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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended May 26, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to __________
Commission file number 0-7426
THE MARCUS CORPORATION
(Exact name of registrant)
as specified in its charter)
Wisconsin 39-1139844
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
250 East Wisconsin Avenue - Suite 1700
Milwaukee, Wisconsin 53202-4220
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 272-6020
Securities registered pursuant to Section 12(b) of the Act: Common Stock,
$1 par value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this
Form 10-K. [__]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of August 12, 1994: $178,886,700.
Number of shares outstanding of each of the classes of the registrant's
capital stock as of August 12, 1994:
Common Stock, $1 par value: 6,808,864 shares
Class B Common Stock, $1 par value: 6,223,893 shares
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE:
Proxy Statement for 1994 annual meeting of shareholders (incorporated by
reference into Part III, to the extent indicated therein).
PART I
Unless the context indicates otherwise, references to the number of
the Company's various facilities set forth in this Form 10-K Annual Report
are as of the date of the Company's 1994 fiscal year-end, May 26, 1994.
Item 1. Business.
The Marcus Corporation and its subsidiaries (collectively referred
to herein as the "Company") are engaged in four business segments:
motels; hotels and resorts; restaurants; and movie theatres. The Company
began in 1935 as the operator of a single movie theatre and currently
owns, operates or franchises 99 motels, five hotels, one resort, 68
restaurants, and 36 movie theatres with an aggregate of 189 screens.
The Company's motel operations include a chain of 98 Budgetel Inn
economy motels in 26 states and one Woodfield Suites all-suite motel in
Wisconsin. Of the 98 Budgetel Inns, 76 are owned or operated by the
Company and 22 are franchised.
The Company's hotel and resort operations include The Pfister and
the Marc Plaza, full-service hotels in the Milwaukee, Wisconsin
metropolitan area, and The Grand Geneva Resort & Spa, a full-facility
destination resort in Lake Geneva, Wisconsin. The Company also operates
or manages three hotels, the Sheraton Mayfair Inn in Milwaukee, Wisconsin,
The Mead Inn in Wisconsin Rapids, Wisconsin, and the Crowne-Plaza
Northstar in Minneapolis, Minnesota.
The Company's restaurant division includes 35 KFC (Kentucky Fried
Chicken) restaurants in Wisconsin; four Marc's Big Boy restaurants in
Wisconsin and Minnesota; 13 Marc's Cafe and Coffee Mill restaurants in
Wisconsin; 13 Applebee's Neighborhood Grill & Bar ("Applebee's")
restaurants in Wisconsin and Illinois; two Big Boy Express restaurants in
Wisconsin; and one Original Gino's East of Chicago Restaurant in
Wisconsin.
The Company operates 36 movie theatres with an aggregate of 189
screens throughout Wisconsin and in northern Illinois.
Business Segment Data
Set forth below is certain business segment data for the Company's
three most recent fiscal years relating to the Company's four industry
segments. As a result of the substantial expansion of the Company's hotel
and resort operations in fiscal 1994 and the increasingly different
operating characteristics of the Company's hotels and resort from the
Company's motels, the Company has commenced separate business segment
reporting for its hotel and resort division and its motel division and has
restated retroactively the following segment reporting information
accordingly. Intersegment sales and transfers are not material.
Fiscal Year(1)
1994 1993 1992
(Dollars in thousands)
Revenues from unaffiliated
customers:(2)
Motels $88,973 $80,596 $74,575
Hotels and resort 32,391 28,485 28,101
Restaurants 71,108 59,138 56,110
Theatres 51,389 43,880 42,959
Corporate items(3) 2,454 1,919 2,552
-------- ------- -------
$246,315 $214,018 $204,297
======== ======== ========
Operating profit or
(loss):
Motels $ 25,971 $ 23,775 $ 19,874
Hotels and resort 2,611 2,116 1,830
Restaurants 2,203 723 434
Theatres 12,378 9,660 9,130
Corporate items(3) (8,509) (9,232) (9,302)
-------- -------- -------
$ 34,654 $ 27,042 $ 21,966
======== ========= ========
Identifiable assets:
Motels $182,174 $166,193 $154,578
Hotels and resort 45,787 24,041 21,747
Restaurants 51,896 46,282 35,800
Theatres 47,244 36,898 35,994
Corporate items(3) 34,505 36,041 26,275
-------- -------- --------
$361,606 $309,455 $274,394
======== ======== ========
_______________
(1) Fiscal year 1992 consisted of 53 weeks in each of the hotels and
resort, motels and restaurants segments; all other segments and years
consisted of 52 weeks.
(2) Included revenues from affiliated customers are not material.
(3) Corporate items include amounts not allocable to specific business
segments. Revenues consist principally of earnings on cash
equivalents. Operating profit includes earnings on cash equivalents,
less interest expense and general corporate expenses. Assets include
primarily cash and cash equivalents, notes receivable, receivables
from joint ventures and land held for development.
Motel Operations
Budgetel Inns
The Company owns, operates or franchises 98 economy motels, with
over 10,000 rooms, under the name "Budgetel Inn" in 26 states. The
Company operates 22 Budgetel Inns through franchisees. The remaining
Budgetel Inns are either Company-owned (68) or operated under joint
venture agreements (eight).
Targeted at the business traveler, Budgetel Inns feature an
upscale, contemporary exterior appearance, are generally located in high
traffic commercial areas in close proximity to interstate highway exits
and major thoroughfares and typically vary in size between 60 and 150
rooms. Budgetel Inn daily room rates generally vary between $30 and $45
per night.
The Company believes that providing amenities not typically
associated with economy-priced motels help distinguish Budgetel Inns from
many of its competitors. These amenities include executive conference
centers, room-delivered complimentary continental breakfasts, king-sized
beds, free local telephone calls and incoming fax transmissions, no
smoking rooms, in-room coffeemakers and hair dryers, remote control cable
televisions, extra-long telephone cords and large working desks. To
enhance customer security, the Company has converted all of its Company-
owned and most of its franchised Budgetel Inn rooms to "card key" locking
systems and provides well-lighted parking areas and all night front desk
staffing. The interior of each Budgetel Inn is refurbished in accordance
with a strict periodic schedule.
Budgetel Inns operates a nationwide guest reservation center, where
travelers can call 1-800-4-BUDGET toll-free to obtain Budgetel Inn room
reservations and other information.
The Company has a national franchise program for its Budgetel Inns.
Franchisees pay an initial franchise fee and annual marketing assessments,
reservation system assessments and royalty fees based on room revenues.
To facilitate continued growth in Budgetel Inn franchising, the Company
offers certain financial assistance plans to its franchisees. The Company
is qualified to sell, and anticipates ultimately selling, franchises in
all 50 states.
During fiscal 1994, five new Company-owned units opened and one
franchised unit was opened. Since the end of fiscal 1994, two new
Company-owned Budgetel Inns have opened, with an additional five new
Company-owned and two new franchised units under various stages of
construction. Depending upon continuing favorable industry conditions and
other factors, the Company currently plans to add a substantial number of
new Budgetel Inns over the next five fiscal years through internal
expansion, franchising and acquisition.
Woodfield Suites
The Company operates a mid-priced, all-suite motel under the name
"Woodfield Suites" and plans to open two more Woodfield Suites in fiscal
1995 using its new prototype all-suites motel design. Woodfield Suites
offers all of its guests the use of its centrally-located swimming pool,
whirlpool and game room. Each suite has a bedroom and separate living
room and features an extra-length bed, sleeper sofa for additional guests,
microwave, refrigerator, wet bar, television and hair dryer. Some suites
also have a kitchenette. All guests receive a free continental breakfast
and are invited to a free cocktail hour.
Hotel and Resort Operations
The Pfister Hotel
The Company owns and operates The Pfister Hotel, a 307-room, full
service luxury hotel, in downtown Milwaukee. In fiscal 1994, The Pfister
Hotel earned its 18th consecutive four-diamond award from the American
Automobile Association. The Pfister is also a member of the Preferred
Hotels and Resorts Worldwide Association, an organization of independent
luxury hotels and resorts, and the Association of Historic Hotels of
America.
In 1988, The Pfister Hotel initiated a five-year exterior and
interior restoration and refurbishment plan which was completed prior to
May 1993, when The Pfister celebrated its centennial anniversary. The
renovation and centennial celebration contributed to increased occupancy
levels in fiscal 1994.
The Marc Plaza Hotel
The Company owns and operates the 500-room Marc Plaza Hotel,
located in downtown Milwaukee. The Company leases office suites on two
floors of The Marc Plaza to professional and other business tenants on a
short- to intermediate-term basis and provides such tenants with various
secretarial and other office-type services.
As a result of the planned opening of a new and expanded municipal
convention center adjacent to the Marc Plaza, the Company will commence
work on a major refurbishment of the Marc Plaza's existing facilities in
November 1994, with completion targeted for May 1995. Additionally, the
Marc Plaza plans to add an additional 250 rooms.
The Grand Geneva Resort & Spa
In July 1993, the Company acquired the Americana Lake Geneva Resort
in Lake Geneva, Wisconsin and renamed it the Grand Geneva Resort & Spa.
Originally opened in 1968, the Grand Geneva Resort & Spa is a full-
facility destination resort located on 1,300 acres. The resort includes
355 guest rooms, a convention center, three speciality restaurants, two
championship golf courses, several ski-hills, indoor tennis courts, a
fitness and sports complex, horse stables and an on-site airport. The
resort was closed by the Company in September 1993 for a complete
renovation and reopened in May 1994.
Operated and Managed Hotels
The Company operates the 150-room Sheraton Mayfair Inn in the
Milwaukee metropolitan area under a operating agreement which expires in
April 1995. The Company is currently evaluating the economic feasibility
of renewing this operating agreement and may enter into negotiations to
continue its operation of the Sheraton Mayfair Inn if the proposed
economic terms and conditions indicate that such a renewal would be in the
best interests of the Company.
The Company manages the 226-room Crowne Plaza - Northstar in
Minneapolis, Minnesota pursuant to a 15-year management agreement.
Formerly known as the Northstar Hotel, the property was substantially
remodeled in early 1994 and renamed the Crowne Plaza-Northstar, the luxury
brand of the Holiday Inn system.
The Company also manages the 154-room Mead Inn in Wisconsin Rapids,
Wisconsin, pursuant to a 15-year management agreement, with the Company
having an option to extend the term of the agreement for three successive
five-year periods.
Restaurant Operations
The restaurant division operates facilities under a number of
different restaurant concepts and the Company is continually trying to
position its restaurants in order to best respond to changing consumer
tastes and preferences. These efforts include closing or selling less
profitable locations, converting them into different concepts or
remodeling them. The Company's current principal emphasis is on casual-
theme dining, as evidenced through the Company's continuing expansion of
its successful Applebee's facilities. The Company also actively considers
developing or being the franchisee for new restaurant concepts. At the
close of fiscal 1994, the Company operated 13 Applebee's Neighborhood
Grill & Bars, 35 KFCs, 13 Marc's Cafe and Coffee Mills, four Marc's Big
Boys, two Big Boy Expresses and one Original Gino's East of Chicago.
KFC Restaurants
The Company has non-exclusive franchise rights to operate KFC
restaurants in the Milwaukee metropolitan area and in northeast Wisconsin.
The Company has operated KFC restaurants for 34 years. The Company
currently operates 35 KFC restaurants and is the largest operator of KFC
restaurants in Wisconsin, based on the number of facilities operated. The
restaurants feature Kentucky Fried Chicken and other franchisor-authorized
food items, including the introduction of the new Colonel's Rotisserie
Gold non-fried chicken in fiscal 1994.
