The Marcus Corporation Reports First Quarter Fiscal 2013 Results

Marcus Hotels continues to improve; challenging quarter for Marcus Theatres

MILWAUKEE--(BUSINESS WIRE)--The Marcus Corporation (NYSE: MCS) today reported results for the first quarter ended August 30, 2012. The record revenues and improved operating income of Marcus® Hotels & Resorts did not offset reduced results for Marcus Theatres® compared to the division’s record first quarter last year.

“Last year’s first quarter included the busy Memorial Day weekend, which we did not have during this year’s first quarter. This timing affected both divisions, but had a much greater impact on Marcus Theatres”

First Quarter Fiscal 2013 Highlights

• Total revenues for the first quarter of fiscal 2013 were $117,939,000, a 4.8% decrease from revenues of $123,907,000 for the first quarter of fiscal 2012.
• Operating income was $20,455,000 for the first quarter of fiscal 2013, a 12.4% decrease from operating income of $23,348,000 for the same period in the prior year.
• Net earnings were $10,679,000, or $0.37 per diluted common share, for the first quarter of fiscal 2013, a 14.4% decrease from net earnings of $12,477,000, or $0.42 per diluted common share, for the first quarter of fiscal 2012.

“Last year’s first quarter included the busy Memorial Day weekend, which we did not have during this year’s first quarter. This timing affected both divisions, but had a much greater impact on Marcus Theatres,” said Gregory S. Marcus, president and chief executive officer of The Marcus Corporation.

Marcus^® Hotels & Resorts

Marcus Hotels & Resorts continued to build momentum, with a 3.7% increase in revenue per available room (RevPAR) contributing to record revenues for the division in the first quarter of fiscal 2013. The majority of the increase was due to continued improvement in the average daily rate, a sign of the lodging industry’s ongoing recovery. Operating income for Marcus Hotels was up 10.2% in the first quarter compared to the prior year.

“Last week, we announced an agreement to purchase the Cornhusker Hotel and Office Plaza in downtown Lincoln, Neb. This is the first transaction sourced by MCS Capital, our new hotel investment business. Marcus Hotels will be the majority owner of a joint venture with a fund affiliate of LEM Capital of Philadelphia. We are currently managing the property and upon completion of the transaction, we plan to begin a major renovation of the hotel and affiliate it with Marriott International,” said Marcus.

“We believe we have the experience and comprehensive portfolio of services that hotel owners and developers are looking for. We have a number of potential growth opportunities in the pipeline and hope to announce more details in the near future,” added Marcus.

Marcus noted that the restoration of the Monarch Room lobby lounge at the Hilton Milwaukee was completed during the first quarter. The design is reminiscent of the classic, old-school lobby cocktail lounge, with added amenities such as spacious seating, workstations and a media center that appeal to today’s travelers. “The Monarch Room looks spectacular and has completely changed the dynamic of the lobby. Its transformation is one of the final phases of a multi-million-dollar renovation of the hotel’s guest rooms, lobby area, public spaces, fitness center and technology infrastructure,” he said.

Marcus Theatres^®

“In addition to the lack of the typically strong Memorial Day weekend box office, the first quarter results for Marcus Theatres were impacted by a weaker slate of films and strong television viewership of the Olympics during the quarter. We also had a difficult comparison against last year’s record first quarter, which was led by the final installment of the tremendously successful Harry Potter series,” said Marcus.

“The top five films for the first quarter were The Dark Knight Rises, Brave (3D), Ted, The Amazing Spider-Man (3D) and Madagascar 3 (3D),” said Bruce J. Olson, senior vice president of The Marcus Corporation and president of Marcus Theatres. “Unfortunately, the next tier of films did not perform as well as last year’s counterparts and the August film performance was particularly disappointing.”

“September is historically the weakest month of the year for movie theatres, but the upcoming fall line-up has several promising films. Potential hits on the October film schedule include Disney’s Frankenweenie (3D), Taken 2 and Paranormal Activity 4. The traditionally strong holiday season kicks off in November, with highly anticipated films including Wreck-It Ralph, the next James Bond film Skyfall, The Twilight Saga: Breaking Dawn – Part 2, Life of Pi (3D) and Rise of the Guardians (3D),” said Olson.

He noted that the company’s third full-service Zaffiro’s Pizzeria & Bar located at the Ridge Cinema in New Berlin, Wis. has been well received since its opening in early August. The division also opened its 14^th UltraScreen® auditorium adjacent to its 10-screen Duluth Cinema in Duluth, Minn. during the first quarter.

