Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check One).

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨ ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

COMMON STOCK OUTSTANDING AT~~November~~ MAY 1, ~~2019~~2020 – ~~22,988,399~~23,131,830

CLASS B COMMON STOCK OUTSTANDING AT~~November~~ MAY 1, ~~2019~~2020 – ~~7,935,769~~7,925,254

THE MARCUS CORPORATION

INDEX

	~~Page~~
				Page
PART I – FINANCIAL INFORMATION

Item 1.		Consolidated Financial Statements:

		Consolidated Balance Sheets (~~September~~March 26, ~~2019~~2020 and December ~~27, 2018)~~26, 2019)	3	4

		Consolidated Statements of Earnings (Loss) (13 ~~and 39~~ weeks ended ~~September~~March 26, ~~2019~~2020 and ~~September 27, 2018)~~March 28, 2019)	5	6

		Consolidated Statements of Comprehensive Income (Loss) (13 ~~and 39~~ weeks ended ~~September~~March 26, ~~2019~~2020 and ~~September 27, 2018)~~March 28, 2019)	6	7

		Consolidated Statements of Cash Flows (3913 weeks ended ~~September~~March 26, ~~2019~~2020 and ~~September 27, 2018)~~March 28, 2019)	7	8

		Condensed Notes to Consolidated Financial Statements	8	9

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	23	22

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	39	38

Item 4.		Controls and Procedures	39	38

PART II – OTHER INFORMATION

Item 1A.		Risk Factors	40	39

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	40	41

Item 4.		Mine Safety Disclosures	40	41

Item 6.	~~Exhibits~~	41Exhibits		42

	~~Signatures~~	~~S-1~~Signatures		1

PART I -– FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

THE MARCUS CORPORATION

Consolidated Balance Sheets

(in thousands, except share and per share data) September 26,
2019 December 27,
2018
ASSETS
Current assets:
Cash and cash equivalents $ 7,451 $ 17,114
Restricted cash 5,086 4,813
Accounts and notes receivable, net of reserves of $270 and $361, respectively 23,566 25,684
Refundable income taxes ─ 5,983
Other current assets 18,820 15,355
Total current assets 54,923 68,949

Property and equipment:
Land and improvements 151,205 150,122
Buildings and improvements 757,324 745,886
Leasehold improvements 160,787 98,885
Furniture, fixtures and equipment 377,905 314,875
Finance lease right-of-use assets 74,348 72,631
Construction in progress 12,717 12,513
Total property and equipment 1,534,286 1,394,912
Less accumulated depreciation and amortization 601,497 554,869
Net property and equipment 932,789 840,043

Operating lease right-of-use assets 229,103 ─

Other assets:
Investments in joint ventures 3,617 4,069
Goodwill 75,797 43,170
Other 43,914 33,100
Total other assets 123,328 80,339

TOTAL ASSETS $ 1,340,143 $ 989,331


	March 26,		December 26,
(in thousands, except share and per share data)	2020		2019

ASSETS
Current assets:
Cash and cash equivalents	$	126,472	$	20,862
Restricted cash		4,795		4,756
Accounts receivable, net of reserves of $998 and $762, respectively		14,765		29,465
Refundable income taxes		10,438		5,916
Other current assets		16,857		18,265
Total current assets		173,327		79,264

Property and equipment:
Land and improvements		152,692		152,434
Buildings and improvements		761,991		761,511
Leasehold improvements		164,873		164,083
Furniture, fixtures and equipment		379,759		377,404
Finance lease right-of-use assets		74,382		74,357
Construction in progress		8,061		4,043
Total property and equipment		1,541,758		1,533,832
Less accumulated depreciation and amortization		629,490		610,578
Net property and equipment		912,268		923,254

Operating lease right-of-use assets		244,468		243,855

Other assets:
Investments in joint ventures		3,538		3,595
Goodwill		75,258		75,282
Other		32,527		33,936
Total other assets		111,323		112,813

TOTAL ASSETS	$	1,441,386	$	1,359,186

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Balance Sheets

(in thousands, except share and per share data) September 26,
2019 December 27,
2018
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,334 $ 37,452
Income taxes 2,523 ─
Taxes other than income taxes 19,575 18,743
Accrued compensation 19,218 17,547
Other accrued liabilities 46,353 59,645
Current portion of finance lease obligations 2,697 5,912
Current portion of operating lease obligations 12,904 ─
Current maturities of long-term debt 9,954 9,957
Total current liabilities 150,558 149,256

Finance lease obligations 21,381 22,208

Operating lease obligations 221,047 ─

Long-term debt 235,787 228,863

Deferred income taxes 41,103 41,977

Deferred compensation and other 47,767 56,908

Equity:
Shareholders’ equity attributable to The Marcus Corporation
Preferred Stock, $1 par; authorized 1,000,000 shares; none issued ─ ─
Common Stock, $1 par; authorized 50,000,000 shares; issued 23,253,641 shares at September 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 7,935,872 shares at September 26, 2019 and 8,346,417 shares at December 27, 2018 7,936 8,347
Capital in excess of par 144,687 63,830
Retained earnings 458,915 439,178
Accumulated other comprehensive loss (7,435 ) (6,758 )
627,357 527,440
Less cost of Common Stock in treasury (266,566 shares at September 26, 2019 and 2,839,079 shares at December 27, 2018) (4,828 ) (37,431 )
Total shareholders' equity attributable to The Marcus Corporation 622,529 490,009
Noncontrolling interest (29 ) 110
Total equity 622,500 490,119

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,340,143 $ 989,331


	March 26,		December 26,
(in thousands, except share and per share data)	2020		2019

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	27,178	$	49,370
Taxes other than income taxes		15,844		20,613
Accrued compensation		17,098		18,055
Other accrued liabilities		50,507		61,134
Current portion of finance lease obligations		2,438		2,571
Current portion of operating lease obligations		15,386		13,335
Current maturities of long-term debt		9,977		9,910
Total current liabilities		138,428		174,988

Finance lease obligations		20,302		20,802

Operating lease obligations		238,010		232,111

Long-term debt		345,206		206,432

Deferred income taxes		45,771		48,262

Deferred compensation and other		55,281		55,133

Equity:
Shareholders’ equity attributable to The Marcus Corporation
Preferred Stock, $1 par; authorized 1,000,000 shares; NaN issued		─		─
Common Stock, $1 par; authorized 50,000,000 shares; issued 23,264,259 shares at March 26, 2020 and 23,253,744 shares at December 26, 2019		23,264		23,254
Class B Common Stock, $1 par; authorized 33,000,000 shares; issued and outstanding 7,925,254 shares at March 26, 2020 and 7,935,769 shares at December 26, 2019		7,926		7,936
Capital in excess of par		146,694		145,549
Retained earnings		437,387		461,884
Accumulated other comprehensive loss		(13,195)		(12,648)
		602,076		625,975
Less cost of Common Stock in treasury (133,363 shares at March 26, 2020 and 242,853 shares at December 26, 2019)		(3,563)		(4,540)
Total shareholders' equity attributable to The Marcus Corporation		598,513		621,435
Noncontrolling interest		(125)		23
Total equity		598,388		621,458

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,441,386	$	1,359,186

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Earnings (Loss)

September 26, 2019 September 27, 2018
(in thousands, except per share data) 13 Weeks 39 Weeks 13 Weeks 39 Weeks
Revenues:
Theatre admissions $ 69,753 $ 211,777 $ 52,422 $ 185,035
Rooms 34,185 81,317 34,467 84,256
Theatre concessions 57,051 172,126 35,476 123,687
Food and beverage 20,170 54,568 19,333 53,972
Other revenues 22,872 66,234 19,813 59,362
204,031 586,022 161,511 506,312
Cost reimbursements 7,431 27,979 9,088 25,776
Total revenues 211,462 614,001 170,599 532,088

Costs and expenses:
Theatre operations 66,971 199,542 48,644 164,452
Rooms 10,829 30,173 10,958 31,026
Theatre concessions 21,471 63,789 10,168 35,105
Food and beverage 15,842 44,353 14,966 43,930
Advertising and marketing 6,653 17,664 6,178 17,317
Administrative 18,053 54,862 16,813 52,653
Depreciation and amortization 19,226 53,484 14,569 42,899
Rent 6,806 19,087 2,815 8,351
Property taxes 5,666 16,527 5,018 15,011
Other operating expenses 10,127 31,729 8,969 27,032
Reimbursed costs 7,431 27,979 9,088 25,776
Total costs and expenses 189,075 559,189 148,186 463,552