In 1988, the KFC franchisor, Pepsico, Inc., began efforts to change
the KFC dining concept from providing facilities with only carryout
services ("carryout stores") to providing facilities with carryout, drive-
thru and sit-down service ("KFC restaurants"). In response to these
efforts, the Company has renovated, rebuilt or renovated 32 of its 35
carryout stores into KFC restaurants, providing virtually all new
facilities with inside seating for approximately 40 customers, drive-thru
windows and updated electronic equipment to better facilitate food
preparation and order processing. In fiscal 1994, the Company replaced
two carryout units with new KFC restaurants in Milwaukee. The Company
plans to build two or three new KFC's in late fiscal 1995.
Applebee's Neighborhood Grill & Bar Restaurants
The Company has the exclusive franchise rights to develop and
operate Applebee's restaurants in the Chicago metropolitan area and
surrounding counties and for substantially all of Wisconsin. The
Applebee's restaurant system is franchised by Applebee's International,
Inc., a publicly-held company headquartered in Kansas City, Missouri. A
majority of the restaurants in the Applebee's system are operated by
franchisees, such as the Company. The Company owns and operates 13
Applebee's, including four in the Milwaukee metropolitan area, two in
Madison, Wisconsin, one in Appleton, Wisconsin, and six in the Chicago
metropolitan area. During early fiscal 1995, the Company opened three new
units, one in Green Bay, Wisconsin and two in Illinois. The Company has
seven additional Applebee's in various stages of development in Wisconsin
and in the Chicago metropolitan area. The Company plans to open a total
of six to eight Applebee's in fiscal 1995.
Applebee's restaurants are local neighborhood establishments, with
a comfortable and casual atmosphere appealing to all ages. Menu items
consisting of beef, chicken, seafood and pasta entrees prepared in a
variety of cuisines include traditional favorites and innovative dishes,
in addition to a full range of appetizers and snack foods. The Company's
Applebee's restaurants generally have about 35 to 40 tables and seat
approximately 165 customers, with a centrally located bar.
Marc's Cafe and Coffee Mill Restaurants
The Company owns and operates 13 Marc's Cafe and Coffee Mill
restaurants. Renovated from former Big Boy restaurants, the updated decor
in each Marc's Cafe includes brass, greenery, rich upholstery and warm,
relaxing colors. Local memorabilia decorate the walls for a hometown
touch in each facility. Marc's Cafes are intended to provide customers
with a casual, intimate atmosphere, with menus featuring, among other
items, freshly-brewed specialty coffees, rotisserie chicken, beer and
wine. Operating in a highly competitive segment of the restaurant
industry, the Company continues to examine alternatives and refinements to
this internally-developed restaurant concept.
Marc's Big Boy Restaurants/Big Boy Express
The Company operates four Marc's Big Boy restaurants and has non-
exclusive franchise rights to operate restaurants under the "Big Boy" name
in Wisconsin, Illinois and Iowa and exclusive rights in Minnesota. In
response to changing consumer tastes and preferences, the Company has
closed, sold or converted 54 of its former Big Boy restaurants over the
last six years in order to focus on more promising locations and
restaurant concepts. The Company expects to ultimately close or convert
all of its remaining Marc's Big Boy locations as appropriate alternatives
arise.
The Company operates two Big Boy Express double drive-thru,
carryout restaurants in metropolitan Milwaukee, designed with a 1950s art
deco motif. Intended as a test concept, Big Boy Express features outdoor
patio seating and enclosed walk-up windows and serves the "Big Boy"
doubledecker hamburger sandwich, other sandwiches, french fries and
milkshakes. The Company continues to evaluate the potential long-term
feasibility of this concept.
The Original Gino's East of Chicago Restaurants
In September 1993, the Company acquired exclusive franchise rights
to operate Original Gino's East of Chicago restaurants in Wisconsin,
Minnesota, Iowa and selected sights in Illinois. Gino's East specializes
in Chicago-style (deep dish) pizza, together with pasta, salads,
sandwiches and Italian cuisine. In fiscal 1994, the Company opened a
Gino's East restaurant in Milwaukee.
Restaurant Franchise Agreements
The Company's restaurant franchise agreements impose various
specifications as to the preparation of the franchised products as well as
general operating procedures, including advertising, maintenance of
records and protection of trademarks. Such agreements also provide, among
other things, for inspection, counseling and advisory services by the
franchisors.
The Company's KFC locations operate under individual franchise
agreements ranging in terms from 10 to 20 years in length. Franchise fees
approximate 4% of gross sales and, in addition, an initial flat fee of
$20,000 is payable for each new KFC restaurant. The KFC franchise
arrangement has been, and is expected to continue to be, material to the
success of the Company's restaurant division.
The Company's Big Boy franchise agreement provides for payment of a
franchise fee of 1% of gross sales. The Big Boy franchise is non-
exclusive and continues in perpetuity, provided the Company complies with
the conditions of the franchise agreement, which relate primarily to
operating procedures and use of trademarks. The Company's exclusive
franchise rights in Wisconsin, Illinois and Iowa terminated as of August
1, 1994 as a result of the Company not maintaining a specified minimum
number of Big Boys in the franchise area. Given the Company's deemphasis
of the Big Boy concept, the Company does not believe this change in its
franchise rights impacts adversely its restaurant operations.
The Company's development agreements with the Applebee's franchisor
for its Chicago and Wisconsin franchise territories require the Company,
among other things, to build a specified number of Applebee's restaurants
in each territory in accordance with a development timetable. The
Applebee's franchisor charges an initial franchise fee of either $30,000
or $35,000 (depending on location) for each Applebee's restaurant
developed. A royalty fee of 4% of monthly gross sales is payable to the
franchisor. Additionally, as franchisee, the Company is required to pay
an advertising fee to the franchisor for national advertising purposes and
to spend certain amounts for local advertising. Applebee's franchise
agreements have a term of 20 years and can be renewed for an additional 20
years.
The Company's franchise agreement with the Gino's East franchisor
provides for an initial franchise fee of $25,000 for each Gino's East
franchise opened. A royalty fee of between 3% and 7% of total gross sales
is payable to the franchisor, depending upon individual franchise sales
levels. The Company's master development agreement for Gino's East
restaurants requires the Company, among other things, to open a specified
number of Gino's East restaurants within the Company's franchised
territory in accordance with a development schedule.
Each of the Company's restaurant franchisors, to varying degrees,
specify certain product requirements and provide for certain approved
suppliers of products and supplies in order to maintain the respective
franchise's quality standards.
Theatre Operations
The Company operates 36 movie theatres with an aggregate of 189
screens in Wisconsin and northern Illinois. The Company's facilities
include 32 automated multi-screen theatres, three single-screen theatres
and one outdoor twin theatre. The Company's long-term growth strategy is
to focus on multi-screen theatres, which typically vary in seating
capacity from 150 to 450 seats per screen. Multi-plex theatres allow the
Company to offer a diversified selection of films to attract additional
customers, to shift movies to larger or smaller auditoriums within the
same theatre depending on the popularity of the movie and to benefit from
the economies of having common box office, concession, projection and
lobby facilities. Virtually all of the Company's movie theatres feature
exclusively first-run films.
The results of the Company's movie theatre business (and the movie
theatre industry in general) are largely dependent upon the box office
appeal and marketing of available first-run films. Stimulated in large
part by additional demand from ancillary markets such as home video, pay-
per-view and cable television, as well as increased demand from European
film markets, the annual number of first-run film releases has more than
doubled since 1981. Over 160 first-run films were released in fiscal
1994, including such box office hits as Mrs. Doubtfire, Philadelphia,
Grumpy Old Men, Jurassic Park, The Firm, Schindler's List, Sleepless in
Seattle, The Fugitive, In the Line of Fire and The Pelican Brief. In
fiscal 1993, approximately 150 first-run films were released.
In fiscal 1994, the Company opened a new 10-plex theatre at Gurnee
Mills, Illinois. Three theatres with a total of five screens were closed
in fiscal 1994, two of which were sold; the Company also sold one of its
outdoor theatres. Since the end of fiscal 1988, the number of screens in
the Company's theatre circuit has grown by 49, representing a 35%
increase. In fiscal 1995, the Company anticipates opening a new eight-
plex theatre in Delafield, Wisconsin and adding up to 11 screens to
existing theatres. The Company currently plans to add up to 33 additional
screens in fiscal 1996, including additional theatres in Illinois, and to
aggressively continue its expansion thereafter as appropriate
opportunities arise.
The Company obtains its films from various national motion picture
production and distribution companies, has never experienced difficulties
in obtaining an adequate supply of available first-run films and is not
dependent on any one motion picture supplier. Bookings, advertising,
refreshment purchases and promotion are handled centrally by an
administrative staff.
The Company strives to provide its movie patrons with high-quality
picture and sound presentation in clean, comfortable, attractive and
contemporary theatre environments. Substantially all of the Company's
movie theatre complexes feature DTS (digital sound) Dolby stereo sound
systems; acoustical ceilings; side wall insulation; engineered drapery
folds to eliminate sound imbalance, reverberation and distortion; tiled
floors; loge seats; cup-holder chair-arms; and computer-controlled
heating, air conditioning and ventilation. Computerized box offices
permit most of the Company's movie theatres to sell tickets in advance and
allow tracking of attendance by film title and time. Most of the
Company's theatres are fully handicapped-accessible and provide wireless
headphones, as well as some closed-captioned films, for hearing-impaired
moviegoers. The Company also operates an exclusive customer information
telephone system in Milwaukee and Madison, allowing customers to call for
information as to the locations, times and titles of movies being shown by
the Company throughout each metropolitan area. In fiscal 1994, the
Company introduced digital sound systems at seven of its screens in four
of its theatres, with additional theatres scheduled to be upgraded to
digital sound in fiscal 1995.
The Company sells refreshments and other concessions at all of its
movie theatres. The Company believes a wide variety of food and
refreshment items, properly merchandized, increases concession revenue per
patron. Although popcorn still remains the traditional favorite with
moviegoers, the Company continues to attempt to upgrade its available
concessions by offering a wide range of choices. For example, some of the
Company's theatres offer hot dogs, pizza, ice cream, frozen yogurt,
coffee, mineral water, juices and dessert.
Competition
All of the Company's business segments are highly competitive and
there are other facilities in close proximity to many of the Company's
facilities which compete directly with those of the Company. In each of
its businesses, the Company experiences intense competition from national
and/or regional chain and franchise operations, some of which have
substantially greater financial and marketing resources than the Company.
The Company's Budgetel Inns compete with such national economy
motel chains as Days Inn, Hampton Inn (owned by The Promus Companies
Incorporated), Fairfield Inn (owned by Marriott Corporation), Red Roof
Inn, La Quinta Inn, Comfort Inn and others, as well as a large number of
regional and local motels.
The Company's hotels compete in the Milwaukee metropolitan area
with the hotels operated by Hilton Hotels, Hyatt Corporation, Marriott
Corporation, Ramada Inns, Holiday Inns and Wyndham Hotels. The Grand
Geneva Resort & Spa and the Company's managed and operated hotels compete
with other hotels, motels and resorts located in proximity to such
facilities.
