk about your request per proposal level, how that's been tracking versus where you were last year.

Yes. The answer to your first question, Eric, obviously, not everything we've booked upfront. And the 61% that I mentioned was not related to jet stuff that came from our last year May meeting. So the upfront process, while it all sort of gets built up around these meetings in New York over a week, in May, is a process that goes on throughout the year. So I think one of the advantages we have, this year, is that we started that process much earlier than we did last year. In fact, we've had many, many more meetings, already this year, than we did last year at this time. And so we were a little late to the game last year. We did, obviously, do the presentation in May. But we started "upfront meetings" last year in the fourth quarter. So it's not just one event. The answer to your question on pricing, it's kind of all over the board. The upfront and scatter market, for us, as you know, is not a fully developed market. We're sort of riding, if you will, off the TV marketplace. And so, for us, there's no real rule of thumb that scatter pricing is up or down. It's all over the board depending on the deal, depending on the number of units that are committed to us, what months those units may fall into. Obviously, if somebody's going to buy -- anyway, if they're going to buy January through April inventory or October inventory, obviously the price can be a lot lower. It'll probably be a lot lower than deals that we do in the scatter market. And so it's really hard to give a rule of thumb. I think the thing that we're trying to impress upon people is that our growth is not going to be coming from CPM. In fact, as Gary mentioned in his briefing, we could have some declines over the near-term as we bring all these new clients on board. The mix of clients that we're hoping to bring on board, obviously, deals in a much lower CPM world when they buy on television. So it would be consistent that, that would do the same in cinema. Did I miss any of your questions in there?

The regional RFP level.

Yes, the regional level of activity is pretty high right now. Pretty robust. As I mentioned in my comments, upfront bookings is up 13% from last year. A lot of that, I'll will tell you, is the fact that we have gotten our new theaters on board, integrated into our sales process, obviously integrated into our technology. There is probably a bit longer lead time in the local and regional business, to get new theaters into the process and up to ramming speed, if you will, from a utilization standpoint, than it is in national. National is just added into the proposal and it gets priced in. With regional it takes a little bit longer. You've got to train people and you've got to get clients up the curve. So I think we're seeing the benefit of some of the expansion of our network that happened in '11 and '12. We're seeing some of that benefit come through. We're also seeing the benefit of just becoming larger. Because, as our network gets larger, more geographically dispersed, our coverage gets better. The regional contracts, I think, become a much more important part of our business. We've continued to talk about that, we've continued to add people to our retail team. And I think, as our network is bigger, that regional business, that sort of middle point between local and national, is going to play a bigger role in some of our growth.

The next question is from Barton Crockett of Lazard Capital.

I had a number of questions and then I wanted to step back and ask a kind of a bigger question. The number one question is just on the 61% of the budget that you sold. How would that compare to the sellout rate at this time last year?

Right now, if I was to do the calculation today, it's not significantly higher. If you looked at it at the beginning of the year, there was a pretty good spread, positive spread, between this year and last year. A lot of it have to do with just what week you pick. Because you'll have contracts come on board. Last year, this time, and it jumps up the percentage last year. So that's why we sort of just said how are we as we entered the year, right before week one of the year started, where were we? There was a pretty meaningful increase there. And as of today, it's kind of come back a little bit. But, obviously, it's on a higher budget number, too, right? So it still represents $1 increase over last year, which is important.

Okay. And then in terms of just the competitive and potential kind of consolidation environment versus let's say Screenvision. Could you just kind of summarize for us? I mean, how many screens do you see coming your way, from them? And how do you see that kind of impacting the possibility of you two consolidating at some point?

Well, as I said in my comments, there about 1,500 screens that we see coming up for -- potentially moving over to our network over the next couple of years. In addition to that, I mentioned there are some theaters that our founding members have acquired, I guess 239 screens I mentioned, that will be coming on board over the next 2 years, too, as their contracts expire with Screenvision. So there's a fair bit. I think the big chunks probably aren't for another 3 or 4 years, as some of the larger regional circuits that Screenvision has come up for renewal. So we're going to continue to do what we have been doing, which is to fill in marketplaces, add DMA's. I think we're in 180-plus DMA's today. That leaves, obviously, about 30 DMAs that we're not in. Most of them very, very small. But we're going to continue to push on it because I think it's good to continue to create a more ubiquitous network that can compete more effectively against television.

But do you think that, as these things switch away, does that increase the likelihood that there could be some combination between you guys and Screenvision at some point?

Well, I think that obviously is a factor. I think the more important factor is how much of the revenue we garner in the marketplace. And because as clients come to the market with money that they're going to shift from television to cinema, obviously, we would like to get 100% of it. Would we get 100% of it? Likely not, but that would be our goal.

Okay. And I guess just one final thing, if I could. On the adjusted EPS calculation, this $11 million tax adjustment and the $5 million in collection of accretion of interest. Could you just tell us what that's about?

You mean in the back of it? On the back of the earnings release? Yes, basically, what it is, is we had a couple of things going on. One being, obviously, when we went and did the refinancings. And then the big one that you're looking at is the -- and historically we had the DTAs, everything, valued at a 40% tax rate. And that was just a guess when we IPO-ed, what we'd be at. And then overtime, we've trended it about 38%, so we just had to adjust that from 40% to 38%. And that's the big chunk of it.

[Operator Instructions] The next question is from Jim Goss of Barrington Research.