Operating income 22,387 54,812 22,413 68,536

Other income (expense):
Investment income 187 835 442 433
Interest expense (2,807 ) (8,959 ) (3,180 ) (10,000 )
Other expense (481 ) (1,441 ) (497 ) (1,489 )
Loss on disposition of property, equipment and other assets (129 ) (269 ) (359 ) (767 )
Equity earnings (loss) from unconsolidated joint ventures, net (84 ) (252 ) 30 282
(3,314 ) (10,086 ) (3,564 ) (11,541 )

Earnings before income taxes 19,073 44,726 18,849 56,995
Income taxes 4,843 10,465 2,626 12,254
Net earnings 14,230 34,261 16,223 44,741
Net earnings (loss) attributable to noncontrolling interest (59 ) 46 (8 ) 70
Net earnings attributable to The Marcus Corporation $ 14,289 $ 34,215 $ 16,231 $ 44,671

Net earnings per share – basic:
Common Stock $ 0.47 $ 1.18 $ 0.60 $ 1.65
Class B Common Stock $ 0.43 $ 1.02 $ 0.52 $ 1.47

Net earnings per share – diluted:
Common Stock $ 0.46 $ 1.10 $ 0.56 $ 1.56
Class B Common Stock $ 0.43 $ 1.01 $ 0.51 $ 1.44


	13 Weeks Ended
(in thousands, except per share data)	March 26, 2020		March 28, 2019

Revenues:
Theatre admissions	$	55,395	$	58,969
Rooms		16,989		18,938
Theatre concessions		45,930		47,155
Food and beverage		13,614		15,783
Other revenues		18,776		20,829
		150,704		161,674
Cost reimbursements		8,756		8,365
Total revenues		159,460		170,039

Costs and expenses:
Theatre operations		54,016		56,378
Rooms		9,655		9,035
Theatre concessions		22,211		17,269
Food and beverage		14,465		13,609
Advertising and marketing		5,390		4,910
Administrative		17,732		17,859
Depreciation and amortization		19,033		15,985
Rent		6,954		5,403
Property taxes		6,029		5,393
Other operating expenses		8,707		10,883
Impairment charges		8,712		—
Reimbursed costs		8,756		8,365
Total costs and expenses		181,660		165,089

Operating income (loss)		(22,200)		4,950

Other income (expense):
Investment income (loss)		(695)		473
Interest expense		(2,516)		(3,059)
Other expense		(590)		(480)
Gain (loss) on disposition of property, equipment and other assets		(12)		7
Equity losses from unconsolidated joint ventures, net		(57)		(84)
		(3,870)		(3,143)

Earnings (loss) before income taxes		(26,070)		1,807
Income taxes		(6,570)		13
Net earnings (loss)		(19,500)		1,794
Net loss attributable to noncontrolling interests		(148)		(66)
Net earnings (loss) attributable to The Marcus Corporation	$	(19,352)	$	1,860

Net earnings (loss) per share - basic:
Common Stock	$	(0.64)	$	0.06
Class B Common Stock	$	(0.58)	$	0.06

Net earnings (loss) per share - diluted:
Common Stock	$	(0.64)	$	0.06
Class B Common Stock	$	(0.58)	$	0.06

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Comprehensive Income(Loss)

September 26, 2019 September 27, 2018
(in thousands) 13 Weeks 39 Weeks 13 Weeks 39 Weeks
Net earnings $ 14,230 $ 34,261 $ 16,223 $ 44,741

Other comprehensive income (loss), net of tax:

Amortization of the net actuarial loss and prior service credit related to the pension, net of tax effect of $30, $89, $42 and $125, respectively 79 238 113 340

Fair market value adjustment of interest rate swap, net of tax (benefit) effect of $(35), $(340), $70 and $70, respectively (138 ) (968 ) 192 191

Reclassification adjustment on interest rate swap included in interest expense, net of tax effect of $11, $19, $17 and $49, respectively 32 53 46 134

Other comprehensive income (loss) (27 ) (677 ) 351 665

Comprehensive income 14,203 33,584 16,574 45,406

Comprehensive income (loss) attributable to noncontrolling interest (59 ) 46 (8 ) 70

Comprehensive income attributable to The Marcus Corporation $ 14,262 $ 33,538 $ 16,582 $ 45,336


	13 Weeks Ended
(in thousands)	March 26, 2020		March 28, 2019

Net earnings (loss)	$	(19,500)	$	1,794

Other comprehensive income (loss), net of tax:

Amortization of the net actuarial loss and prior service credit related to the pension, net of tax effect of $65 and $30, respectively		183		79

Fair market value adjustment of interest rate swaps, net of tax benefit of $288 and $142, respectively		(814)		(386)

Reclassification adjustment on interest rate swaps included in interest expense, net of tax effect of $31 and $4, respectively		84		10

Other comprehensive loss		(547)		(297)

Comprehensive income (loss)		(20,047)		1,497

Comprehensive loss attributable to noncontrolling interests		(148)		(66)

Comprehensive income (loss) attributable to The Marcus Corporation	$	(19,899)	$	1,563

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Cash Flows

39 Weeks Ended
(in thousands) September 26,
2019 September 27,
2018
OPERATING ACTIVITIES:
Net earnings $ 34,261 $ 44,741
Adjustments to reconcile net earnings to net cash provided by operating activities:
Losses (earnings) on investments in joint ventures 252 (282 )
Distributions from joint ventures 200 65
Loss on disposition of property, equipment and other assets 269 767
Amortization of favorable lease right - 250
Depreciation and amortization 53,484 42,899
Amortization of debt issuance costs 232 216
Share-based compensation 2,594 1,950
Deferred income taxes (572 ) 1
Deferred compensation and other 592 2,949
Contribution of the Company’s stock to savings and profit-sharing plan 1,181 1,130
Changes in operating assets and liabilities:
Accounts and notes receivable 2,118 1,224
Other assets 11,057 (1,793 )
Accounts payable (7,524 ) (18,620 )
Income taxes 8,506 12,749
Taxes other than income taxes 626 (1,963 )
Accrued compensation 1,671 1,105
Other accrued liabilities (22,989 ) (10,318 )
Total adjustments 51,697 32,329
Net cash provided by operating activities 85,958 77,070

INVESTING ACTIVITIES:
Capital expenditures (50,097 ) (45,144 )
Acquisition of theatres, net of cash acquired and working capital assumed (30,287 ) -
Proceeds from disposals of property, equipment and other assets 22 86
Capital contribution in joint venture - (743 )
Other investing activities (5,809 ) (295 )
Net cash used in investing activities (86,171 ) (46,096 )

FINANCING ACTIVITIES:
Debt transactions:
Proceeds from borrowings on revolving credit facility 246,000 159,000
Repayment of borrowings on revolving credit facility (215,000 ) (177,000 )
Principal payments on long-term debt (24,203 ) (11,711 )
Repayments of capital lease obligations (1,908 ) (1,375 )
Equity transactions:
Treasury stock transactions, except for stock options (747 ) (2,566 )
Exercise of stock options 1,344 6,902
Dividends paid (14,478 ) (12,277 )
Distributions to noncontrolling interest (185 ) (65 )
Net cash used in financing activities (9,177 ) (39,092 )

Net decrease in cash, cash equivalents and restricted cash (9,390 ) (8,118 )
Cash, cash equivalents and restricted cash at beginning of period 21,927 20,747
Cash, cash equivalents and restricted cash at end of period $ 12,537 $ 12,629

Supplemental Information:
Interest paid, net of amounts capitalized $ 9,540 $ 10,321
Income taxes paid (refunded) 2,530 (448 )
Change in accounts payable for additions to property, equipment and other assets 7,406 (9,813 )


	13 Weeks Ended
(in thousands)	March 26, 2020		March 28, 2019

OPERATING ACTIVITIES:
Net earnings (loss)	$	(19,500)	$	1,794
Adjustments to reconcile net earnings to net cash provided by operating activities:
Losses on investments in joint ventures		57		84
Distributions from joint ventures		—		200
(Gain) loss on disposition of property, equipment and other assets		12		(7)
Impairment charges		8,712		—
Depreciation and amortization		19,033		15,985
Amortization of debt issuance costs		49		71
Share-based compensation		988		777
Deferred income taxes		(2,275)		(1)
Deferred compensation and other		(348)		(16)
Contribution of the Company’s stock to savings and profit-sharing plan		1,315		1,181
Changes in operating assets and liabilities:
Accounts receivable		14,700		5,355
Other assets		1,408		(970)
Operating leases		2,342		(281)
Accounts payable		(22,047)		(3,354)
Income taxes		(4,522)		101
Taxes other than income taxes		(4,769)		(1,703)
Accrued compensation		(957)		(2,816)
Other accrued liabilities		(10,816)		(8,380)
Total adjustments		2,882		6,226
Net cash provided by (used in) operating activities		(16,618)		8,020

