THE MARCUS CORPORATION REPORTS FOURTH QUARTER AND FISCAL 2013 RESULTS

Comparisons impacted by weaker film slate, additional week last year and unusual items

  

Milwaukee, Wis., July 25, 2013….. The Marcus Corporation (NYSE: MCS) today reported results for the fourth quarter and fiscal year ended May 30, 2013.

 

Fourth Quarter Fiscal 2013 Highlights

 

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Total revenues for the 13-week fourth quarter of fiscal 2013 were $100,590,000, a 6.7% decrease from revenues of $107,845,000 for the 14-week fourth quarter of fiscal 2012.

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Operating income was $8,256,000 for the 13-week fourth quarter of fiscal 2013, a 35.7% decrease from operating income of $12,831,000 for the 14-week fourth quarter of fiscal 2012.

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Net earnings attributable to The Marcus Corporation were $3,475,000 for the 13-week fourth quarter of fiscal 2013, a 48.1% decrease from net earnings attributable to The Marcus Corporation of $6,699,000 for the 14-week fourth quarter of fiscal 2012.

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Net earnings per diluted common share attributable to The Marcus Corporation were $0.13 for the 13-week fourth quarter of fiscal 2013, a 43.5% decrease from net earnings per diluted common share attributable to The Marcus Corporation of $0.23 for the 14-week fourth quarter of fiscal 2012.

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Last year’s results benefited from an additional 53rd week of operations (the 14-week quarter) that contributed approximately $7.6 million in revenues, $2.1 million in operating income and $1.1 million, or $0.04 per diluted common share, in net earnings to the fourth quarter and fiscal 2012 results.

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Last year’s results also benefited from an approximately $700,000 one-time pre-tax gain on sale of securities held for investment purposes, or approximately $0.02 per diluted common share.

 

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Fiscal 2013 Highlights

  

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Total revenues were $412,836,000 for the 52-week fiscal 2013, a 0.3% decrease from revenues of $413,898,000 for the 53-week fiscal 2012.

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Operating income was $38,204,000 for the 52-week fiscal 2013, a 17.9% decrease from operating income of $46,515,000 for the 53-week fiscal 2012.

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Net earnings attributable to The Marcus Corporation were $17,506,000 for the 52-week fiscal 2013, a 23.0% decrease from net earnings attributable to The Marcus Corporation of $22,734,000 for the 53-week fiscal 2012.

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Net earnings per diluted common share attributable to The Marcus Corporation were $0.63 for the 52-week fiscal 2013, a 19.2% decrease from net earnings per diluted common share of $0.78 for the 53-week fiscal 2012.

 

“A weaker film slate for Marcus Theatres® and the fact that fiscal 2013 was a 52-week year compared to last year’s 53 weeks contributed to our reduced results for the fourth quarter and fiscal 2013. Not surprisingly in the cyclical theatre industry, our business has improved significantly in recent weeks, thanks to a very strong early summer film line-up. Comparative results for Marcus Hotels & Resorts were also negatively impacted by the extra week last year, as well as difficult comparisons at several of our group-oriented hotels. However, just like our theatres, these same group-focused hotels are also off to a good start in the new summer quarter,” said Gregory S. Marcus, president and chief executive officer of The Marcus Corporation.

 

“Our fiscal 2013 results were also impacted by unusual items totaling $4.8 million, or approximately $0.10 per diluted common share. This includes approximately $3.3 million of costs related to the settlement of lawsuits concerning our Las Vegas property and $1.5 million of impairment charges, primarily in the theatre division. Without the impact of the additional week of operations last year and the unusual items in both years, our earnings per share for fiscal 2013 were essentially even with last year, despite the weaker film slate.”

 

Marcus Theatres^®

 

“Marcus Theatres had a difficult comparison against last year’s record fourth quarter and full year results. Last year’s fourth quarter included two blockbuster films, The Hunger Games and The Avengers, which ended up being our highest grossing films of the year. Without comparable films, particularly during March and April, and one less week in the quarter, we simply couldn’t match last year’s results,” said Marcus.