In the restaurant business, the Company's Marc's Big Boy, Marc's
Cafe and Coffee Mill, Applebee's and Gino's East restaurants compete with
national chains such as Denny's, Shoney's, Cracker Barrel, Perkin's, Red
Lobster, TGI Friday's, Chili's and Olive Garden, among others, as well as
smaller regionalized restaurant chains and individual restaurants. The
Company's KFC restaurants compete locally with Hardee's, Popeye's and
similar national, as well as regional, fast food chains and individual
restaurants offering chicken.
The Company's movie theatres compete with national large movie
theatre operators, such as United Artists, Cinemark and Carmike Cinemas,
Inc., as well as with a wide array of smaller exhibitors. Although movie
exhibitors in general also compete with the home video, pay-per-view and
cable television markets, the Company believes that such markets have
assisted the growth of the movie theatre industry in general by
encouraging a significant increase in the number of first-run movies
produced and released for initial movie theatre exhibition.
The Company believes that the principal factors of competition in
each of its businesses, in varying degrees, are the price and quality of
its product, quality and location of its facilities, and customer service.
The Company believes that it is well positioned to compete on the basis of
these factors.
Seasonality
Historically, the Company's first and fourth fiscal quarters have
produced the strongest operating results, since such period (i.e., late
spring through the July 4th holiday season) coincides with the typical
summer seasonality of the movie theatre industry and the summer strength
of the travel and food service aspects of the Company's business.
However, the Company has been experiencing less seasonality in its theatre
segment over the past several fiscal years due to the continued increased
movie industry emphasis on producing films directed to more diverse and
mature audiences.
Research and Development
Research and development expenditures for the Company are not
material.
Environmental Regulation
The Company does not expect federal, state or local environmental
legislation to have a material effect on the Company's capital
expenditures, earnings or competitive position. However, the Company's
activities in acquiring and selling real estate for business development
purposes have been complicated by the continued increased emphasis placed
by Company personnel on properly analyzing real estate sites for potential
environmental problems. This circumstance has resulted in, and is expected
to continue to result in, greater time and increased costs involved in
acquiring and selling properties associated with the Company's various
businesses.
Employees
As of the end of fiscal 1994, the Company had approximately 7,500
employees, a majority of whom were employed on a part-time basis. A
majority of the Company's hotel employees in Milwaukee and Minneapolis are
covered by collective bargaining agreements. Relations with employees
have been satisfactory and there have been no work stoppages due to labor
disputes.
Item 2. Properties.
The Company owns a substantial portion of its facilities, including
The Pfister Hotel, the Marc Plaza Hotel and the Grand Geneva Resort and
Spa, and leases the remainder. The Company also manages or operates three
hotel properties. Additionally, the Company owns properties acquired for
the future construction and operation of new Company operating facilities.
Some of its properties are leased from entities owned by principal
shareholders of the Company. All of the Company's properties are suitably
maintained and adequately utilized to cover the respective business
segment served.
The operating properties owned or leased by the Company as of
May 26, 1994 are summarized in the following table:
Total Number Leased From Leased From Managed for Managed for
of Facilities Unrelated Related Related Unrelated
Operation in Operation Owned(1) Parties Parties Parties Parties
Restaurants:
Marc's Big Boy 4 3 1 0 0 0
Marc's Cafe and
Coffee Mill 13 10 3 0 0 0
KFC 35 33 2 0 0 0
Applebee's 13 8 5 0 0 0
Big Boy Express 2 2 0 0 0 0
Gino's East 1 0 1 0 0 0
Movie Theatre
Screens:
Indoor 187 131 50 6 0 0
Outdoor 2 0 0 2 0 0
Hotels and Resorts
Hotels 5 2 1 0 0 2
Resorts 1 1 0 0 0 0
Motels
Budgetel 76 56 0 1 18 1
Woodfield Suites 1 1 0 0 0 0
--- --- --- --- --- ---
TOTALS 340 247 63 9 18 3
=== === === === === ===
________________
(1) One of the Marc's Cafe restaurants, three of the KFC restaurants, two of the Applebee's, 16 of the indoor movie
theatre screens and one of the motels owned by the Company are on land leased from unrelated parties under long-term leases.
The Company's partnership interests in 18 Budgetel Inns and six indoor movie theatre screens are not included in this column.
Certain of the above individual properties or facilities are subject
to purchase money or construction mortgages or commercial lease financing
arrangements, none of which encumbrances are considered in the aggregate
to be material to the Company.
Assuming exercise by the Company of all renewal and extension
options, the terms of the Company's operating property leases expire on
various dates, with over 90% of the leases expiring after 1995.
Item 3. Legal Proceedings.
The Company does not believe that any pending legal proceeding
involving the Company is material to its business. No legal proceeding
required to be disclosed under this item was terminated during the fourth
quarter of the Company's 1994 fiscal year.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of the Company's 1994 fiscal year.
EXECUTIVE OFFICERS OF COMPANY
Each of the current executive officers of the Company is identified
below together with information about each such officer's age, current
position with the Company and employment history for at least the past
five years:
Name Position Age
Stephen H. Marcus Chairman of the Board, President
and Chief Executive Officer 59
Bruce J. Olson Group Vice President 44
H. Fred Delmenhorst Vice President-Human Resources 53
Kenneth A. MacKenzie Chief Financial Officer,
Treasurer and Controller 60
Thomas F. Kissinger Secretary and Director of
Legal Affairs 34
Stephen H. Marcus became Chairman of the Board of the Company in
December 1991. He has been the President of the Company for more than the
past five years. He also served as Treasurer of the Company prior to the
election of Mr. MacKenzie to such position in September 1987. In December
1988, he became the Chief Executive Officer of the Company, in addition to
Chief Operating Officer.
Bruce J. Olson has been employed in his present position with the
Company since July 1991. Mr. Olson previously served as Vice President-
Administration and Planning for the Company from September 1987 until July
1991 and as Executive Vice President and Chief Operating Officer of Marcus
Theatres Corporation from August 1978 until October 1988, when he was
appointed President of that corporation.
H. Fred Delmenhorst has been the Vice President-Human Resources since
he joined the Company in December 1984.
Kenneth A. MacKenzie has been the Controller of the Company or its
Marcus Restaurants, Inc. subsidiary since June 1979. He was elected
Treasurer of the Company in September 1987 and Chief Financial Officer in
June 1993.
Thomas F. Kissinger joined the Company in August 1993 as Secretary and
Director of Legal Affairs. Prior thereto, Mr. Kissinger was associated
with the law firm of Foley & Lardner for five years.
The executive officers of the Company are generally elected annually
by the Board of Directors after the annual meeting of shareholders. Each
executive officer holds office until his successor has been duly qualified
and elected or until his earlier death, resignation or removal.
PART II
Item 5. Market for the Company's Common Equity and Related Shareholder
Matters.
Last Sale Price Range of Common Stock*
First Second Third Fourth
Quarter Quarter Quarter Quarter
Fiscal Year Ended May 26, 1994
High $24 1/4 $26 1/4 $29 1/4 $28 1/2
Low $20 1/2 $23 1/4 $23 1/4 $25 3/4
Fiscal Year Ended May 27, 1993
High $15 5/8 $17 3/4 $23 1/2 $26 3/4
Low $11 1/2 $14 1/8 $16 1/4 $21 3/8
*The Company's Common Stock began trading on the New York Stock
Exchange on December 14, 1993. Prior thereto, the Common Stock was quoted
on the Nasdaq National Market.
On August 12, 1994, there were 1,749 shareholders of record for the
Common Stock and 36 shareholders of record for the Class B Common Stock.
See Item 6 for information on the Company's cash dividends paid on its
Common Stock. Cash dividends paid on the Company's Class B Common Stock
were $.25 and $.23 per share in fiscal 1994 and 1993, respectively.
Item 6. Selected Financial Data.
Fiscal Year
1994 1993 1992 1991 1990 1989
Operating Results
(In Thousands)
Revenues $246,315 $214,018 $204,297 $188,008 $176,592 $166,710
Effective income tax rate 39.3% 39.1% 39.5% 38.4% 34.2% 34.5%
Net earnings $ 22,829* $ 16,482 $ 13,289 $ 11,618 $ 10,781 $ 10,042
Common Stock Data
Net earnings per share $ 1.74* $ 1.42 $ 1.18 $ 1.02 $ .94 $ .87
Cash dividends per common share $ 0.28 $ 0.26 $ 0.22 $ 0.20 $ 0.18 $ 0.17
Average shares outstanding (In
Thousands) 13,107 11,648 11,255 11,364 11,484 11,537
Book value per share $ 14.88 $ 13.40 $ 11.19 $ 10.22 $ 9.37 $ 8.61
Financial Position (Year-End)
(In Thousands)
Total assets $361,606 $309,455 $274,394 $255,117 $230,789 $197,898
Long-term debt 107,681 78,995 100,032 96,183 85,563 64,163
Shareholders' equity 193,918 173,980 124,874 114,697 106,983 98,250
Capital expenditures 75,825 47,237 27,238 39,861 42,385 34,253
Financial Ratios
Current ratio (year-end) .67 .90 .73 .65 .91 .75
Return on revenues 9.3% 7.7% 6.5% 6.2% 6.1% 6.0%
Return on average shareholders'
equity 12.4% 11.0% 11.1% 10.5% 10.5% 10.6%
Fiscal Year
1988 1987 1986 1985 1984
Operating Results
(In Thousands)
Revenues $162,393 $152,531 $141,202 $131,844 $126,720
Effective income tax rate 40.3% 45.4% 39.7% 41.8% 45.4%
Net earnings $ 10,073 $ 8,078 $ 8,719 $ 8,215 $ 7,432
Common Stock Data
Net earnings per share $ .87 $ .70 $ .75 $ .71 $ .64
Cash dividends per common share $ 0.15 $ 0.15 $ 0.13 $ 0.13 $ 0.11
Average shares outstanding (In
Thousands) 11,576 11,576 11,543 11,552 11,613
Book value per share $ 7.93 $ 7.20 $ 6.65 $ 6.04 $ 5.46
Financial Position (Year-End)
(In Thousands)
Total assets $181,354 $167,289 $156,343 $122,170 $ 99,114
Long-term debt 56,635 55,255 52,316 31,537 18,225
Shareholders' equity 91,318 82,952 76,328 69,011 63,075
Capital expenditures 23,591 28,234 38,865 25,096 14,796
Financial Ratios
Current ratio (year-end) 1.00 .94 1.13 1.09 1.07
Return on revenues 6.2% 5.3% 6.2% 6.2% 5.9%
Return on average shareholders' equity 11.6% 10.1% 12.0% 12.4% 12.5%
___________________________
* Includes one-time accounting change benefit of $1.8 million or $0.14 per share. See Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Results of Operations - General
The Marcus Corporation and its divisions report their
consolidated results of operations on either a 52-or 53-week fiscal year.
Both fiscal 1994 and fiscal 1993 were 52-week years for the Company and
all of its divisions. Fiscal 1992 was a 53-week year for the motel,
hotels and resort and restaurant divisions. Fiscal 1995 will be a 52-week
fiscal year for the Company and all of its divisions.
