| Page | |||||
Item 8. Financial Statements and Supplementary Data | |||||
Strategic Plans
markets in the future.
Ultra
auditoriums.
2019.
revenues.
ticket-seller, or directly through our website or app.
We have a variety of ancillary revenue sources in our theatres, with the largest related to the sale of pre-show and lobby advertising (through our current advertising providers, Screenvision and National CineMedia). We also obtain ancillary revenues from corporate and group meeting sales, sponsorships, internet surcharge fees and alternate auditorium uses. We continue to pursue additional strategies to increase our ancillary revenue sources.
sources, including the addition of a new post transaction click-through advertising agreement with Rokt during fiscal 2021.
We also own and operate theRonnie’s Plaza retail outlet in St. Louis, Missouri, an 84,000 square foot retail center featuring 21 shops and other businesses to which we lease retail space.
The Skirvin Hilton
.
lease.
The hotel was named #18 of the Top 20 Hotels in the Midwest by
Condé Nast Traveler’s Readers’ Choice Awards in 2021.In January 2019, we closed for renovation one of our owned hotels, the InterContinental Milwaukee hotel, and reopened it in June 2019 as Saint Kate–The Arts Hotel.
In April 2019, we assumed management of
We manage the Murieta Inn and Spa in Rancho Murieta, California. Located near wine country and within the development containing the renowned Murieta Equestrian Center, the largest equestrian facility in California, the 83-room hotel featuresDuring fiscal 2021 we managed The Gate, a one-of-a-kind restaurant and bar that offers fresh, seasonal menus using ingredients from the hotel’s five-acre farm and state-of-the-art greenhouse. The hotel has a resort-style outdoor pool and a luxury salon and day spa. The Murieta Inn and Spa also offers up to 15,000 square feet of indoor and outdoor meeting and event space with the latest audio visual and state-of the-art technology. The hotel currently holds the TripAdvisor® Certificate of Excellence distinction.
We manage the DoubleTree by Hilton El Paso Downtown, which is the only full-service Hilton located in downtown El Paso, Texas. SituatedPaso. Our 200 well-appointed rooms are in El Paso’s Museum District, near the city’s prominentheart of the museum district and steps from the convention and performing arts center, the 200-room DoubleTree by Hilton El Paso Downtowncenter. The hotel features a newly renovated rooftop pool and sun deck,terrace along with 8,500 square feet of meeting space.
We manageceased management of this hotel effective February 28, 2022.
We manage the Crowne Plaza-Northstar Hotel in Minneapolis, Minnesota. The Crowne Plaza-Northstar Hotel is located in downtown Minneapolis and has 222 guest rooms, 10,000 square feetceased management of meeting space, an outdoor Skygarden for group events, a restaurant, a cocktail lounge and an exercise facility.
this hotel effective February 28, 2022.
We manageAwards for the Hilton Garden Inn Houston NW/Willowbrook in Houston, Texas. The Hilton Garden Inn Houston NW/Willowbrook has 171 guest rooms, a ballroom, a restaurant, a fitness center, a convenience mart and a swimming pool. The hotel currently holds the TripAdvisor® Certificate of Excellence distinction.
second consecutive year.
Travelers’ Choice in 2021.
We formerly managed the Heidel House Resort & Spa in Green Lake, Wisconsin. On May 20, 2019, the owners of this resort closedOmaha. Marriott International recognized this property permanently.
We formerly managedas Hotel of the Sheraton Chapel Hill Hotel in Chapel Hill, North Carolina. Year, Classic Premium for the 2019 year. In 2021, The Omaha Marriott Downtown was awarded the prestigious Omaha Metropolitan Area Tourism Award for “Best Hotel” by Visit Omaha, as well as The Reader’s Choice for “Best Hotel.”
We also provide hospitality management services, including check-in, housekeeping and maintenance, for a vacation ownership development adjacent to the Grand Geneva Resort & Spa branded as the Holiday Inn Club Vacations at Lake Geneva Resort. The development includes 68 two-room timeshare units (136 rooms) and a timeshare sales center.
We own a 0.49% minority interest in The Hotel Zamora and Castile Restaurant in St. Pete Beach, Florida. We have agreed to sell this interest to the majority owner during the next several years.
We have taken our highly-regarded web development team and created a new business unit managed by the hotels and resorts division called Graydient Creative. Graydient focuses on website design and development, branding and print design, social media management and new software and application development for both our own properties and third party clients.
In 2017, we were awarded the Service Excellence Award by Governor Scott Walker at the Wisconsin Governor’s Conference on Tourism. The Service Excellence Award honors a Wisconsin business that has achieved significant success and growth by providing exceptional service to its customers and a strong charitable involvement in its community. Marcus® Hotels & Resorts received the award for its ongoing commitment to supporting Wisconsin charities and tourism-driven initiatives.
Our
2022. As of the end of fiscal 2019,2021, approximately 6%9% of our employees were covered by a collective bargaining agreement,agreements, of which approximately 16%98% were covered by an agreement that will expire within one year.
inability to continue to negotiate favorable terms with our landlords in respect of those properties we lease;
entertainment.
A Deteriorationdeterioration in Relationshipsrelationships with Film Distributors Could Adversely Affect Our Abilityfilm distributors could adversely affect our ability to Obtain Commercially Successful Filmsobtain commercially successful films or Increase Our Costsincrease our costs to Obtain Such Films.
obtain such films.
comparable lodging facilities may adversely affect our financial results.
Adverse Economic Conditions in Our Markets May Adversely Affect Our Financial Results.
Downturns or adverse economic conditions affecting the United States economy generally, and particularly downturns or adverse economic conditions in the Midwest and in our other markets, adversely affect our results of operations, particularly with respect to our hotels and resorts division. Poor economic conditions can significantly adversely affect the business and group travel customers, which are the largest customer segments for our hotels and resorts division. Specific economic conditions that may directly impact travel, including financial instability of air carriers and increases in gas and other fuel prices, may adversely affect our results of operations. Additionally, although our theatre business has historically performed well during economic downturns as consumers seek less expensive forms of out-of-home entertainment, a significant reduction in consumer confidence or disposable income in general may temporarily affect the demand for motion pictures or severely impact the motion picture production industry, which, in turn, may adversely affect our results of operations.
If the Amount of Sales Made Through Third-Party Internet Travel Intermediaries Increases Significantly, Consumer Loyalty to Our Hotels Could Decrease and Our Revenues Could Fall.
We expect to derive most
Each of Our Business Segments and Properties Experience Ongoing Intense Competition.
ongoing intense competition.
performance of our strategic initiatives and acquisitions.
Bothmanage will directly impact our movie theatre and hotels and resorts businesses are heavily capital intensive. Purchasing properties and buildings, constructing buildings, renovating and remodeling buildings and investing in joint venture projects all require substantial upfront cash investments before these properties, facilities and joint ventures can generate sufficient revenuesability to pay for the upfront costs and positively contribute to our profitability. In addition, many growth opportunities, particularly for our hotels and resorts division, require lengthy development periods during which significant capital is committed and preopening costs and early start-up losses are incurred. We expense these preopening and start-up costs currently. As a result, our results of operations may be adversely affected by our significant levels of capital investments. Additionally, to the extent we capitalize our capital expenditures, our depreciation expenses may increase, thereby adversely affecting our results of operations.
We periodically consider whether indicators of impairment of long-lived assets held for use are present. Demographic changes, economic conditions and competitive pressures may cause someachieve certain of our properties to become unprofitable. Deterioration in the performance of our properties could require us to recognize impairment losses, thereby adversely affecting our results of operations.
Our Ability to Identify Suitable Properties to Acquire, Develop and Manage Will Directly Impact Our Ability to Achieve Certain of Our Growth Objectives.
growth objectives.
our growth objectives.
Adverse Economic Conditions, Including Disruptions in the Financial Markets, May Adversely Affect Our Ability to Obtain Financing on Reasonable and Acceptable Terms, if at All, and Impact Our Ability to Achieve Certain of Our Growth Objectives.
We expect that we will require additional financing over time, the amount of which will depend upon a number of factors, including the number of theatres and hotels and resorts we acquire and/
Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk.
manage risk.
Our Properties are Subject to
Acts of God, natural disasters, war (including the potential for war), terrorist activity (including threats of terrorist activity), incidents of violence in public venues such as hotels and movie theatres, epidemics (such as SARs, bird flu and swine flu), travel-related accidents, as well as political unrest and other forms of civil strife and geopolitical uncertainty mayassociated costs could adversely affect the lodging and movie exhibition industries and our results of operations. Terrorism or other similar incidents may significantly impact business and leisure travel or consumer choices regarding out-of-home entertainment options and consequently demand for hotel rooms or movie theatre attendance may suffer. In addition, inadequate preparedness, contingency planning, insurance coverage or recovery capability in relation to a major incident or crisis may prevent operational continuity and consequently impact the reputation of our businesses.
We Rely on Our Information Systems to Conduct Our Business, and Any Failure to Protect Our Information Systems and Other Confidential Information Against Cyber Attacks or Other Information Security Breaches or Any Failure or Interruption to the Availability of Our Information Systems Could Have a Material Adverse Effect on Our Business.
The operation of our business depends on the efficient and uninterrupted operation of our information technology systems. Our information technology systems may become unavailable or may fail to perform as anticipated, for any reason, including cyber attacks, loss of power, or human error. Information security risks have generally increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber attacks. Any significant interruption in or failure of our information systems or any breach of our information systems or other confidential information could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation expose us to litigation, increase our costs or cause losses. As cyber and other information security threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures or to investigate and remediate any information security vulnerabilities.
Recalls of Food Products and Associated Costs Could Adversely Affect Our Reputation and Financial Condition.
We may be found liable if the consumption of any of the food products we sell in our theatres or hotels causes illness or injury. We are also subject to recallrecalls by product manufacturers or if the food products become contaminated. Recalls could result in losses due to the cost of the recall, the destruction of the product and lost sales due to the unavailability of the product for a period of time.
substantial government regulation, which could entail significant cost.
additional tax liabilities.
impact our stock price.
Adverse Weather Conditions, Particularly During
Poor weather conditions adversely affectthe market price of their stock have been subject to securities class action litigation. We may become the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business. See “Risks related to our business and leisure travel plans,industry—Our business and operations could be negatively affected if we become subject to any securities litigation or shareholder activism, which directly impactscould cause us to incur significant expense, hinder execution of business strategy and impact our hotelsstock price.”
Our Results May be Seasonal, Resulting in Unpredictable and Varied Quarterly Results.
Our first fiscal quarter typically produces the weakest operating results in our hotels and resorts division due primarily to the effects of reduced travel during the winter months. Our second and third fiscal quarters often produce our strongest operating results because these periods coincide with the typical summer seasonality of the movie theatre industry and the summer strength of the lodging business. Due to the fact that the week between Christmas and New Year’s Eve is historically one of the strongest weeks of the year for our theatre division, the specific timing of the last Thursday in December has an impact on the results of our fiscal first and fourth quarters in that division, particularly when we have a 53-week year.
liabilities.
Our owned, leased and managed properties are summarized, as of December 26, 2019,30, 2021, in the following table:
| Business Segment | Total Number of Facilities in Operation | Owned(1) | Leased | Managed | Managed Parties(2) | |||||||||||||||
| Theatres: | ||||||||||||||||||||
| Movie Theatres | 91 | 50 | 40 | 0 | 1 | |||||||||||||||
| Family Entertainment Center | 1 | 1 | 0 | 0 | 0 | |||||||||||||||
| Other Properties(3) | 1 | 1 | 0 | 0 | 0 | |||||||||||||||
| Hotels and Resorts: | ||||||||||||||||||||
| Hotels | 18 | 6 | 1 | 1 | 10 | |||||||||||||||
| Resorts | 1 | 1 | 0 | 0 | 0 | |||||||||||||||
| Other Properties(4) | 3 | 0 | 2 | 0 | 1 | |||||||||||||||
| Total | 115 | 59 | 43 | 1 | 12 | |||||||||||||||
| Business Segment | Total Number of Facilities in Operation | Owned(1) | Leased from Unrelated Parties(2) | Managed for Related Parties | Managed for Unrelated Parties | |||||||||||||||||||||||||||
| Theatres: | ||||||||||||||||||||||||||||||||
| Movie Theatres | 85 | 48 | 37 | — | — | |||||||||||||||||||||||||||
| Family Entertainment Center | 1 | 1 | — | — | — | |||||||||||||||||||||||||||
| Hotels and Resorts: | ||||||||||||||||||||||||||||||||
| Hotels | 17 | 6 | 1 | 1 | 9 | |||||||||||||||||||||||||||
| Resorts | 1 | 1 | — | — | — | |||||||||||||||||||||||||||
Other Properties(3) | 3 | — | 2 | — | 1 | |||||||||||||||||||||||||||
| Total | 107 | 56 | 40 | 1 | 10 | |||||||||||||||||||||||||||
All 22 Movie Tavern theatres acquired in February 2019 are leased from unrelated parties.
| Name | Position | Age | ||||||||||||
| Stephen H. Marcus | Chairman of the Board | 86 | ||||||||||||
| Gregory S. Marcus | President and Chief Executive Officer | 57 | ||||||||||||
| Thomas F. Kissinger | Senior Executive Vice President, General Counsel and Secretary | 61 | ||||||||||||
| Douglas A. Neis | Executive Vice President and Chief Financial Officer | 63 | ||||||||||||
| Rolando B. Rodriguez | Executive Vice President of The Marcus Corporation and Chairman, President and Chief Executive Officer of Marcus Theatres Corporation | 62 | ||||||||||||
In October 2021, concurrently with the appointment of Chad Paris as Corporate Controller and Treasurer, Mr. Neis assumed the role of Executive Vice President and Chief Financial Officer. Mr. Neis will retire from our company effective May 15, 2022 and Mr. Paris will become Chief Financial Officer and Treasurer effective the same date.
that we believe are not reflective of other peers in our industries.
| 5/29/14 | 5/28/15 | 12/31/15 | 12/29/16 | 12/28/17 | 12/27/18 | 12/26/19 | ||||||||||||||||||||||
| The Marcus Corporation | $ | 100.00 | $ | 119.34 | $ | 116.45 | $ | 197.61 | $ | 173.36 | $ | 249.78 | $ | 215.31 | ||||||||||||||
| Russell 2000 Index | 100.00 | 111.36 | 101.84 | 124.09 | 142.86 | 124.39 | 158.98 | |||||||||||||||||||||
| Composite New Peer Group Index(1) | 100.00 | 129.30 | 108.43 | 139.61 | 141.04 | 133.33 | 147.12 | |||||||||||||||||||||
| Composite Old Peer Group Index(2) | 100.00 | 125.02 | 107.30 | 129.46 | 155.98 | 149.24 | 172.44 | |||||||||||||||||||||
| 12/29/16 | 12/28/17 | 12/27/18 | 12/26/19 | 12/31/20 | 12/30/21 | ||||||||||||||||||||||||||||||
| The Marcus Corporation | $ | 100.00 | $ | 87.73 | $ | 126.40 | $ | 108.96 | $ | 45.34 | $ | 60.37 | |||||||||||||||||||||||
| Russell 2000 Index | 100.00 | 115.13 | 100.24 | 128.12 | 152.94 | 175.87 | |||||||||||||||||||||||||||||
Composite New Peer Group Index(1) | 100.00 | 114.28 | 111.19 | 128.47 | 86.11 | 92.52 | |||||||||||||||||||||||||||||
Composite Old Peer Group Index(1) | 100.00 | 101.02 | 95.51 | 105.38 | 68.10 | 178.48 | |||||||||||||||||||||||||||||
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs(1) | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(1) | ||||||||||||
| September 27 – October 31 | – | – | – | 2,756,561 | ||||||||||||
| November 1 – November 28 | – | – | – | 2,756,561 | ||||||||||||
| November 29 – December 26 | – | – | – | 2,756,561 | ||||||||||||
| Total | – | – | – | 2,756,561 | ||||||||||||
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs(1) | Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(1) | ||||||||||||||||||||||
| October 1 – November 4 | — | $ | — | — | 2,657,340 | |||||||||||||||||||||
| November 5 – December | — | — | — | 2,657,340 | ||||||||||||||||||||||
| December | — | — | — | 2,657,340 | ||||||||||||||||||||||
| Total | — | $ | — | — | 2,657,340 | |||||||||||||||||||||
Five-Year Financial Summary
| F2019(1) | F2018(2) | F2017(3) | F2016 | 31 Weeks Ended December 31, 2015(4) | F2015(5) | |||||||||||||||||||
Operating Results(in thousands) | ||||||||||||||||||||||||
| Revenues | $ | 820,863 | 707,120 | 653,552 | 574,324 | 341,664 | 517,832 | |||||||||||||||||
| Net earnings attributable to The Marcus Corporation | $ | 42,017 | 53,391 | 64,996 | 37,902 | 23,565 | 23,995 | |||||||||||||||||
| Common Stock Data(6) | ||||||||||||||||||||||||
| Net earnings per common share | $ | 1.35 | 1.86 | 2.29 | 1.36 | .84 | .87 | |||||||||||||||||
| Cash dividends per common share | $ | .64 | .60 | .50 | .45 | .21 | .39 | |||||||||||||||||
| Weighted-average shares outstanding (in thousands) | 31,152 | 28,713 | 28,403 | 27,957 | 27,917 | 27,687 | ||||||||||||||||||
| Book value per share | $ | 20.08 | 17.28 | 15.98 | 14.10 | 13.13 | 12.48 | |||||||||||||||||
Financial Position(in thousands) | ||||||||||||||||||||||||
| Total assets | $ | 1,359,186 | 989,331 | 1,017,797 | 911,266 | 804,701 | 805,472 | |||||||||||||||||
| Long-term debt | $ | 206,432 | 228,863 | 289,813 | 271,343 | 207,376 | 229,096 | |||||||||||||||||
| Shareholders’ equity attributable to The Marcus Corporation | $ | 621,435 | 490,009 | 445,024 | 390,112 | 363,352 | 343,779 | |||||||||||||||||
| Capital expenditures and acquisitions | $ | 94,167 | 58,660 | 114,804 | 147,372 | 44,452 | 74,988 | |||||||||||||||||
| Financial Ratios | ||||||||||||||||||||||||
| Current ratio | .45 | .46 | .48 | .28 | .35 | .34 | ||||||||||||||||||
| Debt/capitalization ratio | .26 | .33 | .40 | .42 | .38 | .42 | ||||||||||||||||||
| Return on average shareholders’ equity | 7.6 | % | 11.4 | % | 15.6 | % | 10.1 | % | 6.7 | % | 7.2 | % | ||||||||||||
|
24 Item 6. Reserved. Item 7. Management’s Discussion and Analysis of Financial Condition and |
Results of Operations
.
Fiscal 2017 was a 52-week year, beginning on December 30, 2016 and ending on December 28, 2017. Fiscal 2018 was a 52-week year, beginning on December 29, 2017 and ending on December 27, 2018.
Fiscal 2020 will bewas a 53-week year, which beganbeginning on December 27, 2019 and will endending on December 31, 2020. We anticipate that our reported results for fiscal 2020 will benefit from the additional week of reported operations. In particular, the additional week of operations will most benefit our theatre division, as it includes the traditionally strong movie-going week between ChristmasFiscal 2021 was a 52-week year, beginning on January 1, 2021 and New Year’s Day. The last time we had an additional week of operations was during our 31-week transition period ending on December 31, 2015 (the “Transition Period”). Our additional 31st week of operations that year benefited both of30, 2021.
Our first fiscal quarter typically produces the weakest operating results in our hotels and resorts division due primarily to the effects of reduced travel during the winter months. The quality of film product in any given quarter typically impacts the operating results in our theatre division. Our second and third fiscal quarters generally produce our strongest operating results because these periods coincide with the typical summer seasonality of the movie theatre industry and the summer strength of the lodging business. Due to the fact that the week between Christmas and New Year’s Eve is historically one of the strongest weeks of the year for our theatre division, the specific timing of the last Thursday in December impacts the results of our fiscal first and fourth quarters in that division, particularly when we have a 53-week year.
Implementation of New Accounting Standards
During fiscal 2019, we adopted Accounting Standards Update (“ASU”) No. 2016-02,Leases (Topic 842), intended31, 2020. Within this MD&A amounts for totals, subtotals, and variances may not recalculate exactly within tables due to improve financial reporting related to leasing transactions. ASU No. 2016-02 requires a lessee to recognize a right-of-use (“ROU”) asset and a lease liability for most leases. The new guidance requires disclosures to help investors and other financial statement users better understandrounding as they are calculated using the amount, timing and uncertainty of cash flows arising from the leases. Leases are now classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statements of net earnings. ASU No. 2018-11,Leases (Topic 842): Targeted Improvements,amended ASU No. 2016-02 and allows entities the option to initially apply Topic 842 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We adopted the new accounting standard asunrounded numbers.
In conjunction with the adoption of the new standard, companies were able to elect several practical expedients to aid in the transition to Topic 842. We elected the package of practical expedients which permits us to forego reassessmentboth of our prior conclusions related to lease identification, lease classification and initial direct costs. Topic 842 also provides practical expedients for an entity’s ongoing accounting. We elected the practical expedient to not separate lease and non-lease components for all of our leases. We also made a policy election not to apply the lease recognition requirements for short-term leases. As a result, we did not recognize ROU assets or lease liabilities for short-term leases that qualify for the policy election (those with an initial term of 12 months or less which do not include a purchase or renewal option which is reasonably certainbusiness segments. The situation continues to be exercised), but instead will recognize these lease payments as lease costs on a straight-line basis overvolatile and the lease term.
Adoptionsocial and economic effects are widespread. As an operator of this new standard resulted in a material impact related to the recognition of ROU assets and lease liabilities on the consolidated balance sheet for assets currently subject to operating leases. We recognized lease liabilities representing the present value of the remaining future minimum lease payments for all of our operating leases as of December 28, 2018 of $81.5 million. We recognized ROU assets for all assets subject to operating leases in an amount equal to the operating lease liabilities, adjusted for the balances of long-term prepaid rent, favorable lease intangible assets, deferred lease expense, unfavorable lease liabilities and deferred lease incentive liabilities as of December 28, 2018.
The adoption of the new standard did not have a material effect on our consolidated statements of net earnings.
During fiscal 2018, we adopted ASU No. 2014-09,Revenue from Contracts with Customers (ASU No. 2014-09), a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. We selected the modified retrospective method for adoption of ASU No. 2014-09 and its related ASU amendments. Under this method, we recognized the cumulative effect of the changes in retained earnings at the date of adoption and did not restate prior periods.
The adoption of the new standard primarily impacted our accounting for our loyalty programs and internet ticket fee revenue. Adopting this new standard during fiscal 2018 had the following impact on our financial statements:
We recorded a one-time cumulative effect reduction to retained earnings, net of income taxes, of approximately $2.6 million during fiscal 2018 related to the adoption of ASU No. 2014-09.
Consolidated Financial Comparisons
The following table sets forth revenues, operating income, other income (expense), net earnings and net earnings per common share for the past three fiscal years (in millions, except for per share and percentage change data) :
| Change F19 v. F18 | Change F18 v. F17 | |||||||||||||||||||||||||||
| F2019 | F2018 | Amt. | Pct. | F2017 | Amt. | Pct. | ||||||||||||||||||||||
| Revenues | $ | 820.9 | $ | 707.1 | $ | 113.8 | 16.1 | % | $ | 653.6 | $ | 53.5 | 8.2 | % | ||||||||||||||
| Operating income | 68.2 | 83.2 | (15.0 | ) | -18.0 | % | 77.3 | 5.9 | 7.6 | % | ||||||||||||||||||
| Other income (expense) | (13.8 | ) | (16.6 | ) | 2.8 | 17.1 | % | (9.2 | ) | (7.4 | ) | -80.5 | % | |||||||||||||||
| Net earnings (loss) attributable to noncontrolling interests | 0.1 | 0.1 | - | - | % | (0.5 | ) | 0.6 | 114.5 | % | ||||||||||||||||||
| Net earnings attributable to The Marcus Corporation | $ | 42.0 | $ | 53.4 | $ | (11.4 | ) | -21.3 | % | $ | 65.0 | $ | (11.6 | ) | -17.9 | % | ||||||||||||
| Net earnings per common share - diluted | $ | 1.35 | $ | 1.86 | $ | (0.51 | ) | -27.4 | % | $ | 2.29 | $ | (0.43 | ) | -18.8 | % | ||||||||||||
Fiscal 2019 versus Fiscal 2018
Our revenues increased during fiscal 2019 compared to fiscal 2018 due primarily to increased revenues from our theatre division. Our operating income (earnings before other income/expense and income taxes) decreased during fiscal 2019 compared to fiscal 2018 due to a decrease in both theatre division andmovie theatres, hotels and resorts, division operating incomerestaurants and a small increasebars, each of which consists of spaces where customers and guests gather in corporate operating losses. Bothclose proximity, our businesses are significantly impacted by protective actions that federal, state and local governments have taken to control the spread of the pandemic, and our customers’ reactions or responses to such actions. These actions have included, among other things, declaring national and state emergencies, encouraging social distancing, restricting freedom of movement and congregation, mandating non-essential business closures, issuing curfews, limiting business capacity, mandating mask-wearing and/or proof of vaccination, and issuing shelter-in-place, quarantine and stay-at-home orders.
On February 1, 2019,movie studios released several new films, we acquired the assets of Movie Tavern®consisting of 22 dine-ingradually reopened theatres with 208 screens located in nine states. A detailed description of this acquisition is included below in the “Current Plans” section of this MD&A. The acquisition increased our total number of screens by 23%, resulting in increased revenues from our theatre division during fiscal 2019 compared to fiscal 2018. Excluding acquisition and preopening expenses, the acquisition did not have a material impact on operating income during fiscal 2019.Operating income from our theatre division during fiscal 2019 was unfavorably impacted by reduced attendance at our comparable theatres due to a weaker slate of movies during fiscal 2019 compared to fiscal 2018, partially offset by increased concession sales per person due to our expanded food and beverage offerings as well as an increase in our average ticket price and other revenues. Acquisition and preopening expenses related to the Movie Tavern acquisition and the opening of a newly built Movie Tavern theatre in Brookfield, Wisconsin negatively impacted our operating income by approximately $2.5 million, or $0.06 per diluted common share, during fiscal 2019 and by approximately $1.7 million, or $0.04 per diluted common share, during fiscal 2018. An impairment charge related to a specific theatre location negatively impacted our fiscal 2019 operating income by approximately $1.9 million, or $0.04 per diluted common share.