INVESTING ACTIVITIES:
Capital expenditures		(9,978)		(13,724)
Purchase of theatres, net of cash acquired and working capital assumed		—		(29,626)
Proceeds from disposals of property, equipment and other assets		3		9
Other investing activities		(206)		(2,745)
Net cash used in investing activities		(10,181)		(46,086)

FINANCING ACTIVITIES:
Debt transactions:
Proceeds from borrowings on revolving credit facility		188,000		73,000
Repayment of borrowings on revolving credit facility		(49,000)		(38,000)
Principal payments on long-term debt		(177)		(217)
Debt issuance costs		(414)		—
Principal payments on finance lease obligations		(635)		(587)
Equity transactions:
Treasury stock transactions, except for stock options		(226)		(381)
Exercise of stock options		45		454
Dividends paid		(5,145)		(4,816)
Distributions to noncontrolling interest		—		(60)
Net cash provided by financing activities		132,448		29,393

Net increase (decrease) in cash, cash equivalents and restricted cash		105,649		(8,673)
Cash, cash equivalents and restricted cash at beginning of period		25,618		21,927
Cash, cash equivalents and restricted cash at end of period	$	131,267	$	13,254

Supplemental Information:
Interest paid, net of amounts capitalized	$	2,970	$	3,754
Income taxes (paid) refunded		(226)		88
Change in accounts payable for additions to property, equipment and other assets		(145)		1,165

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE 13 ~~AND 39~~ WEEKS ENDED ~~SEPTEMBER~~MARCH 26, ~~2019~~
2020

1. General

Basis of Presentation - The unaudited consolidated financial statements for the 13 ~~and 39~~ weeks ended ~~September~~March 26, ~~2019~~2020 and ~~September 27, 2018~~March 28, 2019 have been prepared by the Company. In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary to present fairly the unaudited interim financial information at ~~September~~March 26, ~~2019,~~2020, and for all periods presented, have been made. The results of operations during the interim periods are not necessarily indicative of the results of operations for the entire year or other interim periods. However, the unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December ~~27, 2018.~~

26, 2019.

Accounting Policies - Refer to the Company’s audited consolidated financial statements (including footnotes) for the fiscal year ended December ~~27, 2018,~~26, 2019, contained in the Company’s Annual Report on Form 10-K for such year, for a description of the Company’s accounting policies.

During the 39 weeks ended September 26, 2019, there were no significant changes made to the Company’s significant accounting policies other than the changes attributable to the adoption of the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-02,~~Leases (Topic 842)~~, which was adopted on December 28, 2018. The lease policy updates are applied prospectively in the Company’s financial statements from December 28, 2018 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 periods. See Note 3 for further discussion.

Depreciation and Amortization - Depreciation and amortization of property and equipment are provided using the straight-line method over the shorter of the estimated useful lives of the assets or any related lease terms. Depreciation expense totaled ~~$19,194,000~~$19,034,000 and ~~$53,433,000~~$15,955,000 for the 13 ~~and 39~~ weeks ended ~~September~~March 26, 2020 and March 28, 2019, ~~respectively,~~respectively.

Long-Lived Assets – The Company periodically considers whether indicators of impairment of long-lived assets held for use are present. This includes quantitative and ~~$14,556,000~~qualitative factors, including evaluating the historical actual operating performance of the long-lived assets and ~~$43,037,000 for~~assessing the potential impact of recent events and transactions impacting the long-lived assets. If such indicators are present, the Company determines if the long-lived assets are recoverable by assessing whether the sum of the estimated undiscounted future cash flows attributable to such assets is less than their carrying amounts. If the long-lived assets are not recoverable, the Company recognizes any impairment losses based on the excess of the carrying amount of the assets over their fair value. During the 13 ~~and 39~~ weeks ended ~~September 27, 2018, respectively.~~March 26, 2020, the Company determined that indicators of impairment were present. As such the Company evaluated the value of its property and equipment and the value of its operating lease right-of-use assets and recorded an impairment charge as discussed in Note 3.

Goodwill – The Company reviews goodwill for impairment annually or more frequently if certain indicators arise. The Company performs its annual impairment test on the last day of its fiscal year. 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 it carrying value, the Company performs a quantitative impairment test by comparing the carrying value of the reporting unit to the estimated fair value.

During the 13 weeks ended March 26, 2020, the Company determined that indicators of impairment were present and performed a quantitative test. In order to determine fair value, the Company used assumptions based on information available to it as of March 26, 2020, including both market data and forecasted future cash flows. The Company then used this information to determine fair value. The Company determined that the fair value of the Company's goodwill was greater than its carrying value. As such, no impairment was identified.

Trade Name Intangible Asset – The Company recorded 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 reviews 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. During the 13 weeks ended March 26, 2020, indicators of impairment were present and the Company recorded an impairment charge of $2,200,000 (see Note 3 for further detail).

Earnings (Loss) Per Share - Net earnings (loss) per share (EPS) of Common Stock and Class B Common Stock is computed using the two class method. Basic net earnings (loss) per share is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding. Diluted net earnings (loss) per share is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding, adjusted for the effect of dilutive stock options using the treasury method. Convertible Class B Common Stock is reflected on an if-converted basis. The computation of the diluted net earnings (loss) per share of Common Stock assumes the conversion of Class B Common Stock, while the diluted net earnings (loss) per share of Class B Common Stock does not assume the conversion of those shares.

Holders of Common Stock are entitled to cash dividends per share equal to 110% of all dividends declared and paid on each share of Class B Common Stock. As such, the undistributed earnings (losses) for each period are allocated based on the proportionate share of entitled cash dividends. The computation of diluted net earnings (loss) per share of Common Stock assumes the conversion of Class B Common Stock and, as such, the undistributed earnings (losses) are equal to net earnings (loss) for that computation.

The following table illustrates the computation of Common Stock and Class B Common Stock basic and diluted net earnings (loss) per share for net earnings (loss) and provides a reconciliation of the number of weighted-average basic and diluted shares outstanding:

	13 Weeks Ended September 26, 2019		13 Weeks Ended September 27, 2018		39 Weeks Ended September 26, 2019		39 Weeks Ended September 27, 2018
	(in thousands, except per share data)

									13 Weeks Ended
									March 26, 2020		March 28, 2019
									(in thousands, except per share data)
Numerator:
Net earnings attributable to The Marcus Corporation	$	14,289	$	16,231	$	34,215	$	44,671
Net earnings (loss) attributable to The Marcus Corporation									$	(19,352)	$	1,860
Denominator:
Denominator for basic EPS		30,918		28,180		30,566		28,028		30,975		29,883
Effect of dilutive employee stock options		443		638		518		606		—		616
Denominator for diluted EPS		31,361		28,818		31,084		28,634		30,975		30,499
Net earnings per share - basic:
Net earnings (loss) per share - basic:
Common Stock	$	0.47	$	0.60	$	1.18	$	1.65	$	(0.64)	$	0.06
Class B Common Stock	$	0.43	$	0.52	$	1.02	$	1.47	$	(0.58)	$	0.06
Net earnings per share - diluted:
Net earnings (loss) per share - diluted:
Common Stock	$	0.46	$	0.56	$	1.10	$	1.56	$	(0.64)	$	0.06
Class B Common Stock	$	0.43	$	0.51	$	1.01	$	1.44	$	(0.58)	$	0.06

For the periods when the Company reports a net loss, the computation of diluted loss per share equals the computation of basic loss per share since common stock equivalents are dilutive due to the net loss.

Shareholders’ Equity - Activity impacting total shareholders’ equity attributable to The Marcus Corporation and noncontrolling interests for the 13 ~~and 39~~ weeks ended ~~September~~March 26, ~~2019~~2020 and ~~September 27, 2018~~March 28, 2019 was as follows (in thousands, except per share data):

	Common Stock		Class B Common Stock			Capital in Excess of Par			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Shareholders’ Equity Attributable to The Marcus Corporation			Non- controlling Interest			Total Equity
BALANCES AT DECEMBER 27, 2018	$	22,843	$	8,347		$	63,830		$	439,178		$	(6,758	)	$	(37,431	)	$	490,009		$	110		$	490,119