Total consolidated revenues for fiscal 1994 were $246.3 million,
an increase of $32.3 million, or 15.1%, compared to fiscal 1993
consolidated revenues of $214.0 million. Net earnings for fiscal 1994
were $22.8 million, or $1.74 per share. Net earnings increased $6.3
million, or 38.5%, over fiscal 1993 net earnings of $16.5 million, or
$1.42 per share. Earnings per share in fiscal 1994 increased by a smaller
percentage, 22.5%, than net earnings due to the effect on weighted average
shares outstanding resulting from the 1,755,000 shares of Common Stock
issued by the Company in its March 1993 public offering. Weighted average
shares outstanding for fiscal 1994 were 13.1 million compared to 11.6
million for fiscal 1993. Fiscal 1994 earnings included a one-time $1.8
million tax benefit, or $0.14 per share, resulting from the Company's
adoption of SFAS 109 "Accounting for Income Taxes." Excluding the tax
benefit, fiscal 1994 earnings were $21.0 million, or $1.60 per share.
The Company's income tax expense for fiscal 1994 was $13.6
million, an increase of $3.0 million from fiscal 1993. The Company's
effective tax rate for fiscal 1994 was 39.3% versus the prior year's
39.1%.
Inflation has not had a material impact on the Company's
consolidated results of operation.
As a result of the substantial expansion of the Company's hotel
and resort operations in fiscal 1994 and the increasingly different
operating characteristics of the Company's hotels and resort from the
Company's motels, the Company has commenced separate business segment
reporting for its hotel and resort division and its motel division. All
segment information has been retroactively restated to take into account
the Company's change in segment reporting.
Motels
Fiscal 1994 Versus Fiscal 1993
Total revenues in fiscal 1994 for the motel division were $89.0
million, an increase of $8.4 million, or 10.4%, compared to fiscal 1993.
The motel division's operating profits in fiscal 1994 totaled $26.0
million, an increase of $2.2 million, or 9.2%, over the division's fiscal
1993 operating profits of $23.8 million.
Occupancy and average daily room rates continued to increase at
the Company's motels in fiscal 1994 principally as a result of improved
economic conditions and an effective Budgetel advertising campaign. The
Company's motel occupancy percentage increased by 1.4 percentage points
in fiscal 1994 from fiscal 1993 and the average daily motel room rate
increased by 4.0% in fiscal 1994 from 1993. The increased average
occupancy percentage and daily room rate contributed almost $3.8 million
to the motel division's increased fiscal 1994 revenues.
At the close of fiscal 1994, there were 98 Budgetel Inns and one
Woodfield Suites in operation, compared to 92 Budgetel Inns and one
Woodfield Suites at 1993 fiscal year-end. Five new Company-owned Budgetel
locations and one new franchised Budgetel location opened in fiscal 1994.
Together, the six new facilities contributed additional revenues of $4.6
million and nominal operating profits in fiscal 1994.
The Company currently anticipates that up to seven additional
Company-owned Budgetel Inns and two new Woodfield Suites will be opened
during fiscal 1995, together with up to six new franchised Budgetel Inns.
Fiscal 1993 Versus Fiscal 1992
Total revenues for the motel division in fiscal 1993 were $80.6
million, an increase of $6.0 million, or 8.1%, compared to fiscal 1992.
Operating profits for the motel division in fiscal 1993 totaled $23.8
million, an increase of $3.9 million, or 19.6%, over the division's fiscal
1992 operating profits of $19.9 million. The extra operating week in
fiscal 1992 had an immaterial impact on the foregoing comparisons.
Theatres
Fiscal 1994 Versus Fiscal 1993
The theatre division's fiscal 1994 revenues were $51.4 million,
an increase of $7.5 million, or 17.1%, over fiscal 1993. Operating
profits for fiscal 1994 were $12.4 million, an increase of $2.7 million,
or 28.1%, over fiscal 1993. At fiscal 1994 year-end, the Company operated
189 screens at 36 locations in Wisconsin and Illinois, compared to 184
screens at 38 locations at the end of fiscal 1993. Consistent with the
Company's long-term strategic plan to focus on operating large multi-
screen theatres, the Company opened its first Illinois location in fiscal
1994 at Gurnee Mills in metropolitan Chicago, sold a previously closed
outdoor theatre, sold two indoor theatres having a total of three screens
and closed one twin screen theatre. These theatre sales and closure
resulted in a reduction of approximately $445,000 of revenues from fiscal
1993. The Company intends to add 19 screens during fiscal 1995, including
a new eight-plex theatre in suburban Milwaukee and 11 screens to existing
theatres.
Revenues of the theatre business are heavily dependent on the
audience appeal of available films, a factor over which the Company has no
control. In fiscal 1994, over 160 first-run films were released,
including such box office hits as Jurassic Park, Mrs. Doubtfire, The
Fugitive, Sleepless in Seattle, The Firm and Schindler's List. Each of
these films produced box office receipts in excess of $1.0 million for the
theatre division.
Total box office receipts in fiscal 1994 were $35.5 million, an
increase of almost $5.0 million, or 16.2% from fiscal 1993. This increase
can be attributed to a 7.4% increase in attendance and an 8.1% increase in
the average ticket price. The increase in attendance was due principally
to the abundance of high-quality popular films released in fiscal 1994 and
the opening of the Gurnee Mills ten-plex theatre.
Vending revenues in fiscal 1994 were $13.6 million, an increase
of $1.7 million, or 14.6%, over fiscal 1993, due to the increase in
theatre attendance and the 6.4% increase in the average concession sales
per person in fiscal 1994 from fiscal 1993.
Fiscal 1993 Versus Fiscal 1992
The theatre division's total fiscal 1993 revenues were $43.9
million, an increase of $921,000, or 2.1%, over fiscal 1992. Operating
profits for fiscal 1993 were $9.7 million, an increase of $530,000, or
5.8%, over fiscal 1992.
The Company opened six new screens in fiscal 1993. During
fiscal 1993, the Company closed three theatres with a total of seven
screens.
Hotels and Resort
Fiscal 1994 Versus Fiscal 1993
Total revenues from the Company's hotel and resort division in
fiscal 1994 increased by $3.9 million, or 13.7%, to $32.4 million, over
the previous fiscal year, while operating profits increased by $500,000,
or 23.4%, to $2.6 million, over fiscal 1993. Fiscal 1994 occupancy rates
at the Company's three continuing hotels increased by 5.8% and average
room rates for the hotel division increased by 1.4% in fiscal 1994. The
increase in occupancy and room rates contributed $1.2 million to the
division's revenues in fiscal 1994. The remainder of the division's
increase in revenues in fiscal 1994 was attributable principally to the
opening of the Grand Geneva Resort & Spa and, to a significantly lesser
extent, management fees derived from the partial year of operating the
Company's two newly managed hotels during fiscal 1994.
As indicated above, during fiscal 1994, the hotel and resort
division added three new properties totaling 735 rooms through the
Company's July 1993 purchase of The Grand Geneva Resort & Spa and by
entering into two hotel management contracts, one for the 226-room Crowne
Plaza-Northstar in November 1993, and the other for the 154-room Mead Inn
in February 1994. The Company intends to continue pursuing additional
hotel and resort acquisitions and management contracts.
Fiscal 1993 Versus Fiscal 1992
Total revenues for the hotel and resort division in fiscal 1993
were $28.5 million, an increase of $400,000, or 1.4%, compared to fiscal
1992. Operating profits for the hotel and resort division in fiscal 1993
totaled $2.1 million, an increase of $286,000, or 15.6%, over the
division's fiscal 1992 operating profits of $1.8 million. The hotel and
resort division reported results for a 53-week year in fiscal 1992, with
the additional week generating approximately $300,000 in added revenues
and $100,000 in operating profits. Excluding the additional week in
fiscal 1992, the division's revenue increase in fiscal 1993 was negligible
over fiscal 1992, and the comparative operating profits increase was
$386,000 or 22.3%.
Restaurants
Fiscal 1994 Versus Fiscal 1993
The restaurant division operates facilities under a number of
different restaurant concepts and the Company is continually trying to
position its restaurants in order to best respond to changing consumer
tastes and preferences. These efforts include closing or selling less
profitable locations, converting them into different concepts or
remodeling them. The Company also actively considers developing or being
the franchisee for new restaurant concepts. At the close of fiscal 1994,
the Company operated 13 Applebee's Neighborhood Grill & Bars, 35 KFCs, 13
Marc's Cafe and Coffee Mills, four Marc's Big Boys, two Big Boy Expresses
and one Original Gino's East of Chicago.
Restaurant division revenues totaled $71.1 million for fiscal
1994, an increase of $12.0 million, or 20.2%, from fiscal 1993. The
revenue increase was due almost entirely to the Company's newly opened
Applebee's and increasing customer counts and average check amounts at the
Company's continuing Applebee's and KFC restaurants. The division's
operating profits for fiscal 1994 were $2.2 million, an increase of $1.5
million, or 204.7%, from fiscal 1993. Fiscal 1994 operating profit
improvements were derived principally from improved same store sales at
continuing Applebee's and cost savings realized from closing or selling a
number of underperforming Big Boy restaurants during the last two fiscal
years.
In fiscal 1994, the Company's continuing Applebee's restaurants
achieved an 8.8% increase in same store sales and a 3.9% increase in guest
counts. These factors contributed a $715,000 increase in the division's
fiscal 1994 revenues.
Additionally, the Company opened two new Applebee's restaurants
during fiscal 1994 in its metropolitan Chicago franchise market, together
with one new restaurant and one expanded location in its Wisconsin
franchise area. These new and expanded locations contributed $4.3 million
in additional revenues in fiscal 1994, although start-up costs associated
with the new restaurants resulted in a $278,000 reduction in the
division's operating profits. In fiscal 1995, the Company plans to open
six to eight new Applebee's restaurants.
KFC experienced an increase in guest counts, coupled with an
increase in average check amounts, which resulted in a same store sales
increase of 5.2%, or approximately $ 1.2 million, over fiscal 1993.
During fiscal 1994, the Company's KFC restaurants introduced two new
franchisor-sponsored products, The Colonel's Rotisserie Gold Chicken in
the fall of 1993, and a new eight-piece fried chicken cut with larger
breast pieces in May 1994. These new products contributed approximately
$2 million in revenues in fiscal 1994. Additionally, the Company realized
$288,000 in additional revenue during the year from the relocation of two
KFC restaurants in Milwaukee. The Company plans to open two or three new
KFCs late in fiscal 1995.
The Company continued to reduce its number of underperforming
Marc's Big Boy restaurants by closing one Big Boy during fiscal 1994 and
plans to ultimately close its remaining four Big Boy locations. The Big
Boy closing, combined with the other Big Boy closings in fiscal 1993,
resulted in a loss of $2.1 million of fiscal 1993 revenues, but had a
positive impact of $340,000 on the division's fiscal 1994 operating
profits.
The Marc's Cafe and Coffee Mill concept entered its second year
in fiscal 1994, continuing its developmental process as customer counts
and same store sales varied by location. On an aggregate basis, revenues
and operating profits in fiscal 1994 from Marc's Cafes were flat compared
to fiscal 1993. This family-oriented restaurant segment is highly
competitive and the Company continues to examine alternatives and
refinements to this restaurant concept in order to improve further the
division's over-all results.
The Company continues to monitor closely the operating
performance and consumer acceptance of its two Big Boy Express restaurant
locations and its newly opened Gino's East of Chicago restaurant. These
locations contributed nominally to the division's revenues in fiscal 1994
and experienced operating losses because of anticipated start-up expenses.
Fiscal 1993 Versus Fiscal 1992
Restaurant division revenues totaled $59.1 million for fiscal
1993, an increase of $3.0 million, or 5.4%, from fiscal 1992. The
division's fiscal 1993 results were based on 52 weeks, versus 53 weeks in
fiscal 1992. Excluding the additional week in fiscal 1992, revenues in
fiscal 1993 increased approximately 6.3% from the prior year. The
division's operating profits for fiscal 1993 were $723,000, an increase of
$289,000, or 66.6%, from fiscal 1992 operating profits of $434,000. The
operating profits from the additional week in fiscal 1992 were
approximately $150,000.
