NOTE 10—FAIR VALUE MEASUREMENTS

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Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts business. The inputs used to develop these fair value measurements are established in a hierarchy, which ranks the quality and reliability of the information used to determine the fair values. The fair value classification is based on levels of inputs. Assets and liabilities that are carried at fair value are classified and disclosed in one of the following categories:

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Recurring Fair Value Measurements. The following tables summarize the fair value hierarchy of the Company’s financial instruments carried at fair value on a recurring basis:

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Senior Secured Notes due 2030 embedded derivative valuation. The Company’s Senior Secured Exchangeable Notes due 2030 have conversion features that required bifurcation from the host instrument pursuant to ASC 815—Derivatives and Hedging. These conversion features were combined into a single derivative that comprises all features requiring bifurcation. The derivative features have been valued using a combination of Monte Carlo simulations, binomial lattice models, and discounted cash flow models. Monte Carlo simulations use repeated random sampling to simulate a wide range of possible outcomes. The binomial lattice models consist of simulated Common Stock prices from the valuation date to the maturity of the notes. The significant inputs used to value the derivative include the share price of the Common Stock, the volatility of the share price, time to maturity, risk-free interest rate, credit spread, and discount yield. The Company measures the derivative at fair value at the end of each reporting period with any changes in fair value recorded to other expense (income) in the consolidated statements of operations.

6.00%/8.00% Cash/PIK Toggle Senior Secured Exchangeable Notes due 2030. The Company’s Existing Exchangeable Notes have conversion features that required bifurcation from the host instrument pursuant to ASC 815—Derivatives and Hedging. These conversion features were combined into a single derivative that comprises all features requiring bifurcation, see Note 7—Corporate Borrowings and Finance Lease Liabilities for further information. The derivative features have been valued using binomial lattice models. The binomial lattice models consist of simulated Common Stock prices from the valuation date to the maturity of the notes. The significant inputs used to value the derivative include the share price of the Common Stock, the volatility of the share price, time to maturity, risk-free interest rate, credit spread, and the discount yield. The Company measures the derivative at fair value at the end of each reporting period with any changes in fair value recorded to other expense (income) in the consolidated statements of operations.

Nonrecurring Fair Value Measurements. The following tables summarize the Company’s assets that were written down to their fair value on a nonrecurring basis as part of the Company’s impairment evaluation:

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Valuation Techniques. The Company primarily uses a discounted cash flow method in estimating the fair value of its long-lived assets. There is considerable management judgment with respect to cash flow estimates and appropriate discount rates to be used in determining fair value, and accordingly, actual results could vary significantly from such estimates. Such judgments and estimates include estimates of future attendance, revenues, cost expectations, capital expenditures, and the cost of capital, among others. At December 31, 2025, estimated cash flows were discounted at 9.5% for theatres in U.S. markets and 10.5% for theatres in the International markets. At December 31, 2024, estimated cash flows were discounted at 9.0% for theatres in U.S. markets and 10.5% for theatres in International markets.

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The following table summarizes the fair value hierarchy of the debt component of the Company’s Senior Secured Exchangeable Notes due 2030 as of July 1, 2025:

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Valuation Technique. The Company estimated the fair value utilizing a discounted cash flow analysis with a discount yield interpolated by reference to the Company’s other outstanding debt instruments with consideration given to the nature of collateral available to the security relative to the Company’s other debt instruments. See Note 7—Corporate Borrowings and Finance Lease Liabilities for further information.

Other Fair Value Measurement Disclosures. The Company is required to disclose the fair value of financial instruments that are not recognized at fair value in the statement of financial position for which it is practicable to estimate that value:

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Valuation Technique. Quoted market prices and observable market-based inputs were used to estimate fair value for Level 2 inputs. The Company valued these notes at principal value less an estimated discount reflecting a market yield to maturity. See Note 7—Corporate Borrowings and Finance Lease Liabilities for further information.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these instruments.