																																							Shareholders’
																																							Equity
																																			Accumulated				Attributable
																													Class B		Capital				Other				to The		Non-
																											Common		Common		in Excess		Retained		Comprehensive		Treasury		Marcus		controlling		Total
																											Stock		Stock		of Par		Earnings		Loss		Stock		Corporation		Interests		Equity
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 Class B Common Stock		-		-			-			(1,183	)		-			-			(1,183	)		-			(1,183	)		—		—		—		(1,224)		—		—		(1,224)		—		(1,224)
$.16 Common Stock		-		-			-			(3,633	)		-			-			(3,633	)		-			(3,633	)
$.17 Common Stock																												—		—		—		(3,921)		—		—		(3,921)		—		(3,921)
Exercise of stock options		-		-			(78	)		-			-			532			454			-			454			—		—		5		—		—		40		45		—		45
Purchase of treasury stock		-		-			-			-			-			(428	)		(428	)		-			(428	)		—		—		—		—		—		(274)		(274)		—		(274)
Savings and profit-sharing contribution		-		-			810			-			-			371			1,181			-			1,181			—		—		299		—		—		1,016		1,315		—		1,315
Reissuance of treasury stock		-		-			31			-			-			16			47			-			47			—		—		2		—		—		46		48		—		48
Issuance of non-vested stock		-		-			(127	)		-			-			127			-			-			-			—		—		(149)		—		—		149		—		—		—
Shared-based compensation		-		-			777			-			-			-			777			-			777			—		—		988		—		—		—		988		—		988
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	)		-			-			-			-			-			-			-			10		(10)		—		—		—		—		—		—		—
Distributions to noncontrolling interest		-		-			-			-			-			-			-			(60	)		(60	)
Comprehensive income (loss)		-		-			-			1,860			(297	)		-			1,563			(66	)		1,497
BALANCES AT MARCH 28, 2019		23,254		7,936			143,094			436,222			(7,055	)		(5,576	)		597,875			(16	)		597,859
Cash Dividends:
$.15 Class B Common Stock		-		-			-			(1,155	)		-			-			(1,155	)		-			(1,155	)
$.16 Common Stock		-		-			-			(3,675	)		-			-			(3,675	)		-			(3,675	)
Exercise of stock options		-		-			(27	)		-			-			477			450			-			450
Purchase of treasury stock		-		-			-			-			-			(213	)		(213	)		-			(213	)
Reissuance of treasury stock		-		-			182			-			-			96			278			-			278
Issuance of non-vested stock		-		-			(142	)		-			-			142			-			-			-
Shared-based compensation		-		-			949			-			-			-			949			-			949
Distributions to noncontrolling interest		-		-			-			-			-			-			-			(35	)		(35	)
Comprehensive income (loss)		-		-			-			18,066			(353	)		-			17,713			171			17,884
BALANCES AT JUNE 27, 2019		23,254		7,936			144,056			449,458			(7,408	)		(5,074	)		612,222			120			612,342
Cash Dividends:
$.15 Class B Common Stock		-		-			-			(1,155	)		-			-			(1,155	)		-			(1,155	)
$.16 Common Stock		-		-			-			(3,677	)		-			-			(3,677	)		-			(3,677	)
Exercise of stock options		-		-			(134	)		-			-			574			440			-			440
Purchase of treasury stock		-		-			-			-			-			(478	)		(478	)		-			(478	)
Reissuance of treasury stock		-		-			28			-			-			19			47			-			47
Issuance of non-vested stock		-		-			(131	)		-			-			131			-			-			-
Shared-based compensation		-		-			868			-			-			-			868			-			868
Distributions to noncontrolling interest		-		-			-			-			-			-			-			(90	)		(90	)
Comprehensive income (loss)		-		-			-			14,289			(27	)		-			14,262			(59	)		14,203
BALANCES AT SEPTEMBER 26, 2019	$	23,254	$	7,936		$	144,687		$	458,915		$	(7,435	)	$	(4,828	)	$	622,529		$	(29	)	$	622,500
Comprehensive loss																												—		—		—		(19,352)		(547)		—		(19,899)		(148)		(20,047)
BALANCES AT MARCH 26, 2020																											$	23,264	$	7,926	$	146,694	$	437,387	$	(13,195)	$	(3,563)	$	598,513	$	(125)	$	598,388

	Common Stock		Class B Common Stock			Capital in Excess of Par			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Shareholders' Equity Attributable to The Marcus Corporation			Non- controlling Interest			Total Equity
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 earningson December 29, 2017 in connection with the adoption of ASU No. 2018-02		-		-			-			1,574			(1,574	)		-			-			-			-
Amount reclassified to retained earningson December 29, 2017 in connection with the adoption of ASU No. 2014-09		-		-			-			(2,568	)		-			-			(2,568	)		-			(2,568	)

																																							Shareholders’
																																							Equity
																																			Accumulated				Attributable
																													Class B		Capital				Other				to The		Non-
																											Common		Common		in Excess		Retained		Comprehensive		Treasury		Marcus		controlling		Total
																											Stock		Stock		of Par		Earnings		Loss		Stock		Corporation		Interests		Equity
BALANCES AT DECEMBER 27, 2018																											$	22,843	$	8,347	$	63,830	$	439,178	$	(6,758)	$	(37,431)	$	490,009	$	110	$	490,119
Cash Dividends:
$.14 Class B Common Stock		-		-			-			(1,163	)		-			-			(1,163	)		-			(1,163	)
$.15 Common Stock		-		-			-			(2,907	)		-			-			(2,907	)		-			(2,907	)
$.15 Class B Common Stock																												—		—		—		(1,183)		—		—		(1,183)		—		(1,183)
$.16 Common Stock																												—		—		—		(3,633)		—		—		(3,633)		—		(3,633)
Exercise of stock options		-		-			(62	)		-			-			991			929			-			929			—		—		(78)		—		—		532		454		—		454
Purchase of treasury stock		-		-			-			-			-			(453	)		(453	)		-			(453	)		—		—		—		—		—		(428)		(428)		—		(428)
Savings and profit-sharing contribution		-		-			651			-			-			479			1,130			-			1,130			—		—		810		—		—		371		1,181		—		1,181
Reissuance of treasury stock		-		-			26			-			-			23			49			-			49			—		—		31		—		—		16		47		—		47
Issuance of non-vested stock		-		-			(108	)		-			-			108			-			-			-			—		—		(127)		—		—		127		—		—		—
Shared-based compensation		-		-			596			-			-			-			596			-			596			—		—		777		—		—		—		777		—		777
Reissuance of treasury stock-acquisition																												—		—		77,960		—		—		31,237		109,197		—		109,197
Other																												—		—		(109)		—		—		—		(109)		—		(109)
Conversions of Class B Common Stock		8		(8	)		-			-			-			-			-			-			-			411		(411)		—		—		—		—		—		—		—
Distributions to noncontrolling interest		-		-			-			-			-			-			-			(19	)		(19	)		—		—		—		—		—		—		—		(60)		(60)
Comprehensive income (loss)		-		-			-			9,821			(30	)		-			9,791			(15	)		9,776			—		—		—		1,860		(297)		—		1,563		(66)		1,497
BALANCES AT MARCH 29, 2018		22,664		8,526			62,555			407,952			(9,018	)		(42,251	)		450,428			66			450,494
Cash Dividends:
$.14 Class B Common Stock		-		-			-			(1,162	)		-			-			(1,162	)		-			(1,162	)
$.15 Common Stock		-		-			-			(2,926	)		-			-			(2,926	)		-			(2,926	)
Exercise of stock options		-		-			(33	)		-			-			1,207			1,174			-			1,174
Purchase of treasury stock		-		-			-			-			-			(496	)		(496	)		-			(496	)
Reissuance of treasury stock		-		-			143			-			-			93			236			-			236
Issuance of non-vested stock		-		-			(127	)		-			-			127			-			-			-
Shared-based compensation		-		-			715			-			-			-			715			-			715
Conversions of Class B Common Stock		5		(5	)		-			-			-			-			-			-			-
Comprehensive income (loss)		-		-			-			18,619			344			-			18,963			93			19,056
BALANCES AT JUNE 28, 2018		22,669		8,521			63,253			422,483			(8,674	)		(41,320	)		466,932			159			467,091
Cash Dividends:
$.14 Class B Common Stock		-		-			-			(1,139	)		-			-			(1,139	)		-			(1,139	)
$.15 Common Stock		-		-			-			(2,980	)		-			-			(2,980	)		-			(2,980	)
Exercise of stock options		-		-			(672	)		-			-			5,471			4,799			-			4,799
Purchase of treasury stock		-		-			-			-			-			(1,949	)		(1,949	)		-			(1,949	)
Reissuance of treasury stock		-		-			32			-			-			15			47			-			47
Issuance of non-vested stock		-		-			(113	)		-			-			113			-			-			-
Shared-based compensation		-		-			639			-			-			-			639			-			639
Conversions of Class B Common Stock		173		(173	)		-			-			-			-			-			-			-
Distributions to noncontrolling interest		-		-			-			-			-			-			-			(46	)		(46	)
Comprehensive income (loss)		-		-			-			16,231			351			-			16,582			(8	)		16,574
BALANCES AT SEPTEMBER 27, 2018	$	22,842	$	8,348		$	63,139		$	434,595		$	(8,323	)	$	(37,670	)	$	482,931		$	105		$	483,036
BALANCES AT MARCH 28, 2019																											$	23,254	$	7,936	$	143,094	$	436,222	$	(7,055)	$	(5,576)	$	597,875	$	(16)	$	597,859

Accumulated Other Comprehensive Loss – Accumulated other comprehensive loss presented in the accompanying consolidated balance sheets consists of the following, all presented net of tax:

	September 26, 2019			December 27, 2018
	(in thousands)

							March 26,		December 26,
							2020		2019
							(in thousands)
Unrecognized loss on interest rate swap agreements	$	(1,064	)	$	(149	)	$	(1,612)	$	(882)
Net unrecognized actuarial loss for pension obligation		(6,371	)		(6,609	)		(11,583)		(11,766)
	$	(7,435	)	$	(6,758	)
							$	(13,195)	$	(12,648)

Fair Value Measurements - Certain financial assets and liabilities are recorded at fair value in the consolidated financial statements. Some are measured on a recurring basis while others are measured on a non-recurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. A fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.