 

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“The top films in the fourth quarter of fiscal 2013 were Iron Man 3 (3D), Oz: The Great and Powerful (3D) and The Croods. (3D),” said Bruce J. Olson, senior vice president of The Marcus Corporation and president of Marcus Theatres. For all of fiscal 2013, the best performing films were The Dark Knight Rises, Iron Man 3 (3D), The Hobbit: An Unexpected Journey (3D), The Twilight Saga: Breaking Dawn – Part 2 and Skyfall.

 

Olson said the new fiscal year is off to an excellent start, with much stronger film product. “Man of Steel, Monsters University (3D), World War Z (3D) and Despicable Me 2 (3D) have contributed to a great summer so far. Other potential hits opening in the coming weeks include The Wolverine (3D), The Smurfs 2 (3D), 2 Guns (3D), Planes (3D) and Elysium (3D). Our box office revenues at this point in the first quarter are up substantially over the same period last year, illustrating how critical a good film line-up is to our results,” added Olson.

 

“We continue to invest in our existing properties and expand our successful food and beverage concepts. We opened our fourth Take Five cocktail lounge at the Village Pointe Cinema in Omaha, Neb. in May and our fifth Take Five, which also serves Zaffiro’s pizza, opened at the Point Cinema in Madison, Wis. in July. Our 15^th UltraScreen® is under construction at the Gurnee Cinema in Gurnee, Ill. and an extensive renovation of the 20 Grand Cinema in Omaha, Neb. is underway. The remodeling of the 20 Grand includes the addition of a Take Five Lounge, Zaffiro’s Express and premium seating in all auditoriums. The Take Five Lounge concept, with its full-service bar, chef-inspired menu and big-screen TVs, has been such a great addition to our theatres that we plan to add several more locations in fiscal 2014,” said Olson.

 

Marcus^® Hotels & Resorts

 

“Revenues for Marcus Hotels & Resorts increased 4.0% for the year. Revenue per available room (RevPAR) for comparable company-owned hotels was up 0.6% for the fourth quarter and 3.4% for the full year, driven by higher occupancy and an increase in the average daily rate,” said Marcus.

 

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“The average daily rate increased for the tenth consecutive quarter and the third straight year. We are pleased with the continued recovery of the lodging industry, however overall rates are still not back to pre-recession levels and group business continues to be challenged,” said Kirk A. Rose, president of Marcus Hotels & Resorts. He noted that in addition to the extra week last year and the Las Vegas legal costs, the division’s fiscal 2013 results were also impacted by expected winter-season losses at its newest hotel, The Cornhusker, A Marriott Hotel, in Lincoln, Neb., while it is being repositioned.

 

“We are currently overseeing an extensive, multi-million-dollar renovation at The Cornhusker that includes our second Miller Time Pub & Grill restaurant developed in association with world-class brewer MillerCoors. The new restaurant, which is expected to open in August, will feature certified beer experts and creative beer and food pairings, all in a friendly, relaxing environment,” said Rose.

 

He added that exclusive club lounges at The Pfister Hotel in Milwaukee and the Grand Geneva Resort & Spa in Lake Geneva, Wis. opened during the fourth quarter and have been well-received by guests.

 

“The summer season has started strong and we expect our Milwaukee hotels to benefit from the city’s many festivals and events, including the Harley-Davidson 110^th anniversary celebration on Labor Day weekend. We are continuing our focus on growing the division, including pursuing potential opportunities for additional management contracts, some of which may include small equity investments,” added Rose.

 

Summary

 

“In fiscal 2013, we returned capital to shareholders through cash dividends, including a special $1.00 cash dividend in December, and through share repurchases totaling approximately 350,000 shares in the fourth quarter and nearly 2.2 million shares for the year,” said Marcus.