I do have a couple. First, I was thinking about the conversations we had a little earlier, about not being able to target quite as well as television, which affects your strategy. In a way, movies usually have a very specific demo that they're targeting. Is the issue that you don't have their one-time shops and that steady season, that you have the ability to measure or are there other aspects involved?

It's interesting, Jim, two points. Yes, to your second question or point. If you start targeting by film, there's a lot of times a year that the films are not of the mix that people are going to run towards. And there are other times of the year, the summer primarily, and some of the other big moviegoing time periods where you're going to have too much demand. And as you know, we are somewhat limited in the amount of inventory that we have in any given swipe. We have designed our pre-shows, 14-, 30-second units is sort of our max, if you will. They occasionally go a little bit over that, but generally not too far because they will adversely impact our local and regional business, because they get moved back away from short time. So the limited amount of inventory is a big difference between us and television when it comes to that theory, if you will, of trying to target against a specific film it. Because the last thing you want to have is 200% demand against one film and you can only handle 100, and then lots of times a year you've got very low demand against other films. So that's why we have always gone against the movie rating as a primary way to target, because we always felt there was enough reach and enough films that would fall into those rating groups where we would always have enough demand throughout the year. And so that's really behind it. Now, you made an interesting point on the actual audience. As you dig into the audience for motion pictures, the audience doesn't change as much as you would think, whether it be between male or female our various age groups. Because even if you targeted, say…

Okay. Well, this ties into one of the other questions I had, which relates to make-goods. The concept of make-goods, for you, is different from television, certainly in terms of your ability to deliver or satisfy the make-goods in the next quarter. Except you really can't, because if you had a make-goods from summer season and you go into September, you might have a totally different audience, there's a person-to-person.

Yes. Well, look, they're making good against specific demos, right? Because they make demo guarantees, the television guys do. We make total audience guarantees against a specific rating or group of ratings. Generally, we won't make specific guarantees against 1 rating, it's usually a group of ratings, at least the PG-13 rating. So we're kind of hedging our bet in some respects. Because, again, going back to what I said at the beginning, we don't have a lot of inventory. And if you started making demo guarantees in the first 4 months of the year, and all of a sudden you couldn't make those guarantees because the theater attendance wasn't there, against those specific demos, then you're stuck with a big make-good that you make good in the summer. And if that would happen, obviously, you'd have to take some stuff out of inventory, potentially, during your highest selling period. So the fact that cinema doesn't have anywhere near the amount of inventory that TV networks have, puts us at a bit of a disadvantage if we were going to play in that game. And I think it becomes a much trickier type of situation. It's why we've always guaranteed against total audience as opposed to demo.

Okay. And maybe one quick question. The $103.9 million ad revenue number you reported. If you had to adjust, in your own mind, for Sandy, what do you think that figure might have been?

Great question. I don't think Sandy affected our national business all that much. But it clearly affected our local business in and the tail end of the quarter. And the only thing I can sort of reference you to is we were sort of trending towards a growth rate, in the fourth quarter, for our local, a little over 20%, around 21% or so. And it turned out to be 19%. So it may have cost us a couple of points on our local growth rate, local and regional growth rate. As I mentioned, we're starting to, obviously, see businesses open back up again in the Northeast. Although some parts of the Northeast just got whacked by a snowstorm. So, those are things you always have to deal with, and I don't like to dwell on these things too much, because every year there's something like this that goes on. Maybe Sandy was a little more significant than most.

And it's a big region for us.

Yes. And again, the Northeast in all businesses, is usually a pretty important region. And of for us, if you look at the amount of attendance and impressions, theaters, any way you want to look at it, the Northeast is quite significant for us.

Okay, was there anything else that affected that comp then? Because it was a little bit less than I was looking for as far as...

Yes. No, I wouldn't say so. I mean, clearly, 19% growth is hard to kind of cribble, it's pretty good, so I'm not going to complain about it. But as we know, the whole business environment slowed down dramatically in November and December. I think when the GDP numbers came out, that surprised everybody. We saw that or felt that, maybe earlier than most companies either did or at least admitted they did. As you know, we came out pretty early and said that we're feeling some slowdown in the fourth quarter. We sort of indicated, when the final GDP numbers came out. So other than just this on-again, off-again macroeconomic stuff, I can't see anything that really affected fourth quarter.

Our next question is from Ben Mogil of Stifel Nicolaus. Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division: So, I want to make sure that I've got everything sort of right here. The 61%, I understand, where this is all coming from, have you actually told us what percentage of your full-year revenue guidance you sold to date? I know in the past you've sort of given, not just on national, but on total. Have you given that on today's call?

No, we haven't. Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division: Do you want to give it?

No, but you can assume that our plan or our budgets are somewhere in the guidance somewhere, right? That we're considering those when we give our guidance. And then we probably left ourselves some room. So you can make those assumptions. Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division: In terms of the dollar amount that you're tracking, on national, above where you were last -- I get the 61% is the same, but the dollar amount is a little bit higher. Could you give us a sense of what percent -- the dollar amount is higher, is it 5%, is it 10%? Can you give us a sense of where it is or is it tracking to the overall guidance range?

I think I said 10% at the beginning of the year. So it's probably a little less than that as we sit today, but still an increase.

Yes, we have no further questions in queue at this time. I would like to turn the floor back over to management for any additional remarks.

Great. Well, thank you very much, everyone, for all your support. And if anyone has any additional questions, we will be here for quite a while, so please give us a call. Thanks very much.

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