The Company’s assets and liabilities measured at fair value are classified in one of the following categories:

Level 1 - Assets or liabilities for which fair value is based on quoted prices in active markets for identical instruments as of the reporting date. At ~~September~~March 26, ~~2019~~2020 and December ~~27, 2018,~~26, 2019, respectively, the Company’s ~~$7,017,000~~$5,168,000 and ~~$5,302,000~~$5,825,000 of debt and equity securities classified as trading were valued using Level 1 pricing inputs and were included in other current assets.

Level 2 - Assets or liabilities for which fair value is based on pricing inputs that were either directly or indirectly observable as of the reporting date. At ~~September~~March 26, ~~2019~~2020 and December ~~27, 2018,~~26, 2019, respectively, the Company’s ~~$1,441,000~~$2,181,000 and ~~$205,000~~$1,194,000 liability related to the Company’s interest rate swap contracts was valued using Level 2 pricing ~~inputs and was included in deferred compensation and other in the consolidated balance sheets.~~

inputs.

Level 3 - Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which result in the use of management estimates. At ~~September~~March 26, ~~2019~~2020 and December ~~27, 2018,~~26, 2019, none of the Company’s recorded assets or liabilities that are measured on a recurring basis at fair market value ~~measurements~~ were valued using Level 3 pricing inputs. ~~See~~Assets and liabilities that are measured on a non-recurring basis are discussed in Note ~~2 for further discussion on Level~~ 3 ~~assumptions used in regard to the acquisition.~~

and Note 4.

Defined Benefit Plan - The components of the net periodic pension cost of the Company’s unfunded nonqualified, defined-benefit plan are as follows:


	13 Weeks Ended
	March 26, 2020		March 28, 2019
	(in thousands)
Service cost	$	274	$	209
Interest cost		342		371
Net amortization of prior service cost and actuarial loss		248		109
Net periodic pension cost	$	864	$	689

13 Weeks
Ended
September 26,
2019 13 Weeks
Ended
September 27,
2018 39 Weeks
Ended
September 26,
2019 39 Weeks
Ended
September 27,
2018
(in thousands)
Service cost $ 207 $ 231 $ 625 $ 694
Interest cost 372 341 1,114 1,023
Net amortization of prior service cost and actuarial loss 109 156 327 466
Net periodic pension cost $ 688 $ 728 $ 2,066 $ 2,183

Service cost is included in Administrative expense while all other components are recorded within Other expense outside of operating income in the consolidated statements of earnings.

Revenue Recognition – The disaggregation of revenues by business segment for the 13 ~~and 39~~ weeks ended ~~September~~March 26, ~~2019~~2020 is as follows (in thousands):

	13 Weeks Ended September 26, 2019
	Reportable Segment
	Theatres		Hotels/Resorts		Corporate		Total

									Reportable Segment
									Theatres		Hotels/Resorts		Corporate		Total
Theatre admissions	$	69,753	$	-	$	-	$	69,753	$	55,395	$	—	$	—	$	55,395
Rooms		-		34,185		-		34,185		—		16,989		—		16,989
Theatre concessions		57,051		-		-		57,051		45,930		—		—		45,930
Food and beverage		-		20,170		-		20,170		—		13,614		—		13,614
Other revenues⁽¹⁾		9,781		13,003		88		22,872		7,703		10,984		89		18,776
Cost reimbursements		217		7,214		-		7,431		183		8,573		—		8,756
Total revenues	$	136,802	$	74,572	$	88	$	211,462	$	109,211	$	50,160	$	89	$	159,460

(1)

⁽¹⁾

Included in other revenues is an immaterial amount related to rental income that is not considered revenue from contracts with ~~customers under ASC Topic 606.~~customers.

39 Weeks Ended September 26, 2019
Reportable Segment
Theatres Hotels/Resorts Corporate Total
Theatre admissions $ 211,777 $ - $ - $ 211,777
Rooms - 81,317 - 81,317
Theatre concessions 172,126 - - 172,126
Food and beverage - 54,568 - 54,568
Other revenues⁽¹⁾ 29,525 36,386 323 66,234
Cost reimbursements 646 27,333 - 27,979
Total revenues $ 414,074 $ 199,604 $ 323 $ 614,001

The disaggregation of revenues by business segment for the 13 weeks ended March 28, 2019 is as follows (in thousands):


	Reportable Segment
	Theatres		Hotels/Resorts		Corporate		Total
Theatre admissions	$	58,969	$	—	$	—	$	58,969
Rooms		—		18,938		—		18,938
Theatre concessions		47,155		—		—		47,155
Food and beverage		—		15,783		—		15,783
Other revenues ⁽¹⁾		8,569		12,167		93		20,829
Cost reimbursements		192		8,173		—		8,365
Total revenues	$	114,885	$	55,061	$	93	$	170,039

(1)

⁽¹⁾

Included in other revenues is an immaterial amount related to rental income that is not considered revenue from contracts with ~~customers under ASC Topic 606.~~

~~The disaggregation of revenues by business segment for the 13 and 39 weeks ended September 27, 2018 is as follows (in thousands):~~

13 Weeks Ended September 27, 2018
Reportable Segment
Theatres Hotels/Resorts Corporate Total
Theatre admissions $ 52,422 $ - $ - $ 52,422
Rooms - 34,467 - 34,467
Theatre concessions 35,476 - - 35,476
Food and beverage - 19,333 - 19,333
Other revenues⁽¹⁾ 6,893 12,822 98 19,813
Cost reimbursements 218 8,870 - 9,088
Total revenues $ 95,009 $ 75,492 $ 98 $ 170,599

⁽¹⁾

~~Included in other revenues is an immaterial amount related to rental income that is not considered revenue from contracts with customers under ASC Topic 606.~~customers.

39 Weeks Ended September 27, 2018
Reportable Segment
Theatres Hotels/Resorts Corporate Total
Theatre admissions $ 185,035 $ - $ - $ 185,035
Rooms - 84,256 - 84,256
Theatre concessions 123,687 - - 123,687
Food and beverage - 53,972 - 53,972
Other revenues ⁽¹⁾ 23,591 35,453 318 59,362
Cost reimbursements 1,084 24,692 - 25,776
Total revenues $ 333,397 $ 198,373 $ 318 $ 532,088

⁽¹⁾

~~Included in other revenues is an immaterial amount related to rental income that is not considered revenue from contracts with customers under ASC Topic 606.~~

The Company had deferred revenue from contracts with customers of ~~$32,499,000~~$37,108,000 and ~~$37,048,000~~$43,200,000 as of ~~September~~March 26, ~~2019~~2020 and December ~~27, 2018,~~26, 2019, respectively. The Company had no0 contract assets as of ~~September~~March 26, ~~2019~~2020 and December ~~27, 2018.~~26, 2019. During the 13 ~~and 39~~ weeks ended ~~September~~March 26, ~~2019,~~2020, the Company recognized revenue of ~~$4,042,000 and $18,747,000, respectively,~~$11,240,000 that was included in deferred revenues as of December ~~27, 2018.~~26, 2019. The majority of the Company’s deferred revenue relates to non-redeemed gift cards, advanced ticket sales and the Company’s loyalty ~~programs.~~

program. The decrease in deferred revenue from December 26, 2019 to March 26, 2020 was due to theatre gift card redemptions and advanced movie ticket redemptions during the 13 weeks ended March 26, 2020.

As of ~~September~~March 26, ~~2019,~~2020, the amount of transaction price allocated to the remaining performance obligations under the Company’s advanced ticket sales was ~~$4,680,000~~$4,709,000 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.

As of ~~September~~March 26, ~~2019,~~2020, the amount of transaction price allocated to the remaining performance obligations related to the amount of Hotels and Resorts non-redeemed gift cards was ~~$2,276,000~~$2,667,000 and is reflected in the Company’s consolidated balance sheet as part of deferred ~~revenues, which is included in other accrued liabilities.~~revenues. The Company recognizes revenue as the gift cards are redeemed, which is expected to occur within the next two years.