We closed the InterContinental Milwaukee hotel (the “InterContinental Milwaukee”) in early January 2019 and began a substantial renovation project that converted this hotel into an experiential arts hotel named Saint Kate®–The Arts Hotel (the “Saint Kate”). The newly renovated hotel reopened during the first week of June 2019 (although a portion of the rooms and food and beverage outlets didn’t fully open until later in the month). Revenues from our hotels and resorts division during fiscal 2019 compared to fiscal 2018 were unfavorably impacted by the closing of the hotel for nearly six months for renovation, the negative impact of comparing a newly opened independent hotel (i.e. the Saint Kate) to a stabilized branded hotel (i.e. the InterContinental Milwaukee) and the impact of a major renovation at our Hilton Madison hotel during the first half of fiscal 2019, offset by2021. We ended fiscal 2021 with all of our theatres open (excluding three theatres which were permanently closed during fiscal 2021). The majority of our reopened theatres operated with reduced operating days (Fridays, Saturdays, Sundays and Tuesdays) and reduced operating hours during the fiscal 2021 first quarter. By the end of May 2021, we had returned the vast majority of our theatres to normal operating days (seven days per week) and operating hours. During fiscal 2021, all of our reopened theatres operated at significantly reduced attendance levels compared to prior pre-COVID-19 pandemic years due to customer concerns related to the COVID-19 pandemic and a reduction in the number of new films released. While still below pre-COVID-19 levels, attendance has gradually improved beginning in June 2021 as the number of vaccinated individuals increased, room revenuesmore films were released, and food and beverage revenues fromcustomer willingness to return to movie theatres increased.
Operating losses from our corporate items, which include amounts not allocablenumber of COVID-19 cases now beginning to the business segments, increased during fiscal 2019 compared to fiscal 2018 due in part to increased long-term incentive compensation expenses. In addition, our fiscal 2019 operating loss from our corporate items was negatively impacted by non-recurring items totaling approximately $550,000 related to a depreciation adjustment and a payroll tax audit settlement.
We recognized investment income of $1.4 million during fiscal 2019 compared to investment income of $208,000 during fiscal 2018. Investment income includes interest earned on cash and cash equivalents, as well as increases/decreasesdecline, industry customer surveys indicate that consumer comfort is once again increasing.
Interest expense totaled $11.8 million during fiscal 2019, a decrease of $1.3 million, or 9.8%, compared to interest expense of $13.1 million during fiscal 2018. The decrease in interest expense during fiscal 2019 was due to reduced borrowing levels compared to fiscal 2018. We currently do not expect a material change in interest expense during fiscal 2020. Changes in our borrowing levels due to variations in our operating results, capital expenditures, acquisition opportunities (or the lack thereof), share repurchases and asset sale proceeds, among other items, may impact, either favorably or unfavorably, our actual reported interest expense in future periods, as may changes in short-term interest rates.
We incurred other expense of $1.9 million during fiscal 2019, a decrease of approximately $100,000, or 3.2%, compared to other expense of $2.0 million during fiscal 2018. Other expense consists of the non-service cost components of our periodic pension costs. Based upon information from an actuarial report for our pension plans, we expect other expense to increase by approximately $400,000 during fiscal 2020 compared to fiscal 2019.
We reported net losses on disposition of property, equipment and other assets of $1.1 million during fiscal 2019, compared to net losses on disposition of property, equipment and other assets of $1.3 million during fiscal 2018. The net losses during fiscal 2019 and fiscal 2018 were due primarily to losses related to old theatre seats and other items disposed of in conjunction with theatre renovations. The timing of our periodic sales and disposals of property, equipment and other assets results in variations each year in the gains or losses that we report on dispositions of property, equipment and other assets. We anticipate the potential for additional disposition losses resulting from theatre renovations, as well as disposition gains or losses from periodic sales of property, equipment and other assets,be released during fiscal 2020 and beyond. 2021 were delayed until fiscal 2022, further increasing the quality and quantity of films that we expect to be available during future time periods.
We reported a net equity loss from an unconsolidated joint venture of $274,000 and $399,000, respectively, duringour group room revenue bookings for fiscal 2019 and fiscal 2018. The net equity losses during both fiscal years consisted of our pro-rata share of losses from the Omaha Marriott Downtown at The Capitol District hotel in Omaha, Nebraska (the “Omaha Marriott”) – a hotel we manage and in which we have a 10% minority ownership interest. The Omaha Marriott is actually performing well from an operational perspective, but is experiencing overall losses due2022 - commonly referred to depreciation and interest expense. We currently do not expect significant variations in net equity losses from unconsolidated joint ventures during fiscal 2020 compared to fiscal 2019, unless we significantly increase the number of joint ventures in which we participate during fiscal 2020.
The operating results of one majority-owned hotel, The Skirvin Hilton, are included in the hotels and resorts divisionindustry as “group pace” - is running behind where we would typically be at this same time in prior years (pre-pandemic), but group pace has improved from earlier in the fiscal year and we have experienced increased booking activity in recent months for fiscal 2022 and beyond. Banquet and catering revenue pace for fiscal 2022 is also running behind where we would typically be at this same time in prior pre-pandemic years. Increased wedding bookings have contributed to banquet and operating income duringcatering revenue in fiscal 2019 and fiscal 2018, and the after-tax net earnings or loss attributable to noncontrolling interests is deducted from or added to net earnings2021. The future economic environment will also have a significant impact on the consolidated statementspace of earnings. We reported net earnings attributableour return to noncontrolling interest“normal” hotel operations.
We reported income tax expense during fiscal 2019 of $12.3 million, a decrease of approximately $800,000, or 6.1%, compared to income tax expense of $13.1 million during fiscal 2018. The decrease in income tax expense during fiscal 2019 was the resultheight of the reduced earnings before income taxes, partially offset by an increased effective income tax rate. Our fiscal 2018 income tax expenseCOVID-19 pandemic has impacted our ability to service our increasing customer counts in both theatres and effective income tax rate were favorably impacted byhotels and may also increase labor costs in future periods.
Weighted-average shares outstanding were 31.2 million during fiscal 2019 and 28.7 million during fiscal 2018. All per share data in this MD&A is presented on a fully diluted basis.
Current Plans
Our aggregate cash capital expenditures, acquisitions and purchases of interests in, and contributions to, joint ventures were approximately $94$19.5 million during fiscal 2021, compared to $21.4 million during fiscal 2020 and $94.2 million during fiscal 2019 including(including approximately $30 million in cash consideration paid in conjunction with the Movie Tavern acquisition described below, comparedbelow). Although we anticipate that we will continue to $59 millioncarefully monitor our capital expenditures during fiscal 2018 and $115 million during fiscal 2017. We2022, we currently anticipateestimate that our fiscal 2020 cash capital expenditures will be inincrease during fiscal 2022 to the $65-$85$35 - $45 million range, excluding any presently unidentified acquisitions that may arise during the year.range. We will, however, continue to monitor our operating results and economic and industry conditions so that we may adjust our plans accordingly.
We believe selective, disciplined
DreamLounger recliner additions. These luxurious, state-of-the-art recliners allow guests to go from upright to a full-recline position in seconds. These seat changes require full auditorium remodels to accommodate the necessary 84 inches of legroom, resulting Growth opportunities that we may explore in the lossfuture include:
UltraScreen DLX®2020, we sold two land parcels andSuperScreen DLX® (DreamLounger eXperience) conversions. We introduced one a former budget theatre, generating total proceeds of the first PLF presentations to the industry when we rolled out our proprietaryUltraScreen® concept approximately 20 years ago. We later introduced ourUltraScreen DLX concept by combining our premium large-format presentation with DreamLounger recliner seating and Dolby® Atmos™ immersive sound to elevate the movie-going experience for our guests. More recently, we began including heated DreamLounger recliner seating in our DLX auditoriums.$3.0 million. During fiscal 2019,2021, we opened one newUltraScreen DLX atsold an existing Marcus Wehrenbergequity interest in a joint venture, several land parcels, another former
Our PLF screens generally have higher per-screen revenues and draw customers from a larger geographic region compared to our standard screens, and we charge a premium price to our guests for this experience. We are currently evaluating opportunities to convert several additional existing screens toSuperScreen DLX auditoriums during fiscal 2020. In addition, our new theatre currently under construction in Tacoma, Washington will include one PLF auditorium.
Signature cocktail and dining concepts. We have continued to further enhance our food and beverage offerings within our existing theatres. We believe our 50-plus years of food and beverage experience in the hotel and restaurant businesses provides us with a unique advantage and expertise that we can leverage to further grow revenues in our theatres. The concepts we are expanding include:
Marketing initiatives. We offer a “$5 Tuesday” promotion at every theatre in our circuit that includes a free complimentary-size popcorn to our loyalty program members. We have seen our Tuesday attendance increase dramatically since the introduction of the $5 Tuesday promotion. We believe this promotion has increased movie going frequency and reached a customer who may have stopped going to the movies because of price, creating another “weekend” day for us without adversely impacting the movie-going habits of our regular weekend customers. We introduced our $5 Tuesday promotion with the free popcorn for loyalty members at our Marcus Wehrenberg theatres immediatelynext year totaling approximately $10 - $20 million, depending upon acquisition in December 2016 and did the same thing in February 2019 with our newly acquired Movie Tavern theatres. We experienced an increase in Tuesday performance at the Marcus Wehrenberg theatres and have seen a similar response from customers at our Movie Tavern theatres. We also offer a “$6 Student Thursday” promotion at all of our locations that has been well received by that particular customer segment. In addition, we offer a $6 “Young-at-Heart” program for seniors on Friday afternoons that was also introduced to our Movie Tavern locations during our fiscal 2019 first quarter.
Loyalty program. We offer what we believe to be a best-in-class customer loyalty program called Magical Movie RewardsSM. We currently have approximately 4.0 million members enrolled in the program. Approximately 42% of all transactions in our theatres during fiscal 2019 were completed by registered members of the loyalty program. The program allows members to earn points for each dollar spent and access special offers available only to members. The rewards are redeemable at the box office, concession stand or at the many Marcus Theatres® food and beverage venues. In addition, we have partnered with Movio, a global leader in data analysisdemand for the cinema industry, to allow more targeted communication with our loyalty members. The software provides us with insight into customer preferences, attendance habits and general demographics, which we believe will help us deliver customized communication to our members. In turn, members of this program can enjoy and plan for a more personalized movie-going experience. The program also gives us the ability to cost effectively promote non-traditional programming and special events, particularly during non-peak time periods. We believe that this will resultreal estate in increased movie-going frequency, more frequent visits to the concession stand, increased loyalty to Marcus Theatres and, ultimately, improved operating results. The acquired Wehrenberg theatres offered a loyalty program to their customers that had approximately 200,000 members. We converted these members to our Magical Movie Rewards program during fiscal 2017 and program membership at our Marcus Wehrenberg theatres has subsequently increased. The acquired Movie Tavern theatres did not offer a loyalty program to their customers. We introduced our Magical Movie Rewards program to these theatres during the second quarter of fiscal 2019 after all necessary technology requirements were completed.
Technology enhancements. We have recently enhanced our mobile ticketing capabilities, our downloadable Marcus Theatres mobile application, and ourmarcustheatres.comwebsite. We also recently added food and beverage ordering capabilities to our mobile application at select theatres, including our recently opened Movie Tavern location in Brookfield, Wisconsin. We will continue to install additional theatre-level technology, such as new ticketing kiosks, digital menu boards and concession advertising monitors. Each of these enhancements is designed to improve customer interactions, both at the theatre and through mobile platforms and other electronic devices.
Hotels and Resorts
Corporate
The actual number, mix and timing of our potential future new facilities and expansions and/or divestitures will depend, in large part, on industry, economic and economicCOVID-19 pandemic conditions, our financial performance and available capital, the competitive environment, evolving customer needs and trends, and the availability of attractive acquisition and investment opportunities. It is likely that our growth goals and strategies will continue to evolve and change in response to these and other factors, and there can be no assurance that we will achieve our current goals. Each of our goals and strategies are subject to the various risk factors discussed above in this Annual Report on Form 10-K.
| F21 v. F20 | F20 v. F19 | ||||||||||||||||||||||||||||||||||||||||
| F2021 | F2020 | Amt. | Pct. | F2019 | Amt. | Pct. | |||||||||||||||||||||||||||||||||||
| Revenues | $ | 458.2 | $ | 237.7 | $ | 220.6 | 92.8 | % | $ | 820.9 | $ | (583.2) | (71.0) | % | |||||||||||||||||||||||||||
| Operating income (loss) | (41.5) | (178.4) | 137.0 | 76.8 | % | 68.2 | (246.6) | (361.7) | % | ||||||||||||||||||||||||||||||||
| Other income (expense), net | (17.5) | (17.4) | (0.2) | (1.1) | % | (13.8) | (3.6) | (26.3) | % | ||||||||||||||||||||||||||||||||
| Net earnings attributable to noncontrolling interests | — | — | — | — | % | 0.1 | (0.1) | (123.5) | % | ||||||||||||||||||||||||||||||||
| Net earnings (loss) attributable to The Marcus Corporation | $ | (43.3) | $ | (124.8) | $ | 81.6 | 65.3 | % | $ | 42.1 | $ | (167.0) | (396.4) | % | |||||||||||||||||||||||||||
| Net earnings (loss) per common share - diluted | $ | (1.42) | $ | (4.13) | $ | 2.71 | 65.6 | % | $ | 1.35 | $ | (5.48) | (405.9) | % | |||||||||||||||||||||||||||
| Change F19 v. F18 | Change F18 v. F17 | |||||||||||||||||||||||||||
| F2019 | F2018 | Amt. | Pct. | F2017 | Amt. | Pct. | ||||||||||||||||||||||
| (in millions, except percentages) | ||||||||||||||||||||||||||||
| Revenues | $ | 557.1 | $ | 446.8 | $ | 110.3 | 24.7 | % | $ | 403.4 | $ | 43.4 | 10.8 | % | ||||||||||||||
| Operating income | $ | 76.9 | $ | 88.8 | $ | (11.9 | ) | -13.4 | % | $ | 80.4 | $ | 8.4 | 10.4 | % | |||||||||||||
| Operating margin | 13.8 | % | 19.9 | % | 19.9 | % | ||||||||||||||||||||||
| Number of screens and locations at period-end(1)(2) | F2019 | F2018 | F2017 | |||||||||
| Theatre screens | 1,106 | 889 | 885 | |||||||||
| Theatre locations | 91 | 68 | 69 | |||||||||
| Average screens per location | 12.2 | 13.1 | 13.0 | |||||||||
| F21 v. F20 | F20 v. F19 | ||||||||||||||||||||||||||||||||||||||||
| F2021 | F2020 | Amt. | Pct. | F2019 | Amt. | Pct. | |||||||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 271.2 | $ | 132.6 | $ | 138.6 | 104.5 | % | $ | 557.1 | $ | (424.5) | (76.2) | % | |||||||||||||||||||||||||||
| Operating income (loss) | $ | (27.6) | $ | (121.4) | $ | 93.9 | 77.3 | % | $ | 76.9 | $ | (198.3) | (257.9) | % | |||||||||||||||||||||||||||
| Operating margin | (10.2) | % | (91.6) | % | 13.8 | % | |||||||||||||||||||||||||||||||||||
Number of screens and locations at period-end (1)(2) | F2021 | F2020 | F2019 | |||||||||||||||||
| Theatre screens | 1,064 | 1,097 | 1,106 | |||||||||||||||||
| Theatre locations | 85 | 89 | 91 | |||||||||||||||||
| Average screens per location | 12.5 | 12.3 | 12.2 | |||||||||||||||||
| Change F19 v. F18 | Change F18 v. F17 | |||||||||||||||||||||||||||
| F2019 | F2018 | Amt. | Pct. | F2017 | Amt. | Pct. | ||||||||||||||||||||||
| (in millions, except percentages) | ||||||||||||||||||||||||||||
| Admission revenues | $ | 284.2 | $ | 246.4 | $ | 37.8 | 15.3 | % | $ | 227.1 | $ | 19.3 | 8.5 | % | ||||||||||||||
| Concession revenues | 231.2 | 166.6 | 64.6 | 38.8 | % | 149.0 | 17.6 | 11.8 | % | |||||||||||||||||||
| Other revenues | 40.8 | 32.5 | 8.3 | 25.4 | % | 25.2 | 7.3 | 29.2 | % | |||||||||||||||||||
| 556.2 | 445.5 | 110.7 | 24.8 | % | 401.3 | 44.2 | 11.0 | % | ||||||||||||||||||||
| Cost reimbursements | 0.9 | 1.3 | (0.4 | ) | -32.1 | % | 2.1 | (0.8 | ) | -39.6 | % | |||||||||||||||||
| Total revenues | $ | 557.1 | $ | 446.8 | $ | 110.3 | 24.7 | % | $ | 403.4 | $ | 43.4 | 10.8 | % | ||||||||||||||
years:
| F21 v. F20 | F20 v. F19 | ||||||||||||||||||||||||||||||||||||||||
| F2021 | F2020 | Amt. | Pct. | F2019 | Amt. | Pct. | |||||||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||||||||
| Admission revenues | $ | 130.7 | $ | 64.8 | $ | 65.9 | 101.7 | % | $ | 284.1 | $ | (219.3) | (77.2) | % | |||||||||||||||||||||||||||
| Concession revenues | 118.7 | 56.7 | 62.0 | 109.2 | % | 231.2 | (174.5) | (75.5) | % | ||||||||||||||||||||||||||||||||
| Other revenues | 21.8 | 10.8 | 11.0 | 102.1 | % | 40.8 | (30.1) | (73.6) | % | ||||||||||||||||||||||||||||||||
| 271.2 | 132.3 | 138.9 | 105.0 | % | 556.2 | (423.9) | (76.2) | % | |||||||||||||||||||||||||||||||||
| Cost reimbursements | 0.1 | 0.3 | (0.2) | (72.8) | % | 0.9 | (0.6) | (63.1) | % | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 271.2 | $ | 132.6 | $ | 138.6 | 104.5 | % | $ | 557.1 | $ | (424.5) | (76.2) | % | |||||||||||||||||||||||||||
Fiscal 20192021 versus Fiscal 2018
2020
Total theatre attendance increased 8.8% and total admission revenues increased 15.3% during fiscal 2019 compared to fiscal 2018. Excluding Movie Tavern and the newly opened theatre, fiscal 2019 attendance and admission revenues at our comparable theatres decreased approximately 8.6% and 5.5%, respectively, compared to the prior year.pre-pandemic levels. The following table sets forth our percentage change in comparablecompares the components of revenues for the theatre attendance during eachdivision for fiscal 2021 to fiscal 2019:
| F21 v. F19 | |||||||||||||||||||||||
| F2021 | F2019 | Amt. | Pct. | ||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||
| Admission revenues | $ | 130.7 | $ | 284.1 | $ | (153.4) | (54.0) | % | |||||||||||||||
| Concession revenues | 118.7 | 231.2 | (112.6) | (48.7) | % | ||||||||||||||||||
| Other revenues | 21.8 | 40.8 | (19.1) | (46.7) | % | ||||||||||||||||||
| 271.2 | 556.2 | (285.0) | (51.2) | % | |||||||||||||||||||
| Cost reimbursements | 0.1 | 0.9 | (0.8) | (90.0) | % | ||||||||||||||||||
| Total revenues | $ | 271.2 | $ | 557.1 | $ | (285.8) | (51.3) | % | |||||||||||||||
| Change F19 v. F18 | ||||||||||||||||||||
| 1st Qtr. | 2nd Qtr. | 3rd Qtr. | 4th Qtr. | Total | ||||||||||||||||
| Pct. change in Marcus theatre attendance | -16.6 | % | -7.2 | % | +0.2 | % | -9.9 | % | -8.6 | % | ||||||||||
| Pct. change in Marcus admission revenues | -17.8 | % | -3.7 | % | +6.3 | % | -5.1 | % | -5.5 | % | ||||||||||
| Pct. change in U.S. box office revenues | -16.5 | % | -4.5 | % | +3.0 | % | -5.5 | % | -6.0 | % | ||||||||||
| Marcus performance vs. U.S. | -1.3 | pts | +0.8 | pts | +3.3 | pts | +0.4 | pts | +0.5 | pts | ||||||||||
Our comparable during each quarter of fiscal 2021 compared to the same quarter during fiscal 2019:
| F21 v. F19 | |||||||||||||||||||||||||||||
1st Qtr. (1) | 2nd Qtr. | 3rd Qtr. | 4th Qtr. | Total | |||||||||||||||||||||||||
| Pct. change in Marcus admission revenues | -81.9 | % | -70.0 | % | -45.2 | % | -21.4 | % | -54.0 | % | |||||||||||||||||||
| Pct. change in U.S. box office revenues | -89.7 | % | -73.9 | % | -52.8 | % | -23.5 | % | -59.6 | % | |||||||||||||||||||
| Marcus performance vs. U.S. | +7.8 pts | +3.9 pts | +7.6 pts | +2.1 pts | +5.6 pts | ||||||||||||||||||||||||
We did not include the performance of our Movie Tavern theatres, which we acquired in February 2019, in the comparison to the industry because we did not own Movie Tavern during fiscal 2018. Based upon data available to us from the previous owner, however, we believe that our Movie Tavern theatres outperformed the industry by approximately seven percentage points during the 11 months that we owned them during fiscal 2019. We believe that this outperformance was once againmarkets.
Theatreexceeded expectations, partially offsetting reduced traditional attendance and corresponding box office revenues vary significantly from quartercontributing to quarter due to a variety of factors. The third quarter of fiscal 2019 was aour industry outperformance, particularly good quarter for the industry and included strong performances from two of our top four films for fiscal 2019,The Lion King andToy Story 4, as well as a strong horror film,It Chapter Two, which was released during the historically slower movie-going month of September. We believe that a favorable film mix during the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018 may also have had a positive impact on our comparative performance versus the overall industry. We believe our theatres outperformed our normal share of the total box office on the films noted above, as family-oriented films and horror films represent genres that have historically performed very well in our legacy Midwestern markets.
Conversely, the first quarter of fiscal 2019 was a particularly weak quarter for the industry compared to the prior year. The first quarter of fiscal 2018 benefited from several strong 2017 holdover films, such asStar Wars: The Last Jedi,Jumanji: Welcome to the Jungle andThe Greatest Showman. We did not have as many strong holdovers from 2018 to benefit the first quarter of fiscal 2019. The reductions in fiscal 2019 first quarter attendance and admission revenues were also due to the fact that our highest grossing film of fiscal 2018,Black Panther, was released during February 2018, and February 2019 film product could not match those results. We also believe that snowier and colder Midwestern weather and a less favorable film mix in the fiscal 2019 first quarter compared to last year may also have had a slight negative impact on our comparative performance versus the overall industry. We believe our Midwestern circuit outperformed our normal share of the total box office on all three of the above referenced 2017 holdover films last year, negatively impacting our relative performance to the U.S. box office during the first quarter of fiscal 2019.
Finally, while2021 when more governmental restrictions were in place and the vaccine rollout was in its early stages. Under this program, a guest may purchase an entire auditorium for up to 20 of his or her friends and family for a fixed charge, ranging from $99 to $275 (depending upon the film and number of weeks it has been in theatres). At its peak during the majority of the weeks during our fiscal 2021 first quarter, we averaged over 1,500 MPC events per week, accounting for approximately 21% of our admission revenues during those weeks.
increase during fiscal 2022. The early list of films scheduled to be released during fiscal 2023 also appears quite strong.
We believe that the mosta significant factor contributing to variations in theatre attendance during fiscal 2019, as in other periods, was the quantity and qualitynumber of films released during the respective periods compared to the films released during the same periods of the prior year. Blockbusters (generally defined as films grossing more than $100 million nationally) accounted for an increased percentage of our total admission revenues during fiscal 2019 compared to fiscal 2018 - our top 15 performing films accounted for 48% of our total admission revenues during fiscal 2019 compared to 42% during fiscal 2018. The following five top performing fiscal 2019 films, all distributed by Disney, accounted for nearly 26% of the total admission revenues for our circuit:Avengers: Endgame,The Lion King,Frozen 2,Toy Story 4andCaptain Marvel. The top five performingits films during fiscal 2018 accounted2022. After
The quantity of wide-release films shownEarly in our fiscal 2021 third quarter, we ceased providing management services to a 6-screen managed theatre. Early in our fiscal 2021 fourth quarter, we made the decision to not reopen three remaining closed theatres, consisting of one former budget-oriented theatre and number of wide-release films provided by the six major studios decreased during fiscal 2019 compared to fiscal 2018. A film is generally considered “wide release” if it is shown on over 600 screens nationally, and these films generally have the greatest impact on box office receipts. We played 117 wide-release films (including 29 digital 3D films) at our theatres during fiscal 2019 compared to 132 wide-release films (including 24 digital 3D films) during fiscal 2018. In total, we played 285 films and 190 alternate content attractions at our theatres during fiscal 2019 compared to 344 films and 216 alternate content attractions during fiscal 2018. Based upon projected film and alternate content availability, we currently estimate that we may show an increased number of films and alternate content events on our screens during fiscal 2020 compared to fiscal 2019.