 

“Our debt-to-total capitalization ratio was 44% at the end of the year and we had $118 million of unused credit lines at year end. We also have a new $225 million credit facility in place and we recently took advantage of historically low interest rates by entering into an agreement to issue $50 million of 4.02% senior notes maturing in 2025. With our strong financial position and available capital, we believe we are well positioned to pursue our growth strategies and to continue our commitment to enhancing long-term shareholder value,” he added.

 

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Conference Call and Webcast

 

Marcus Corporation management will host a conference call today, July 25, 2013, at 10:30 a.m. Central/11:30 a.m. Eastern time to discuss the fourth quarter results. Interested parties can listen to the call live on the Internet through the investor relations section of the company’s website: www.marcuscorp.com, or by dialing 1-617-399-5125 and entering the passcode 38492440. Listeners should dial in to the call at least 5 - 10 minutes prior to the start of the call or should go to the website at least 15 minutes prior to the call to download and install any necessary audio software. The call will be available for telephone replay through Thursday, August 1, 2013, by dialing 1-888-286-8010 and entering the passcode 67798334. The Webcast of the conference call will be archived on the company’s website until its next earnings release.

 

About The Marcus Corporation

 

Headquartered in Milwaukee, Wisconsin, The Marcus Corporation is a leader in the lodging and entertainment industries, with significant company-owned real estate assets. The Marcus Corporation’s theatre division, Marcus Theatres^®, currently owns or manages 686 screens at 55 locations in Wisconsin, Illinois, Iowa, Minnesota, Nebraska, North Dakota and Ohio. The company’s lodging division, Marcus^® Hotels & Resorts, owns and/or manages 20 hotels, resorts and other properties in 11 states. For more information, please visit the company’s website at www.marcuscorp.com.

  

Certain matters discussed in this press release are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements include words such as we “believe,” “anticipate,” “expect” or words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which may cause results to differ materially from those expected, including, but not limited to, the following: (1) the availability, in terms of both quantity and audience appeal, of motion pictures for our theatre division, as well as other industry dynamics such as the maintenance of a suitable window between the date such motion pictures are released in theatres and the date they are released to other distribution channels; (2) the effects of increasing depreciation expenses, reduced operating profits during major property renovations, and preopening and start-up costs due to the capital intensive nature of our businesses; (3) the effects of adverse economic conditions in our markets, particularly with respect to our hotels and resorts division; (4) the effects of adverse weather conditions, particularly during the winter in the Midwest and in our other markets; (5) the effects on our occupancy and room rates of the relative industry supply of available rooms at comparable lodging facilities in our markets; (6) the effects of competitive conditions in our markets; (7) our ability to identify properties to acquire, develop and/or manage and the continuing availability of funds for such development; and (8) the adverse impact on business and consumer spending on travel, leisure and entertainment resulting from terrorist attacks in the United States or incidents such as the tragedy in a movie theatre in Colorado. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this press release and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

 

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THE MARCUS CORPORATION

Consolidated Statements of Earnings

(In thousands, except per share data)

 