Summary

“Our debt-to-total capitalization ratio was 36% at the end of the first quarter and we repurchased 97,000 shares of our common stock during the quarter. With our strong balance sheet and cash flow, we believe that when timing and market conditions are appropriate, we are able to repurchase shares to enhance shareholder value while at the same time continuing to invest in our businesses to facilitate our growth,” added Marcus.

Conference Call and Webcast

Marcus Corporation management will host a conference call today, September 20, 2012, at 10:00 a.m. Central/11:00 a.m. Eastern time to discuss the first quarter results. Interested parties can listen to the call live on the Internet through the investor relations section of the company’s Web site: www.marcuscorp.com, or by dialing 1-617-597-5361 and entering the passcode 75388276. Listeners should dial in to the call at least 5 - 10 minutes prior to the start of the call or should go to the Web site 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, September 27, 2012, by dialing 1-888-286-8010 and entering the passcode 97177892. The Webcast of the conference call will be archived on the company’s Web site 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 695 screens at 56 locations in Wisconsin, Illinois, Iowa, Minnesota, Nebraska, North Dakota and Ohio. The company’s lodging division, Marcus^® Hotels & Resorts, owns and/or manages 19 hotels, resorts and other properties in 10 states. For more information, please visit the company’s web site 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 recent 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.

THE MARCUS CORPORATION
Consolidated Statements of Earnings
(Unaudited)
(In thousands, except per share data)
		13 Weeks Ended
		August 30,			August 25,
		2012			2011
Revenues:
	Theatre admissions	$	38,478		$	44,174
	Rooms		29,964			28,918
	Theatre concessions		20,979			22,869
	Food and beverage		14,769			14,696
	Other revenues		13,749			13,250
Total revenues			117,939			123,907
Costs and expenses:
	Theatre operations		32,566			36,201
	Rooms		9,857			9,411
	Theatre concessions		5,557			5,537
	Food and beverage		10,729			10,465
	Advertising and marketing		6,405			5,855
	Administrative		10,762			10,815
	Depreciation and amortization		8,313			8,920
	Rent		2,113			2,123
	Property taxes		3,635			3,228
	Other operating expenses		7,547			8,004
Total costs and expenses			97,484			100,559
Operating income			20,455			23,348
Other income (expense):
	Investment income		24			144
	Interest expense		(2,074	)		(2,351	)
	Gain (loss) on disposition of property, equipment and other assets		22			(181	)
	Equity losses from unconsolidated joint ventures, net		(40	)		(71	)
			(2,068	)		(2,459	)
Earnings before income taxes			18,387			20,889
Income taxes			7,708			8,412
Net earnings		$	10,679		$	12,477
Net earnings per common share - diluted:		$	0.37		$	0.42
Weighted-average shares outstanding - diluted			28,964			29,669

THE MARCUS CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
		(Unaudited)		(Audited)
		August 30,		May 31,
		2012		2012
Assets:
	Cash and cash equivalents	$	14,305	$	12,402
	Accounts and notes receivable		10,553		8,467
	Refundable income taxes		-		2,950
	Deferred income taxes		2,837		2,797
	Other current assets		7,959		7,020
	Property and equipment, net		610,534		614,645
	Other assets		84,506		84,730
Total Assets		$	730,694	$	733,011
Liabilities and Shareholders' Equity:
	Accounts and notes payable	$	14,997	$	18,945
	Income taxes		4,330		-
	Taxes other than income taxes		12,760		13,110
	Other current liabilities		33,535		37,102
	Current portion of capital lease obligation		4,287		4,189
	Current maturities of long-term debt		92,927		97,918
	Capital lease obligation		31,187		31,489
	Long-term debt		106,091		106,276
	Deferred income taxes		43,755		44,372
	Deferred compensation and other		34,484		35,821
	Shareholders' equity		352,341		343,789
Total Liabilities and Shareholders' Equity		$	730,694	$	733,011

THE MARCUS CORPORATION
Business Segment Information
(Unaudited)
(In thousands)
			Hotels/		Corporate
	Theatres		Resorts		Items			Total
13 Weeks Ended August 30, 2012
Revenues	$	62,352	$	55,439	$	148		$	117,939
Operating income (loss)		13,278		10,233		(3,056	)		20,455
Depreciation and amortization		4,210		3,976		127			8,313
13 Weeks Ended August 25, 2011
Revenues	$	69,863	$	53,898	$	146		$	123,907
Operating income (loss)		16,883		9,287		(2,822	)		23,348
Depreciation and amortization		4,850		3,942		128			8,920

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.