Our average ticket price increased 8.0% during fiscal 2019 compared to fiscal 2018, due in part to the addition oftwo Movie Tavern theatres in certain markets where competitive pricing is slightly higher than in our legacy Midwestern markets. Excluding Movie Tavern theatres, our average ticket price at comparable theatres increased 3.4%with leases that will expire within the next year. One former budget-oriented theatre was converted to first-run during fiscal 2019 compared to fiscal 2018. At the beginning2021 and as a result, we no longer operate any budget-oriented theatres. One of the second quarter of fiscal 2019,Marcus Wehrenberg theatres that we implemented selected ticket price increases at certain locationsreopened in order to reflect the competitive market in which those theatres operate. In addition, we enactedMay 2021 completed a modest price increase for our proprietary PLF screens and converted our admission ticket pricing to a sales tax additive (or “tax-on-top”) model, consistent with the majority of our competitors. These modest ticket price increases likely had a favorable impact on our average ticket pricerenovation during fiscal 2019. The fact2021 that our top performing films during the fiscal 2019 performed particularlyadded DreamLounger recliner seating, as well in our PLF screens (with a corresponding price premium),as
Total concession revenues increased 38.8% during fiscal 2019 compared to fiscal 2018. Excluding Movie Tavern theatres, concession revenues at our comparable theatres decreased approximately 2.4% compared to the prior year. Our average concession sales per person increased 27.6% during fiscal 2019 compared to fiscal 2018. Our Movie Tavern theatres had a significant favorable impact on our overall average concession sales per person, as the average concession sales per person at these dine-in theatres are on average more than double the average concession sales per person we generally achieve at our average theatre without a dine-in option. Excluding Movie Tavern, our average concession revenues per person at comparable theatres increased 6.9% during fiscal 2019 compared to fiscal 2018. The increase in our concession sales per person contributed approximately $10.6 million to our comparable theatres concession revenues during fiscal 2019, partially offsetting the impact of reduced attendance on our overall decreased comparable theatre concession revenues during fiscal 2019 compared to fiscal 2018. Pricing, concession/food and beverage product mix and film product mix are the three primary factors that impact our concession sales per person. A change in concession product mix, including increased sales of higher priced non-traditional food and beverage items from our increasing number ofTake Five Lounges,Zaffiro’s Express,Reel Sizzle and in-theatre dining outlets, was the primary reason for our increased average concession sales per person during fiscal 2019. Conversely, we believe that the above-described change in film product mix during fiscal 2019 may have slightly reduced the growth of our overall average concession sales per person, as family-oriented and animated films such as the Disney films identified above tend not to contribute to sales of non-traditional food and beverage items as much as adult-oriented films. We currently expect to report an increase in our average concession sales per person at our comparable theatres during fiscal 2020 compared to fiscal 2019 due to our increased number of non-traditional food and beverage outlets, although as noted above, several factors may impact our actual results in this key metric.
Other revenues, which include management fees, pre-show advertising income, family entertainment center revenues, surcharge revenues, rental income and gift card breakage income, increased by $8.3 million during fiscal 2019 compared to fiscal 2018. This increase was primarily due to internet surcharge ticketing fees and preshow advertising income from our new Movie Tavern locations. We currently expect other revenues to continue to increase in fiscal 2020.
Our theatre division operating income and operating margin decreased during fiscal 2019 compared to fiscal 2018 due primarily to reduced attendance and revenues at comparable theatres as described above. Due to the significant investments we have made in our theatres over the last five years, we have higher fixed costs, such as rent, depreciation and amortization, and higher labor expenses, attributable in part to our increased number of new food and beverage outlets in our theatres. As a result, it is more difficult to remove costs when attendance declines as it did in several quarters during fiscal 2019, and operating margins are more likely to decline when that happens. Conversely, during periods with a strong film slate, operating margins potentially increase, as that same “leverage” should benefit our theatre division. Our fiscal 2019 operating margin was also negatively impacted by higher film costs, expressed as a percentage of admission revenues, compared to the prior year. Film cost percentage increased during fiscal 2019 primarily due to the increased percentage of our admission revenues that were derived from our top five blockbuster films during fiscal 2019 compared to fiscal 2018 (discussed above). Film costs, expressed as a percentage of admission revenues, are generally greater for the significant blockbuster films.
Due to the weaker 2019 film slate and anticipated ramp-up costs as we integrated the 22 acquired Movie Tavern theatres into our operating and marketing systems and programs, the Movie Tavern theatres, excluding acquisition and preopening expenses, did not have a significant impact on our theatre division operating income during fiscal 2019. Our theatre division operating margin also declined during fiscal 2019 compared to fiscal 2018 due to the impact of the Movie Tavern theatres. Our Movie Tavern theatres have a lower operating margin than our legacy theatres because all 22 acquired theatres are leased rather than owned (rent expense is generally significantly higher than depreciation expense). In addition, the fact that a larger portion of Movie Tavern revenues are derived from the sale of in-theatre food and beverage also results in lower operating margins, as food and labor costs are generally higher for those items compared to traditional concession items. Our operating income and operating margin were also negatively impacted during fiscal 2019 by approximately $2.5 million of acquisition and preopening expenses related to the Movie Tavern acquisition and the opening of a newly built Movie Tavern theatre in Brookfield, Wisconsin. Our operating income and operating margin were negatively impacted during fiscal 2018 by approximately $1.7 million of acquisition and preopening expenses related to the Movie Tavern acquisition.
In addition to the screens added due to the Movie Tavern acquisition, we opened one newUltraScreen DLX at an existing Marcus Wehrenberg theatre during the first quarter of fiscal 2019. We also opened a new eight-screen Movie Tavern by Marcus theatre in Brookfield, Wisconsin early in our fiscal 2019 fourth quarter and added four new screens to an existing Movie Tavern theatre during the first quarter of fiscal 2020. We did not add any new screens to existing theatres or open any new theatres during fiscal 2018. We ceased managing one five-screen theatre during the second quarter of fiscal 2018, and we lost one screen at a Marcus Wehrenberg theatre during the second quarter of fiscal 2018 in conjunction with a renovation that expanded the size of two adjacent auditoriums.
Admission revenues at comparable theatres during the first quarter of fiscal 2020 through the date of this report have increased compared to the prior year comparable period due primarily to a strong week between December 27 and New Year’s Day, and a stronger January and February film slate compared to the prior year. Snow and extreme cold in the Midwest during the first quarter of fiscal 2019 likely also had a negative impact on admission revenues last year. In addition to December holdover films such asStar Wars: The Rise of Skywalker andJumanji: The Next Level, films such as1917,Bad Boys For Life,DolittleandSonic the Hedgehog have contributed positively to our early fiscal 2020 results. Comparisons for the remainder of the quarter may be negatively impacted by the strong performance fromCaptain Marvelduring March 2019.
The film slate for the remainder of fiscal 2020 is expected to include a higher quantity of films and will likely be less dependent on major blockbusters. Whether a more diverse slate of films from multiple studios, without anAvengers orStar Wars movie, can match the box office performance of the Disney-centric franchise film line-up we experienced in fiscal 2019 is yet to be determined. Films that have potential to perform very well during the remainder of fiscal 2020 includeOnward,A Quiet Place Part II,Mulan,Peter Rabbit 2: The Runaway,No Time to Die,Black Widow, Trolls: World Tour,Scoob!,The Spongebob Movie: Sponge On The Run,Fast & Furious 9, Wonder Woman 1984,Soul,Top Gun Maverick,In The Heights,Minions: The Rise Of Gru,Free Guy,Ghostbusters: Afterlife,Tenet,Jungle Cruise,Morbius, Bill & Ted Face The Music,The King’s Man,Venom 2,Death On The Nile,The Eternals,Raya and The Last Dragon,Godzilla vs. Kong,Dune,Coming To Americasequel,The Croods 2and West Side Story. Generally, an increase in the quantity of films released, particularly from the six major studios, increases the potential for more blockbusters in any given year. Our goal is to continue to outperform the industry, but with the majority of our renovations now completed for our circuit, our ability to do so in any given quarter will likely be partially dependent upon film mix, weather, the competitive landscape in our markets and the impact of local sporting events.
As noted above, fiscal 2020 will be a 53-week year, which began on December 27, 2019 and will end on December 31, 2020. We anticipate that our reported results for fiscal 2020 will benefit from the additional week of reported operations. In particular, the additional week of operations will most benefit our theatre division, as it includes the traditionally strong movie-going week between Christmas and New Year’s Day. The last time we had an additional week of operations was during the Transition Period. Our additional 31st week of operations that year, which included a newStar Wars film, contributed approximately $14.4 million in additional revenues and $5.7 million in additional operating income to our final five-week period and Transition Period results for our theatre division. Although there can be no assurance that we will realize similar benefits in fiscal 2020, it is important to note that our theatre operations in 2015 did not include our two recent acquisitions.
Hotels and Resorts
| Change F19 v. F18 | Change F18 v. F17 | |||||||||||||||||||||||||||
| F2019 | F2018 | Amt. | Pct. | F2017 | Amt. | Pct. | ||||||||||||||||||||||
| (in millions, except percentages) | ||||||||||||||||||||||||||||
| Revenues | $ | 263.4 | $ | 259.9 | $ | 3.5 | 1.3 | % | $ | 249.6 | $ | 10.3 | 4.1 | % | ||||||||||||||
| Operating income | $ | 10.1 | $ | 12.5 | $ | (2.4 | ) | -19.5 | % | $ | 12.9 | $ | (0.4 | ) | -3.2 | % | ||||||||||||
| Operating margin | 3.8 | % | 4.8 | % | 5.2 | % | ||||||||||||||||||||||
| Available rooms at period-end | F2019 | F2018 | F2017 | |||||||||
| Company-owned | 2,627 | 2,629 | 2,629 | |||||||||
| Management contracts with joint ventures | 333 | 333 | 333 | |||||||||
| Management contracts with condominium hotels | 480 | 480 | 480 | |||||||||
| Management contracts with other owners | 1,945 | 1,833 | 1,399 | |||||||||
| Total available rooms | 5,385 | 5,275 | 4,841 | |||||||||
| F21 v. F20 | F20 v. F19 | ||||||||||||||||||||||||||||||||||||||||
| F2021 | F2020 | Amt. | Pct. | F2019 | Amt. | Pct. | |||||||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 186.6 | $ | 104.6 | $ | 82.0 | 78.4 | % | $ | 263.4 | $ | (158.7) | (60.3) | % | |||||||||||||||||||||||||||
| Operating income (loss) | $ | 5.9 | $ | (43.9) | $ | 49.8 | 113.4 | % | $ | 10.1 | $ | (53.9) | (536.7) | % | |||||||||||||||||||||||||||
| Operating margin | 3.1 | % | (41.9) | % | 3.8 | % | |||||||||||||||||||||||||||||||||||
| Available rooms at period-end | F2021 | F2020 | F2019 | |||||||||||||||||
| Company-owned | 2,628 | 2,628 | 2,627 | |||||||||||||||||
| Management contracts with joint ventures | 248 | 333 | 333 | |||||||||||||||||
| Management contracts with condominium hotels | 480 | 480 | 480 | |||||||||||||||||
| Management contracts with other owners | 2,088 | 1,691 | 1,945 | |||||||||||||||||
| Total available rooms | 5,444 | 5,132 | 5,385 | |||||||||||||||||
| Change F19 v. F18 | Change F18 v. F17 | |||||||||||||||||||||||||||
| F2019 | F2018 | Amt. | Pct. | F2017 | Amt. | Pct. | ||||||||||||||||||||||
| (in millions, except percentages) | ||||||||||||||||||||||||||||
| Room revenues | $ | 105.9 | $ | 108.8 | $ | (2.9 | ) | -2.7 | % | $ | 106.9 | $ | 1.9 | 1.8 | % | |||||||||||||
| Food/beverage revenues | 74.7 | 72.8 | 1.9 | 2.6 | % | 70.6 | 2.2 | 3.0 | % | |||||||||||||||||||
| Other revenues | 46.5 | 45.3 | 1.2 | 2.7 | % | 43.4 | 1.9 | 4.6 | % | |||||||||||||||||||
| 227.1 | 226.9 | 0.2 | 0.1 | % | 220.9 | 6.0 | 2.7 | % | ||||||||||||||||||||
| Cost reimbursements | 36.3 | 33.0 | 3.3 | 10.0 | % | 28.7 | 4.3 | 15.0 | % | |||||||||||||||||||
| Total revenues | $ | 263.4 | $ | 259.9 | $ | 3.5 | 1.3 | % | $ | 249.6 | $ | 10.3 | 4.1 | % | ||||||||||||||
| F21 v. F20 | F20 v. F19 | ||||||||||||||||||||||||||||||||||||||||
| F2021 | F2020 | Amt. | Pct. | F2019 | Amt. | Pct. | |||||||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||||||||
| Room revenues | $ | 77.7 | $ | 35.4 | $ | 42.3 | 119.4 | % | $ | 105.9 | $ | (70.5) | (66.6) | % | |||||||||||||||||||||||||||
| Food/beverage revenues | 47.1 | 24.8 | 22.3 | 89.7 | % | 74.7 | (49.8) | (66.8) | % | ||||||||||||||||||||||||||||||||
| Other revenues | 43.2 | 27.6 | 15.7 | 56.9 | % | 46.5 | (19.0) | (40.8) | % | ||||||||||||||||||||||||||||||||
| 168.0 | 87.8 | 80.2 | 91.4 | % | 227.1 | (139.3) | (61.4) | % | |||||||||||||||||||||||||||||||||
| Cost reimbursements | 18.7 | 16.9 | 1.8 | 10.7 | % | 36.3 | (19.4) | (53.5) | % | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 186.6 | $ | 104.6 | $ | 82.0 | 78.4 | % | $ | 263.4 | $ | (158.7) | (60.3) | % | |||||||||||||||||||||||||||
2020
| F21 v. F19 | |||||||||||||||||||||||
| F2021 | F2019 | Amt. | Pct. | ||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||
| Room revenues | $ | 77.7 | $ | 105.9 | $ | (28.2) | (26.6) | % | |||||||||||||||
| Food/beverage revenues | 47.1 | 74.7 | (27.6) | (36.9) | % | ||||||||||||||||||
| Other revenues | 43.2 | 46.5 | (3.3) | (7.1) | % | ||||||||||||||||||
| 168.0 | 227.1 | (59.1) | (26.0) | % | |||||||||||||||||||
| Cost reimbursements | 18.7 | 36.3 | (17.6) | (48.5) | % | ||||||||||||||||||
| Total revenues | $ | 186.6 | $ | 263.4 | $ | (76.7) | (29.1) | % | |||||||||||||||
Roomski and golf revenues at the Grand Geneva Resort & Spa, partially offset by decreased management fees. Cost reimbursements decreased during fiscal 20192021 compared to fiscal 2018 due entirely to the closing of the InterContinental Milwaukee and its reopening as the Saint Kate, partially offset by increased revenue per available room, or RevPAR, at our remaining seven company-owned hotels. Excluding the Saint Kate, room revenues during fiscal 2019 increased by 1.1% compared to fiscal 2018, despite the fact that our Hilton Madison hotel was undergoing a major renovation during the first half of fiscal 2019 that negatively impacted our overall room revenues. Food and beverage revenues increased during fiscal 2019 compared to fiscal 2018 despite having a closed hotel for most of the first half of fiscal 2019. Excluding the Saint Kate, food and beverage revenues during fiscal 2019 increased by 3.8% compared to fiscal 2018, due primarily to increased banquet and catering revenues, and despite the negative impact from our Hilton Madison hotel while it was under renovation. Other revenues increased during fiscal 2019 compared to fiscal 2018 due in part to increased management fees and revenues from our company-owned laundry facility. Cost reimbursements also increased during fiscal 2019 compared to fiscal 2018 due to an increase in the number of management contracts in this division.
Hotels and resorts division operating income and operating margin decreased by 19.5% and 1.0 percentage points (from 4.8% to 3.8%), respectively, during fiscal 2019 compared to fiscal 2018 due entirely to approximately $6.8 million of preopening expenses and initial startup losses related to the closing and conversion of the InterContinental Milwaukee into the Saint Kate. We also had approximately $1.1 million of additional depreciation and amortization attributable to this hotel during fiscal 2019 due to the new investment made at this property. Our operating income during fiscal 2018 was negatively impacted by preopening expenses of approximately $500,000 and accelerated depreciation expense of approximately $3.7 million also related to the Saint Kate conversion. Excluding this hotel from both years, our fiscal 2019 operating income would have improved by approximately $1.2 million, or 7.6% ($17.4 million in fiscal 2019 compared to $16.2 million in fiscal 2018). Again excluding this hotel, our operating margin was 6.8% during fiscal 2019 compared to 6.5% during fiscal 2018. This same-hotel improvement can be attributed to increasedreduced revenues and a continued focus on cost controls andreduced operating efficiency and was achieved despite the fact that the renovationcosts at the Hilton Madison hotel negatively impacted our operating results during fiscal 2019.
Initial guest and community reaction to the new Saint Kate hotel has been very favorable. As an independent hotel, we expected that it would take a period of time for this hotel to ramp up, particularly with group business, and as a result our fiscal 2019 second half comparisons of Saint Kate to a stabilized branded hotel during the prior year were unfavorable. The Saint Kate is achieving a higher average daily room rate than the hotel it replaced and its food and beverage revenues are exceeding the previous hotel as well. We believe that over time, the new hotel will ultimately outperform the previous hotel.
The following table sets forth certain operating statistics, including our average occupancy percentage (number of occupied rooms as a percentage of available rooms), our average daily room rate (“ADR”), and our total revenue per available room (“RevPAR”), for company-owned properties:
| Change F19 v. F18 | ||||||||||||||||
| Operating Statistics(1) | F2019 | F2018 | Amt. | Pct. | ||||||||||||
| Occupancy percentage | 73.6 | % | 74.0 | % | -0.4 | pts | -0.5 | % | ||||||||
| ADR | $ | 154.42 | $ | 151.98 | $ | 2.44 | 1.6 | % | ||||||||
| RevPAR | $ | 113.65 | $ | 112.51 | $ | 1.14 | 1.0 | % | ||||||||
(1)These operating statistics represent averages of our comparable eight distinct company-owned hotels and resorts, branded and unbranded, in different geographic markets with a wide range of individual hotel performance. The statistics are not necessarily representative of any particular hotel or resort. The statistics only include the periods the hotels were open during fiscal 2020. RevPAR increased at all eight of our company-owned properties during fiscal 2021 compared to fiscal 2020. The “drive-to leisure” travel customer provided the most demand during fiscal 2021, with weekend business quite strong at the majority of our properties. During fiscal 2021, our non-group business represented approximately 67% of our total rooms revenue, compared to approximately 56% during fiscal 2019 prior to the pandemic – an indication that group business continues to lag. Non-group retail pricing was very strong in the majority of our markets, with large demand drivers during our fiscal 2021 third quarter in our Milwaukee market (Milwaukee Bucks playoffs, major league baseball, Summerfest and the Ryder Cup) and significant leisure demand at Grand Geneva contributing to increased occupancy percentages and ADR. 42 As a result of the significantly reduced revenues during 2020, we believe it is also beneficial to compare our operating statistics to pre-pandemic levels. The following table sets forth certain operating statistics for fiscal 2021 and fiscal 2019, including our average occupancy percentage, our ADR, and our RevPAR, for company-owned properties:
(1)These operating statistics represent averages of our comparable seven distinct company-owned hotels and resorts, branded and unbranded, in different geographic markets with a wide range of individual hotel performance. The statistics are not necessarily representative of any particular hotel or resort. The statistics exclude the Saint Kate, as this hotel was closed for the majority of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RevPAR increased at five of our seven comparable company-owned properties during fiscal 2019 compared to fiscal 2018. As noted above, our Hilton Madison hotel underwent a major renovation during the first half of fiscal 2019, negatively impacting our overall operating statistics. Excluding the Hilton Madison, our remaining six comparable company-owned hotels experienced a RevPAR increase of 2.4% during fiscal 2019 compared to fiscal 2018. 2019.
Theupper upscale, continue to experience lower occupancies compared to lower class hotel segments such as economy and midscale.
| Change F19 v. F18 | ||||||||||||||||
| 1st Qtr. | 2nd Qtr. | 3rd Qtr. | 4th Qtr. | |||||||||||||
| Occupancy percentage | -1.3 | pts | 0.4 | pts | -0.5 | pts | -0.3 | pts | ||||||||
| ADR | 0.1 | % | 2.9 | % | 1.2 | % | 1.7 | % | ||||||||
| RevPAR | -1.9 | % | 3.4 | % | 0.6 | % | 1.3 | % | ||||||||
| F21 v. F19 | |||||||||||||||||||||||
1st Qtr. | 2nd Qtr. | 3rd Qtr. | 4th Qtr. | ||||||||||||||||||||
| Occupancy percentage | (35.8) pts | (26.9) pts | (17.1) pts | (16.5) pts | |||||||||||||||||||
| ADR | 1.9 | % | (11.8) | % | 10.3 | % | 5.5 | % | |||||||||||||||
| RevPAR | (54.5) | % | (42.2) | % | (12.4) | % | (19.7) | % | |||||||||||||||
Our comparable hotelfuture RevPAR growth of 1.0% during fiscal 2019 compared to fiscal 2018 was entirely the result of an increase in our comparable ADR. We experienced increases in our ADR during all four fiscal 2019 quarters and five of our seven comparable company-owned hotels (including the Hilton Madison, but excluding the Saint Kate) reported increased ADR during fiscal 2019 compared to fiscal 2018. Group business also has an impact on our ADR. Typically, when we have substantial blocks of rooms committed to group business, we are able to raise rates with non-group business. Our largest increase in ADR during fiscal 2019 – the second quarter – coincided with our largest increases in group business during the year. Conversely, leisure customers tend to be very loyal to online travel agencies, which is one of the reasons why we continue to experience some rate and margin pressure. While we have been selective in choosing the online portals to which we grant access to our inventory, such portals are part of the booking landscape today, and our goal is to use them in the most efficient way possible.
Nationally, the pace of RevPAR growth has been declining over the past several years and many published reports by those who closely follow the hotel industry suggest that the United States lodging industry will experience very limited overall growth in RevPAR in calendar 2020, with some markets possibly experiencing small declines. Whether the relatively positive trends in the lodging industry over the last several years will continue depends in large part on the economic environment, as hoteldifficult. Hotel revenues have historically tracked very closely with traditional macroeconomic statistics such as the gross domestic product. We also continueGross Domestic Product, so we will be monitoring the economic environment very closely. After past shocks to monitorthe system, such as the terrorist attacks on September 11, 2001 and the 2008 financial crisis, hotel demand took longer to recover than other components of the economy. Conversely, we now anticipate that hotel supply ingrowth will be limited for the foreseeable future, which can be beneficial for our markets, as increased supply without a corresponding increase in demand may have a negative impact on our results.
We generally expect our future revenue trends to trackexisting hotels. Most industry experts believe the overall industry trends, particularly in our respective markets.pace of recovery will be steady over the next couple of years. We are encouraged by the fact that, asdemand from drive-to leisure customers during fiscal 2021, which exceeded our expectations. We will continue to focus on reaching the drive-to leisure market through aggressive campaigns promoting creative packages for our guests. Overall, we generally expect our revenue trends to track or exceed the overall industry trends for our segment of the dateindustry, particularly in our respective markets.
As discussed in the “Current Plans” section of this MD&A, we currently anticipate beginning major renovations at The Pfister Hotel and Grand Geneva Resort & Spa late in fiscal 2020, with the majority of the work likely to be performed during fiscal 2021. We do not currently expect these renovations to have any significant impact on fiscal 2020 operating results. We do expect favorable comparisons during fiscal 2020 (compared to fiscal 2019 results) at the Hilton Madison, now that renovations are complete, and the Saint Kate, as it will be open all year and should experience operating improvements as market awareness of this new hotel continues to increase. Additionally, as noted above, fiscal 2020 will be a 53-week year. The last time we had an additional week of operations was during our Transition Period. Our additional 31st week of operations that year contributed approximately $3.0 million in additional revenues and $700,000 in additional operating income to our final five-week period and Transition Period results for our hotels and resorts division. There can be no assurance that we will realize similar benefits in fiscal 2020.
Our hotels and resorts division operating results during fiscal 2019 benefited from three management contracts added during fiscal 2018 – the Murieta Inn and Spa in Rancho Murieta, California (added January 2018), along with the DoubleTree by Hilton Hotel El Paso Downtown (added April 2018) and the Courtyard by Marriott El Paso Downtown/Convention Center(added August 2018), both in El Paso, Texas. In addition, on April 1, 2019, we assumed management of the Hyatt Regency Schaumburg hotel in Schaumburg, Illinois. Conversely, in May 2019, we ceased managing the Heidel House Resort & Spa in Green Lake, Wisconsin, after the owners of this resort decided to close this property permanently. Early in our fiscal 2019 third quarter, the owners of the Sheraton Chapel Hill Hotel in Chapel Hill, North Carolina sold the hotel, and as a result our contract to manage this hotel was terminated. The loss of these management contracts has partially offset the benefits of the new management contracts described above. effective February 28, 2022. As of the date of this filing, our current portfolio of hotels and resorts includes 2017 owned and managed properties across the country.