Financial Condition
At the end of fiscal 1994, the Company's current ratio was .67,
compared to .90 at the end of fiscal 1993. Given the cash nature of the
Company's various businesses and the availability to the Company of $15
million in unused credit lines at fiscal 1994 year-end, the Company
believes that the cash generated from its ongoing operations and available
credit facilities are adequate to support the ongoing operational
liquidity needs of the Company's businesses.
Net cash provided from operations increased $13.3 million in
fiscal 1994 to $50.1 million compared to fiscal 1993. The increase
resulted from increased net earnings, an increase in depreciation and
amortization expense reflecting the Company's continuing facilities
expansion and an increase in net liabilities resulting from differences in
the timing of payments on accounts payable.
Investing activity increased $29.2 million to $74.8 million in
fiscal 1994 primarily resulting from capital expenditures to support the
Company's expansion. The most significant amount of capital spent by the
Company during fiscal 1994 was on the renovation of the Grand Geneva
Resort & Spa. The Grand Geneva renovation is expected to be completed by
the fall of 1994. Other significant capital expenditures in fiscal 1994
were made in opening new motels, theatres and restaurants.
Principally as a result of funding a portion of the Company's
fiscal 1994 facility expansions and renovations, the Company's total debt
increased to $112.0 million at the close of fiscal 1994 compared to $89.0
million at the end of fiscal 1993. In addition to the incurrence of $23.7
million of new debt to finance expansion, approximately $41.0 million in
debt was raised to refinance at reduced interest rates existing debt. The
Company's debt- capitalization ratio at May 26, 1994 was .37 compared to
.34 at May 27, 1993.
The Company is currently undertaking an aggressive five-year
expansion plan which will impact all four of its business segments. The
current aggregate estimated cost of these expansion plans is between $350
million and $400 million, with total estimated capital expenditures in
fiscal 1995 (including normal continuing capital maintenance projects)
expected to be almost $90 million. The Company's fiscal 1995 expansion
plans are expected to be funded by cash generated from operations and up
to $55 million in additional long-term debt.
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
of The Marcus Corporation
We have audited the accompanying consolidated balance sheets of The Marcus
Corporation as of May 26, 1994 and May 27, 1993, and the related
consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended May 26, 1994. These
financial statements are the responsibility of the Company s management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The
Marcus Corporation at May 26, 1994 and May 27, 1993, and the consolidated
results of its operations and its cash flows for each of the three years
in the period ended May 26, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 6 to the consolidated financial statements, effective
May 28, 1993, the Company changed its method of accounting for income
taxes.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
July 22, 1994
THE MARCUS CORPORATION
CONSOLIDATED BALANCE SHEETS
May 26, May 27,
1994 1993
(In Thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,974 $ 15,839
Accounts and notes receivable
(Note 2) 6,359 5,497
Receivables from joint ventures
(Note 8) 7,983 10,372
Other current assets 3,049 1,674
-------- --------
Total current assets 27,365 33,382
PROPERTY AND EQUIPMENT, NET
(Note 2) 321,871 267,841
OTHER ASSETS:
Investments in joint ventures
(Notes 7 and 8) 662 1,223
Other (Note 9) 11,708 7,009
-------- -------
Total other assets 12,370 8,232
-------- -------
Total assets $361,606 $309,455
======== =======
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES:
Notes payable (Note 8) $ 4,533 $ 5,017
Accounts payable 13,248 6,850
Income taxes 2,796 261
Taxes other than income taxes 7,307 7,319
Accrued compensation 1,448 1,554
Other accrued liabilities 6,978 5,706
Current maturities on long-term
debt (Note 3) 4,357 10,503
-------- -------
Total current liabilities 40,667 37,210
LONG-TERM DEBT (Note 3) 107,681 78,995
DEFERRED INCOME TAXES (Note 6) 15,999 16,138
DEFERRED COMPENSATION AND OTHER
(Note 5) 3,341 3,132
COMMITMENTS, LICENSE RIGHTS AND
CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY (Note 4):
Preferred Stock, $1 par;
authorized 500,000 shares; none
issued
Common Stock:
Common Stock, $1 par; authorized
20,000,000 shares; issued
7,365,987 shares in 1994 and
7,269,457 shares in 1993 7,366 7,269
Class B Common Stock, $1 par;
authorized 9,000,000 shares;
issued and outstanding 6,225,333
shares in 1994 and 6,321,863
shares in 1993 6,225 6,322
Capital in excess of par 44,745 44,557
Retained earnings 139,777 120,429
-------- --------
198,113 178,577
Less cost of Common Stock in
treasury (559,608 shares in 1994
and 604,117 shares in 1993) 4,195 4,597
-------- -------
Total shareholders' equity 193,918 173,980
-------- -------
Total liabilities and
shareholders' equity $361,606 $309,455
======= ========
See accompanying notes.
THE MARCUS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
THREE YEARS ENDED MAY 26, 1994
May 26, May 27, May 28,
1994 1993 1992
(In Thousands, Except
Per Share Data)
REVENUES:
Rooms and telephone $100,691 $ 91,332 $ 84,788
Food and beverage 81,948 69,225 66,517
Theatre operations 50,263 43,551 42,959
Other income 13,413 9,910 10,033
------- ------- -------
Total revenues 246,315 214,018 204,297
COSTS AND EXPENSES:
Rooms and telephone 37,100 33,603 32,876
Food and beverage 64,241 54,565 52,896
Theatre operations 30,212 26,285 25,364
Administrative and selling 36,056 32,265 29,462
Depreciation and amortization 20,385 18,273 17,563
Rent (Note 7) 3,572 3,028 2,963
Property taxes 8,873 8,320 7,611
Other operating expenses 4,291 3,437 4,601
Interest 6,931 7,200 8,995
------- ------- -------
Total costs and expenses 211,661 186,976 182,331
------- ------- -------
EARNINGS BEFORE INCOME TAXES
AND CHANGE IN ACCOUNTING
PRINCIPLE 34,654 27,042 21,966
INCOME TAXES (Note 6) 13,607 10,560 8,677
------- ------- -------
EARNINGS BEFORE CHANGE IN
ACCOUNTING PRINCIPLE 21,047 16,482 13,289
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES
(Note 6) 1,782 -- --
------- ------- -------
NET EARNINGS $ 22,829 $ 16,482 $ 13,289
======= ======= =======
EARNINGS PER SHARE:
EARNINGS BEFORE CHANGE IN
ACCOUNTING PRINCIPLE $ 1.60 $ 1.42 $ 1.18
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME
TAXES .14 -- --
------- ------- ------
NET EARNINGS $ 1.74 $ 1.42 $ 1.18
======== ======= ======
WEIGHTED AVERAGE SHARES
OUTSTANDING (Note 4) 13,107 11,648 11,255
======== ======= =======
See accompanying notes.
THE MARCUS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED MAY 26, 1994
Class B Capital
Common Common in Excess Retained Treasury
Stock Stock of Par Earnings Stock
(In Thousands)
BALANCES AT MAY 30, 1991 $3,465 $4,427 $15,624 $ 95,723 $(4,542)
Cash dividends:
$.20 per share Class B Common Stock -- -- -- (1,328) --
$.22 per share Common Stock -- -- -- (1,009) --
Exercise of stock options -- -- 9 -- 118
Purchase of treasury stock -- -- -- -- (1,126)
Savings and profit-sharing
contribution -- -- 33 -- 187
Reissuance of treasury stock -- -- -- -- 4
Conversions of Class B Common Stock 43 (43) -- -- --
Net earnings for the year -- -- -- 13,289 --
----- ------ ------ ------- ------
BALANCES AT MAY 28, 1992 3,508 4,384 15,666 106,675 (5,359)
Cash dividends:
$.23 per share Class B Common Stock -- -- -- (1,203) --
$.26 per share Common Stock -- -- -- (1,525) --
Three-for-two stock split 1,767 2,177 (3,944) -- --
Secondary stock offering 1,755 -- 32,856 -- --
Exercise of stock options -- -- (226) -- 646
Purchase of treasury stock -- -- -- -- (50)
Savings and profit-sharing
contribution -- -- 203 -- 163
Reissuance of treasury stock -- -- 2 -- 3
Conversions of Class B Common Stock 239 (239) -- -- --
Net earnings for the year -- -- -- 16,482 --
------ ------ ------ ------- -------
BALANCES AT MAY 27, 1993 7,269 6,322 44,557 120,429 (4,597)
Cash dividends:
$.25 per share Class B Common Stock -- -- -- (1,609) --
$.28 per share Common Stock -- -- -- (1,872) --
Exercise of stock options -- -- (38) -- 389
Purchase of treasury stock -- -- -- -- (148)
Savings and profit-sharing
contribution -- -- 224 -- 160
Reissuance of treasury stock -- -- 2 -- 1
Conversions of Class B Common Stock 97 (97) -- -- --
Net earnings for the year -- -- -- 22,829 --
------- -------- -------- ------- ------
BALANCES AT MAY 26, 1994 $7,366 $6,225 $44,745 $139,777 $(4,195)
======= ======== ======== ======= =======
See accompanying notes.
THE MARCUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED MAY 26, 1994
May 26, 1994 May 27, 1993 May 28, 1992
(In Thousands)
OPERATING ACTIVITIES
Net earnings $22,829 $16,482 $13,289
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Earnings on investments in joint ventures (533) (641) (444)
Loss (gain) on disposition of property and
equipment (1,539) 717 270
Depreciation and amortization 20,385 18,273 17,563
Deferred income taxes 1,643 1,580 671
Deferred compensation and other 901 211 359
Contribution of Company stock to savings
and profit-sharing plan 384 366 220
Changes in assets and liabilities, net of
effects from purchase of joint ventures
(Note 8):
Accounts and notes receivable (862) (166) (635)
Other current assets (1,375) 374 821
Accounts payable 6,398 (363) 2,071
Income taxes 2,535 (1,610) (485)
Taxes other than income taxes (12) 1,027 825
Accrued compensation (106) (734) (139)
Other accrued liabilities 1,272 1,277 (1,353)
------- ------- -------
Total adjustments 29,091 20,311 19,744
Cumulative effect of change in accounting
for income taxes (Note 6) (1,782) -- --
------- ------- -------
Net cash provided by operating activities 50,138 36,793 33,033
INVESTING ACTIVITIES
Additions to property and equipment (75,825) (47,237) (27,238)
Proceeds from disposals of property and
equipment 3,349 1,782 3,298
Payment for purchase of interest in joint
ventures, net of cash acquired (692) -- (50)
Net distributions from (investments in)
joint ventures 841 -- (460)
Loan to affiliated hotel (2,860) -- --
Increase in other assets (1,986) (126) (3,413)
Cash received from (advanced to) joint
ventures 2,389 (24) 3,064
-------- ------- -------
Net cash used in investing activities (74,784) (45,605) (24,799)
FINANCING ACTIVITIES
Debt transactions:
Proceeds from issuance of long-term debt 64,650 3,695 6,771
Principal payments on notes payable and
long-term debt (42,594) (19,401) (10,976)
Equity transactions:
Proceeds from secondary stock offering -- 34,611 --
Treasury stock transactions, except for
stock options (145) (45) (1,122)
Exercise of stock options 351 420 127
Cash dividends paid (3,481) (2,728) (2,337)
------ ------ ------
Net cash provided by (used in) financing
activities 18,781 16,552 (7,537)
------ ------ ------
Net increase (decrease) in cash and cash
equivalents (5,865) 7,740 697
Cash and cash equivalents at beginning of
year 15,839 8,099 7,402
------ ------- ------
Cash and cash equivalents at end of year $ 9,974 $15,839 $ 8,099
======= ======= =======
See accompanying notes.