The majority of the Company’s revenue is recognized in less than one year from the original contract.

New Accounting Pronouncements – On December ~~28, 2018,~~27, 2019, the Company adopted Accounting Standards Update (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. The adoption of the new standard did not have a material effect on the Company’s consolidated financial statements or footnote disclosures.

On December 27, 2019, the Company adopted ASU No. ~~2016-02,~~~~Leases (Topic 842)~~, which is intended to improve financial reporting related to leasing transactions. ASC 842 requires a lessee to recognize on the balance sheet assets and liabilities for rights and obligations created by leased assets with lease terms of more than 12 months. The new guidance also requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from the leases. See Note 3 for further discussion.

~~In January 2017, the FASB issued 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~~will 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 the Company in fiscal 2020 and must be applied prospectively.~~ The ~~Company does not believe~~adoption of the new standard ~~will~~did not have a material effect on ~~its~~the Company’s consolidated financial statements.

~~In August 2018,~~On December 27, 2019, the ~~FASB issued~~Company adopted 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 2021 and early application is permitted. The Company is evaluating the effect that the guidance will have on its 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, (ASU No. 2018-13)~~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. The adoption of the new standard did not have a material effect on the Company’s consolidated financial statements or footnote disclosures.

In December 2019, the Financial Accounting Standards Board (FASB) issued ASU No. ~~2018-13~~2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Incomes Taxes. The amendments in ASU No. 2019-12 are designed to simplify the accounting for incomes 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. ASU No. 2019-12 is effective for the Company in fiscal ~~2020. The amendments in ASU No. 2018-13 should be applied prospectively.~~2021 and early application is permitted. The Company ~~does not expect ASU No. 2018-13 to~~is currently evaluating the effect the new standard will have ~~a significant impact~~ on its consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this update provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions that reference London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. ASU No. 2020-14 is effective as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the effect the new standard will have on its consolidated financial statements.

2. ~~Acquisition~~Impact of COVID-19 Pandemic

The recent outbreak of the COVID-19 pandemic has had an unprecedented impact on the world and both of the Company’s business segments. The situation continues to be volatile and the social and economic effects are widespread. As an operator of movie theatres, hotels and resorts, restaurants and bars, each of which consists 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 control the spread of the pandemic. These actions include, among other things, declaring national and state emergencies, encouraging social distancing, restricting freedom of movement, mandating non-essential business closures and issuing shelter-in-place, quarantine and stay-at-home orders.

As a result of these measures, the Company temporarily closed all of its theatres on March 17, 2020, and it currently is not generating any revenues from its theatre operations (other than some limited online sales and curbside sales of popcorn, pizza and other assorted food and beverage items). The Company also temporarily closed all of its hotel division restaurants and bars at approximately the same time and closed 5 of its 8 company-owned hotels and resorts on March 24, 2020 due to a significant reduction in occupancy at those hotels. The Company announced the closing of its remaining 3 company-owned hotels on April 8, 2020. The Company currently is not generating any revenues from its hotels and resorts operations.

Since the COVID-19 crisis began, the Company has been working proactively to preserve cash and ensure sufficient liquidity to withstand the impacts of the COVID-19 pandemic and ultimately emerge in a continued position of strength. In addition to obtaining additional financing and modifying previously existing debt covenants (see Note 5), additional measures the Company has already taken and intend to take in the future to enhance liquidity include:

●

Discontinuing all non-essential operating and capital expenditures;

●

Temporarily laying off the majority of its hourly theatre and hotel associates, in addition to temporarily reducing property management and corporate office staff levels;

●

Temporarily reducing the salary of the Company’s chairman and president and chief executive officer by 50%, as well as reducing the salary of all other executives and remaining divisional/corporate staff;

●

Temporarily eliminating all board of directors cash compensation;

●

Temporarily suspending quarterly dividend payments;

●

Actively working with landlords and major suppliers to modify the timing and terms of certain contractual payments;

●

Evaluating the provisions of the CARES Act and utilizing the benefits, relief and resources under those provisions as appropriate (See Note 7); and

●

Evaluating the provisions of any subsequent federal or state legislation enacted as a response to the COVID-19 pandemic.

The Amendment (see Note 5) allows the Company to consider additional borrowings from governmental authorities under provisions of the CARES Act or any other subsequent governmental actions that it could avail itself of if it deemed it necessary and appropriate. Although the Company intends to seek any available potential benefits under the CARES Act, it cannot predict the manner in which such benefits will be allocated or administered, and it cannot assure shareholders that it will be able to access such benefits in a timely manner or at all.

The timing for when the Company’s theatres and hotels will reopen is uncertain as of the date of this report. The majority of the Company’s theatres are currently required to be closed under various state and local governmental restrictions, and the Company will continue to monitor and follow those restrictions until lifted. The Company is encouraged by recent federal guidance for a phased reopening of the U.S. economy that included the reopening of movie theatres in phase one, albeit under strict social distancing guidelines. Prior to closing our theatres, the Company had announced a social distancing seating plan that effectively reduced each theatre auditorium’s capacity by 50%. Current expectation is that, when theatres do reopen, they will open to similar capacity limitations. When the Company closed its hotels, it was not because of any governmental requirements to close. The restaurants and bars within the Company’s hotels were required to close, but the hotels themselves were considered “essential businesses” under most definitions. The hotels closed due to a significant drop in demand that made it financially prudent for them to close rather than stay open. As a result, the timing of reopening the Company’s hotels and resorts will likely be driven by an increase in demand, as individual and business travelers begin to travel more freely once again.

The COVID-19 pandemic and the resulting impact on the Company's operating performance has affected, and may continue to affect, the estimates and assumptions made by management. Such estimates and assumptions include, among other things, the Company's goodwill and long-lived asset valuations and the measurement of compensation costs for annual and long-term incentive plans. Events and changes in circumstances arising after March 26, 2020, including those resulting from the impacts of COVID-19, will be reflected in management's estimates for future periods.

The Company believes that the actions that have been taken will allow it to have sufficient liquidity to meet its obligations as they come due and to comply with its debt covenants for at least 12 months from the issuance date of these consolidated financial statements. However, future compliance with the Company's financial debt covenants (see Note 5) could be impacted if the Company is unable to resume its operations as currently expected.

3. Impairment Charges

During the 13 weeks ended March 26, 2020, the Company determined that indicators of impairment were evident at all asset groups. For certain theatre asset groups, the sum of the estimated undiscounted future cash flows attributable to these assets was less than their carrying amount. The Company evaluated the fair value of these assets, consisting primarily of 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 (using estimated discounted cash flows over the life of the primary asset, including estimated sale proceeds) was less than their carrying values and recorded a $6,512,000 impairment loss. The fair value of the impaired assets was $13,686,000 as of March 26, 2020.

During the 13 weeks ended March 26, 2020, the Company determined that indicators of impairment were evident related to its trade name intangible asset. The Company estimated the fair value of its trade name intangible asset as of March 26, 2020 using an income approach, specifically the relief from royalty method, which uses certain assumptions that are Level 3 pricing inputs, including future revenues attributable to the trade name, a royalty rate (1.0% as of March 26, 2020) and a discount rate (17.0% as of March 26, 2020). The Company determined that the fair value of the asset was less than the carrying value and recorded a $2,200,000 impairment loss. The fair value of the trade name intangible asset was $7,300,000 as of March 26, 2020.

4. Acquisition

On February 1, 2019, the Company acquired 22 dine-in theatres with 208 screens located in nine Southern and Eastern states from VSS-Southern Theatres LLC (Movie Tavern) for a total purchase price of ~~$139,516,000,~~$139,310,000, consisting of $30,000,000 in cash, subject to certain adjustments, and 2,450,000 shares of the ~~company’s~~Company’s Common Stock with a value of $109,197,000, based on the Company’s closing share price as of January 31, 2019. ~~Acquisition~~During the 13 weeks ended March 28, 2019, the Company incurred acquisition costs ~~incurred~~ as a result of the Movie Tavern acquisition ~~were~~of approximately ~~$1,283,000 and $1,507,000 during fiscal 2019 and fiscal 2018, respectively, and~~$1,153,000 which were expensed as incurred and included in administrative expense in the consolidated ~~statements~~statement of earnings.

The ~~preliminary~~ purchase price allocation was finalized in fiscal 2019 using Level 3 pricing inputs and is reflected in the ~~Company’s~~ consolidated balance ~~sheet on~~sheets for the ~~acquisition date~~periods presented.