During our fiscal 2020 first quarter, Michael R. Evans joined us as the new president of Marcus Hotels & Resorts. Mr. Evans
| F2021 | F2020 | F2019 | |||||||||||||||
| Net earnings (loss) attributable to The Marcus Corporation | $ | (43.3) | $ | (124.8) | $ | 42.0 | |||||||||||
| Add (deduct): | |||||||||||||||||
| Investment income | (0.6) | (0.6) | (1.4) | ||||||||||||||
| Interest expense | 18.7 | 16.3 | 11.8 | ||||||||||||||
| Other expense (income) | 2.5 | 1.0 | 1.9 | ||||||||||||||
| Loss (gain) on disposition of property, equipment and other assets | (3.2) | (0.9) | 1.1 | ||||||||||||||
| Equity losses from unconsolidated joint ventures, net | 0.1 | 1.5 | 0.3 | ||||||||||||||
| Net loss attributable to noncontrolling interests | — | — | 0.1 | ||||||||||||||
| Income tax expense (benefit) | (15.7) | (70.9) | 12.3 | ||||||||||||||
| Depreciation and amortization | 72.1 | 75.1 | 72.3 | ||||||||||||||
Share-based compensation expenses (1) | 9.3 | 4.4 | 3.5 | ||||||||||||||
Acquisition and preopening expenses (2)(3) | — | — | 9.3 | ||||||||||||||
Property closure/reopening expenses (4)(5) | — | 11.5 | — | ||||||||||||||
Impairment charges (6) | 5.8 | 24.7 | 1.9 | ||||||||||||||
Government grants and federal tax credits (7) | (10.7) | (7.0) | — | ||||||||||||||
Insurance proceeds (8) | — | (1.8) | — | ||||||||||||||
| Total Adjusted EBITDA | $ | 35.1 | $ | (71.6) | $ | 155.2 | |||||||||||
| F2021 | F2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Theatres | Hotels & Resorts | Corp. Items | Total | Theatres | Hotels & Resorts | Corp. Items | Total | ||||||||||||||||||||||||||||||||||||||||
| Operating income (loss) | $ | (27.6) | $ | 5.9 | $ | (19.8) | $ | (41.5) | $ | (121.4) | $ | (43.9) | $ | (13.1) | $ | (178.4) | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 51.7 | 20.2 | 0.3 | 72.1 | 53.5 | 21.1 | 0.5 | 75.1 | |||||||||||||||||||||||||||||||||||||||
Share-based compensation (1) | 2.3 | 1.7 | 5.3 | 9.3 | 1.1 | 0.7 | 2.6 | 4.4 | |||||||||||||||||||||||||||||||||||||||
Property closure/reopening expenses (4) (5) | — | — | — | — | 5.8 | 5.7 | — | 11.5 | |||||||||||||||||||||||||||||||||||||||
Impairment charges (6) | 5.8 | — | — | 5.8 | 24.7 | — | — | 24.7 | |||||||||||||||||||||||||||||||||||||||
Government grants and federal tax credits (7) | (7.2) | (3.4) | (0.1) | (10.7) | (5.8) | (1.2) | — | (7.0) | |||||||||||||||||||||||||||||||||||||||
Insurance proceeds (8) | — | — | — | — | — | — | (1.8) | (1.8) | |||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 24.9 | $ | 24.4 | $ | (14.3) | $ | 35.1 | $ | (42.2) | $ | (17.6) | $ | (11.8) | $ | (71.6) | |||||||||||||||||||||||||||||||
| F2019 | |||||||||||||||||||||||
| Theatres | Hotels & Resorts | Corp. Items | Total | ||||||||||||||||||||
| Operating income (loss) | $ | 76.9 | $ | 10.1 | $ | (18.8) | $ | 68.2 | |||||||||||||||
| Depreciation and amortization | 51.2 | 20.4 | 0.6 | 72.3 | |||||||||||||||||||
Share-based compensation (1) | 0.9 | 0.6 | 2.1 | 3.5 | |||||||||||||||||||
Acquisition/preopening expenses (2)(3) | 2.5 | 6.8 | 0.0 | 9.3 | |||||||||||||||||||
Impairment charges (6) | 1.9 | 0.0 | 0.0 | 1.9 | |||||||||||||||||||
| Adjusted EBITDA | $ | 133.3 | $ | 37.9 | $ | (16.0) | $ | 155.2 | |||||||||||||||
| F21 v. F20 | F20 v. F19 | ||||||||||||||||||||||||||||||||||||||||
| F2021 | F2020 | Amt. | Pct. | F2019 | Amt. | Pct. | |||||||||||||||||||||||||||||||||||
| (in millions, except percentages) | |||||||||||||||||||||||||||||||||||||||||
| Theatres | $ | 24.9 | $ | (42.2) | $ | 67.1 | (159.1) | % | $ | 133.3 | $ | (175.5) | (131.6) | % | |||||||||||||||||||||||||||
| Hotels and resorts | 24.4 | (17.6) | 42.0 | (239.0) | % | 37.9 | (55.5) | (146.3) | % | ||||||||||||||||||||||||||||||||
| Corporate items | (14.3) | (11.8) | (2.4) | 20.5 | % | (16.0) | 4.2 | (26.3) | % | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 35.1 | $ | (71.6) | 106.7 | (149.0) | % | $ | 155.2 | (226.7) | (146.1) | % | |||||||||||||||||||||||||||||
result, we were pleased to report positive consolidated Adjusted EBITDA during fiscal 2021 as we continue to recover from the pandemic.
our 86-year history, and, despite the COVID-19 pandemic, our financial position remains strong. As of December 30, 2021, we had a cash balance of approximately $17.7 million, $221.4 million of availability under our $225.0 million revolving credit facility, and our debt-to-capitalization ratio (including short-term borrowings) was 0.37. With our strong liquidity position, combined with the expected receipt of additional state grants, income tax refunds and proceeds from the sale of surplus real estate (discussed above), we believe we are positioned to meet our obligations as they come due and continue to sustain our operations for one year from the date of this report, as well as our longer-term capital requirements for periods beyond one year from the date of this report, even if our properties continue to generate reduced revenues during these periods. We will continue to work to preserve cash and maintain strong liquidity to endure the impacts of the global pandemic, even if it continues for a prolonged period of time.
UnderBorrowings under the Credit Agreement we have agreedgenerally bear interest at a variable rate equal to: (i) LIBOR, subject to a 1% floor, plus a specified margin based upon our consolidated debt to capitalization ratio as of the most recent determination date; or (ii) the base rate (which is the highest of (a) the prime rate, (b) the greater of the federal funds rate and the overnight bank funding rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR), subject to a 1% floor, plus a specified margin based upon our consolidated debt to capitalization ratio as of the most recent determination date. In addition, the Credit Agreement generally requires us to pay a facility fee payable quarterly, equal to 0.125% to 0.250%0.25% of the total revolving commitment, depending on our consolidated debt to capitalization ratio, as defined in the Credit Agreement. Certain borrowings, such as ABR borrowings, underHowever, pursuant to the First Amendment and the Second Amendment: (A) in respect of revolving loans, (1) we are charged a facility fee equal to 0.40% of the total revolving credit facility bear interest, payable no less frequently than quarterly, at acommitment and (2) the specified margin is 2.35% for LIBOR borrowings and 1.35% for ABR borrowings, which facility fee rate equal toand specified margins will remain in effect until the alternate base rate, as definedend of the first fiscal quarter ending after the end of any period in which any portion of the term loan facility remains outstanding or the testing of any financial covenant in the Credit Agreement plusis suspended (the “specified period”); and (B) in respect of term loans, the applicable rate, as definedspecified margin is 2.75% for LIBOR borrowings and 1.75% for ABR borrowings, in the Credit Agreement. Other borrowings, such as Eurodollar borrowings, under the revolving credit facility bear interesteach case, at a rate equal to the adjusted LIBO rate for the interest period, as defined in the Credit Agreement, plus the applicable rate.
all times.
Agreement).
The Credit Agreement We believe that the actions we have taken over the past two years will allow us to have sufficient liquidity to meet our obligations as they come due and to comply with our debt covenants for at least 12 months from the issuance date of the consolidated financial statements. However, future compliance with our debt covenants could be impacted if we are unable to return to closer-to-normal operations as currently expected, which could be impacted by matters that are not entirely in our control, such as the continuation of protective actions that federal, state and local governments have taken, the impact of any new variants of COVID-19 on customer behavior and the senior notes impose various financialtiming of new movie releases (as described in the Impact of the COVID-19 Pandemic section of this MD&A). Future compliance with our debt covenants applicable to The Marcus Corporation and certaincould also be impacted if the speed of recovery of our subsidiaries. As oftheatres and hotels and resorts businesses is slower than currently expected. For example, our current expectations are that our theatre division will continue to improve during fiscal 2022 (but still report results below comparable periods in fiscal 2019), before beginning to progressively return to closer-to-normal performance as we enter fiscal 2023. Our current expectations for our hotels and resorts division are that we will continue to show improvement in each succeeding quarter compared to the date of this filing, we are in compliance with all of the financial covenants imposed by the Credit Agreement and the senior notes, and weprior year, but continue to underperform compared to pre-COVID-19 pandemic years. We do not expect to return to pre-COVID-19 occupancy levels during fiscal 2022 due to an expected lag in business and group travel. It is possible that the impact of COVID-19 may be ablegreater than currently expected across one or both of our divisions such that we may be unable to meetcomply with our debt covenants in future periods. In such financialan event, we would either seek covenant waivers or attempt to amend our covenants, during the remainder of fiscal 2020.
though there is no certainty that we would be successful in such efforts.
2020
2021.
2021 or fiscal 2020.
Net cash used in financing activities during fiscal 20192021 totaled $43.8$47.2 million, compared to $76.9 millionnet cash provided by financing activities during fiscal 2018. The decrease in net2020 of $69.1 million. During fiscal 2021, we increased our borrowings under our revolving credit facility as needed to fund our cash used in financing activities of $33.1 million, or 43.0%, was due to a smaller reduction in our long term debt during fiscal 2019 compared to fiscal 2018, which primarily was the result of the use of cash for the Movie Tavern acquisition described above.
Weneeds and used excess cash during fiscal 2019 and fiscal 2018 to reduce our borrowings under our revolving credit facility. As short-term revolving credit facility borrowings became due, we replaced them as necessary with new short-term revolving credit facility borrowings. As a result, we added $335.0$178.5 million of new short-term revolving credit facility borrowings, and we made $333.0$178.5 million of repayments on short-term revolving credit facility borrowings during fiscal 2019 (net increase in borrowings on our credit facility of $2.0 million) compared to $203.0 million of new short-term borrowings2021. Net cash provided by operating and $254.0 million of repayments on short-term borrowings made during fiscal 2018 (net decrease in net borrowings on our credit facility of $51.0 million), accounting for the decrease in net cash used in financinginvesting activities during fiscal 2019.
2021 was used to repay $40.3 million of short-term borrowings, including the early repayment of a portion of our term loan facility, as described above. We did not issue any new long-term debt during fiscal 2019 or2021.
2020, which included a $9.0 million final payment on senior notes that matured in April 2020. We incurred $0.2 million and $7.6 million in debt issuance costs during fiscal 2021 and fiscal 2020, respectively.
We repurchased approximately 30,000
In conjunction with the Movie Tavern acquisition, we issued 2,450,000
We paid regularability to declare quarterly dividends totaling $19.3 million and $16.4 million, respectively, during fiscal 2019 and fiscal 2018. The increase in dividend payments was the resultand/or repurchase shares of an increased number of outstanding shares and a 6.7% increase in our regular quarterly dividend payment rate initiated in March 2019. During the first quarter of fiscal 2020, we increased our regular quarterly common stock cash dividend by an additional 6.3% to $0.17 per common share.
Future Uses of Cash
| Payments Due by Period | ||||||||||||||||||||
| Total | Less Than 1 Year | 1-3 Years | 4-5 Years | After 5 Years | ||||||||||||||||
| Long-term debt | $ | 216,342 | $ | 9,910 | $ | 21,976 | $ | 22,185 | $ | 162,271 | ||||||||||
| Interest on fixed-rate long term debt(1) | 34,775 | 7,357 | 11,854 | 8,165 | 7,399 | |||||||||||||||
| Pension obligations | 43,824 | 1,400 | 3,247 | 3,323 | 35,854 | |||||||||||||||
| Operating lease obligations | 339,814 | 24,369 | 52,043 | 49,342 | 214,060 | |||||||||||||||
| Capital lease obligations | 29,345 | 3,606 | 5,947 | 5,699 | 14,093 | |||||||||||||||
| Construction commitments | 2,243 | 2,243 | - | - | - | |||||||||||||||
| Total contractual obligations | $ | 666,343 | $ | 48,885 | $ | 95,067 | $ | 88,714 | $ | 433,677 | ||||||||||
| Payments Due by Period | |||||||||||||||||||||||||||||
| Total | Less Than 1 Year | 1-3 Years | 4-5 Years | After 5 Years | |||||||||||||||||||||||||
| Long-term debt | $ | 215,144 | $ | 10,967 | $ | 22,118 | $ | 124,346 | $ | 57,713 | |||||||||||||||||||
Interest on fixed-rate long term debt(1) | 41,368 | 10,710 | 18,254 | 10,095 | 2,309 | ||||||||||||||||||||||||
| Pension obligations | 46,827 | 1,697 | 3,734 | 4,561 | 36,835 | ||||||||||||||||||||||||
| Operating lease obligations | 310,190 | 26,803 | 52,152 | 50,711 | 180,524 | ||||||||||||||||||||||||
| Finance lease obligations | 23,794 | 3,404 | 6,218 | 5,714 | 8,458 | ||||||||||||||||||||||||
| Short-term borrowings | 47,346 | 47,346 | — | — | — | ||||||||||||||||||||||||
| Construction commitments | 11,776 | 11,776 | — | — | — | ||||||||||||||||||||||||
| Total contractual obligations | $ | 696,445 | $ | 112,703 | $ | 102,476 | $ | 195,427 | $ | 285,839 | |||||||||||||||||||
As of December 26, 2019,30, 2021, we had no debt or lease guarantee obligations.
The variable interest rate debt (including short-term borrowings) and fixed interest rate debt outstanding as of December 26, 201930, 2021 matures as follows (in thousands):
| F2020 | F2021 | F2022 | F2023 | F2024 | Thereafter | Total | ||||||||||||||||||||||
| Variable interest rate | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 81,000 | $ | 81,000 | ||||||||||||||
| Fixed interest rate | 9,965 | 11,015 | 11,065 | 11,118 | 11,171 | 81,330 | 135,664 | |||||||||||||||||||||
| Debt issuance costs | (55 | ) | (52 | ) | (52 | ) | (52 | ) | (52 | ) | (59 | ) | (322 | ) | ||||||||||||||
| Total debt | $ | 9,910 | $ | 10,963 | $ | 11,013 | $ | 11,066 | $ | 11,119 | $ | 162,271 | $ | 216,342 | ||||||||||||||
| F2022 | F2023 | F2024 | F2025 | F2026 | Thereafter | Total | |||||||||||||||||||||||||||||||||||
| Variable interest rate | $ | 47,499 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 47,499 | |||||||||||||||||||||||||||
| Fixed interest rate | 11,977 | 12,038 | 12,099 | 124,847 | 297 | 57,716 | 218,974 | ||||||||||||||||||||||||||||||||||
| Debt issuance costs | (1,162) | (1,010) | (1,009) | (759) | (40) | (3) | (3,983) | ||||||||||||||||||||||||||||||||||
| Total debt | $ | 58,314 | $ | 11,028 | $ | 11,090 | $ | 124,088 | $ | 257 | $ | 57,713 | $ | 262,490 | |||||||||||||||||||||||||||
•We review long-lived assets, including property and equipment, operating lease right-of-use assets and our trade name intangible asset, for impairment at least annually, or whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. Such review is primarily done at the individual theatre or hotel property level, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other asset groups. We use judgment to determine whether indicators of impairment exist. The determination of the occurrence of a triggering event is based upon our knowledge of the theatre and hospitality industries, historical experience such as recent operating results, location of the property, market conditions, recent events or transactions, and property-specific information available at the time of the assessment. When a triggering event occurs, judgment is also required in determining the assumptions and estimates to use within the recoverability analysis and when calculating the fair value of the asset if it is determined that the long-lived asset is not recoverable. In performing these analyses, we must make assumptions regarding the estimated future cash flows and other factors that a market participant would make to determine the fair value of the respective assets. The estimate of cash flows is based upon, among other things, certain assumptions about expected future operating performance and anticipated sales prices. Our estimates of cash flows are sensitive to assumed revenue growth rates and may differ from actual cash flows due to factors such as economic conditions, the continuing impact of the COVID-19 pandemic, changes to our business model or changes in our operating performance and anticipated sales prices. For long-lived assets other than goodwill, if the sum of the undiscounted estimated cash flows is less than the current carrying value, we then prepare a fair value analysis of the asset. If the carrying value of the asset exceeds the fair value of the asset, we recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset. During fiscal 2021, we recorded before-tax impairment charges totaling $5.8 million related to two operating theatres, three permanently closed theatres and surplus real estate that we intend to sell. During fiscal 2020, we recorded before-tax impairment charges totaling $24.7 million related to our trade name intangible asset and multiple theatre locations. During fiscal 2019, we recorded a before-tax impairment charge of $1.9 million related to a specific theatre location. •We review goodwill for impairment annually or more frequently if certain indicators arise. Beginning in fiscal 2021, we performed our annual impairment test on the first day of our fiscal fourth quarter. In prior years, we performed our annual impairment test on the last day of our fiscal year. We believe performing the test at the beginning of the fourth fiscal quarter is preferable as it better aligns with our forecasting and budgeting process. The change in the annual impairment test date does not represent a material change to our method of applying an accounting principle. Goodwill is tested for impairment at a reporting unit level, determined to be at an operating segment level. When reviewing goodwill for impairment, we consider the amount of excess fair value over the carrying value of the reporting unit, the period of time since the last quantitative test, and other factors to determine whether or not to first perform a qualitative test. When performing a qualitative test, we assess numerous factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying value. Examples of qualitative factors that we assess include our share price, our financial performance, market and competitive factors in our industry, and other events specific to the reporting unit. If we conclude that it is more likely than not that the fair value of our reporting unit is less than its carrying value, we perform a quantitative test by comparing the carrying value of the reporting unit to the estimated fair value. Primarily all of our goodwill relates to our theatre segment. Due to the COVID-19 pandemic and the temporary closing of all of our theatre locations, we determined that a triggering event occurred during the 13 weeks ended March 26, 2020 and performed a quantitative analysis. In order to determine fair value, we used assumptions based on information available to us as of March 26, 2020, including both market data and forecasted cash flows. We then used this information to determine fair value and determined that the fair value of our theatre reporting unit exceeded our carrying value by approximately 20% and deemed that no impairment was indicated as of March 26, 2020. Due to the ongoing impact of the COVID-19 pandemic, the continued temporary closing of several of our theatre locations, and a reduction in our share price, we also determined that a triggering event occurred during the quarter ended September 24, 2020. As a result, we performed a quantitative analysis as of that date as well as of December 31, 2020. In order to determine fair value, we used assumptions based on information available to us as of September 24, 2020 and December 31, 2020, including both market data and forecasted cash flows. We then 55 used this information to determine fair value and determined that the fair value of our theatre reporting unit exceeded our carrying value by approximately 17% and 21%, respectively, and deemed that no impairment was indicated as of September 24, 2020 and December 31, 2020. During the first three quarters of fiscal 2021, we determined that there were no indicators of impairment that would require an additional quantitative analysis during these interim periods. We performed our annual goodwill impairment test as of October 1, 2021 and determined that a quantitative analysis would be appropriate. In order to determine fair value, we used assumptions based on information available to us as of October 1, 2021, including both market data and forecasted cash flows. We then used this information to determine fair value and determined that the fair value of our theatre reporting unit exceeded our carrying value by a substantial amount and deemed that no impairment was indicated as of October 1, 2021. If we are unable to achieve our forecasted cash flow or if market conditions worsen, our goodwill could be impaired at a later date. •Depreciation expense is based on the estimated useful life of our assets. The life of the assets is based on a number of assumptions, including cost and timing of capital expenditures to maintain and refurbish the asset, as well as specific market and economic conditions. While management believes its estimates are reasonable, a change in the estimated lives could affect depreciation expense and net earnings or the gain or loss on the sale of any of the assets. •Periodically, we make acquisitions that may have a material |
Accounting Changes
In January 2017, the Financial Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) No. 2017-04,Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment, which eliminates Step 2 of the goodwill impairment test that had required a hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and recognize an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 is effective for us in fiscal 2020 and must be applied prospectively. We do not believe the new standard will have a material effect on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-14,Compensation—Retirement Benefits—Defined Benefit Plans—General, designed to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. ASU No. 2018-14 is effective for us in fiscal 2020 and early application is permitted. We do not believe the new standard will have a material effect on our consolidated financial statement disclosures.
In August 2018, the FASB issued ASU No. 2018-13,Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The purpose of ASU No. 2018-13 is to improve the disclosures related to fair value measurements in the financial statements. The improvements include the removal, modification and addition of certain disclosure requirements primarily related to Level 3 fair value measurements. ASU No. 2018-13 is effective for us in fiscal 2020. The amendments in ASU No. 2018-13 should be applied prospectively. We do not expect ASU No. 2018-13 to have a significant impact on our consolidated financial statements.
position. Assets acquired and liabilities assumed in acquisitions are recorded at fair value as of the acquisition date. We use judgment to allocate the purchase price of the businesses acquired to the identifiable tangible and intangible assets acquired and liabilities assumed. In Decembersome cases, we may use an independent valuation firm to assist with our valuation, and our assumptions and estimates are based upon comparable market data and information obtained from our management and the management of the acquired businesses using acceptable valuation techniques. Generally, tangible assets acquired include property and equipment, finance lease right-of-use assets and operating lease right-of-use assets. Intangible assets acquired may include tradename intangibles, non-compete agreements or goodwill in a business combination. While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year following the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. During fiscal 2019, we acquired the FASB issuedassets of Movie Tavern for a total purchase price of approximately $139.3 million.
| Balance at December 31, 2020 | Cumulative adjustment | Balance at January 1, 2021 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Long-term debt | $ | 193,036 | $ | 21,393 | $ | 214,429 | |||||||||||
| Deferred income taxes | 33,429 | (5,584) | 27,845 | ||||||||||||||
| Capital in excess of par | 153,529 | (16,511) | 137,018 | ||||||||||||||
| Retained earnings | 331,897 | 702 | 332,599 | ||||||||||||||
| Gregory S. Marcus | Douglas A. Neis | ||||
| President and Chief Executive Officer | Executive Vice President and Chief Financial Officer | ||||
Change in Accounting Principle
As discussed in Note 8 to the financial statements, the Company changed its method of accounting for leases in the year ended December 26, 2019 due to the adoption of Accounting Standards Update No. 2016-02,Leases (Topic 842), using the modified retrospective method.