THE MARCUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 26, 1994
1. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements
include the accounts of The Marcus Corporation and all of its subsidiaries
(the Company). Investments in 50%-owned affiliates for which the Company
has the ability to exercise significant influence are accounted for on the
equity method. All intercompany accounts and transactions have been
eliminated in consolidation.
Fiscal Year - The Company reports on a 52/53-week year ending the last
Thursday of May.
Cash Equivalents - The Company considers all highly liquid investments
with maturities of three months or less when purchased to be cash
equivalents.
Inventories - Inventories, consisting principally of food and beverages,
are stated at average cost or at first-in, first-out cost.
Preopening Costs - Costs pertaining to new or remodeled motels and certain
restaurant concepts are charged to operations over 12 months. Similar
expenses incurred in connection with the opening and remodeling of
theatres and all other restaurants are charged to operations at the time
of opening. Costs incurred in connection with the opening of the Grand
Geneva Resort have been capitalized and will be charged to operations over
three years.
Depreciation and Amortization - Depreciation and amortization of property
and equipment, including capital leases, is provided using the
straight-line method over the following estimated useful lives:
Years
Land improvements 10 33
Buildings and improvements 10 33
Leasehold improvements 3 33
Furniture, fixtures and equipment 3 15
Net Earnings Per Share - Net earnings per share were computed based on the
weighted average number of shares of Common Stock, Class B Common Stock
and common stock equivalents (stock options) outstanding during the year.
Capitalization of Interest - The Company capitalizes interest on borrowed
funds during construction periods by adding such interest to the cost of
property and equipment. Interest of approximately $726,000, $314,000 and
$177,000 was capitalized in fiscal 1994, 1993 and 1992, respectively.
2. Additional Balance Sheet Information
The composition of accounts and notes receivable is as follows:
May 26, 1994 May 27, 1993
(In Thousands)
Trade receivables $2,720 $ 2,336
Notes receivable 1,603 2,011
Other receivables 2,036 1,150
------ ------
$6,359 $5,497
====== ======
The composition of property and equipment, which is stated at cost, is as
follows:
May 26, 1994 May 27, 1993
(In Thousands)
Land and improvements $ 49,618 $ 41,919
Buildings and improvements 231,905 209,891
Leasehold improvements 7,565 8,150
Furniture, fixtures and equipment 118,123 103,935
Construction in progress 37,302 13,174
------- -------
Total property and equipment 444,513 377,069
Less accumulated depreciation and
amortization 122,642 109,228
------- -------
$321,871 $267,841
======== ========
3. Long-Term Debt
Long-term debt is summarized as follows:
May 26, 1994 May 27, 1993
(In Thousands)
Mortgage notes due to 2006 $ 13,130 $32,889
Senior notes, unsecured, due 2005 at
10.22% 28,773 30,000
Industrial Development Revenue Bonds due
to 2006 10,135 14,903
Unsecured term notes 60,000 --
Commercial paper -- 8,606
Revolving credit agreement -- 3,100
------- -------
112,038 89,498
Less current maturities 4,357 10,503
------- -------
$107,681 $78,995
======= =======
Substantially all of the mortgage notes, both fixed rate and adjustable,
bear interest from 6% to 9% at May 26, 1994. Adjustable rate Industrial
Development Revenue Bonds ($5,745,000 at May 26, 1994) bear interest at
76.5% of prime plus 1%, or are adjustable based on high quality tax-exempt
obligation rates. The Company's remaining Industrial Development Revenue
Bonds bear interest at approximately 8.8%.
The mortgage notes and the Industrial Development Revenue Bonds are
secured by land, buildings and equipment with a cost of approximately
$33,580,000 and a net book value of $21,544,000 at May 26, 1994.
The Company has three unsecured term notes outstanding, as follows:
May 26,
1994
(In
thousands)
Note due May 31, 2004, with quarterly principal
payments of $781,250 due beginning May 31, 1996.
The variable interest rate is based on the LIBOR
rate with an effective rate of 5.375% at May 26,
1994. $25,000
Note due February 1, 2001, with quarterly principal
payments of $714,286 due beginning May 1, 1997. The
variable interest rate is based on the LIBOR rate
with an effective rate of 4.38% at May 26, 1994. 20,000
Note due November 1, 2000, with quarterly principal
payments of $750,000 due beginning January 1, 1996.
The variable interest rate is based on the LIBOR
rate with an effective rate of 4.6875% at May 26,
1994. 15,000
------
$60,000
======
The Company issues commercial paper through an agreement with a bank. The
agreement requires the Company to maintain unused bank lines of credit at
least equal to the principal amount of its outstanding commercial paper.
At May 26, 1994, the Company had $15,000,000 of unused credit lines
available under various bank revolving credit agreements. There is an
annual commitment fee of .25% of the unused portion of $10,000,000 of
these commitments.
Scheduled annual principal payments on long-term debt for the five years
subsequent to May 26, 1994, are:
Fiscal Year (In Thousands)
1995 $ 4,357
1996 8,559
1997 9,566
1998 15,710
1999 11,890
Interest paid, net of amounts capitalized, in 1994, 1993 and 1992 totaled
$7,266,000, $7,277,000 and $9,205,000, respectively.
The Company has entered into interest rate swap agreements on a notional
amount aggregating $30,000,000. Two of the swap agreements covering
$15,000,000 expire June 30, 1995, and require the Company to pay interest
at defined variable rates (3.50% and 5.25%) and receive interest at
defined fixed rates (4.13% and 4.57%). The remaining swap agreement
covering $15,000,000 expires October 31, 2000, and requires the Company to
pay interest at a defined fixed rate of 5.08% while receiving interest at
a defined variable rate of LIBOR. The Company recorded expense related to
these swap agreements in 1994 totaling $94,000. The accompanying
consolidated balance sheet at May 26, 1994, does not reflect the fair
market value of these swap agreements which totals approximately $680,000.
4. Shareholders' Equity
The Company's Board of Directors declared a three-for-two stock split,
effected in the form of a 50% stock dividend, distributed on November 6,
1992, to all holders of Common and Class B Common Stock. All per share,
weighted average shares outstanding and stock option data prior to
November 6, 1992, have been adjusted to reflect this dividend.
Shareholders may convert their shares of Class B Common Stock into shares
of Common Stock at any time. Class B Common Stock shareholders are
substantially restricted in their ability to transfer their Class B Common
Stock. Holders of Common Stock are entitled to cash dividends per share
equal to 110% of all dividends declared and paid on each share of the
Class B Common Stock. Holders of Class B Common Stock are entitled to ten
votes per share while holders of Common Stock are entitled to one vote per
share on any matters brought before the shareholders of the Company.
Liquidation rights are the same for both classes of stock.
Shareholders have approved the issuance of up to 562,500 shares of Common
Stock under stock option plans. The options generally become exercisable
40% after two years, 60% after three years and 80% after four years. The
remaining options are exercisable four and one-half years after the date
of the grant. At May 26, 1994, there were 147,255 shares available for
grants under the plans.
Transactions with respect to the Company's stock option plans for each of
the three years in the period ended May 26, 1994, are summarized as
follows:
Price Range Number of
Shares
Outstanding at May 30, 1991 $ 7.00 - $ 9.67 226,500
Exercised $ 7.00 - $ 9.67 (14,865)
Canceled $ 7.00 - $ 9.67 (46,860)
-------
Outstanding at May 28, 1992 $ 7.00 - $ 9.67 164,775
Granted $15.00 119,550
Exercised $ 7.00 - $ 9.67 (64,080)
Canceled $ 7.00 - $ 9.67 (7,080)
-------
Outstanding at May 27, 1993 $ 7.00 - $15.00 213,165
Granted $ 20.75 - $27.00 140,850
Exercised $ 7.00 - $15.00 (32,085)
Canceled $ 7.00 - $15.00 (28,215)
-------
Outstanding at May 26, 1994 $ 7.00 - $27.00 293,715
=======
Shares exercisable at
May 26, 1994 $ 7.00 - $ 7.67 24,300
=======
The Company's Board of Directors has approved the repurchase of up to
750,000 shares of Common Stock to be held in treasury. The Company intends
to reissue these shares upon the exercise of stock options. The Company
purchased 6,167; 3,451 and 100,535 shares pursuant to this plan during
1994, 1993 and 1992, respectively. At May 26, 1994, there were 236,538
shares available for repurchase under this authorization.
The Company's loan agreements include, among other covenants, restrictions
on retained earnings and maintenance of certain financial ratios. At May
26, 1994, retained earnings of approximately $56,107,000 were
unrestricted.
5. Employee Benefit Plans
The Company has a qualified profit-sharing savings plan (401(k) plan)
covering eligible employees. The 401(k) plan provides for a contribution
of a minimum of 1% of defined compensation for all plan participants and
matching of 25% of employee contributions up to 6% of defined
compensation. In addition, the Company may make additional discretionary
contributions. The Company also operates unfunded nonqualified defined
benefit and deferred compensation plans. Pension and profit-sharing
expense for all plans was $1,138,000, $902,000 and $789,000 for 1994, 1993
and 1992, respectively.
6. Income Taxes
Income tax expense consists of the following:
Year Ended
May 26, May 27, May 28,
1994 1993 1992
(In Thousands)
Currently payable:
Federal, after jobs tax credits
of $300,000, $250,000 and
$350,000, respectively $ 9,470 $ 7,068 $6,176
State 2,494 1,912 1,830
Deferred 1,643 1,580 671
------ ------ -----
$13,607 $10,560 $8,677
====== ====== ======
Effective May 28, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS No. 109). SFAS No. 109 requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates for the year in which the differences
are expected to reverse.
As of May 28, 1993, the Company recorded a tax benefit of $1,782,000, or
$.14 per share, which amount represents the net change in its deferred
income tax assets and liabilities at that date. Such amount has been
reflected in the consolidated statement of earnings as the cumulative
effect of change in accounting for income taxes.
The components of the net deferred tax liability as of May 26, 1994, were
as follows (in thousands):
Deferred tax assets:
Tax credit carryforwards $ 921
Accrued employee benefits 604
Other accrued liabilities 203
-------
Total deferred assets 1,728
Deferred tax liability -
Depreciation and amortization 17,727
-------
Net deferred tax liability included
in balance sheet $15,999
=======
Deferred income taxes in 1993 and 1992 also related principally to
differences between financial and tax reporting of depreciation and
amortization.
A reconciliation of the statutory federal tax rate to the effective tax
rate follows:
Year ended
May 26, May 27, May 28,
1994 1993 1992
Expected tax expense: 35.0% 34.0% 34.0%
State income taxes, net of
federal income tax benefit 5.3 5.3 5.2
Jobs tax credits (.6) (0.9) (1.6)
Other (.4) 0.7 1.9
----- ----- -----
39.3% 39.1% 39.5%
===== ===== ======
Income taxes paid in 1994, 1993 and 1992 totaled $9,445,000, $10,610,000
and $8,502,000, respectively.