		13 Weeks				14 Weeks				52 Weeks				53 Weeks
		Ended				Ended				Ended				Ended
		(Unaudited)				(Unaudited)				(Unaudited)				(Audited)
		May 30,				May 31,				May 30,				May 31,
		2013				2012				2013				2012
Revenues:
Theatre admissions		$	32,424			$	37,587			$	134,523			$	142,103
Rooms			24,543				24,653				99,668				94,890
Theatre concessions			18,172				19,842				73,189				74,478
Food and beverage			13,100				13,550				55,458				54,465
Other revenues			12,351				12,213				49,998				47,962
Total revenues			100,590				107,845				412,836				413,898
Costs and expenses:
Theatre operations			28,271				31,333				115,078				119,009
Rooms			10,056				9,480				38,260				35,896
Theatre concessions			4,884				4,793				19,816				18,447
Food and beverage			10,826				10,402				43,062				41,022
Advertising and marketing			5,481				5,836				23,571				22,551
Administrative			10,378				11,739				45,266				43,825
Depreciation and amortization			8,337				8,416				33,827				34,525
Rent			2,110				2,065				8,418				8,247
Property taxes			3,821				3,347				14,836				13,106
Other operating expenses			7,693				7,603				30,986				30,755
Impairment charge			477				-				1,512				-
Total costs and expenses			92,334				95,014				374,632				367,383
Operating income			8,256				12,831				38,204				46,515
Other income (expense):
Investment income			193				898				494				1,155
Interest expense			(2,454	)			(2,298	)			(9,309	)			(9,272	)
Extinguishment of debt			-				-				6,008				-
Gain (loss) on disposition of property, equipment and other assets			23				161				(266	)			(759	)
Equity earnings (losses) from unconsolidated joint ventures, net			(132	)			10				(450	)			(200	)
			(2,370	)			(1,229	)			(3,523	)			(9,076	)
Earnings before income taxes			5,886				11,602				34,681				37,439
Income taxes			2,299				4,903				11,350				14,705
Net earnings			3,587				6,699				23,331				22,734
Net earnings attributable to noncontrolling interests			112				-				5,825				-
Net earnings attributable to The Marcus Corporation		$	3,475			$	6,699			$	17,506			$	22,734
Net earnings per common share attributable to The Marcus Corporation - diluted		$	0.13			$	0.23			$	0.63			$	0.78
Weighted-average shares outstanding - diluted			27,090				29,143				27,865				29,308

 

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THE MARCUS CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

  

		(Unaudited)				(Audited)
		May 30,				May 31,
		2013				2012
Assets:
Cash and cash equivalents		$	18,053			$	12,402
Accounts and notes receivable			8,568				8,467
Refundable income taxes			255				2,950
Deferred income taxes			2,877				2,797
Other current assets			6,384				7,020
Property and equipment, net			625,757				614,645
Other assets			84,802				84,730
Total Assets		$	746,696			$	733,011
Liabilities and Shareholders' Equity:
Accounts and notes payable		$	25,330			$	18,945
Taxes other than income taxes			14,000				13,110
Other current liabilities			36,123				37,102
Current portion of capital lease obligation			4,562				4,189
Current maturities of long-term debt			11,193				97,918
Capital lease obligation			28,241				31,489
Long-term debt			231,580				106,276
Deferred income taxes			43,516				44,372
Deferred compensation and other			35,455				35,821
Equity			316,696				343,789
Total Liabilities and Shareholders' Equity		$	746,696			$	733,011

 

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THE MARCUS CORPORATION

Business Segment Information

(Unaudited)

(In thousands)

  

						Hotels/				Corporate
		Theatres				Resorts				Items				Total
13 Weeks Ended May 30, 2013
Revenues		$	53,702			$	46,726			$	162			$	100,590
Operating income (loss)			9,881				1,558				(3,183	)			8,256
Depreciation and amortization			4,103				4,087				147				8,337
14 Weeks Ended May 31, 2012
Revenues		$	60,767			$	46,834			$	244			$	107,845
Operating income (loss)			13,625				2,727				(3,521	)			12,831
Depreciation and amortization			4,269				4,021				126				8,416
52 Weeks Ended May 30, 2013
Revenues		$	219,533			$	192,676			$	627			$	412,836
Operating income (loss)			40,907				10,662				(13,365	)			38,204
Depreciation and amortization			16,753				16,520				554				33,827
53 Weeks Ended May 31, 2012
Revenues		$	227,914			$	185,177			$	807			$	413,898
Operating income (loss)			47,065				12,706				(13,256	)			46,515
Depreciation and amortization			18,189				15,837				499				34,525

 

Corporate items include amounts not allocable to the business segments. Corporate revenues consist principally of rent and the corporate operating loss includes general corporate expenses. Corporate information technology costs and accounting shared services costs are allocated to the business segments based upon several factors, including actual usage and segment revenues.

 

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