Matter
|
Our audit procedures related to management’s assessment and evaluation of impairment statements. (LOSS) (LOSS) Year Ended Capital of Par Retained Earnings Wisconsin. Cash Equivalents Restricted cash also includes funds held within the Company's captive insurance entity that are designated to pay expenses related specifically to the captive. The carrying value of the Company’s financial instruments (including cash and cash equivalents, restricted cash, accounts receivable and accounts payable) approximates fair value. The fair value of the Company’s practice. Acquisition - was required. Substantially all of the Company’s goodwill relates to the theatre reporting unit. discussed in Note 4. earnings (loss). Investments 3 - Revenue Recognition. Holders of Common Stock are entitled to cash dividends per share equal to 110% of all dividends declared and paid on each share of Significant Accounting Policies (continued) December 26, December 27, Hotels/ follows: Other revenues include management fees for theatres and hotels under management agreements. The management fees are recognized as earned based on the terms of the agreements. The management fees include variable consideration that is recognized based on the Company’s right to invoice as the amount invoiced corresponds directly to the value transferred to the customer. Other revenues also include family entertainment center revenues and revenues from Hotels/Resorts outlets such as spa, ski, golf and parking, each of which are recognized at the time of sale. In addition, other revenues include pre-show advertising income in the Company’s theatres. Pre-show advertising revenue includes variable consideration, primarily based on attendance levels, that is allocated to distinct time periods that make up the overall performance obligation. earnings (loss). a trade name intangible asset of $9,500 which the Company has determined to have an indefinite life. 7. Long-Term Debt and Short-Term Borrowings 7. Long-Term Debt and Short-Term Borrowings (continued) 30, 2021, are as follows: Year Ended December 26, 2019 Year Ended December 27, 2018 Year Ended December 28, 2017 Total pre-tax $10.00 to $18.34 $18.35 to $27.00 $27.01 to $41.90 2.0 years fiscal 2019, respectively. per share data) The status of the Company’s unfunded nonqualified, defined-benefit and account-based retirement plan based on the respective December The pre-tax change in the benefit obligation recognized in other comprehensive loss was as follows: per share data) The refundable payroll tax credits, deferment of employer-side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. After reviewing these provisions, the Company filed income tax refund claims of approximately $37,400 in fiscal 2020 and $24,200 in fiscal 2021, with the primary benefit derived from several accounting method changes and new rules for qualified improvement property expenditures and net operating loss carrybacks. The Company received $31,500 of the tax refunds in fiscal 2020 and $7,800 in fiscal 2021. The Company received the remaining $22,300 in February 2022. December 26, 2019 December 27, 2018 December 28, 2017 30, 2021. In December 2021 the Company formed a joint venture with Searchlight Capital Partners (“Searchlight”) to acquire the Kimpton Hotel Monaco Pittsburgh (“Monaco”), a 248-room upper upscale hotel in downtown Pittsburgh, Pennsylvania. The fraud, intentional misrepresentation, voluntary incurrence of prohibited debt, prohibited transfers of the collateral, and voluntary bankruptcy of the Monaco joint venture. Under the terms of the Monaco joint venture operating agreement, Searchlight has fully indemnified the Company under the “bad boy” guarantees for any losses other than those attributable to the Company’s own bad acts and has indemnified the Company to its proportionate liability under the environmental liability. Theatres Hotels/ Resorts Corporate Items Total 2019: June 27, 2019 June 28, 2018 *This exhibit is a management contract or compensatory plan, contract or arrangement in which a director or named executive officer of the Company participated. Douglas A. Neis, Executive Vice President and Chief Financial Officer Officer)Our audit procedures related to the valuation of the property and equipment, favorable and unfavorable lease amounts, and the trade name intangible asset included the following, among others:·We tested the effectiveness of internal controls over the fair value determinations, including the controls related to the review of the replacement cost estimates used in valuing the property and equipment, the rent expense-to-revenue and operating cash flow margin assumptions used in valuing the favorable and unfavorable lease amounts, and the royalty rate assumption used in valuing the trade name intangible asset.·We read the purchase agreement and evaluated whether information in the purchase price allocation, including the identification of assets acquired and liabilities assumed, was consistent with the terms and conditions in the purchase agreement.·With the assistance of our fair value specialists, we evaluated the reasonableness of (1) the Company’s valuation methodologies, (2) the estimated replacement costs used in valuing the property and equipment, (3) the rent-to-revenue and operating cash flow margin assumptions used in valuing the favorable and unfavorable lease amounts, and (4) the royalty rate assumption used in valuing the trade name, including testing the source information underlying the determination of these estimates and assumptions, testing the mathematical accuracy of the calculations, and developing a range of independent estimates and assumptions and comparing those to the estimates and assumptions used in management’s determination of fair values.Long-Lived Assets – Assessment of Impairment Indicators – Refer to Note 1 and Note 3 to the financial statementsCritical Audit Matter DescriptionAs of December 26, 2019, the Company had a significant amount of long-lived assets, including $923 million of net property and equipment, with the majority of this balance consisting of land, buildings and improvements at hotel and theatre properties, and $244 million of operating lease right-of-use assets, primarily related to hotel and theatre properties. The Company assesses long-lived assets for impairment at the individual hotel or theatre properties at least annually, or whenever events or changes in circumstances indicate the carrying amount of any such asset may not be recoverable.52In assessing long-lived assets at hotel and theatre properties for indicators of potential impairment, Company management considered quantitative and qualitative factors, including evaluating the historical actual operating performance of the properties and assessing the potential impact of recent events and transactions impacting the properties. Company management evaluated these factors to determine whether any events or changes in circumstances indicated that the carrying amount of an asset may not be recoverable. Evaluating whether any of these quantitative and qualitative factors represented an indicator of potential impairment required significant judgment by management.We identified the assessment of impairment indicators for long-lived assets as a critical audit matter because of the subjectivity used by management when determining whether events or changes in circumstances have occurred indicating that the carrying amounts of long-lived assets may not be recoverable. This required a high degree of auditor judgment when performing audit procedures to evaluate whether management appropriately identified impairment indicators, specifically in the evaluation of the appropriateness and completeness of the quantitative and qualitative factors used in management’s assessment of impairment indicators.How the Critical Audit Matter Was Addressed in the Audit indicators for long-lived assets included the following, among others:·We tested the effectiveness of internal controls over management’s assessment of impairment indicators for long-lived assets.·We evaluated management’s assessment of long-lived asset impairment indicators by performing procedures to test the completeness and accuracy of the assessment, including:(1)We tested the accuracy of historical actual operating results used in management’s assessment for each hotel and theatre property.(2)We developed an independent estimate of the expected future recovery period for each hotel and theatre property by dividing the net book value of the long-lived assets by the annual operating cash flows of the property for the most recent period. We assessed whether the estimated future recovery period exceeded a reasonable remaining economic life for that applicable type of property.(3)We held discussions with management and read internal communications to management and the Board of Directors to consider consistency with information included in the assessment and to identify any recent events or transactions that may have a potential impact on the assessment of impairment indicators for the long-lived assets.(4)We considered whether quantitative and qualitative information in the assessment was consistent with information included in Company press releases, analyst and industry reports relevant to the Company, and evidence obtained in other areas of the audit.February 24, 20205326, 2019,30, 2021, based on criteria established inInternal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 26, 2019,30, 2021, based on criteria established inInternal Control — Integrated Framework (2013) issued by COSO.26, 2019,30, 2021, of the Company and our report dated February 24, 2020,March 3, 2022 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of a new accounting standard.February 24, 202054 December 26, 2019 December 27, 2018 Assets Current assets: Cash and cash equivalents(Note 1) $ 20,862 $ 17,114 Restricted cash(Note 1) 4,756 4,813 Accounts receivable, net of reserves(Note 6) 29,465 25,684 Refundable income taxes 5,916 5,983 Other current assets(Note 1) 18,265 15,355 Total current assets 79,264 68,949 Property and equipment,NET(Note 6) 923,254 840,043 OPERATING LEASE RIGHT-OF-USE ASSETS(Note 8) 243,855 – Other assets: Investments in joint ventures(Note 13) 3,595 4,069 Goodwill(Note 1) 75,282 43,170 Other(Note 6) 33,936 33,100 Total other assets 112,813 80,339 Total assets $ 1,359,186 $ 989,331 Liabilities and shareholders’ equity Current liabilities: Accounts payable $ 49,370 $ 37,452 Taxes other than income taxes 20,613 18,743 Accrued compensation 18,055 17,547 Other accrued liabilities (Note 1) 61,134 59,645 Current portion of finance lease obligations (Note 8) 2,571 5,912 Current portion of operating lease obligations (Note 8) 13,335 – Current maturities of long-term debt (Note 7) 9,910 9,957 Total current liabilities 174,988 149,256 Finance LEASE OBLIGATIONS(Note 8) 20,802 22,208 operating lease obligations(Note 8) 232,111 – Long-term debt(Note 7) 206,432 228,863 Deferred income taxes(Note 11) 48,262 41,977 Deferred compensation and other(Note 10) 55,133 56,908 commitments AND license rights(Note 12) equity(Note 9): Shareholders’ equity attributable to The Marcus Corporation Preferred Stock, $1 par; authorized 1,000,000 shares; none issued – – Common Stock: Common Stock, $1 par; authorized 50,000,000 shares; issued 23,253,744 at December 26, 2019 and 22,843,096 shares at December 27, 2018 23,254 22,843 Class B Common Stock, $1 par; authorized 33,000,000 shares; issued and outstanding 7,935,769 at December 26, 2019 and 8,346,417 at December 27, 2018 7,936 8,347 Capital in excess of par 145,549 63,830 Retained earnings 461,884 439,178 Accumulated other comprehensive loss (12,648 ) (6,758 ) 625,975 527,440 Less cost of Common Stock in treasury (242,853 shares at December 26, 2019 and 2,839,079 shares at December 27, 2018) (4,540 ) (37,431 ) Total shareholders’ equity attributable to The Marcus Corporation 621,435 490,009 Noncontrolling interests 23 110 Total equity 621,458 490,119 Total liabilities and shareholders’ equity $ 1,359,186 $ 989,331
See accompanying notes.December 30, 2021 December 31, 2020 ASSETS CURRENT ASSETS: $ 17,658 $ 6,745 6,396 7,343 28,902 6,359 4,335 4,913 Refundable income taxes 22,435 27,934 4,856 4,117 15,364 10,406 Total current assets 99,946 67,817 771,192 848,328 217,072 229,660 OTHER ASSETS: 2,335 2,084 75,095 75,188 10,032 — 12,689 31,101 Total other assets 100,151 108,373 Total assets $ 1,188,361 $ 1,254,178 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 35,781 $ 13,158 Taxes other than income taxes 19,566 18,308 Accrued compensation 20,474 7,633 59,678 58,154 47,346 87,194 2,561 2,783 16,795 19,614 10,967 10,548 Total current liabilities 213,168 217,392 17,192 19,744 216,064 230,550 204,177 193,036 26,183 33,429 57,963 61,304 0 0 Shareholders’ equity attributable to The Marcus Corporation Preferred Stock, $1 par; authorized 1,000,000 shares; none issued — — Common Stock: 24,345 23,264 7,130 7,926 Capital in excess of par 145,656 153,529 Retained earnings 289,306 331,897 Accumulated other comprehensive loss (11,444) (14,933) 454,993 501,683 Less cost of Common Stock in treasury (48,111 shares at December 30, 2021 and 124,758 shares at December 31, 2020) (1,379) (2,960) Total shareholders’ equity attributable to The Marcus Corporation 453,614 498,723 Noncontrolling interests — — Total equity 453,614 498,723 Total liabilities and shareholders’ equity $ 1,188,361 $ 1,254,178 55The Marcus CorporationConsolidated Statements Year Ended December 26, December 27, December 28, 2019 2018 2017 Revenues: Theatre admissions $ 284,141 $ 246,385 $ 227,091 Rooms 105,857 108,786 106,876 Theatre concessions 231,237 166,564 148,989 Food and beverage 74,665 �� 72,771 70,627 Other revenues 87,805 78,329 69,131 783,705 672,835 622,714 Cost reimbursements 37,158 34,285 30,838 Total revenues 820,863 707,120 653,552 Costs and expenses: Theatre operations 267,741 217,851 197,270 Rooms 40,381 41,181 40,286 Theatre concessions 85,289 47,522 43,634 Food and beverage 60,812 58,662 59,375 Advertising and marketing 24,583 23,775 23,960 Administrative 73,522 72,116 66,954 Depreciation and amortization 72,277 61,342 51,719 Rent(Note 8) 26,099 11,267 11,869 Property taxes 21,871 19,396 18,815 Other operating expenses 41,065 36,534 31,525 Impairment charge(Note 3) 1,874 – – Reimbursed costs 37,158 34,285 30,838 Total costs and expenses 752,672 623,931 576,245 OPERATING INCOME 68,191 83,189 77,307 OTHER INCOME (EXPENSE): Investment income 1,379 208 588 Interest expense (11,791 ) (13,079 ) (12,100 ) Other expense (1,921 ) (1,985 ) (1,712 ) Gain (loss) on disposition of property, equipment and other assets (1,149 ) (1,342 ) 3,981 Equity earnings (losses) from unconsolidated joint ventures, net(Note 13) (274 ) (399 ) 46 (13,756 ) (16,597 ) (9,197 ) Earnings before income taxes 54,435 66,592 68,110 Income taxes(Note 11) 12,320 13,127 3,625 NET EARNINGS 42,115 53,465 64,485 NET EARNINGS (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 98 74 (511 ) NET EARNINGS ATTRIBUTABLE TO THE MARCUS CORPORATION $ 42,017 $ 53,391 $ 64,996 net earnings per share – BASIC: Common Stock $ 1.44 $ 1.96 $ 2.42 Class B Common Stock 1.25 1.75 2.17 net earnings per share – DILUTED: Common Stock $ 1.35 $ 1.86 $ 2.29 Class B Common Stock 1.24 1.72 2.13 Year Ended December 30,
2021December 31,
2020December 26,
2019REVENUES: Theatre admissions $ 130,740 $ 64,825 $ 284,141 Rooms 77,650 35,386 105,857 Theatre concessions 118,666 56,711 231,237 Food and beverage 47,086 24,822 74,665 Other revenues 65,331 38,742 87,805 439,473 220,486 783,705 Cost reimbursements 18,771 17,202 37,158 Total revenues 458,244 237,688 820,863 COSTS AND EXPENSES: Theatre operations 140,821 92,232 267,741 Rooms 30,394 21,243 40,381 Theatre concessions 47,681 29,747 85,289 Food and beverage 36,833 26,124 60,812 Advertising and marketing 16,069 11,074 24,583 Administrative 63,350 51,046 73,522 Depreciation and amortization 72,127 75,052 72,277 25,594 26,866 26,099 Property taxes 18,473 23,560 21,871 23,817 17,288 41,065 5,766 24,676 1,874 Reimbursed costs 18,771 17,202 37,158 Total costs and expenses 499,696 416,110 752,672 OPERATING INCOME (LOSS) (41,452) (178,422) 68,191 OTHER INCOME (EXPENSE): Investment income 599 564 1,379 Interest expense (18,702) (16,275) (11,791) Other income (expense), net (2,510) (986) (1,921) Gain (loss) on disposition of property, equipment and other assets 3,163 856 (1,149) (92) (1,539) (274) (17,542) (17,380) (13,756) EARNINGS (LOSS) BEFORE INCOME TAXES (58,994) (195,802) 54,435 (15,701) (70,936) 12,320 NET EARNINGS (LOSS) (43,293) (124,866) 42,115 NET EARNINGS (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS — (23) 98 NET EARNINGS (LOSS) ATTRIBUTABLE TO THE MARCUS CORPORATION $ (43,293) $ (124,843) $ 42,017 NET EARNINGS (LOSS) PER SHARE – BASIC: Common Stock $ (1.42) $ (4.13) $ 1.44 Class B Common Stock (1.25) (3.74) 1.25 NET EARNINGS (LOSS) PER SHARE – DILUTED: Common Stock $ (1.42) $ (4.13) $ 1.35 Class B Common Stock (1.25) (3.74) 1.24 56The Marcus CorporationConsolidated Statements December 26, December 27, December 28, 2019 2018 2017 NET EARNINGS $ 42,115 $ 53,465 $ 64,485 OTHER COMPREHENSIVE INCOME (LOSS): Change in unrealized gain on available for sale investments, net of tax benefit of $0, $0 and $9, respectively – – (14 ) Pension gain (loss) arising during period, net of tax effect (benefit) of $(1,833), $708 and $(1,685), respectively (5,484 ) 1,925 (2,559 ) Amortization of the net actuarial loss and prior service credit related to the pension, net of tax effect of $109, $167 and $142, respectively 327 454 214 Fair market value adjustment of interest rate swap, net of tax benefit of $300, $115 and $0, respectively(Note 7) (853 ) (313 ) – Reclassification adjustment on interest rate swap included in interest expense, net of tax effect of $44, $59 and $0, respectively(Note 7) 120 164 – Other comprehensive income (loss) (5,890 ) 2,230 (2,359 ) COMPREHENSIVE INCOME 36,225 55,695 62,126 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS 98 74 (511 ) COMPREHENSIVE INCOME ATTRIBUTABLE TO THE MARCUS CORPORATION $ 36,127 $ 55,621 $ 62,637 Year Ended December 30,
2021December 31,
2020December 26,
2019NET EARNINGS (LOSS) $ (43,293) $ (124,866) $ 42,115 OTHER COMPREHENSIVE INCOME (LOSS): 1,943 (2,813) (5,484) 969 732 327 25 (949) (853) 552 745 120 Other comprehensive income (loss) 3,489 (2,285) (5,890) COMPREHENSIVE INCOME (LOSS) (39,804) (127,151) 36,225 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS — (23) 98 COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE MARCUS CORPORATION $ (39,804) $ (127,128) $ 36,127 57 Common
Stock Class B
Common
Stock
in Excess Accumulated
Other
Comprehensive
Income (Loss) Treasury
Stock Shareholders’
Equity
Attributable
to The
Marcus
Corporation Non-
controlling
Interests Total
Equity BALANCES AT DECEMBER 29, 2016 $ 22,490 $ 8,700 $ 58,584 $ 351,220 $ (5,066 ) $ (45,816 ) $ 390,112 $ 1,535 $ 391,647 Cash dividends: $.45 per share Class B Common Stock – – – (3,929 ) – – (3,929 ) – (3,929 ) $.50 per share Common Stock – – – (9,575 ) – – (9,575 ) – (9,575 ) Exercise of stock options – – 105 – – 2,166 2,271 – 2,271 Purchase of treasury stock – – – – – (850 ) (850 ) – (850 ) Savings and profit-sharing contribution – – 600 – – 424 1,024 – 1,024 Reissuance of treasury stock – – 253 – – 176 429 – 429 Issuance of non-vested stock – – (501 ) – – 501 – – – Share-based compensation – – 2,411 – – – 2,411 – 2,411 Purchase of noncontrolling interest – – – 494 – – 494 (904 ) (410 ) Conversions of Class B Common Stock 166 (166 ) – – – – – – – Distributions to noncontrolling interest – – – – – – – (20 ) (20 ) Comprehensive income (loss) – – – 64,996 (2,359 ) – 62,637 (511 ) 62,126 BALANCES AT DECEMBER 28, 2017 22,656 8,534 61,452 403,206 (7,425 ) (43,399 ) 445,024 100 445,124 Amount reclassified to retained earnings on December 29, 2017 in connection with the adoption of ASU No. 2016-01 - - - (11 ) 11 - - - - Amount reclassified to retained earnings on December 29, 2017 in connection with the adoption of ASU No. 2018-02 - - - 1,574 (1,574 ) - - - - Amount reclassified to retained earnings on December 29, 2017 in connection with the adoption of ASU No. 2014-09 - - - (2,568 ) - - (2,568 ) - (2,568 ) BALANCES AT DECEMBER 29, 2017 22,656 8,534 61,452 402,201 (8,988 ) (43,399 ) 442,456 100 442,556 Cash dividends: $.55 per share Class B Common Stock - - - (4,603 ) - - (4,603 ) - (4,603 ) $.60 per share Common Stock - - - (11,811 ) - - (11,811 ) - (11,811 ) Exercise of stock options - - (736 ) - - 7,784 7,048 - 7,048 Purchase of treasury stock - - - - - (2,898 ) (2,898 ) - (2,898 ) Savings and profit-sharing contribution - - 651 - - 479 1,130 - 1,130 Reissuance of treasury stock - - 231 - - 144 375 - 375 Issuance of non-vested stock - - (459 ) - - 459 - - - Share-based compensation - - 2,691 - - - 2,691 - 2,691 Conversions of Class B Common Stock 187 (187 ) - - - - - - - Distributions to noncontrolling interest - - - - - - - (64 ) (64 ) Comprehensive income - - - 53,391 2,230 - 55,621 74 55,695 BALANCES AT DECEMBER 27, 2018 22,843 8,347 63,830 439,178 (6,758 ) (37,431 ) 490,009 110 490,119 Cash dividends: $.58 per share Class B Common Stock - - - (4,648 ) - - (4,648 ) - (4,648 ) $.64 per share Common Stock - - - (14,663 ) - - (14,663 ) - (14,663 ) Exercise of stock options - - (205 ) - - 1,725 1,520 - 1,520 Purchase of treasury stock - - - - - (1,119 ) (1,119 ) - (1,119 ) Savings and profit-sharing contribution - - 810 - - 371 1,181 - 1,181 Reissuance of treasury stock - - 267 - - 150 417 - 417 Issuance of non-vested stock - - (527 ) - - 527 - - - Share-based compensation - - 3,523 - - - 3,523 - 3,523 Reissuance of treasury stock - acquisition - - 77,960 - - 31,237 109,197 - 109,197 Other - - (109 ) - - - (109 ) - (109 ) Conversions of Class B Common Stock 411 (411 ) - - - - - - - Distributions to noncontrolling interest - - - - - - - (185 ) (185 ) Comprehensive income (loss) - - - 42,017 (5,890 ) - 36,127 98 36,225 BALANCES AT DECEMBER 26, 2019 $ 23,254 $ 7,936 $ 145,549 $ 461,884 $ (12,648 ) $ (4,540 ) $ 621,435 $ 23 $ 621,458 Common
StockClass B
Common
StockCapital
in Excess
of ParRetained
EarningsAccumulated
Other
Comprehensive
Income (Loss)Treasury
StockShareholders'
Equity
Attributable to The Marcus
CorporationNon-Controlling
InterestsTotal
EquityBALANCES AT DECEMBER 27, 2018 $ 22,843 $ 8,347 $ 63,830 $ 439,178 $ (6,758) $ (37,431) $ 490,009 $ 110 $ 490,119 Cash dividends: $.58 per share Class B Common Stock — — — (4,648) �� — (4,648) — (4,648) $.64 per share Common Stock — — — (14,663) — — (14,663) — (14,663) Exercise of stock options — — (205) — — 1,725 1,520 — 1,520 Purchase of treasury stock — — — — — (1,119) (1,119) — (1,119) Savings and profit-sharing contribution — — 810 — — 371 1,181 — 1,181 Reissuance of treasury stock — — 267 — — 150 417 — 417 Issuance of non-vested stock — — (527) — — 527 — — — Share-based compensation — — 3,523 — — — 3,523 — 3,523 Reissuance of treasury stock - acquisition — — 77,960 — — 31,237 109,197 — 109,197 Other — — (109) — — — (109) — (109) Conversions of Class B Common Stock 411 (411) — — — — — — — Distributions to noncontrolling interest — — — — — — — (185) (185) Comprehensive income (loss) — — — 42,017 (5,890) — 36,127 98 36,225 BALANCES AT DECEMBER 26, 2019 23,254 7,936 145,549 461,884 (12,648) (4,540) 621,435 23 621,458 Cash dividends: $.15 per share Class B Common Stock — — — (1,224) — — (1,224) — (1,224) $.17 per share Common Stock — — — (3,921) — — (3,921) — (3,921) Exercise of stock options — — (67) — — 446 379 — 379 Purchase of treasury stock — — — — — (696) (696) — (696) Savings and profit-sharing contribution — — 299 — — 1,016 1,315 — 1,315 Reissuance of treasury stock — — (21) — — 183 162 — 162 Issuance of non-vested stock — — (631) — — 631 — — — Share-based compensation — — 4,385 — — — 4,385 — 4,385 Equity component of issuance of convertible notes, net of tax and issuance costs — — 16,511 — — — 16,511 — 16,511 Capped call transactions, net of tax — — (12,495) — — — (12,495) — (12,495) Other — — (1) 1 — — — — — Conversions of Class B Common Stock 10 (10) — — — — — — — Comprehensive loss — — — (124,843) (2,285) — (127,128) (23) (127,151) BALANCES AT DECEMBER 31, 2020 23,264 7,926 153,529 331,897 (14,933) (2,960) 498,723 — 498,723 — — (16,511) 702 — — (15,809) — (15,809) Exercise of stock options — — (749) — — 2,279 1,530 — 1,530 Purchase of treasury stock — — — — — (1,391) (1,391) — (1,391) Savings and profit-sharing contribution 43 — 968 — — — 1,011 — 1,011 Reissuance of treasury stock — — 6 — — 32 38 — 38 Issuance of non-vested stock 242 — (903) — — 661 — — — Share-based compensation — — 9,316 — — — 9,316 — 9,316 Conversions of Class B Common Stock 796 (796) — — — — — — — Comprehensive income (loss) — — — (43,293) 3,489 — (39,804) — (39,804) BALANCES AT DECEMBER 30, 2021 $ 24,345 $ 7,130 $ 145,656 $ 289,306 $ (11,444) $ (1,379) $ 453,614 $ — $ 453,614 58The Marcus CorporationConsolidated Statements Year Ended December 26, December 27, December 28, 2019 2018 2017 Operating activities Net earnings $ 42,115 $ 53,465 $ 64,485 Adjustments to reconcile net earnings to net cash provided by operating activities: Losses (earnings) on investments in joint ventures 274 399 (46 ) Distributions from joint ventures 200 65 377 Loss (gain) on disposition of property, equipment and other assets 1,149 1,342 (3,981 ) Impairment change 1,874 – – Amortization of favorable lease right – 334 334 Depreciation and amortization 72,277 61,342 51,719 Amortization of debt issuance costs 285 287 308 Share-based compensation 3,523 2,691 2,411 Deferred income taxes 9,111 3,247 (6,438 ) Deferred compensation and other 1,011 3,339 911 Contribution of the Company’s stock to savings and profit-sharing plan 1,181 1,130 1,024 Changes in operating assets and liabilities: Accounts receivable (3,781 ) 1,546 (8,852 ) Other assets 1,102 (1,946 ) (2,268 ) Operating leases (3,355 ) – – Accounts payable 9,733 (4,232 ) 15,015 Income taxes 67 10,297 (13,663 ) Taxes other than income taxes 1,664 (895 ) 2,377 Accrued compensation 508 1,920 (1,380 ) Other accrued liabilities 2,541 3,058 6,703 Total adjustments 99,364 83,924 44,551 Net cash provided by operating activities 141,479 137,389 109,036 Investing activities Capital expenditures (64,086 ) (58,660 ) (114,804 ) Purchase of theatres, net of cash acquired and working capital assumed (30,081 ) – – Proceeds from disposals of property, equipment and other assets 22 116 4,524 Other investing activities 199 (429 ) 911 Capital contribution in joint venture – (294 ) (111 ) Contribution received from local government – – 1,545 Proceeds from sale of interests in joint ventures – – 6,729 Net cash used in investing activities (93,946 ) (59,267 ) (101,206 ) Financing activities Debt transactions: Proceeds from borrowings on revolving credit facility 335,000 203,000 322,000 Repayment of borrowings on revolving credit facility (333,000 ) (254,000 ) (332,000 ) Proceeds from issuance of long-term debt – – 65,000 Principal payments on long-term debt (24,620 ) (12,153 ) (36,300 ) Principal payments on finance lease obligations (2,544 ) (1,836 ) (1,986 ) Debt issuance costs – – (418 ) Equity transactions: Treasury stock transactions, except for stock options (702 ) (2,523 ) (421 ) Exercise of stock options 1,520 7,048 2,271 Dividends paid (19,311 ) (16,414 ) (13,504 ) Distributions to noncontrolling interest (185 ) (64 ) (20 ) Purchase of noncontrolling interest – – (410 ) Net cash provided by (used in) financing activities (43,842 ) (76,942 ) 4,212 Net increase in cash, cash equivalents and restricted cash 3,691 1,180 12,042 Cash, cash equivalents and restricted cash at beginning of year 21,927 20,747 8,705 Cash, cash equivalents and restricted cash at end of year $ 25,618 $ 21,927 $ 20,747 Supplemental Information: Change in accounts payable for additions to property and equipment $ 2,185 $ (9,857 ) $ 5,320 Year Ended December 30,
2021December 31,
2020December 26,
2019OPERATING ACTIVITIES Net earnings (loss) $ (43,293) $ (124,866) $ 42,115 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Losses on investments in joint ventures 92 1,539 274 Distributions from joint ventures — — 200 Loss (gain) on disposition of property, equipment and other assets (3,163) (856) 1,149 Impairment charges 5,766 24,676 1,874 Depreciation and amortization 72,127 75,052 72,277 Amortization of debt issuance costs and debt discount 2,198 2,235 285 Share-based compensation 9,316 4,385 3,523 Deferred income taxes (15,843) (38,836) 9,111 Other long-term obligations 1,689 2,969 1,011 Contribution of the Company’s stock to savings and profit-sharing plan 1,011 1,315 1,181 Changes in operating assets and liabilities: Accounts receivable (22,055) 23,106 (3,781) Government grants receivable 578 (4,913) — Other assets (2,255) 3,476 1,102 Operating leases (5,325) 9,185 (3,355) Accounts payable 21,501 (32,131) 9,733 Income taxes 8,508 1,467 67 Taxes other than income taxes 1,258 (2,305) 1,664 Accrued compensation 12,841 (10,422) 508 Other accrued liabilities 1,300 (3,630) 2,541 Total adjustments 89,544 56,312 99,364 Net cash provided by (used in) operating activities 46,251 (68,554) 141,479 INVESTING ACTIVITIES Capital expenditures (17,082) (21,363) (64,086) Acquisition of theatres, net of cash acquired and working capital assumed — — (30,081) Proceeds from disposals of property, equipment and other assets 22,145 4,485 22 Capital contribution in joint venture (2,427) (28) — Proceeds from sale of trading securities 377 5,184 — Purchase of trading securities (3,080) (801) — Life insurance premium reimbursement 11,411 — — Other investing activities (461) 450 199 Net cash provided by (used in) investing activities 10,883 (12,073) (93,946) FINANCING ACTIVITIES Debt transactions: Proceeds from borrowings on revolving credit facility 178,500 221,500 335,000 Repayment of borrowings on revolving credit facility (178,500) (302,500) (333,000) Proceeds from short-term borrowings — 90,800 — Repayment on short-term borrowings (40,346) (2,955) — Proceeds from convertible senior notes — 100,050 — Principal payments on long-term debt (10,717) (9,447) (24,620) Proceeds received from PPP loans expected to be repaid — 3,424 — Proceeds received from borrowing on insurance policy 6,700 — — Principal payments on finance lease obligations (2,774) (2,007) (2,544) Debt issuance costs (208) (7,560) — Equity transactions: Treasury stock transactions, except for stock options (417) (534) (702) Exercise of stock options 594 379 1,520 Capped call transactions — (16,908) — Dividends paid — (5,145) (19,311) Distributions to noncontrolling interest — — (185) Net cash provided by (used in) financing activities (47,168) 69,097 (43,842) Net increase (decrease) in cash, cash equivalents and restricted cash 9,966 (11,530) 3,691 Cash, cash equivalents and restricted cash at beginning of year 14,088 25,618 21,927 Cash, cash equivalents and restricted cash at end of year $ 24,054 $ 14,088 $ 25,618 Supplemental Information: Change in accounts payable for additions to property and equipment $ 1,122 $ (4,081) $ 2,185 59The Marcus CorporationNotes to Consolidated Financial Statementstwo2 business segments:Wisconsin and a retail center in Missouri.subsidiaries, including a 50% owned joint venture entity in which the Company has a controlling financial interest.subsidiaries. The Company has ownership interests greater than 50% in one joint venture that is considered a Variable Interest Entity (VIE) that is also included in the accounts of the Company. The Company is the primary beneficiary of the VIE and the Company’s interest is considered a majority voting interest. The equity interest of outside owners in consolidated entities is recorded as noncontrolling interests in the consolidated balance sheets, and their share of earnings is recorded as net earnings (losses) attributable to noncontrolling interests in the consolidated statements of earnings (loss) in accordance with the partnership agreements. In fiscal 2017, the Company purchased the noncontrolling interest of a joint venture from its former partner.60The Marcus CorporationNotes to Consolidated Financial Statements1. Description of Business and Summary of Significant Accounting Policies (continued)Change in Accounting Policies – The Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-02,Leases,(Topic 842), on the first day of fiscal 2019. These lease policy updates were applied prospectively in the Company’s financial statements from December 28, 2018 forward. Reported financial information for the historical comparable periods was not revised and continues to be reported under the accounting standards in effect during the historical periods. See Note 8 for further discussion.The Company adopted ASU No. 2014-09,Revenue from Contracts with Customers, on the first day of fiscal 2018. These revenue recognition policy updates were applied prospectively in the Company’s financial statements from December 29, 2017 forward. Reported financial information for the historical comparable period was not revised and continues to be reported under the accounting standards in effect during the historical period. See Note 2 for further discussion.26, 201930, 2021 and December 27, 2018,31, 2020, respectively, the Company’s $5,825,000$4,617 and $5,302,000$1,415 of debt and equity securities classified as trading were valued using Level 1 pricing inputs and were included in other current assets.26, 201930, 2021 and December 27, 2018,31, 2020, respectively, the $1,194,000$689 and $205,000$1,470 liability related to the Company’s interest rate hedge contracts werecontract was valued using Level 2 pricing inputs.26, 201930, 2021 and December 27, 2018,31, 2020, none of the Company’s recorded assets or liabilities that are measured on a recurring basis at fair market value were valued using Level 3 pricing inputs. Assets and liabilities that are measured on a non-recurring basis are discussed in Note 34 and Note 4.