7. Commitments, License Rights and Contingencies
Lease Commitments - The Company leases real estate under various
noncancellable operating leases with an initial term greater than one
year. Percentage rentals are based on the revenues at the specific rented
property. Rent expense charged to operations under operating leases was as
follows:
Year ended
May 26, May 27, May 28,
1994 1993 1992
(In Thousands)
Fixed minimum rentals $2,519 $2,208 $1,986
Percentage rentals 1,218 1,012 1,016
Sublease rental income (165) (192) (39)
------ ------ ------
$3,572 $3,028 $2,963
====== ====== ======
Payments to affiliated parties for operating lease obligations were
approximately $390,000, $491,000 and $460,000 in 1994, 1993 and 1992,
respectively.
Aggregate minimum rental commitments at May 26, 1994, are as follows:
Fiscal Year Operating Leases
(In Thousands)
1995 $ 1,669
1996 1,450
1997 1,298
1998 1,089
1999 1,041
After 1999 10,994
------
$17,541
=======
Included in the above commitments is $1,675,000 in minimum rental
commitments to affiliated parties.
Construction Commitments - The Company has commitments for the completion
of construction at various properties totaling approximately $14,582,000
at May 26, 1994.
License Rights - The Company owns the license rights in certain areas to
operate a number of its restaurants and to sell products using the
Applebee s, Big Boy, Original Gino s East of Chicago and Kentucky Fried
Chicken trademarks. Under the terms of the licenses, the Company is
obligated to pay fees based on defined gross sales. Three of these
licenses also require the Company to pay an additional fee for each new
location established.
Contingencies - The Company is contingently liable for debt guarantees of
joint ventures totaling approximately $6,958,000 at May 26, 1994.
8. Joint Venture Transactions
At May 26, 1994 and May 27, 1993, the Company held investments of $662,000
and $1,223,000, respectively, in various approximately 50%-owned
affiliates (joint ventures) which are accounted for under the equity
method. In fiscal 1992, the Company paid $50,000 (net of $750,000 cash
acquired in the purchase) to acquire complete ownership of four previously
partially owned joint ventures. In connection with the acquisitions (which
were accounted for using the purchase method) and consolidation of joint
ventures, the assets acquired and liabilities assumed were as follows:
(In Thousands)
Fair value of assets acquired $15,354
Net cash paid for joint ventures (50)
------
Liabilities assumed $15,304
=======
The Company has receivables from the joint ventures of $7,983,000 and
$10,372,000 at May 26, 1994 and May 27, 1993, respectively. The Company
earns interest on $7,373,000 and $9,702,000 of the receivables at
approximately prime to prime plus 1.5%.
Included in notes payable at May 26, 1994 and May 27, 1993, is $1,223,000
and $1,735,000, respectively, due to joint ventures in connection with
cash advanced to the Company. The Company pays interest on the cash
advances based on the 90-day certificate of deposit rates.
9. Business Segment Information
The Company operates principally in four business segments: Restaurants,
Theatres, Hotels/Resorts and Motels. Prior to 1994, the Company reported
in three business segments. However, due to the expansion of the hotel
operations and the increasingly different operating characteristics of the
hotel division from the motel division, the Company has commenced separate
business segment reporting in 1994 for the hotel and motel divisions,
resulting in four segments. All prior year segment information has been
restated to reflect this change. Following is a summary of business
segment information for 1992 through 1994:
Hotels/ Corporate
Restaurants Theatres Resorts Motels Items Total
(In Thousands)
1994
Revenues $71,108 $51,389 $32,391 $ 88,973 $ 2,454 $246,315
Operating profit (loss) 2,203 12,378 2,611 25,971 (8,509) 34,654
Depreciation and
amortization 3,112 2,519 3,030 11,246 478 20,385
Assets 51,896 47,244 45,787 182,174 34,505 361,606
Capital expenditures 8,165 2,791 19,403 31,884 13,582 75,825
1993
Revenues $59,138 $43,880 $28,485 $ 80,596 $ 1,919 $214,018
Operating profit (loss) 723 9,660 2,116 23,775 (9,232) 27,042
Depreciation and
amortization 2,503 2,463 2,572 10,224 511 18,273
Assets 46,282 36,898 24,041 166,193 36,041 309,455
Capital expenditures 12,451 4,282 6,358 22,536 1,610 47,237
1992
Revenues $56,110 $42,959 $28,101 $ 74,575 $ 2,552 $204,297
Operating profit (loss) 434 9,130 1,830 19,874 (9,302) 21,966
Depreciation and
amortization 2,426 2,497 2,819 9,150 671 17,563
Assets 35,800 35,994 21,747 154,578 26,275 274,394
Capital expenditures 5,702 5,540 910 14,897 189 27,238
Corporate items include amounts not allocable to the business segments.
Corporate revenues consist principally of earnings on cash equivalents and
operating profit includes earnings on cash equivalents less interest
expense and general corporate expenses. Corporate assets primarily include
cash and cash equivalents, notes receivable, receivables from joint
ventures and land held for development.
The 1992 results of operations for the Restaurants, Hotels/Resorts and
Motels segments include 53 weeks. All other periods include 52 weeks.
During 1994, the Company entered into contracts to manage two hotel
properties. The Company also loaned $2,860,000 to one of these hotels
which bears interest at the prime rate plus 1% and matures December 31,
2008.
Supplementary Quarterly Consolidated Financial Data
(Unaudited, dollars in thousands, except per share data)
12 Weeks Ended 12 Weeks Ended 12 Weeks Ended 16 Weeks Ended
Fiscal 1994 August 19, 1993 November 11, 1993 February 3, 1994 May 26, 1994
Revenues $64,746 $55,459 $51,753 $74,357
Gross profit 31,280 25,587 21,206 32,398
Net earnings 9,577 4,494 2,223 6,535
Net earnings
per share $ 0.73 $ 0.34 $ 0.17 $ 0.50
12 Weeks Ended 12 Weeks Ended 12 Weeks Ended 16 Weeks Ended
Fiscal 1993 August 20, 1992 November 12, 1992 February 4, 1993 May 27, 1993
Revenues $54,063 $47,299 $46,312 $66,344
Gross profit 26,234 22,052 18,666 29,176
Net earnings 5,808 3,525 1,620 5,529
Net earnings
per share $ 0.51 $ 0.31 $ 0.14 $ 0.44
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Company.
The information required by this item with respect to directors
is incorporated herein by reference to the information pertaining thereto
set forth under the caption entitled "Election of Directors" in the Proxy
Statement. The required information with respect to executive officers
appears at the end of Part I of this Form 10-K.
Item 11. Executive Compensation.
The information required by this item is incorporated herein by
reference to the information pertaining thereto set forth under the
caption entitled "Executive Compensation" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated herein by
reference to the information pertaining thereto set forth under the
caption entitled "Stock Ownership of Management and Others" in the Proxy
Statement.
Item 13. Certain Relationships and Related Transactions.
The information required by this item, to the extent applicable,
is incorporated herein by reference to the information pertaining thereto
set forth under the caption entitled "Certain Transactions" in the Proxy
Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed, and incorporated by reference
herein, as a part of this report:
Form 10-K Page
Reference
1. Financial Statement Schedules.
Independent Auditors' Report - Ernst & Young N/A
LLP (incorporated by reference from
Exhibit 23.1)
Schedule II - Amounts Receivable from F-1
Related Parties and Underwriters,
Promoters and Employees other than
Related Parties
Schedule V - Property, Plant and Equipment F-2
Schedule VI - Accumulated Depreciation and F-3
Amortization of Property, Plant and
Equipment
Schedule IX - Short-Term Borrowings F-4
Schedule X - Supplementary Income F-5
Statement Information
All other schedules are omitted because they are inapplicable, not
required under the instructions or the financial information is included
in the consolidated financial statements or notes thereto.
2. Exhibits and Reports on Form 8-K.
(a) The exhibits filed herewith or incorporated by reference herein
are set forth on the attached Exhibit Index.*
(b) No reports on Form 8-K were required to be filed by the Company
during the fourth quarter of fiscal 1994.
__________________
* Exhibits to this Form 10-K will be furnished to shareholders upon
advance payment of a fee of $0.20 per page, plus mailing expenses.
Requests for copies should be addressed to Thomas F. Kissinger,
Secretary, The Marcus Corporation, 250 East Wisconsin Avenue, Suite
1700, Milwaukee, Wisconsin 53202.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE MARCUS CORPORATION
Date: August 24, 1994 By: /s/ Stephen H. Marcus
Stephen H. Marcus,
Chairman of the Board and President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Company and in the capacities as of the date indicated above.
By: /s/ Stephen H. Marcus By: /s/ George R. Slater
Stephen H. Marcus, George R. Slater, Director
Chairman of the Board
and President (Chief
Executive Officer)
By: /s/ Kenneth A. MacKenzie By: /s/ Lee Sherman Dreyfus
Kenneth A. MacKenzie, Lee Sherman Dreyfus, Director
Treasurer and Controller
(Chief Financial
and Accounting Officer)
By: /s/ Ben Marcus By: /s/ Daniel F. McKeithan, Jr.
Ben Marcus, Director Daniel F. McKeithan, Jr.,
Director
By: /s/ John L. Murray By: /s/ Diane Marcus Gershowitz
John L. Murray, Director Diane Marcus Gershowitz,
Director
THE MARCUS CORPORATION - FORM 10-K FOR YEAR-ENDED MAY 26, 1994
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
THREE YEARS ENDED MAY 26, 1994
(Dollars in thousands)
Balance at Balance at
Beginning Amounts Amounts End of
Name of Debtor of Year Additions Collected Written Off Year
1992
Dave Lucas (1) $163 $ 30 $ 13 -- $180
Michael Kominsky 103 -- 2 -- 101
Richard Slayton 203 30 27 -- 207
----- ----- ----- -----
Total $469 $ 60 $ 42 -- $488
==== ==== ==== ====
1993
Dave Lucas (1) $180 $ 30 $ 87 -- $123
Michael Kominski 101 -- 101 -- --
Richard Slayton 207 30 89 -- 148
Daniel Kite (2) -- 298 -- -- 298
----- ----- ---- ---- -----
Total $488 $358 $277 -- $569
==== ==== ==== ==== ====
1994
Dave Lucas (1) $123 $ 30 $ 23 -- $130
Michael Kominsky 148 -- 148 -- --
Daniel Kite (2) 298 -- -- -- 298
----- ----- ----- ---- -----
Total $569 $30 $171 $-- $428
==== ==== ==== === ====
_____________________
(1) Amounts receivable are due on demand. Interest rate is prime.
(2) Amounts receivable are due on demand from a partnership in which Mr. Kite is a general partner. Interest rate is prime
plus 1/2%. Secured by mortgage on real property.