5. Long-Term Debt

Long-term debt is summarized as ~~follows (in thousands):~~follows:


	March 26, 2020		December 26, 2019
	(in thousands, except payment data)
Mortgage notes	$	24,482	$	24,571
Senior notes		109,000		109,000
Unsecured term note due February 2025, with monthly principal and interest payments of $39,110, bearing interest at 5.75%		2,006		2,093
Revolving credit agreement		220,000		81,000
Debt issuance costs		(305)		(322)
		355,183		216,342
Less current maturities, net of issuance costs		9,977		9,910
	$	345,206	$	206,432

First Amendment to Credit Agreement

Other current assets $ 4,862
Property and equipment 95,564
Operating lease right-of-use-assets 159,011
Other (long-term assets) 9,710
Goodwill 32,697
Taxes other than income (206 )
Other accrued liabilities (3,322 )
Operating lease obligations (158,800 )
Total $ 139,516

During the 13 weeks ended March 26, 2020, the Company replaced its then-existing Credit Agreement (the Credit Agreement) with a new five-year $225,000,000 credit facility that expires in January 2025. On April 29, 2020, the Company entered into the First Amendment to Credit Agreement (the Amendment) among the Company and several banks, amending its existing Credit Agreement dated January 9, 2020. The preliminary fair value measurement of tangible and intangible assets and liabilities was based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value measurement hierarchy. Level 3 fair market values were determined usingAmendment provides a variety of information, including estimated future cash flows and market comparables. The Company is in the process of completing the purchase price allocation and expects to have it finalized within the 12 month measurement period.

~~3. Leases~~

The Company determines if an arrangement is a lease at inception. The Company evaluates each lease for classification as either a finance lease or an operating lease according to accounting guidance ASU No. 2016-02,~~Leases (Topic 842)~~new $90,800,000 364-day Senior Term Loan A (the Term Loan A). The Company ~~performs this evaluation~~used the proceeds from the Term Loan A to pay down borrowings under the Credit Agreement, to pay costs and expenses related to the Amendment and for general corporate purposes.

Borrowings under the Credit Agreement bear interest at a variable rate equal to: (i) LIBOR, subject to a 1% floor, plus a specified margin; or (ii) the ~~inception~~base rate (which is the highest of (a) the prime rate, (b) the greater of the ~~lease~~federal funds rate and ~~when~~the overnight bank funding rate plus 0.50% or (c) the sum of l% plus one-month LIBOR plus a ~~modification~~specified margin based upon the Company's consolidated debt to capitalization ratio as of the most recent determination date). Pursuant to the Amendment, as of April 29, 2020: (A) in respect of revolving loans, (1) the Company is ~~made~~charged a facility fee equal to 0.40% of the total revolving credit facility commitment and (2) the specified margin is 2.1% for LIBOR borrowings and 1.1% for ABR borrowings, which specified margin will remain in effect until the end 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 is suspended (the "Specified Period"); and (B) in respect of term loans, the specified margin is 2.5% for LIBOR borrowings and 1.5% for ABR borrowings, in each case, at all times.

The Amendment also amends the Credit Agreement to modify various restrictions and covenants applicable to the Company. Among other modifications, the Amendment amends the Credit Agreement to include restrictions on the ability of the Company to incur additional indebtedness, pay dividends and other distributions, and make voluntary prepayments on or defeasance of the Company's 4.02% Senior Notes due August 2025 and 4.32% Senior Notes due February 2027. Further, the Amendment amends the Credit Agreement to: (i) suspend testing of the minimum consolidated fixed charge coverage ratio of 3.0 to 1.0 until the earlier to occur of (a) September 2021 and (b) the last day of the Company's fiscal quarter in which the Company provides notice to the administrative agent that the Company is reinstating the testing of such ratio; (ii) add a ~~lease.~~covenant requiring the Company's consolidated EBITDA to be greater than (a) negative $57 million as of June 25, 2020 for the fiscal quarter then ending, (b) negative $90 million as of September 24, 2020 for the two consecutive fiscal quarters then ending, (c) negative $65 million as of December 31, 2020 for the three consecutive fiscal quarters then ending, (d) negative $40 million as of April 1, 2021 for the four consecutive fiscal quarters then ending, and (e) $42 million as of July 1, 2021 for the four consecutive fiscal quarters then ending; (iii) add a covenant requiring the Company's consolidated liquidity to be greater than (a) $102 million as of June 25, 2020, (b) $67 million as of September 24, 2020, (c) $78.5 million as of December 31, 2020, (d) $83 million as of April 1, 2021, and (e) $103.5 million as of July 1, 2021, which minimum liquidity amounts will be reduced by $50 million for each such testing date if the term loans are paid in full as of such date; and (iv) add a covenant prohibiting the Company from incurring or making capital expenditures (a) during the period from April 1, 2020 through December 31, 2020, in excess of $22.5 million plus certain adjustments, or (b) during the Company's 2021 fiscal year, in excess of $50 million plus certain adjustments.

Pursuant to the Amendment, the Company is required to apply net cash proceeds received from certain events, including certain asset dispositions, casualty losses, condemnations, equity issuances, capital contributions, and the incurrence of certain debt, to prepay outstanding term loans. In addition, if, at any time during the Specified Period the Company's aggregate unrestricted cash on hand exceeds $125 million, the Amendment requires the Company to prepay revolving loans under the Credit Agreement by the amount of such excess, without a corresponding reduction in the revolving commitments under the Credit Agreement.

In connection with the Amendment: (i) the Company pledged, subject to certain exceptions, security interests and liens in and on (a) substantially all of their respective personal property assets and (b) certain of their respective real property assets, in each case, to secure the Credit Agreement and related obligations; and (ii) certain subsidiaries of the Company have guaranteed the Company's obligations under the Credit Agreement. The ~~Company leases real estate~~foregoing security interests, liens and ~~equipment with lease~~guaranties will remain in effect until the Collateral Release Date (as defined in the Amendment).

The Credit Agreement contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then, among other things, the lenders may declare any outstanding obligations under the Credit Agreement to be immediately due and payable and exercise rights and remedies against the pledged collateral.

Except as amended by the Amendment, the remaining terms of ~~one year~~the Credit Agreement remain in full force and effect.

First Amendment to ~~45 years, some~~Note Purchase Agreements

The $109,000,000 of ~~which~~senior notes include ~~options~~a $9,000,000 Note Purchase Agreement, dated April 17, 2018, that was paid off on April 17, 2020. The remaining $100,000,000 of senior notes consist of 2 Purchase Agreements maturing in 2021 through 2027, require annual principal payments in varying installments and bear interest payable semi-annually at fixed rates ranging from 4.02% to ~~extend and/or terminate~~4.32%.

On April 29, 2020, the ~~lease.~~Company and 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 ~~exercise~~Note Amendments amend certain covenants and other terms of ~~lease renewal options is done at~~ the ~~Company’s sole discretion. When deemed reasonably certain of exercise,~~Note Purchase Agreements and are identical to the ~~renewal options~~amended covenants that are ~~included~~referenced in the ~~determination~~Amendment section above.

Additionally, from April 29, 2020 until the last day of the ~~lease term and related right-of-use asset and lease liability. The depreciable life of~~first fiscal quarter ending after the ~~asset is limited to~~Collateral Release Date (as defined in the ~~expected term. The Company’s lease agreements do not contain any residual value guarantees or any restrictions or covenants.~~

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and labilities are recognized at commencement date of the lease based on the present value of lease payments over the lease term. When readily determinable,Note Amendments), 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 foris required to pay a ~~similar amount, over a similar lease term with similar collateral. The Company recognizes right-of-use assets for all assets subject~~fee to ~~operating leases~~each Note holder 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 majority~~0.725% of the ~~Company’s lease agreements include fixed rental payments. For those leases with variable payments based on increases in an index subsequent to lease commencement,~~aggregate principal amount of Notes held by such ~~payments are recognized as variable lease expense as they occur. Variable lease payments that do not depend on an index or rate, including those that depend on the Company’s performance or use~~holder. Such fee is payable quarterly (0.18125% of the ~~underlying asset, are also expensed as incurred.~~

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 as follows (all relating to 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

~~As part~~aggregate principal amount of the ~~Company’s adoption of ASC 842,~~Notes per quarter) commencing with 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, and ii) 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 which is reasonably certain to be exercised), but will recognize these lease payments as lease costs on a straight-line basis over the lease term.