7.61The Marcus CorporationNotes to Consolidated Financial Statements1. Description of Business and Summary of Significant Accounting Policies (continued)$109,000,000$90,000 of senior notes, valued using Level 2 pricing inputs, is approximately $110,985,000$91,212 at December 26, 2019,30, 2021, determined based upon discounted cash flows using current market interest rates for financial instruments with a similar average remaining life. The fair value of the Company's $100,050 of convertible senior notes, valued using Level 2 pricing inputs, is approximately $184,342 at December 30, 2021, determined based on market rates and the closing trading price of the convertible senior notes as of December 30, 2021 (see Note 7 for further discussion on the Company’s senior notes and convertible senior notes). The carrying amounts of the Company’s remaining long-term debt approximate their fair values, determined using current rates for similar instruments, or Level 2 pricing inputs.practice.$5,673,000$4,913 and $4,138,000$3,434 as of December 26, 201930, 2021 and December 27, 2018,31, 2020, respectively, were included in other current assets.YearsYears Land improvements 10 - 20 Buildings and improvements 12 - 39 Leasehold improvements 3 - 40 Furniture, fixtures and equipment 32 - 20Finance lease right-of-use assets 4 - 15 $72,244,000, $61,470,000$72,044, $75,067 and $51,542,000$72,244 for fiscal 2019,2021, fiscal 20182020 and fiscal 2017,2019, respectively.For the purpose of determining fair value, defined as the amount at which an asset or group of assets could be bought or sold in a current transaction between willing parties,During fiscal 2021 and fiscal 2020, the Company utilizes currently available market valuationsdetermined that indicators of similar assets in its respective industries, often expressed as a given multiple of operating cash flow. Theimpairment were present. As such, the Company evaluated the value of its property and equipment during fiscal 2019, fiscal 2018 and fiscal 2017 and the value of its operating lease right-of-use assets during fiscal 2019 and determined that there was no impact on the Company’s results of operations, other than therecorded impairment chargecharges as discussed in Note 3.
4.62The Marcus CorporationNotes to Consolidated Financial Statements1. Description of Business and Summary of Significant Accounting Policies (continued)TheBeginning in fiscal 2021, the Company performsperformed its annual impairment test on the first day of the fiscal fourth quarter. In prior years, the Company performed its annual impairment test on the last day of itsthe fiscal year. The Company believes performing the test at the endbeginning of the fourth fiscal yearquarter is preferable as it better aligns with the Company’s forecasting and budgeting process. The change in the annual impairment test is predicated on qualitative factors which are developed and finalized near fiscal year-end.date does not represent a material change to the Company’s method of applying an accounting principle. Goodwill is tested for impairment at a reporting unit level, determined to be at an operating segment level. When reviewing goodwill for impairment, the Company considers the amount of excess fair value over the carrying value of the reporting unit, the period of time since its last quantitative test, and other factors to determine whether or not to first perform a qualitative test. When performing a qualitative test, the Company assesses numerous factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying value. Examples of qualitative factors that the Company assesses include its share price, its financial performance, market and competitive factors in its industry, and other events specific to the reporting unit. If the Company concludes that it is more likely than not that the fair value of its reporting unit is less than itsit carrying value, the Company performs a two-step quantitative impairment test by comparing the carrying value of the reporting unit to the estimated fair value. Noidentifiedindicated as of October 1, 2021.26, 2019 or December 27, 2018.31, 2020. Inhas never recorded athen used this information to determine fair value. During the first, third and fourth quarters of fiscal 2020, the Company determined that the fair value of its goodwill was greater than its carrying value and no impairment loss. December 26,
2019 December 27,
2018 December 28,
2017 (in thousands) Balance at beginning of period $ 43,170 $ 43,492 $ 43,735 Acquisition 32,205 – – Sale – – (105 ) Deferred tax adjustment (93 ) (322 ) (138 ) Balance at end of period $ 75,282 $ 43,170 $ 43,492 December 30,
2021December 31,
2020December 26,
2019Balance at beginning of period $ 75,188 $ 75,282 $ 43,170 Acquisition — — 32,205 Sale — — — Deferred tax adjustment (93) (94) (93) Balance at end of period $ 75,095 $ 75,188 $ 75,282 acquiredrecorded a trade name intangible asset in conjunction with the Movie Tavern acquisition (see Note 4) that was determined to have an indefinite life. The Company will reviewreviews its trade name intangible asset for impairment at least annually or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable. The Company will perform its annual impairment test on the last day of itsDuring fiscal year. Under ASC Topic 350,2020, the Company can elect to perform a qualitative or quantitativedetermined that indicators of impairment assessment forwere present. As such, the Company evaluated the value of its trade name intangible asset. The Company will first assess the qualitative factors to determine whether the existence of eventsasset and circumstances indicate that is it more likely than not that the fair value of the indefinite-lived asset is less than its carrying amountrecorded an impairment charge during fiscal 2020 as a basis for determining whether it is necessary to perform the quantitative impairment test. No impairment was identified as of December 26, 2019.$53,000, $65,000$23, $48 and $400,000$53 was capitalized in fiscal 2019,2021, fiscal 20182020 and fiscal 2017,2019, respectively.$285,000, $287,000$2,198, $2,235 and $308,000$285 for fiscal 2019,2021, fiscal 20182020 and fiscal 2017,2019, respectively, and were included in interest expense on the consolidated statements of earnings. – - The Company adopted ASUFinancial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-02,Leases, (Accounting Standards Codification (ASC) 842), on the first day of fiscal 2019. See Note 8 for further discussion.63The Marcus CorporationNotes to Consolidated Financial Statements1. Description of Business and Summary of Significant Accounting Policies (continued)earnings.earnings (loss). The cost of securities sold is based upon the specific identification method.adopted ASU No. 2014-09,recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, on the first day of fiscal 2018.. See Note 2 for further discussion.treasuryif-converted method. Convertible Class B Common Stock isand convertible debt instruments are reflected on an if-converted basis.basis when dilutive to Common Stock. The computation of the diluted net earnings (loss) per share of Common Stock assumes the conversion of Class B Common Stock in periods that have net earnings since it would be dilutive to Common Stock earnings per share, while the diluted net earnings (loss) per share of Class B Common Stock does not assume the conversion of those shares.64The Marcus CorporationNotes to Consolidated Financial Statements1. Description of Business and Summary of Significant Accounting Policies (continued)the Class B Common Stock. As such, the undistributed earnings (losses) for each yearperiod are allocated based on the proportionate share of entitled cash dividends. The computationCommon Stock assumes the conversionBusiness and Summary of Class B Common Stock and, as such, the undistributed earnings are equal to net earnings for that computation. Year Ended
2019
2018 December 28,
2017 (in thousands, except per share data) Numerator: Net earnings attributable to The Marcus Corporation $ 42,017 $ 53,391 $ 64,996 Denominator: Denominator for basic EPS 30,656 28,105 27,789 Effect of dilutive employee stock options 496 608 614 Denominator for diluted EPS 31,152 28,713 28,403 Net earnings per share – Basic: Common Stock $ 1.44 $ 1.96 $ 2.42 Class B Common Stock $ 1.25 $ 1.75 $ 2.17 Net earnings per share- Diluted: Common Stock $ 1.35 $ 1.86 $ 2.29 Class B Common Stock $ 1.24 $ 1.72 $ 2.13 OptionsYear Ended December 30,
2021December 31,
2020December 26,
2019Numerator: Net earnings (loss) attributable to The Marcus Corporation $ (43,293) $ (124,843) $ 42,017 Denominator: Denominator for basic EPS 31,360 31,042 30,656 Effect of dilutive employee stock options — — 496 Denominator for diluted EPS 31,360 31,042 31,152 Net earnings (loss) per share – Basic: Common Stock $ (1.42) $ (4.13) $ 1.44 Class B Common Stock $ (1.25) $ (3.74) $ 1.25 Net earnings (loss) per share- Diluted: Common Stock $ (1.42) $ (4.13) $ 1.35 Class B Common Stock $ (1.25) $ (3.74) $ 1.24 324,0001,999,000 shares, 16,0001,706,000 shares and 250,000324,000 shares of common stock at prices ranging from $18.68 to $41.90, $16.32 to $41.90 and $38.51 to $41.90 $38.51 to $41.35 and $31.20 to $31.55 per share were outstanding at December 26, 2019,30, 2021, December 27, 201831, 2020 and December 28, 2017,26, 2019, respectively, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares, and therefore, the effect would be antidilutive. December 26, 2019 December 27, 2018 (in thousands) Unrecognized loss on interest rate swap agreements $ (882 ) (149 ) Net unrecognized actuarial loss for pension obligation (11,766 ) (6,609 ) $ (12,648 ) $ (6,758 ) 65December 30, 2021 December 31, 2020 Unrecognized loss on interest rate swap agreements $ (509) (1,086) Net unrecognized actuarial loss for pension obligation (10,935) (13,847) $ (11,444) $ (14,933) The Marcus CorporationNotes to Consolidated Financial Statements1. Description of Business and Summary of Significant Accounting Policies (continued)Concentration of Risk - As of December 26, 2019, 6% of the Company’s employees were covered by a collective bargaining agreement, of which 15% were covered by an agreement that will expire within one year. As of December 27, 2018, 7% of the Company’s employees were covered by a collective bargaining agreement, of which 96% were covered by an agreement that will expire within one year. – In - On January 2017,1, 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-04,Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment, which eliminates Step 2 of the goodwill impairment test that had required a hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and recognize an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.Company adopted ASU No. 2017-04 is effective for the Company in fiscal 2020 and must be applied prospectively. The Company does not believe the new standard will have a material effect on its consolidated financial statements.In August 2018, the FASB issued ASU No. 2018-14,Compensation—Retirement Benefits—Defined Benefit Plans—General, designed to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. ASU No. 2018-14 is effective for the Company in fiscal 2020 and early application is permitted. The Company does not believe the new standard will have a material effect on its consolidated financial statement disclosures.In August 2018, the FASB issued ASU No. 2018-13,Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The purpose of ASU No. 2018-13 is to improve the disclosures related to fair value measurements in the financial statements. The improvements include the removal, modification and addition of certain disclosure requirements primarily related to Level 3 fair value measurements. ASU No. 2018-13 is effective for the Company in fiscal 2020. The amendments in ASU No. 2018-13 should be applied prospectively. The Company does not expect ASU No. 2018-13 to have a significant impact on its consolidated financial statements.In December 2019, the FASB issued ASU No. 2019-12,Income Taxes.Incomes Taxes. The amendments in ASU No. 2019-12 are designed to simplify the accounting for incomeincomes taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify generally accepted accounting principles for other areas of Topic 740 by clarifying and amending existing guidance. The adoption of the new standard did not have a material effect on the Company’s consolidated financial statements.2019-122020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. ASU No. 2020-06 is designed to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. The amendments remove the separation models in ASC 470-20 for certain contracts. As a result, embedded conversion features are not presented separately in equity, rather, the contract is accounted for as a single liability measured at its amortized cost.Balance at December 31, 2020 Cumulative adjustment Balance at
January 1, 2021Long-term debt $ 193,036 $ 21,393 $ 214,429 Deferred income taxes 33,429 (5,584) 27,845 Capital in excess of par 153,529 (16,511) 137,018 Retained earnings 331,897 702 332,599 for the Company in fiscal 2021 and early application is permitted.as of March 12, 2020 through December 31, 2022. The Company is currently evaluatingwill evaluate the effect the new standard will have on its consolidated financial statements.On December 28, 2018,statements when a replacement rate is chosen.adopted ASU No. 2016-02,Leases (Topic 842),in fiscal 2022 with early adoption permitted. The standard can be applied either prospectively to all transactions within the scope of Topic 832 that are reflected in the financial statements as of the adoption date and all new transactions entered into after the date of adoption, or retrospectively. The Company is evaluating the effect that the standard will have on its related disclosures.is intendedconsists of spaces where customers and guests gather in close proximity, the Company’s businesses are significantly impacted by protective actions that federal, state and local governments have taken to improve financial reportingcontrol the spread of the pandemic, and customers’ reactions or responses to such actions. These actions have included, among other things, declaring national and state emergencies, encouraging social distancing, restricting freedom of movement and congregation, mandating non-essential business closures, issuing curfews, limiting business capacity, mandating mask-wearing and/or proof of vaccination, and issuing shelter-in-place, quarantine and stay-at-home orders.leasing transactions. ASC 842 requiresthe COVID-19 pandemic and a lesseereduction in the number of new films released. While still below pre-COVID-19 levels, attendance has gradually improved beginning in June 2021 as the number of vaccinated individuals increased, more films were released, and customer willingness to recognize onreturn to movie theatres increased.sheet assetsof its short-term borrowings from approximately $83,500 to $50,000, and liabilitiesmodified its previously existing debt covenants. In conjunction with the amendment, the maturity date of the term loan facility was extended to September 22, 2022.rightsat least 12 months from the issuance date of these consolidated financial statements. The Company’s estimates and obligations created by leased assets with lease termsassumptions related to future forecasted results of more than 12 months. The new guidance also requires disclosuresthe Company are subject to help investors and other financial statement users better understand the amount, timinginherent risk and uncertainty due to the ongoing impact of the COVID-19 pandemic. The Company cannot assure that the impact of the COVID-19 pandemic will cease to have a material adverse effect on both its theatre and hotels and resorts businesses, results of operations, cash flows, arising from the leases. See Note 8 for further discussion.
financial condition, and debt covenant compliance.66The Marcus CorporationNotes to Consolidated Financial Statements2.Revenue Recognition Policy20192021, fiscal 2020 and fiscal 20182019 is as follows (in thousands): Fiscal 2019 Reportable Segment Theatres
Resorts Corporate Total Theatre admissions $ 284,141 $ – $ – $ 284,141 Rooms – 105,857 – 105,857 Theatre concessions 231,237 – – 231,237 Food and beverage – 74,665 – 74,665 Other revenues(1) 40,825 46,547 433 87,805 Cost reimbursements 877 36,281 – 37,158 Total revenues $ 557,080 $ 263,350 $ 433 $ 820,863 Fiscal 2018 Reportable Segment Theatres Hotels/
Resorts Corporate Total Theatre admissions $ 246,385 $ – $ – $ 246,385 Rooms – 108,786 – 108,786 Theatre concessions 166,564 – – 166,564 Food and beverage – 72,771 – 72,771 Other revenues(1) 32,563 45,342 424 78,329 Cost reimbursements 1,292 32,993 – 34,285 Total revenues $ 446,804 $ 259,892 $ 424 $ 707,120 (1)Included in other revenues is an immaterial amount related to rental income that is not considered contract revenue from contracts with customers under ASC No. 2014-09.Fiscal 2021 Reportable Segment Theatres Hotels/Resorts Corporate Total Theatre admissions $ 130,740 $ — $ — $ 130,740 Rooms — 77,650 — 77,650 Theatre concessions 118,666 — — 118,666 Food and beverage — 47,086 — 47,086 21,754 43,219 358 65,331 Cost reimbursements 88 18,683 — 18,771 Total revenues $ 271,248 $ 186,638 $ 358 $ 458,244 Fiscal 2020 Reportable Segment Theatres Hotels/Resorts Corporate Total Theatre admissions $ 64,825 $ — $ — $ 64,825 Rooms — 35,386 — 35,386 Theatre concessions 56,711 — — 56,711 Food and beverage — 24,822 — 24,822 10,764 27,552 426 38,742 Cost reimbursements 324 16,878 — 17,202 Total revenues $ 132,624 $ 104,638 $ 426 $ 237,688 Fiscal 2019 Reportable Segment Theatres Hotels/Resorts Corporate Total Theatre admissions $ 284,141 $ — $ — $ 284,141 Rooms — 105,857 — 105,857 Theatre concessions 231,237 — — 231,237 Food and beverage — 74,665 — 74,665 40,825 46,547 433 87,805 Cost reimbursements 877 36,281 — 37,158 Total revenues $ 557,080 $ 263,350 $ 433 $ 820,863 earnings. The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements.