THE MARCUS CORPORATION - FORM 10-K FOR YEAR-ENDED MAY 26, 1994
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED MAY 26, 1994
(Dollars in thousands)
Furniture,
Land Held Buildings Capital Fixtures Construction
Land and for and Leases- Leasehold and in
Improvements Development Improvements Buildings Improvements Equipment Progress Total
BALANCE, MAY 30,
1991 $28,975 $ 2,484 $176,882 $ 4,122 $ 8,456 $ 91,680 $ 2,043 $314,642
Additions at cost 2,117 --- 11,391 --- 899 10,933 1,898 27,238
Additions, through
acquisition of
joint ventures 2,898 --- 8,565 --- --- 3,070 --- 14,533
Retirements (486) --- (3,067) --- (892) (8,239) (200) (12,884)
Reclassifications 2,484 ( 2,484) 1,572 --- (391) 657 (1,838) ---
------- -------- -------- -------- ------- -------- -------- --------
BALANCE, MAY 28,
1992 35,988 --- 195,343 4,122 8,072 98,101 1,903 343,529
Additions at cost 6,147 --- 12,529 --- 1,697 13,949 12,915 47,237
Retirements (216) --- (1,391) (1,223) (1,698) (9,169) --- (13,697)
Reclassifications --- --- 3,253 (2,742) 79 1,054 (1,644) ---
------- -------- --------- -------- -------- -------- --------- ---------
BALANCE, MAY 27,
1993 41,919 --- 209,734 157 8,150 103,935 13,174 377,069
Additions at cost 7,854 --- 17,942 --- 901 13,616 35,512 75,825
Retirements (808) --- (1,003) (157) (607) (5,790) (16) (8,381)
Reclassifications 653 --- 5,232 --- (879) 6,362 (11,368) ---
-------- --------- --------- --------- --------- --------- --------- ----------
BALANCE, MAY 26,
1994 $49,618 $ --- $231,905 $ --- $ 7,565 $118,123 $37,302 $444,513
======== ========= ========== ========= ========= ========= ========= ==========
THE MARCUS CORPORATION - FORM 10-K FOR YEAR-ENDED MAY 26, 1994
SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
THREE YEARS ENDED MAY 26, 1994
(Dollars in thousands)
Buildings Capital Furniture,
and Leases - Leasehold Fixtures and
Improvements Buildings Improvements Equipment Total
BALANCE, MAY 30, 1991 $43,859 $ 1,788 $ 3,619 $44,831 $ 94,097
Additions charged to
costs and expenses 6,966 125 462 9,924 17,477
Reclassifications (201) --- 201 --- ---
Retirements (1,874) --- (729) (6,713) (9,316)
------- -------- ----- ------ -------
BALANCE, MAY 28, 1992 48,750 1,913 3,553 48,042 102,258
Additions charged to
costs and expenses 7,129 50 441 10,548 18,168
Reclassifications 49 --- (4) (45) ---
Retirements (228) (1,807) (789) (8,374) (11,198)
------- ------- ------ ------- -------
BALANCE, MAY 31, 1993 55,700 156 3,201 50,171 109,228
Additions charged to
costs and expenses 7,828 --- 695 11,759 20,282
Reclassifications (682) --- 881 (199) ---
Retirements --- (156) (221) (6,491) (6,868)
------- -------- ------- -------- --------
BALANCE, MAY 26, 1994 $62,846 $ --- $ 4,556 $55,240 $122,642
======= ======== ======= ======= ========
THE MARCUS CORPORATION - FORM 10-K FOR YEAR-ENDED MAY 26, 1994
SCHEDULE IX - SHORT-TERM BORROWINGS
THREE YEARS ENDED MAY 26, 1994
(Dollars in thousands)
Balance Weighted Maximum Amount Average Amount Weighted Average
Payable to Holders of at End of Average Outstanding During Outstanding During Interest Rate During
Short-Term Borrowings Period Interest Rate the Period the Period the Period(B)
MAY 26, 1994: --- --- $10,838 $ 2,494(A) 3.5%
Commercial paper
MAY 27, 1993:
Commercial paper $8,606(C) 3.4% $16,526 $8,111(A) 3.8%
MAY 28, 1992:
Commercial paper $16,526(C) 4.3% $16,526 $7,920(A) 5.2%
Revolving credit
agreements -- -- 6,000 4,418(D) 6.8%
_______________
(A) Average amount outstanding during the period is computed by dividing the total of the daily outstanding principal
balance by 365.
(B) Weighted average interest rate for the year is computed by dividing the actual short-term interest expense by the
average short-term debt outstanding during the period prorated for the period outstanding.
(C) The Company has the ability to replace commercial paper borrowings and the revolving credit agreements with borrowings
under a long-term revolving credit agreement. Accordingly, the Company has classified the outstanding commercial paper
and revolving credit agreement borrowings as long-term debt.
(D) Average amount outstanding during the period is computed by dividing the total of the daily outstanding principal
balance by 96 (beginning of the fiscal year through final payment on the revolving credit agreement on September 3,
1991).
THE MARCUS CORPORATION - FORM 10-K FOR YEAR-ENDED MAY 26, 1994
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT
INFORMATION THREE YEARS ENDED MAY 26, 1994
(Dollars in thousands)
1994 1993 1992
Maintenance and repairs $10,980 $9,884 $8,804
Taxes, other than payroll and
income taxes 8,570 8,067 7,690
Advertising costs 13,172 11,037 10,344
Amounts for amortization of intangible assets and royalties are not
presented as such amounts are less than 1% of revenues.
EXHIBIT INDEX
Sequential Page No.
3.1 Articles of Incorporation. [Incorporated N/A
by reference to Exhibit 3.1 to the
Company's Form S-3 Registration Statement
(No. 33-57468).]
3.2 Bylaws. 53
4 Senior Note Purchase Agreement dated N/A
May 31, 1990 between the Company and The
Northwestern Mutual Life Insurance Company.
[Incorporated by reference to Exhibit 4 to
the Company's Annual Report on From 10-K
for the fiscal year ended May 31, 1990.]
4.1 Other than as set forth in Exhibit (4), the N/A
Company has numerous instruments which
define the rights of holders of long-term
debt. These instruments, primarily
promissory notes, have arisen from the
purchase of operating properties in the
ordinary course of business. These
instruments are not being filed with this
Annual Report on Form 10-K in reliance upon
Item 601(b)(4)(iii) of Regulation S-K.
Copies of these instruments will be
furnished to the Securities and Exchange
Commission upon request.
10.1 Franchise Contract dated August 29, 1958 N/A
between Big Boy Franchises, Inc. and Marc's
Big Boy Corporation. [Incorporated by
reference to Exhibit 13.5 to the Company's
Registration Statement on Form S-1 (Reg.
No. 2-45091).]
10.2 Franchise Contract dated November 20, 1959 N/A
between Big Boy Franchises, Inc. and Marc's
Big Boy Corporation. [Incorporated by
reference to Exhibit 13.6 to the Company's
Registration Statement on Form S-1 (Reg.
No. 2-45091).]
10.3 Franchise Contract dated November 20, 1959 N/A
between Big Boy Franchises, Inc. and Marc's
Big Boy Corporation. [Incorporated by
reference to Exhibit 13.7 to the Company's
Registration Statement on Form S-1 (Reg.
No. 2-45091).]
10.4 The Company is the guarantor and/or obligor N/A
under various loan agreements in connection
with operating properties (primarily
Budgetel Inns) which were financed through
the issuance of industrial development
bonds. These loan agreements and the
additional documentation relating to these
projects are not being filed with this
Annual Report on Form 10-K in reliance upon
Item 601(b)(4)(iii) of Regulation S-K.
Copies of these documents will be furnished
to the Securities and Exchange Commission
upon request.
*10.5 1987 Stock Option Plan. [Incorporated by N/A
reference to Exhibit A to the Company's
Proxy Statement for its Annual Meeting of
Shareholders held on September 29, 1987.]
*10.6 Form of Incentive Stock Option Agreement N/A
used in connection with 1987 stock option
plan. [Incorporated by reference to
Exhibit 4.3 to the Company's Registration
Statement on Form S-8 (Reg. No. 33-21060).]
*10.7 Form of Nonstatutory Stock Option Agreement N/A
used in connection with 1987 Stock Option
Plan. [Incorporated by reference to
Exhibit 4.4 to the Company's Registration
Statement on Form S-8 (Reg. No. 33-21060).]
10.8 Form of Addendum dated March 6, 1985 to Big N/A
Boy Franchise Contracts listed as Exhibits
10.2, 10.3 and 10.4 between the Company and
Marriott Corporation. [Incorporated by
reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 29, 1986.]
10.9 Comprehensive Image Enhancement Agreement N/A
dated October 12, 1988 between the Company
and KFC Corporation. [Incorporated by
reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 25, 1989.]
10.10 Form of individual Kentucky Fried Chicken N/A
franchise agreement between the Company and
KFC Corporation. [Incorporated by
reference to Exhibit 10.12 to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 25, 1989.]
10.11 Standard Form - Applebee's Neighborhood 76
Grill & Bar Development Agreement for
Chicago, Illinois A.D.I. dated April 8,
1994 between Marcus Restaurants, Inc. and
Applebee's International, Inc.
10.12 Standard Form - Applebee's Neighborhood N/A
Grill & Bar Development Agreement for
Milwaukee, Wisconsin, Madison, Wisconsin,
La Crosse-Eau Claire, Wisconsin,
Wausau-Rhinelander, Wisconsin and Green
Bay-Appleton, Wisconsin A.D.I.s dated
December 29, 1989 between Marcus
Restaurants, Inc. and Applebee's
International, Inc. [Incorporated by
reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the fiscal
year ended May 31, 1990.]
10.13 Amendment to Applebee's Neighborhood Grill N/A
& Bar Development Agreement for Milwaukee,
Madison, LaCrosse-Eau Claire, Wausau-
Rhinelander and Green Bay-Appleton,
Wisconsin A.D.I.s dated April 8, 1993
between Marcus Restaurants, Inc. and
Applebee's International, Inc.
[Incorporated by reference to Exhibit 10.14
to the Company's Form 10-K Annual Report
for the year ended May 27, 1993.]
10.14 Area Development Agreement dated September N/A
27, 1993 between Gino's East Restaurant
Corp. and Marcus Restaurants, Inc. for the
State of Wisconsin Development Area.
[Incorporated by reference to Exhibit 10.16
to the Company's Form 10-Q/A for its fiscal
quarter ended August 19, 1993.] [Marcus
Restaurants, Inc. is a party to Area
Development Agreements dated September 27,
1993 with Gino's East Restaurant Corp. for
the State of Iowa Development Area and
State of Minnesota Development Area,
respectively, each of which Area
Development Agreements are substantially
identical in all material respects with the
Area Development Agreement incorporated by
reference herein, except with respect to
the designated market area and applicable
restaurant development schedules. Such
other Area Development Agreements are not
being filed or incorporated by reference
herein, but a copy thereof will be provided
to the Commission upon request.]
10.15 Master Development Agreement dated N/A
September 27, 1993 between Gino's East
Restaurant Corp. and Marcus Restaurants,
Inc. [Incorporated by reference to Exhibit
10.17 to the Company's Form 10-Q/A for its
fiscal quarter ended August 19, 1993.]
10.16 Form of Gino's East Restaurant Corp. N/A
Franchise Agreement between Gino's East
Restaurant Corp. and Marcus Restaurants,
Inc. [Incorporated by reference to Exhibit
10.18 to the Company's Form 10-Q/A for its
fiscal quarter ended August 19, 1993.]
21 Subsidiaries of the Company as of May 26, 186
1994.
23.1 Consent of Ernst & Young LLP. 188
99 Proxy Statement for Annual Meeting of N/A
Shareholders scheduled to be held on
September 30, 1994. (To be filed with the
Securities and Exchange Commission under
Regulation 14A within 120 days of May 26,
1994 and, upon such filing, to be hereby
incorporated by reference herein to the
extent indicated).
_________
* This exhibit is a management contract or compensatory plan
or arrangement required to be filed as an exhibit to this
form pursuant to Item 14(c) of Form 10-K.
____________________