earnings (loss).67The Marcus CorporationNotes to Consolidated Financial Statements2. Revenue Recognition (continued) The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements.earnings. The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements.$43,200,000, $37,048,000$39,144, $37,307 and $36,007,000$43,200 as of December 30, 2021, December 31, 2020 and December 26, 2019, December 27, 2018 and December 28, 2017, respectively, which includes the one-time cumulative effect adjustment to the balance sheet on the first day of fiscal 2018.respectively. The Company had no contract assets as of December 26, 201930, 2021 and December 27, 2018.31, 2020. During fiscal 2019,2021, the Company recognized revenue of $22,266,000$13,968 that was included in deferred revenues as of December 27, 2018.31, 2020. During fiscal 2018,2020, the Company recognized revenue of $24,840,000$13,579 that was included in deferred revenues as of December 29, 2017.26, 2019. The majority of the Company’s deferred revenue relates to non-redeemed gift cards, advanced ticket sales and the Company’s loyalty program.26, 2019,30, 2021, the amount of transaction price allocated to the remaining performance obligations under the Company’s advanced ticket sales was $5,117,000$3,631 and is reflected in the Company’s consolidated balance sheet as part of deferred revenues, which is included in other accrued liabilities. The Company recognizes revenue as the tickets are redeemed, which is expected to occur within the next two years.26, 2019,30, 2021, the amount of transaction price allocated to the remaining performance obligations related to the amount of Hotels and Resorts non-redeemed gift cards was $2,929,000$3,774 and is reflected in the Company’s consolidated balance sheet as part of deferred revenues, which is included in other accrued liabilities. The Company recognizes revenue as the gift cards are redeemed, which is expected to occur within the next two years.68The Marcus CorporationNotes to Consolidated Financial Statements2. Revenue Recognition (continued)Adoption2018, the Company recorded a one-time cumulative effect adjustment to the balance sheet as follows: Balance at December 28,
2017 Cumulative
Adjustment Balance at December 29,
2017 (in thousands) Refundable income taxes $ 15,335 $ 945 $ 16,280 Other accrued liabilities 53,291 3,296 56,587 Deferred compensation and other 56,662 217 56,879 Retained earnings 403,206 (2,568 ) 400,638 The one-time cumulative effect adjustment to the balance sheet is due to a change in accounting for the Company’s loyalty programs. The Company offers a customer loyalty program to its theatre customers called Magical Movie Rewards. The program allows members to earn points for each dollar spent and access special offers available only to members. Therewards are redeemable at any Marcus Theatre box office, concession stand or food and beverage venue. The Company also offers a customer loyalty program to its Hotels and Resorts customers which allows members to earn points for each dollar spent in its restaurants. The rewards are redeemable at any of the Company’s hotel outlets including spas, restaurants, and golf. Under ASU No. 2014-09, the portion of Theatre admission revenues, Theatre concession revenues and Food and beverage revenues attributable to loyalty points earned by customers are deferred as a reduction of these revenues until related reward redemption. Through December 28, 2017, the Company recorded the estimated incremental cost of redeeming loyalty points at the time they were earned in Advertising and marketing expense. The change had the effect of an immaterial reduction of theatre admission revenues and a corresponding immaterial increase in theatre concession revenues with an offsetting increase in other long-term liabilities based upon historical customer reward redemption patterns.In accordance with ASU No. 2014-09, the Company has concluded that it is the principal (as opposed to agent) in the arrangement with third-party internet ticketing companies in regards to sale of internet tickets to customers, and therefore, recognizes ticket fee revenue based on a gross transaction price. As such, internet ticket fee revenue is deferred and recognized when the related film exhibition takes place on a gross transaction price basis. Through December 28, 2017, the Company recorded internet ticket fee revenues net of third-party commission or service fees. The change had the effect of increasing other revenues and other operating expense but had no impact on net earnings or cash flows from operations.69The Marcus CorporationNotes to Consolidated Financial Statements2. Revenue Recognition (continued)The adoption of ASU No. 2014-09 had the following effect on our fiscal 2018 consolidated statement of earnings (in thousands): As Reported ASU No. 2014-09
Impact Adjusted(1) Revenues: Theatre admissions $ 246,385 $ (1,805 ) $ 248,190 Theatre concessions 166,564 2,526 164,038 Food and beverage 72,771 19 72,752 Other revenues 78,329 4,997 73,332 Total revenues 707,120 5,737 701,383 Costs and expenses: Theatre operations 217,851 669 217,182 Theatre concessions 47,522 634 46,888 Advertising and marketing 23,775 (1,076 ) 24,851 Other operating expenses 36,534 4,878 31,656 Total costs and expenses 623,931 5,105 618,826 Operating income 83,189 632 82,557 Income taxes 13,127 125 13,002 Net earnings attributable to The Marcus Corporation 53,391 507 52,884 (1)The amounts reflect each affected financial statement line item as they would have been reported under US GAAP prior to the adoption of ASU No. 2014-09.The adoption of ASU No. 2014-09 had the following effect on our consolidated balance sheet as of December 27, 2018 (in thousands): As Reported ASU No. 2014-09 Impact Adjusted(1) Refundable income taxes $ 5,983 $ 820 $ 5,163 Total current assets 68,949 820 68,129 Total assets 989,331 820 988,511 Other accrued liabilities 59,645 2,782 56,863 Total current liabilities 149,256 2,782 146,474 Deferred compensation and other 56,908 99 56,809 Retained Earnings 439,178 (2,061 ) 441,239 Shareholders’ equity attributable to The Marcus Corporation 490,009 (2,061 ) 492,070 Total equity 490,119 (2,061 ) 492,180 Total liabilities and shareholders’ equity 989,331 820 988,511 (1)The amounts reflect each affected financial statement line item as they would have been reported under US GAAP prior to the adoption of ASU No. 2014-09.70The Marcus CorporationNotes to Consolidated Financial Statements2. Revenue Recognition (continued)As part of the Company’s adoption of ASU No. 2014-09, the Company elected to use the following practical expedients: (i) not to adjust the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company’s transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less; (ii) not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer; (iii) to expense costs as incurred for costs to obtain contracts when the amortization period would have been one year or less, which mainly includes internal sales and development compensation; (iv) not to disclose remaining performance obligations when the remaining performance obligations have original expected durations of one year or less; and (v) not to disclose remaining performance obligations when variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms a single performance obligation (which exists in the Company’s management fee contracts and its pre-show advertising contracts).3. Impairment ChargeIn fiscal 2019,2021, the Company determined that indicators of impairment were evidentpresent at a specificcertain theatre location and thatasset groups. For certain of the theatre asset groups evaluated for impairment, the sum of the estimated undiscounted future cash flows attributable to this assetcertain theatre assets was less than itstheir carrying amount. As such, theamounts. The Company evaluated the ongoingfair value of this assetthese assets, consisting primarily of land, building, leasehold improvements, furniture, fixtures and equipment, and operating lease right-of-use assets less lease obligations, and determined that the fair value, measured using Level 3 pricing inputs (estimated(using estimated discounted cash flows over the life of the primary assets, including estimated salessale proceeds), was less than itstheir carrying value and recorded impairment losses of $5,766, reducing certain property and equipment and certain operating lease right-of-use assets. The remaining net book value of all impaired assets was $11,689 as of December 30, 2021, excluding any applicable remaining lease obligations.$1,874,000$22,076 impairment loss, reducing certain property and equipment and certain operating lease right-of-use assets. The remaining net book value of all impaired assets was $33,313 as of December 31, 2020, excluding any applicable remaining lease obligations.impairedtrade name intangible asset was $808,000$6,900 as of December 26, 2019.4.31, 2020.$139,310,000,$139,310, consisting of $30,000,000$30,000 in cash, subject to certain adjustments, and 2,450,000 shares of the company’s Common Stock with a value of $109,197,000,$109,197, based on the Company’s closing share price as of January 31, 2019. The acquisition was treated as a purchase in accordance with ASC No. 805,Business Combinations, which requires allocation of the purchase price to the estimated fair values of assets and liabilities acquired in the transaction. The Company obtained assistance from a third party valuation specialist in order to assist in the determination of fair value. The Company provided assumptions to the third party valuation firm based on information available to it at the acquisition date, including both quantitative and qualitative information about the specified assets or liabilities. The Company primarily utilized the third party to accumulate comparative data from multiple sources and assemble a report that summarized the information obtained. The Company then used the information to determine fair value. The third party valuation firm was supervised by Company personnel who are knowledgeable about valuations and fair values. The Company finalized the fair values for both tangible and intangible assets and the liabilities during the fourth quarter of fiscal 2019.price (in thousands):price:71Other current assets $ 4,855 95,021 Operating lease right-of-use assets 160,567 Deferred tax asset 753 9,710 32,205 Taxes other than income taxes (206) Other accrued liabilities (3,322) Operating lease obligations (160,273) Total $ 139,310 The Marcus CorporationNotesConsolidated Financial Statements4. Acquisition (continued)Other current assets $ 4,855 Property and equipment(1) 95,021 Operating lease right-of-use assets 160,567 Deferred tax asset 753 Other (long-term assets)(2) 9,710 Goodwill(3) 32,205 Taxes other than income taxes (206 ) Other accrued liabilities (3,322 ) Operating lease obligations (160,273 ) Total $ 139,310 (1)Amounts recorded for property and equipment include land, building, leasehold improvements and equipment.(2)Amounts recorded primarily relate to a trade name intangible asset of $9,500,000 which the Company has determined to have an indefinite life.(3)Amounts recorded for goodwill are expected to be deductible for tax purposes.expects to realizerealized synergy and cost savings related to the acquisition because of purchasing and procurement economies of scale.$125,839,000$125,839 to revenue in fiscal 2019. Excluding the impact of acquisition costs, the acquired theatres did not have a material impact on the Company’s fiscal 2019 net earnings. Acquisition costs incurred as a result of the Movie Tavern acquisition were approximately $1,283,000$1,283 and $1,507,000$1,507 during fiscal 2019 and fiscal$845,662,000.$845,662. The Movie Tavern theatres would not have had a material impact on the Company’s fiscal 2018 net earnings. Unaudited pro forma revenues for the Company during fiscal 2019 would have been $832,349,000.$832,349. The additional five weeks of Movie Tavern theatres operations would not have had a material impact on the Company’s fiscal 2019 net earnings.5. Asset SaleOn October 20, 2017, the Company sold its 11% minority interest in The Westin® Atlanta Perimeter North in Atlanta, Georgia, and recorded a gain of $4,875,000 during the fiscal 2017 fourth quarter, which is included in Gain (loss) on disposition of property, equipment and other assets in the consolidated statement of earnings.72The Marcus CorporationNotes to Consolidated Financial Statements December 26, 2019 December 27, 2018 (in thousands) Trade receivables, net of allowances of $762 and $361, respectively $ 9,327 $ 8,538 Other receivables 20,138 17,146 $ 29,465 $ 25,684 December 30, 2021 December 31, 2020 Trade receivables, net of allowances of $1,001 and $1,284, respectively $ 8,981 $ 405 Other receivables 19,921 5,954 $ 28,902 $ 6,359 December 26, 2019 December 27, 2018 (in thousands) Land and improvements $ 152,434 $ 150,122 Buildings and improvements 761,511 745,886 Leasehold improvements 164,083 98,885 Furniture, fixtures and equipment 377,404 314,875 Finance lease right-of-use assets 74,357 72,631 Construction in progress 4,043 12,513 1,533,832 1,394,912 Less accumulated depreciation and amortization 610,578 554,869 $ 923,254 $ 840,043 December 30, 2021 December 31, 2020 Land and improvements $ 129,642 $ 145,671 Buildings and improvements 756,974 759,421 Leasehold improvements 166,060 163,879 Furniture, fixtures and equipment 375,650 374,253 Finance lease right-of-use assets 75,124 75,322 Construction in progress 6,000 3,360 1,509,450 1,521,906 Less accumulated depreciation and amortization 738,258 673,578 $ 771,192 $ 848,328 December 26, 2019 December 27, 2018 (in thousands) Split dollar life insurance policies $ 11,411 $ 11,411 Intangible assets 10,057 890 Favorable lease right – 8,818 Other assets 12,468 11,981 $ 33,936 $ 33,100 December 30, 2021 December 31, 2020 Split dollar life insurance policies $ — $ 11,411 Intangible assets 6,987 7,297 Other assets 5,702 12,393 $ 12,689 $ 31,101 as of December 26, 2019 is a trade name valued at $9,500,000$6,900 as of December 30, 2021 and December 31, 2020 that has an indefinite life.Asconjunction with the adoption of Topic 842, the Company’s favorable lease right is included in Operating lease right-of-use assets in the consolidated balance sheet. (See Note 8 for further detail.)
thousands, except share and per share data)73The Marcus CorporationNotes to Consolidated Financial Statements December 26, 2019 December 27, 2018 (in thousands, except payment data) Mortgage notes $ 24,571 $ 39,852 Senior notes 109,000 118,000 Unsecured term note due February 2025, with monthly principal and interest payments of $39,110, bearing interest at 5.75% 2,093 2,432 Revolving credit agreement 81,000 79,000 Debt issuance costs (322 ) (464 ) 216,342 238,820 Less current maturities, net of issuance costs 9,910 9,957 $ 206,432 $ 228,863 December 30, 2021 December 31, 2020 Mortgage notes $ 24,388 $ 24,482 Senior notes 90,000 100,000 Unsecured term note due February 2025, with monthly principal and interest payments of $39, bearing interest at 5.75% 1,356 1,735 Convertible senior notes 100,050 100,050 Payroll Protection Program loans 3,181 3,424 Revolving credit agreement — — Debt issuance costs (3,831) (3,684) Total debt, net of debt issuance costs 215,144 226,007 Less current maturities, net of issuance costs 10,967 10,548 Less debt discount — 22,423 Long-term debt 204,177 193,036 Short-term borrowings 47,346 87,194 Total debt and short-term borrowings, net of issuance costs $ 262,490 $ 313,201 bothbear fixed rate and adjustable, bear interest from 3.00% to 5.03%, have a weighted-average rateof 4.27% at December 26, 201930, 2021 and 4.66% at December 27, 2018,31, 2020, and mature in fiscal years 2025 through 2043. The mortgage notes are secured by the related land, buildings and equipment.$109,000,000Credit Agreement provides for a revolving credit facility that matures on January 9, 2025 with an initial maximum aggregate amount of availability of $225,000. At December 30, 2021, there were no borrowings outstanding on the revolving credit facility, which when borrowed, bear interest at LIBOR plus a margin, effectively 3.35% at December 30, 2021. Availability under the $225,000 revolving credit facility was $221,449 as of December 30, 2021 after taking into consideration outstanding letters of credit that reduce revolver availability.20202025 through 2027, require annual principal payments in varying installments and bear interest payable semi-annually at fixed rates ranging from 4.02% to 6.55%4.32%, with a weighted-average fixed rate of 4.37%4.19% at December 26, 201930, 2021 and 4.53%4.17% at December 27, 2018.At December 26, 2019,31, 2020.hadand certain purchasers entered into amendments (the “Note Amendments”) to the Note Purchase Agreement, dated June 27, 2013, and the Note Purchase Agreement, dated December 21, 2016 (collectively, the “Note Purchase Agreements”). The Note Amendments amend certain covenants and other terms of the Note Purchase Agreements and are identical to the amended covenants that are referenced in the Credit Agreement section above. Additionally, from April 29, 2020 until the last day of the first fiscal quarter ending after the Collateral Release Date (as defined in the Note Amendments), the Company is required to pay a fee to each Note holder equal to 0.975% of the aggregate principal amount of Notes held by such holder and is payable quarterly (0.24375% of the aggregate principal amount of the Notes per quarter).totaling $225,000,000and for general corporate purposes. The Convertible Notes are senior unsecured obligations and rank (i) senior in placeright of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Convertible Notes; (ii) equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; (iii) effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and (iv) structurally junior to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.an existing credit agreement that maturesspecified circumstances relating to the Company’s failure to comply with its reporting obligations under the Indenture or if the Convertible Notes are not freely tradeable as required by the Indenture. The Convertible Notes will mature on September 15, 2025, unless earlier repurchased or converted. Prior to March 15, 2025, the Convertible Notes will be convertible at the option of the holders only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ending on December 30, 2020 (and only during such fiscal quarter), if the last reported sale price of the Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period immediately after any five consecutive trading day period, or the measurement period, in June 2021. There were borrowingswhich the trading price per $1,000 principal amount of $81,000,000 outstandingthe Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Common Stock and the conversion rate on each such trading day; or (iii) upon the occurrence of specified corporate events. On or after March 15, 2025, the Convertible Notes will be convertible at the option of the holders at any time until the close of business on the revolving credit facilitysecond scheduled trading day immediately preceding the maturity date.December 26, 2019, bearingthe company’s election, in cash, shares of Common Stock or a combination thereof. The initial conversion rate is 90.8038 shares of Common Stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $11.01 per share of Common Stock), representing an initial conversion premium of approximately 22.5% to the $8.99 last reported sale price of the Common Stock on The New York Stock Exchange on September 17, 2020. If the Company undergoes certain fundamental changes, holders of Convertible Notes may require the Company to repurchase for cash all or part of their Convertible Notes for a purchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, if a make-whole fundamental change occurs prior to the maturity date, the Company will, under certain circumstances, increase the conversion rate for holders who convert Convertible Notes in connection with such make-whole fundamental change. The Company may not redeem the Convertible Notes before maturity and no “sinking fund” is provided for the Convertible Notes. The Indenture includes covenants customary for securities similar to the Convertible Notes, sets forth certain events of default after which the Convertible Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company and certain of its subsidiaries after which the Convertible Notes become automatically due and payable.LIBOR plus a margin which adjusts basedthe option of the holders as the last reported sale price of the Common Stock was greater than or equal to 130% of the applicable conversion price for at least 20 trading days during the last 30 consecutive trading days ending on the Company’s borrowing levels, effectively 2.70%last trading day of the preceding fiscal quarter. The Company has the ability to settle the conversion in Company stock. As such, the Convertible Notes will continue to be classified as long-term. Future convertibility and resulting balance sheet classification of this liability will be monitored at December 26, 2019each quarterly reporting date and 3.46% at December 27, 2018. The revolving credit facility requires an annual facility feewill be analyzed dependent upon market prices of 0.15% to 0.25% on the total commitment, based on the Company’s borrowing levels. Availability underCommon Stock during the line at December 26, 2019 totaled $139,000,000.On January 9,prescribed measurement period. No Convertible Notes have been converted to date and the Company does not expect any to be converted within the next 12 months.replaced its then-existing credit agreemententered into privately negotiated Capped Call Transactions (the “Capped Call Transactions”) with a new five-year $225,000,000 credit facilitycertain of the Initial Purchasers and/or their respective affiliates and/or other financial institutions (the “Capped Call Counterparties”). The Capped Call Transactions are expected generally to reduce potential dilution of the Company’s common stock upon any conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of such converted Convertible Notes, as the case may be, in the event that expires in January 2025. Thethe market price per share of the Company’s common stock, as measured under the terms of the new credit agreement did not change materially.TheCapped Call Transactions, is greater than the strike price of the Capped Call Transactions, which initially corresponds to the conversion price of the Convertible Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Convertible Notes. If, however, the market price per share of the Company’s loan agreements include, among other covenants, maintenancecommon stock, as measured under the terms of certain financial ratios, including a debt-to-capitalization ratiothe Capped Call Transactions,a fixed charge coverage ratio. The Company is in compliance with all financial debt covenants at December 26, 2019.
per share data)74The Marcus CorporationNotes to Consolidated Financial Statements26, 2019, are:Fiscal Year (in thousands) 2020 $ 9,910 2021 10,963 2022 11,013 2023 11,066 2024 11,119 Thereafter 162,271 $ 216,342 Fiscal Year 2022 $ 10,967 2023 11,028 2024 11,090 2025 124,088 2026 258 Thereafter 57,713 $ 215,144 2019,2021, fiscal 20182020 and fiscal 20172019 totaled $10,281,000, $11,434,000$14,119, $10,885 and $10,338,000,$10,281, respectively.two2 interest rate swap agreements on March 1, 2018 covering $50,000,000$50,000 of floating rate debt. The first agreement hashad a notional amount of $25,000,000, expires$25,000, expired March 1, 2021, and requiresrequired the Company to pay interest at a defined rate of 2.559% while receiving interest at a defined variable rate of one-month LIBOR (1.750% at December 26, 2019).LIBOR. The second agreement has a notional amount of $25,000,000,$25,000, expires March 1, 2023, and requires the Company to pay interest at a defined rate of 2.687% while receiving interest at a defined variable rate of one-month LIBOR (1.750%(0.125% at December 26, 2019)30, 2021). The Company26, 2019,30, 2021, the remaining interest rate swaps wereswap was considered highly effective. The fair value of the interest rate swapsswap on December 26, 2019 and December 27, 2018, respectively,30, 2021 was a liability of $1,194,000 and $205,000 and was$689 which is included in deferred compensation and other long-term obligations in the consolidated balance sheets.sheet. The fair value of the interest rate swaps on December 31, 2020, was a liability of $1,470, of which $100 was included in other accrued liabilities and $1,370 was included in other long-term obligations in the consolidated balance sheet. The Company does not expect the interest rate swapsswap to have a material effect on earnings within the next 12 months.The Company had an interest rate swap that expired in January 2018. The swap agreement covered $25,000,000 of floating rate debt that required the Company to pay interest at a defined fixed rate of 0.96% while receiving interest at a defined variable rate of one-month LIBOR. The Company’s interest rate swap agreement was considered effective and qualified as a cash flow hedge from inception through June 16, 2016, at which time the derivative was undesignated and the balance in accumulated other comprehensive loss was reclassified into interest expense. As of June 16, 2016, the swap was considered ineffective for accounting purposes and the change in fair value was recorded as an increase or decrease in interest expense. As such, the $13,000 decrease in fair value of the swap during fiscal 2018 was recorded to interest expense.75The Marcus CorporationNotes to Consolidated Financial StatementsASU No. 2016-02,Leases (Topic 842).ASC 842. The Company performs this evaluation at the inception of the lease and when a modification is made to a lease. The Company leases real estate and equipment with lease terms of one year to 45 years, some of which include options to extend and/or terminate the lease. The exercise of lease renewal options is done at the Company’s sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term and related right-of-use asset and lease liability. The depreciable life of the asset is limited to the expected term. The Company’s lease agreements do not contain any residual value guarantees or any restrictions or covenants.labilitiesliabilities are recognized at commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable, the Company uses the implicit rate in the lease in determining the present value of lease payments. When the lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, including the fixed rate the Company could borrow for a similar amount, over a similar lease term with similar collateral. The Company recognizes right-of-use assets for all assets subject to operating leases in an amount equal to the operating lease liabilities, adjusted for the balances of long-term prepaid rent, favorable lease intangible assets, deferred lease expense, unfavorable lease liabilities and deferred lease incentive liabilities. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.The Company adopted ASC 842 on the first day of fiscal 2019 using the modified retrospective approach. Under this method, the Company was allowed to initially apply the new lease standard at the adoption date and recognize the assets and liabilities in the period of adoption. As such, upon adoption, no adjustments were made to prior period financial information or disclosures and the new lease standard did not result in a cumulative effect adjustment to retained earnings. Finance lease accounting remained substantially unchanged. The adoption of ASC 842 had the following effect on the Company’s financial statements (all relating to Lease expense for operating lease right-of-use assets and obligations): Balance at
December 27,
2018 ASC 842
Adjustments Balance at
December 28,
2018 (in thousands) Assets Other current assets $ 15,355 $ (690 ) $ 14,665 Operating lease right-of-use assets - 76,178 76,178 Other assets (long term) 33,100 (8,868 ) 24,232 Liabilities Other accrued liabilities 59,645 (4,396 ) 55,249 Current portion of operating lease obligations - 5,909 5,909 Operating lease obligations - 75,608 75,608 Deferred compensation and other 56,908 (10,501 ) 46,407 76The Marcus CorporationNotes to Consolidated Financial Statements8. Leases (continued)As part of the Company’s adoption of ASC 842, the Company elected the following practical expedients: i) to forego reassessment of its prior conclusion related to lease identification, lease classification and initial direct costs, ii) to not separate lease and non-lease components for all its leases, and iii) to make a policy election not to apply the lease recognition requirements for short-term leases. As a result, the Company does not recognize right-of use assets or lease liabilities for short-term leases that qualify for the policy election (those with an initial term of 12 months or less which do not include a purchase or renewal option whichpayments is reasonably certain to be exercised), but will recognize these lease payments as lease costsrecognized on a straight-line basis over the lease term.Lease Cost Classification Fiscal 2019 (in thousands) Finance lease costs: Amortization of finance lease assets Depreciation and amortization $ 3,507 Interest on lease liabilities Interest expense 1,247 $ 4,754 Operating lease costs: Operating lease costs Rent expense $ 24,302 Variable lease cost Rent expense 1,560 Short-term lease cost Rent expense 237 $ 26,099 Lease Cost Classification Fiscal 2021 Fiscal 2020 Finance lease costs: Amortization of finance lease assets Depreciation and amortization $ 2,732 $ 2,851 Interest on lease liabilities Interest expense 951 1,048 $ 3,683 $ 3,899 Operating lease costs: Operating lease costs Rent expense $ 25,489 $ 25,821 Variable lease cost Rent expense (30) 724 Short-term lease cost Rent expense 135 321 $ 25,594 $ 26,866 Other Information Fiscal 2019 (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows from finance leases $ 2,544 Operating cash flows from finance leases 1,247 Operating cash flows from operating leases 25,226 Right of use assets obtained in exchange for new lease obligations: Finance lease liabilities 1,726 Operating lease liabilities, including from acquisitions 180,103 December 26, 2019 (in thousands) Finance leases: Property and equipment – gross $ 74,357 Accumulated depreciation and amortization (52,869 ) Property and equipment - net $ 21,488 In fiscal 2017, the Company had the following non-cash transactions related to leases: 1) obtained $6,173,000 of new capital leases, and 2) exercised $3,675,000 in capital lease extensions.77Other Information Fiscal 2021 Fisal 2020 Cash paid for amounts included in the measurement of lease liabilities: Financing cash flows from finance leases $ 2,774 $ 2,007 Operating cash flows from finance leases 951 1,048 Operating cash flows from operating leases 31,136 17,685 Right of use assets obtained in exchange for new lease obligations: Finance lease liabilities — 1,417 Operating lease liabilities, including from acquisitions 2,663 10,957 The Marcus CorporationNotes to Consolidated Financial Statements8. Leases (continued)December 30, 2021 December 31, 2020 Finance leases: Property and equipment – gross $ 75,124 $ 75,322 Accumulated depreciation and amortization (58,197) (55,547) Property and equipment - net $ 16,927 $ 19,775 Lease Term and Discount RateDecember 26, 2019Weighted-average remaining lease terms:Finance leases10 yearsOperating leases15 yearsWeighted-average discount rates:Finance leases4.67%Operating leases4.56%Lease Term and Discount Rate December 30, 2021 December 31, 2020 Weighted-average remaining lease terms: Finance leases 8 years 9 years Operating leases 13 years 15 years Weighted-average discount rates: Finance leases 4.58% 4.62% Operating leases 4.48% 4.53% 26, 201930, 2021 are as follows (in thousands):Fiscal Year Operating
Leases Finance
Leases 2020 $ 24,369 $ 3,606 2021 25,730 2,997 2022 26,313 2,950 2023 24,808 2,840 2024 24,534 2,859 Thereafter 214,060 14,093 Total lease payments 339,814 29,345 Less: amount representing interest (94,368 ) (5,972 ) Total lease liabilities $ 245,446 $ 23,373 Aggregate minimumfollows:Fiscal Year Operating Leases Finance Leases 2022 $ 26,803 $ 3,404 2023 26,684 3,162 2024 25,468 3,056 2025 25,532 2,897 2026 25,179 2,817 Thereafter 180,524 8,458 Total lease payments 310,190 23,794 Less: amount representing interest (77,331) (4,041) Total lease liabilities $ 232,859 $ 19,753 commitmentspayments and contract terms of leases due to the pandemic. The lease terms were negotiated on a lease-by-lease basis with individual landlords. In conjunction with these lease discussions, the Company obtained lease concessions for the majority of its leases. Substantially all of the lease concessions were for the deferral of lease payments into future periods. This resulted in the total payments required by the modified contract being substantially the same as or less than the total payments required by the original contract. The Company has made the policy election to account for these lease concessions as if they were made under the enforceable rights included in the original agreement and are thus outside of the modification framework. The Company has elected to account for these concessions as if no changes to the lease contract were made and has continued to recognize rent expense during the deferral period. Deferred rent payments of approximately $2,727 for the Company’s operating leases have been included in the total operating lease obligations as of December 27, 2018 under Accounting Standard Codification Topic 840 are as follows (in thousands):Fiscal Year Operating
Leases Capital
Leases 2019 $ 11,317 $ 3,073 2020 10,169 2,978 2021 9,670 2,679 2022 9,910 2,718 2023 9,038 2,718 2024 and thereafter 80,523 16,940 Total minimum lease payments $ 130,627 31,106 Less: amount representing interest (6,978 ) Total present value of minimum capital lease payments $ 24,128 As30, 2021, of December 26, 2019, the Company had a build-to-suitwhich approximately $788 is included in long-term operating lease arrangement in which the Company is responsible for the construction of a new leased theatre and for paying construction costs during development. Construction costs will be reimbursed by the landlord up to an agreed upon amount. During construction, the Company is deemed to not have control of the assets or the leased premises and will record the development expenditures in other assets on the consolidated balance sheet. The lease commences when the Company has access to the right-of-use asset, which is expected to be upon project completion during fiscal 2020.
obligations.78The Marcus CorporationNotes to Consolidated Financial StatementsStock-BasedShare-Based Compensationten10 votes per share while holders of Common Stock are entitled to one1 vote per share on any matters brought before the shareholders of the Company. Liquidation rights are the same for both classes of stock.26, 2019,30, 2021, the Company’s Board of Directors has approved the repurchase of up to 11,687,500 shares of Common Stock to be held in treasury. The Company intends to reissue these shares upon the exercise of stock options and for savings and profit-sharing plan contributions. The Company purchasedrepurchased 61,654, 37,567 and 30,139 82,722 and 28,898 shares pursuant to these authorizations during fiscal 2019,2021, fiscal 20182020 and fiscal 2017,2019, respectively. At December 26, 2019,30, 2021, there were 2,756,5612,657,340 shares available for repurchase under these authorizations.26, 2019,30, 2021, there were 430,582421,870 shares available under this authorization.4,937,5007,437,500 shares of Common Stock under various equity incentive plans. Stock options granted under the plans to employees generally become exercisable either 40% after two years, 60% after three years, 80% after four years and 100% after five years of the date of grant, or 50% after two years, 75% after three years and 100% after four years of the date of grant, depending on the date of grant. The options generally expire ten years from the date of grant as long as the optionee is still employed with the Company.aremay be issued from previously acquired treasury shares. At December 26, 2019,30, 2021, there were 588,8341,851,090 shares available for grants of additional stock options, non-vested stock and other types of equity awards under the current plan.Stock-based2019,2021, fiscal 20182020 and fiscal 2017: Risk-free interest rate 2.50 – 2.60% 2.70 – 2.80% 2.08 – 2.20% Dividend yield 1.70% 2.10% 2.10% Volatility 27 – 32% 28 – 33% 34 – 43% Expected life 6 – 8 years 6 – 8 years 7 – 8 years 79Year Ended Risk-free interest rate 0.97 – 1.26% 0.40 – 1.26% 2.50 – 2.60% Dividend yield 1.50 – 1.50% 1.70 – 1.90% 1.70% Volatility 28 - 53% 27 – 41% 27 – 32% Expected life 6 – 8 years 6 – 8 years 6 – 8 years The Marcus CorporationNotes to Consolidated Financial Statements9. Shareholders’ Equity and Stock-Based Compensation (continued)stock-basedshare-based compensation expense was $3,523,000, $2,691,000$9,316, $4,385 and $2,411,000$3,523 in fiscal 2019,2021, fiscal 20182020 and fiscal 2017,2019, respectively. The recognized tax benefit on stock-basedshare-based compensation was $1,127,000, $2,617,000$1,997, $771 and $1,227,000$1,127 in fiscal 2019,2021, fiscal 20182020 and fiscal 2017,2019, respectively. The increase in the recognized tax benefit during fiscal 20182019 was primarily due to an increase in stock options exercised where the market price was significantly greater than the grant date fair value of the stock options. December 26, 2019 December 27, 2018 December 28, 2017 Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Options Price Options Price Options Price (options in thousands) Outstanding at beginning of period 1,450 $ 21.25 1,629 $ 18.08 1,563 $ 15.94 Granted 329 41.67 336 27.59 273 31.08 Exercised (97 ) 15.60 (478 ) 14.74 (133 ) 17.04 Forfeited (41 ) 30.58 (37 ) 23.35 (74 ) 22.37 Outstanding at end of period 1,641 25.46 1,450 21.25 1,629 18.08 Exercisable at end of period 802 $ 18.22 699 $ 15.87 988 $ 14.69 Weighted-average fair value of options granted during the period $ 11.79 $ 7.87 $ 10.54 Year Ended December 30, 2021 December 31, 2020 December 26, 2019 Options Weighted-
Average
Exercise
PriceOptions Weighted-
Average
Exercise
PriceOptions Weighted-
Average
Exercise
PriceOutstanding at beginning of period 2,234 $ 24.87 1,641 $ 25.46 1,450 $ 21.25 Granted 531 21.74 728 23.47 329 41.67 Exercised (134) 11.42 (31) 12.21 (97) 15.60 Forfeited (98) 26.60 (104) 28.06 (41) 30.58 Outstanding at end of period 2,533 24.84 2,234 24.87 1,641 25.46 Exercisable at end of period 1,119 $ 24.76 1,001 $ 20.38 802 $ 18.22 Weighted-average fair value of options granted during the period $ 9.47 $ 5.96 $ 11.79 26, 201930, 2021 ranged from $10.00$12.71 to $41.90. The weighted-average remaining contractual life of those options is 6.46.6 years. The weighted-average remaining contractual life of options4.54.4 years. There were 1,587,0002,486,000 options outstanding, vested and expected to vest as of December 26, 2019,30, 2021, with a weighted-average exercise price of $25.13$24.87 and an intrinsic value of $14,567,000.$1,965. Additional information as of December 30, 2021 related to these options outstanding segregated by exercise price range is as follows: Exercise Price Range (options in thousands) Options outstanding 464 610 567 Weighted-average exercise price of options outstanding $ 14.03 $ 23.22 $ 37.22 Weighted-average remaining contractual life of options outstanding 3.1 7.0 8.4 Options exercisable 464 218 120 Weighted-average exercise price of options exercisable $ 14.03 $ 19.80 $ 31.54 Exercise Price Range Options outstanding 827 765 941 Weighted-average exercise price of options outstanding $ 16.18 $ 23.66 $ 33.42 Weighted-average remaining contractual life of options outstanding 4.5 8 7.2 Options exercisable 580 205 334 Weighted-average exercise price of options exercisable $ 17.55 $ 26.96 $ 35.89 26, 201930, 2021 was $14,693,000$1,996 and the intrinsic value of options exercisable at December 26, 201930, 2021 was $11,579,000.$756. The intrinsic value of options exercised was $2,135,000, $10,373,000$1,164, $0 and $1,770,000$2,135 during fiscal 2019,2021, fiscal 20182020 and fiscal 2017,2019, respectively. As of December 26, 2019,30, 2021, total remaining unearned compensation cost related to stock options was $5,314,000,$6,336, which will be amortized to expense over the remaining weighted-average life of 2.72.6 years.80The Marcus CorporationNotes to Consolidated Financial Statements9. Shareholders’ Equity and Stock-Based Compensation (continued) December 26, 2019 December 27, 2018 December 28, 2017 Weighted- Weighted- Weighted- Average Average Average Fair Fair Fair Shares Value Shares Value Shares Value (options in thousands) Outstanding at beginning of period 158 $ 18.98 137 $ 21.94 143 $ 19.30 Granted 39 38.24 52 29.02 37 29.12 Vested (23 ) 18.60 (31 ) 16.41 (36 ) 18.78 Forfeited – – – – (7 ) 22.86 Outstanding at end of period 174 $ 29.16 158 $ 18.98 137 $ 21.94 Year Ended December 30, 2021 December 31, 2020 December 26, 2019 Shares Weighted-
Average
Fair
ValueShares Weighted-
Average
Fair
ValueShares Weighted-
Average
Fair
ValueOutstanding at beginning of period 147 $ 31.02 174 $ 29.16 158 $ 18.98 Granted 251 19.63 42 31.43 39 38.24 Vested (32) 30.69 (69) 26.56 (23) 18.60 Forfeited (9) 19.77 — — — — Outstanding at end of period 357 $ 23.32 147 $ 31.02 174 $ 29.16 26, 2019,30, 2021, total remaining unearned compensation related to non-vested stock was $3,015,000,$3,022, which will be amortized over the weighted-average remaining service period of 2.8 years.Prior to fiscal 2017, the plan provided 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 made additional discretionary contributions. During fiscal 20192021, fiscal 2020 and fiscal 2018,2019, the first 2% of the matching contribution was made with the Company’s common stock. DuringRetirement savings plan expense was $1,696, $1,718 and $2,311 for fiscal 2017, the 1%2021, fiscal 2020 and discretionary contributions were made with the Company’s common stock. Pensionprofit-sharing expense for all plans was $5,065,000, $5,117,000 and $4,415,000 for fiscal 2019, fiscal 2018 and fiscal 2017, respectively.81The Marcus CorporationNotes to Consolidated Financial Statements10. Employee Benefit Plans (continued)26, 201930, 2021 and December 27, 201831, 2020 measurement dates is as follows: December 26, December 27, 2019 2018 (in thousands) Change in benefit obligation: Benefit obligation at beginning of period $ 35,640 $ 37,639 Service cost 833 926 Interest cost 1,485 1,364 Actuarial (gain) loss 7,317 (2,633 ) Benefits paid (1,451 ) (1,656 ) Benefit obligation at end of year $ 43,824 $ 35,640 Amounts recognized in the statement of financial position consist of: Current accrued benefit liability (included in Other accrued liabilities) $ (1,400 ) $ (1,378 ) Noncurrent accrued benefit liability (included in Deferred compensation and other) (42,424 ) (34,262 ) Total $ (43,824 ) $ (35,640 ) Amounts recognized in accumulated other comprehensive loss consist of: Net actuarial loss $ 16,373 $ 9,556 Prior service credit (451 ) (515 ) Total $ 15,922 $ 9,041 Year Ended December 26, December 27, December 28, 2019 2018 2017 (in thousands) Net periodic pension cost: Service cost $ 833 $ 926 $ 765 Interest cost 1,485 1,364 1,356 Net amortization of prior service cost and actuarial loss 436 621 356 $ 2,754 $ 2,911 $ 2,477 December 30,
2021December 31,
2020Change in benefit obligation: Benefit obligation at beginning of period $ 48,604 $ 43,824 Service cost 1,122 1,095 Interest cost 1,201 1,371 Actuarial (gain) loss (2,630) 3,806 Benefits paid (1,470) (1,492) Benefit obligation at end of year $ 46,827 $ 48,604 Amounts recognized in the statement of financial position consist of: Current accrued benefit liability (included in Other accrued liabilities) $ (1,674) $ (1,401) Noncurrent accrued benefit liability (included in Other long-term obligations) (45,153) (47,203) Total $ (46,827) $ (48,604) Amounts recognized in accumulated other comprehensive loss consist of: Net actuarial loss $ 15,120 $ 19,125 Prior service credit (323) (387) Total $ 14,797 $ 18,738 Year Ended December 30, 2021 December 31, 2020 December 26, 2019 Net periodic pension cost: Service cost $ 1,122 $ 1,095 $ 833 Interest cost 1,201 1,371 1,485 Net amortization of prior service cost and actuarial loss 1,311 990 436 $ 3,634 $ 3,456 $ 2,754 $11,766,000$10,935 loss, net of tax, included in accumulated other comprehensive loss at December 26, 2019,30, 2021, consists of the $12,100,000$11,174 net actuarial loss, net of tax, and the $334,000$239 unrecognized prior service credit, net of tax, which have not yet been recognized in the net periodic benefit cost. The $6,609,000$13,847 loss, net of tax, included in accumulated other comprehensive loss at December 27, 2018,31, 2020, consists of the $6,985,000$14,133 net actuarial loss, net of tax, and the $376,000$286 unrecognized prior service credit, net of tax, which have not yet been recognized in the net periodic benefit cost.$37,474,000$42,853 and $30,576,000$43,548 as of December 26, 201930, 2021 and December 27, 2018,31, 2020, respectively.82The Marcus CorporationNotes to Consolidated Financial Statements10. Employee Benefit Plans (continued) Year Ended December 26, 2019 December 27, 2018 (in thousands) Net actuarial loss (gain) $ 7,317 (2,633 ) Amortization of the net actuarial loss (499 ) (685 ) Amortization of the prior year service credit 63 64 Total $ 6,881 (3,254 ) The estimated amount that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in fiscal 2020 is $990,000, of which $1,054,000 relates to the actuarial loss and $64,000 relates to the prior service credit.Year Ended December 30, 2021 December 31, 2020 (in thousands) Net actuarial (gain) loss $ (2,630) 3,806 Amortization of the net actuarial loss (1,375) (1,055) Amortization of the prior year service credit 64 64 Total $ (3,941) 2,815 December 26, 2019 December 27, 2018 Discount rate 3.10 % 4.15 % Rate of compensation increase 4.00 % 4.00 % December 30, 2021 December 31, 2020 Discount rate 2.85% 2.45% Rate of compensation increase 4.00% 4.00% Year Ended December 26, 2019 December 27, 2018 December 28, 2017 Discount rate 4.15 % 3.60 % 4.15 % Rate of compensation increase 4.00 % 4.00 % 4.00 % December 30, 2021 December 31, 2020 December 26, 2019 Discount rate 2.45% 3.10% 4.15% Rate of compensation increase 4.00% 4.00% 4.00% 26, 2019, are:Fiscal Year (in thousands) 2020 $ 1,400 2021 1,709 2022 1,538 2023 1,532 2024 1,791 Years 2025 – 2029 12,402
30, 2021, are as follows:83Fiscal Year 2022 $ 1,697 2023 1,759 2024 1,975 2025 2,204 2026 2,357 Years 2026 – 2030 15,043 The Marcus CorporationNotes to Consolidated Financial Statements December 26, 2019 December 27, 2018 (in thousands) Accrued employee benefits $ 15,145 $ 13,381 Depreciation and amortization (69,100 ) (59,296 ) Operating lease assets (62,339 ) - Operating lease liabilities 62,750 - Other 5,282 3,938 Net deferred tax liability $ (48,262 ) $ (41,977 ) December 30, 2021 December 31, 2020 Deferred tax assets Accrued employee benefits $ 17,669 $ 16,685 Operating lease liabilities 59,622 64,055 Gift card liabilities 7,318 5,098 Net operating loss, disallowed interest & tax credit carryforwards 24,166 21,525 Other 6,876 876 Total 115,651 108,239 Less valuation allowance (2,415) — Deferred tax assets 113,236 108,239 Deferred tax liabilities Depreciation and amortization (73,898) (82,964) Operating lease assets (55,489) (58,704) Deferred tax liabilities (129,387) (141,668) Net deferred tax liability $ (16,151) $ (33,429) Amounts recognized in the consolidated balance sheets consist of: Deferred income taxes - other assets $ 10,032 $ — Deferred income taxes - liabilities (26,183) (33,429) Net amount recognized $ (16,151) $ (33,429) Year Ended December 26,
2019 December 27,
2018 December 28,
2017 (in thousands) Current: Federal $ 1,187 $ 7,022 $ 8,707 State 2,041 3,181 1,558 Deferred: Federal 9,228 2,815 (7,155 ) State (136 ) 109 515 $ 12,320 $ 13,127 $ 3,625 A tax benefitYear Ended December 30, 2021 December 31, 2020 December 26, 2019 Current: Federal $ 13 $ (32,626) $ 1,187 State 129 526 2,041 Deferred: Federal (12,629) (24,751) 9,228 State (3,214) (14,085) (136) $ (15,701) $ (70,936) $ 12,320 the fiscal 2018 current federal income tax amountthousands, except share and a tax benefit of $21,240,000 is included in the fiscal 2017 deferred federal income tax amount, both of which relate to the Tax Cuts and Jobs Act of 2017.22.7%26.6%, 19.7%36.2% and 5.3%22.7% for fiscal 2019,2021, fiscal 20182020 and fiscal 2017,2019, respectively. The Company's effective income tax rate during fiscal 2020 benefitted from several accounting method changes and the March 27, 2020 signing of the CARES Act, one of the provisions of which allows the Company's 2019 and 2020 taxable losses to be carried back to prior fiscal years during which the federal income tax rate was 35.0%, compared to the current statutory federal income tax rate of 21.0%. During fiscal 2018,2020, the Company recorded current tax benefits of $1,947,000 related to reductions in$11,976 and deferred tax liabilities related to tax accounting method changes that the Company made subsequent to the Tax Cuts and Jobs Actbenefits of 2017. During fiscal 2017, the Company recorded a deferred tax benefit of $21,240,000$8,095 related to the reduction of its net deferredCARES Act and tax liability resulting from the reduction in the corporate tax rate enacted in December 2017 under the Tax Cuts and Jobs Act of 2017.accounting changes. Excluding these favorable impacts, the Company’scompany’s effective income tax ratesrate for fiscal 2018 and fiscal 2017 were 22.7% and 36.2%, respectively. The Company also recorded significant current tax benefits in fiscal 2018 related to excess tax benefits on share-based compensation.2020 was 26.0%. The Company has not included the income tax expense or benefit related to the net earnings or loss attributable to noncontrolling interests in its income tax expense as the entities areentity is considered a pass-through entitiesentity and, as such, the income tax expense or benefit is attributable to its owners.84Marcus CorporationNotesCompany has evaluated the provisions of the CARES Act. Among other things, the CARES Act includes provisions relating to Consolidated Financial Statements11. Income Taxes (continued) Year Ended December 26,2019 December 27,2018 December 28,2017 Statutory federal tax rate 21.0 % 21.0 % 35.0 % Tax benefit from Tax Cuts and Jobs Act of 2017 – (2.9 ) (30.9 ) State income taxes, net of federal income tax benefit 5.5 6.1 4.8 Tax credits, net of federal income tax benefit (2.7 ) (1.1 ) (0.8 ) Other (1.1 ) (3.4 ) (2.8 ) 22.7 % 19.7 % 5.3 % December 30, 2021 December 31, 2020 December 26, 2019 Statutory federal tax rate 21.0 % 21.0 % 21.0 % Tax benefit from CARES Act and accounting method changes — 10.3 — State income taxes, net of federal income tax benefit 6.7 5.0 5.5 Tax credits, net of federal income tax benefit 1.6 0.2 (2.7) Valuation allowance (4.1) — — Other 1.4 (0.3) (1.1) 26.6 % 36.2 % 22.7 % 2019,2021, fiscal 20182020 and fiscal 20172019 were $3,062,000, $(218,000)$(8,316), $(33,275) and $23,691,000,$3,062, respectively.During Net income taxes refunded in fiscal 2017,2021 and fiscal 2020 included $7,800 and $31,500, respectively, related to net operating loss carrybacks to prior years, as allowed under the Company was able to make a reasonable estimateprovisions of the impact of the Tax Cuts and Jobs Act of 2017, including the reduction in the corporate tax rate and the provisions related to executive compensation and 100% bonus depreciation on qualifying property. Following the guidance of the U.S. Securities and Exchange Commission’s Staff Accounting Bulletin No. 118, any adjustments to the Company’s estimates within a one-year measurement period were reported as a component of income tax expense in fiscal 2018. CARES Act.did not make any adjustments to the estimates recorded in fiscal 2017.A reconciliation of the beginning and ending gross amounts ofhad no unrecognized tax benefit are as follows: Year Ended (in thousands) Balance at beginning of year $ – $ 102 $ 414 Increases due to: Tax positions taken in prior years – – – Tax positions taken in current year – – – Decreases due to: Tax positions taken in prior years – – – Settlements with taxing authorities – (102 ) – Lapse of applicable statute of limitations – – (312 ) Balance at end of year $ – $ – $ 102 85The Marcus CorporationNotes to Consolidated Financial Statements11. Income Taxes (continued)During fiscal 2018, the Company settled a dispute with a state taxing authority and no longer carries an unrecognized tax benefitbenefits as of December 27, 2018. The Company’s total unrecognized tax benefit that, if recognized, would affect the Company’s effective tax rate was $67,000 as of30, 2021, December 28, 2017.31, 2020 and December 26, 2019. The Company had no accrued interest or penalties at December 26, 201930, 2021 or December 27, 2018.31, 2020. The Company classifies interest and penalties relating to income taxes as income tax expense. For the year ended December 26, 2019, $1,00030, 2021, $60 of interest income was recognized in the consolidated statement of earnings (loss), compared to $68,000$296 of interest income for the year ended December 27, 2018,31, 2020 and $50,000$1 of interest expenseincome for the year ended December 28, 2017.During fiscal 2018,26, 2019.return forreturns. The examination included the 31 weeks ended December 31, 2015. The Company’s federal income tax returns are no longer subjectprevious five fiscal years, to examination priorthe extent that net operating losses were carried back to those fiscal 2016.years under the CARES Act. With certain exceptions, the Company’sCompany's state income tax returns are no longer subject to examination prior to fiscal 2016.2017. At this time, the Company does not expect the results from any income tax audit or appeal to have a significant impact on the Company’sCompany's financial statements.The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.$2,243,000$11,776 at December 26, 2019.26, 2019,30, 2021, the Company had license rights to operate three hotels using the Hilton trademark and two hotels using the Marriott trademark. Under the terms of the licenses, the Company is obligated to pay fees based on defined gross sales.26, 201930, 2021 and December 27, 2018,31, 2020, the Company held investments with aggregate carrying values of $3,593,000$2,335 and $4,069,000, respectively, in several$2,084, respectively. Investments at December 30, 2021 included two joint ventures accounted for under the equity method. Investments at December 31, 2020 included one of which isjoint venture accounted for under the equity method and two of which are investments in equity investments without readily determinable fair values.
values in which the Company surrendered or sold its ownership interest during fiscal 2021.86Marcus CorporationNotesCompany invested $2,427 for a 10% equity interest in the Monaco joint venture and entered into a management agreement for the hotel. The Monaco joint venture entity, as the borrower, financed the acquisition of Monaco with a non-recourse mortgage loan. In connection with this mortgage loan, the Company provided an environmental indemnity and a “bad boy” guaranty that provides that the lender can recover losses from the Company for certain bad acts of the Monaco joint venture, such as but not limited to Consolidated Financial Statements2019,2021, fiscal 20182020 and fiscal 2017: (in thousands) Fiscal 2019 Revenues $ 557,080 $ 263,350 $ 433 $ 820,863 Operating income (loss) 76,903 10,050 (18,762 ) 68,191 Depreciation and amortization 51,202 20,430 645 72,277 Assets 953,299 337,206 68,681 1,359,186 Capital expenditures and acquisitions 61,604 31,783 780 94,167 Fiscal 2018 Revenues $ 446,804 $ 259,892 $ 424 $ 707,120 Operating income (loss) 88,790 12,480 (18,081 ) 83,189 Depreciation and amortization 38,760 22,229 353 61,342 Assets 624,512 306,162 58,657 989,331 Capital expenditures and acquisitions 43,568 14,931 161 58,660 Fiscal 2017 Revenues $ 403,431 $ 249,564 $ 557 $ 653,552 Operating income (loss) 80,447 12,895 (16,035 ) 77,307 Depreciation and amortization 33,448 17,912 359 51,719 Assets 637,723 313,942 66,132 1,017,797 Capital expenditures and acquisitions 93,676 20,604 524 114,804 Theatres Hotels/
ResortsCorporate
ItemsTotal Fiscal 2021 Revenues $ 271,248 $ 186,638 $ 358 $ 458,244 Operating loss (27,559) 5,865 (19,758) (41,452) Depreciation and amortization 51,654 20,192 281 72,127 Assets 820,547 305,928 61,886 1,188,361 Capital expenditures and acquisitions 10,299 6,783 — 17,082 Fiscal 2020 Revenues $ 132,624 $ 104,638 $ 426 $ 237,688 Operating income (loss) (121,429) (43,885) (13,108) (178,422) Depreciation and amortization 53,460 21,096 496 75,052 Assets 871,655 309,320 73,203 1,254,178 Capital expenditures and acquisitions 15,828 4,669 866 21,363 Fiscal 2019 Revenues $ 557,080 $ 263,350 $ 433 $ 820,863 Operating income (loss) 76,903 10,050 (18,762) 68,191 Depreciation and amortization 51,202 20,430 645 72,277 Assets 953,299 337,206 68,681 1,359,186 Capital expenditures and acquisitions 61,604 31,783 780 94,167 87The Marcus CorporationNotes to ConsolidatedStatements15. Unaudited Quarterly Financial Information(in thousands, except per share data) 13 Weeks Ended Fiscal 2019 March 28,
2019 September 26,
2019 December 26,
2019 Revenues $ 170,039 $ 232,500 $ 211,462 $ 206,862 Operating income 4,950 27,475 22,387 13,379 Net earnings attributable to The Marcus Corporation 1,860 18,066 14,289 7,802 Net earnings per common share – diluted $ 0.06 $ 0.58 $ 0.46 $ 0.25 13 Weeks Ended Fiscal 2018 March 29,
2018 September 27,
2018 December 27,
2018 Revenues $ 168,191 $ 193,298 $ 170,599 $ 175,032 Operating income 17,016 29,107 22,413 14,653 Net earnings attributable to The Marcus Corporation 9,821 18,619 16,231 8,720 Net earnings per common share – diluted $ 0.35 $ 0.65 $ 0.56 $ 0.30
Disclosure.88Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.None.Item 9A.Controls and Procedures.20192021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.Item 10.Directors, Executive Officers and Corporate Governance.Directors,”Directors” and “Board of Directors and Corporate Governance” and “Delinquent Section 16(a) Reports” in the definitive Proxy Statement for our 20202022 Annual Meeting of Shareholders scheduled to be held on May 6, 202010, 2022 (our “Proxy Statement”). Information regarding our executive officers may be found in Part I of this Form 10-K under the caption “Executive Officers of the Company.” Except as otherwise specifically incorporated by reference, our Proxy Statement is not deemed to be filed as part of this Form 10-K.Item 11.Executive Compensation.89Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.Number of securities to be
issued upon the exercise
of outstanding options,
warrants and rights Weighted-average
exercise price of
outstanding options,
warrants and rights Number of securities remaining available
for future issuance under current equity
compensation plan (excluding
securities reflected in the first column) 1,641,000 $25.46 589,000 Number of securities to be
issued upon the exercise
of outstanding options,
warrants and rightsWeighted-average
exercise price of
outstanding options,
warrants and rightsNumber of securities remaining available
for future issuance under current equity
compensation plan (excluding
securities reflected in the first column)2,533,000 $24.84 1,851,090 Item 13.Certain Relationships and Related Transactions, and Director Independence.Item 14.Principal Accounting Fees and Services.Item 15. Financial Statement Schedules.(a)(1) Financial Statements.The information required by this item is set forth in “Item 8 – Financial Statements and Supplementary Data” above.(a)(2) Financial Statement Schedules.90EXHIBIT INDEX10.2* 10.3* 10.4* 9110.5 9210.18*10.16* 10.19*10.17*10.20*10.18*10.21*10.19*10.22*10.20*10.2310.21*10.22* 10.23 10.24 14.110.2510.25 14.1 21 232223 31.1 31.2 32 99 Proxy Statement for the 20202022 Annual Meeting of Shareholders. (The Proxy Statement for the 20202022 Annual Meeting of Shareholders will be filed with the Securities and Exchange Commission under Regulation 14A within 120 days after the end of our fiscal year.)93101 The following materials from The Marcus Corporation’s Annual Report on Form 10-K for the fiscal year ended December 30, 2021 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. 104 Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101). Item 16.Form 10-K Summary.None.94THE MARCUS CORPORATIONTHE MARCUS CORPORATION Date: February 24, 2020March 3, 2022By: /s/ Gregory S. Marcus Gregory S. Marcus, President and Chief Executive Officer By:By: /s/ Gregory S. Marcus By: By:/s/ Diane Marcus Gershowitz Gregory S. Marcus, President and Chief Executive Officer (Principal Executive Officer) and Director Diane Marcus Gershowitz, Director By: /s/ Douglas A. Neis By: By:/s/ Timothy E. Hoeksema and Treasurer (Principal Financial Officer and AccountingTimothy E. Hoeksema, Director By: /s/ Stephen H. Marcus By: By:/s/ Allan H. Selig Stephen H. Marcus, Chairman and Director Allan H. Selig, Director By: /s/ Philip L. Milstein By: By:/s/ Brian J. Stark Philip L. Milstein, Director Brian J. Stark, Director By: /s/ Bruce J. Olson By: By:/s/ David M. Baum Bruce J. Olson, Director David M. Baum, Director By: /s/ Katherine M. Gehl Katherine M. Gehl, Director S-1