~~Total lease cost consists of the following:~~

Lease Cost Classification 13 Weeks
Ended
September 26,
2019 39 Weeks
Ended
September 26,
2019
(in thousands)
Finance lease costs:
Amortization of finance lease assets Depreciation and amortization $ 952 $ 2,814
Interest on lease liabilities Interest expense 284 870
$ 1,236 $ 3,684

Operating lease costs:
Operating lease costs Rent expense $ 6,386 $ 17,752
Variable lease cost Rent expense 362 1,157
Short-term lease cost Rent expense 58 178
$ 6,806 $ 19,087

Other Information 39 Weeks
Ended
September 26,
2019
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases $ 1,908
Operating cash flows from finance leases 870
Operating cash flows from operating leases 18,140
Right of use assets obtained in exchange for new lease obligations:
Finance lease liabilities 1,716
Operating lease liabilities, including from acquisitions 163,416

September 26,
2019
(in thousands)
Finance leases:
Property and equipment – gross $ 74,348
Accumulated depreciation and amortization (52,069 )
Property and equipment - net $ 22,279

~~Lease Term and Discount Rate~~	~~September 26,~~ ~~2019~~
~~Weighted-average remaining lease terms:~~
~~Finance leases~~		~~10 years~~
~~Operating leases~~		~~15 years~~

~~Weighted-average discount rates:~~
~~Finance leases~~		~~4.68~~	%
~~Operating leases~~		~~4.64~~	%

~~Maturities of lease liabilities as of September 26, 2019 are as follows (in thousands):~~

Fiscal Year Operating Leases Finance Leases
2019 (excluding the 39 weeks ended September 26, 2019) $ 4,649 $ 1,020
2020 25,154 3,584
2021 24,485 2,992
2022 25,056 2,946
2023 23,538 2,836
2024 and thereafter 221,983 16,948
Total lease payments 324,865 30,326
Less: amount representing interest (90,914 ) (6,248 )
Total lease liabilities $ 233,951 $ 24,078

~~Aggregate minimum lease commitments 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

fiscal quarter ending June 25, 2020.

In ~~fiscal 2018,~~connection with the Company entered into a build-to-suit 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 has recorded the development expenditures in other assets on the consolidated balance sheet. The lease will commence whenNote Amendments: (i) the Company has ~~access~~pledged, subject to certain exceptions, security interests and liens in and on (a) substantially all of their respective personal property assets and (b) certain of their respective real property assets, in each case, to secure the ~~right-of-use asset, which is expected to be upon project completion.~~

~~Digital Cinema Projection Systems~~ ~~- During fiscal 2012,~~Notes and related obligations; and (ii) certain subsidiaries of the Company ~~entered into a master licensing agreement with CDF2 Holdings, LLC, a subsidiary of Cinedigm Digital Cinema Corp (CDF2), whereby CDF2 purchased on~~have guaranteed the ~~Company’s behalf,~~Company's obligations under the Note Purchase Agreements and ~~then deployed~~the Notes. The foregoing security interests, liens and ~~licensed back to the Company, digital cinema projection systems (the “systems”) for use by the Company~~guaranties will remain in its theatres. As of September 26, 2019, 642 of the Company’s screens were utilizing the systems under a 10-year master licensing agreement with CDF2. Included in Finance lease right-of-use assets is $45,510,000 related to the digital systems as of September 26, 2019 and December 27, 2018, which is being amortized over the remaining estimated useful life of the assets. Accumulated amortization of the digital systems was $45,279,000 and $40,647,000 as of September 26, 2019 and December 27, 2018, respectively.

Under the terms of the master licensing agreement, the Company made an initial one-time payment to CDF2. The Company expects that the balance of CDF2’s costs to deploy the systems will be covered primarily through the payment of virtual print fees (VPF’s) from film distributors to CDF2 each time a digital movie is booked on one of the systems deployed on a Company screen. The Company agreed to make an average number of bookings of eligible digital movies on each screen on which a licensed system has been deployed to provide for a minimum level of VPF’s paid by distributors (standard booking commitment) to CDF2. To the extent the VPF’s paid by distributors are less than the standard booking commitment, the Company must make a shortfall payment to CDF2. Based upon the Company’s historical booking patterns, the Company does not expect to make any shortfall payments during the life of the agreement. Accounting Standards Codification No. 842,~~Leases~~, requires that the Company consider the entire amount of the standard booking commitment minimum lease payments for purposes of determining the finance lease obligation. The maximum amount per year that the Company could be required to pay is approximately $6,163,000effect until the ~~obligation is fully satisfied.~~

Collateral Release Date.

The ~~Company’s finance lease obligation~~Note Purchase Agreements contain customary events of default. If an event of default under the Note Purchase Agreements occurs and is being reduced as VPF’s are paid by the film distributors to CDF2. The Company has recorded the reduction of the obligation associated with the payment of VPF’s as a reduction of the interest related to the obligationcontinuing, then, among other things, all Notes then outstanding become immediately due and payable and the ~~amortization incurred related to~~Note holders may exercise their rights and remedies against the systems, as the payments represent a specific reimbursement of the cost of the systems by the studios. Based on the Company’s expected minimum number of eligible movies to be booked, the Company expects the obligation to be reduced by at least $140,000 within the next 12 months. This reduction will be recognized as an offset to amortization and is expected to offset the majority of the amortization of the systems.pledged collateral.

~~4. Long-Term Debt~~

Derivatives

The Company utilizes derivatives principally to manage market risks and reduce its exposure resulting from fluctuations in interest rates. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions.

The Company entered into two interest rate swap agreements on March 1, 2018 covering $50,000,000 of floating rate debt. The first agreement has a notional amount of $25,000,000, expires March 1, 2021, and requires the Company to pay interest at a defined rate of 2.559% while receiving interest at a defined variable rate of one-month LIBOR ~~(2.125%~~(1.625% at ~~September~~March 26, ~~2019)~~2020). The second agreement has a notional amount of $25,000,000, 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 ~~(2.125%~~(1.625% at ~~September~~March 26, ~~2019)~~2020). The Company recognizes derivatives as either assets or liabilities on the consolidated balance sheets at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and on the type of hedging relationship. Derivatives that do not qualify for hedge accounting must be adjusted to fair value through earnings. For derivatives that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The Company’s interest rate swap agreements are considered effective and qualify as cash flow hedges. The Company assesses, both at the inception of each hedge and on an on-going basis, whether the derivatives that are used in its hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. As of ~~September~~March 26, ~~2019,~~2020, the interest rate swaps were considered highly effective. The fair value of the interest rate swaps on ~~September~~March 26, ~~2019 and December 27, 2018, respectively,~~2020 was a liability of ~~$1,441,000~~$2,181,000, of which, $514,000 is included in other accrued liabilities and ~~$205,000,~~$1,667,000 is included in deferred compensation and other in the consolidated balance sheet. The fair value of the interest rate swap on December 26, 2019, was a liability of $1,194,000 and was included in deferred compensation and other in the consolidated balance ~~sheets.~~sheet. The Company does not expect the interest rate swaps to have a material effect on earnings within the next 12 months.

6. Leases

The Company ~~had~~determines if an ~~interest rate swap that expired in January 2018.~~arrangement is a lease at inception. The ~~swap agreement covered $25,000,000 of floating rate debt that required~~Company evaluates each lease for classification as either a finance lease or an operating lease according to accounting guidance ASU No. 2016-02, Leases (Topic 842). The Company performs this evaluation at 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 for~~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 ~~39 weeks ended September 27, 2018 was recorded~~lease.

The majority of the Company’s lease agreements include fixed rental payments. For those leases with variable payments based on increases in an index subsequent to ~~interest expense.~~

~~During the 39 weeks ended September 26, 2019, a note~~lease commencement, such payments are recognized as variable lease expense as they occur. Variable lease payments that ~~was scheduled to mature in January 2020 with a balance of $14,638,000, was repaid and replaced with borrowings~~do not depend on an index or rate, including those that depend on the Company’s ~~revolving credit facility.~~performance or use of the underlying asset, are also expensed as incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

5.Total lease cost consists of the following:


		13 Weeks
		Ended
Lease Cost	Classification	March 26, 2020
		(in thousands)
Finance lease costs:
Amortization of finance lease assets	Depreciation and amortization	$	711
Interest on lease liabilities	Interest expense		269
		$	980
Operating lease costs:
Operating lease costs	Rent expense	$	6,667
Variable lease cost	Rent expense		227
Short-term lease cost	Rent expense		60
		$	6,954

Additional Information related to leases is as follows:


	13 Weeks
	Ended
Other Information	March 26, 2020
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	635
Operating cash flows from finance leases		269
Operating cash flows from operating leases		4,644

Right of use assets obtained in exchange for new lease obligations:
Finance lease liabilities		25
Operating lease liabilities		9,630


	March 26, 2020
	(in thousands)
Finance leases:
Property and equipment – gross	$	74,382
Accumulated depreciation and amortization		(53,631)
Property and equipment - net	$	20,751

Remaining lease terms and discount rates are as follows:


Lease Term and Discount Rate	March 26, 2020
Weighted-average remaining lease terms:
Finance leases	10	years
Operating leases	15	years

Weighted-average discount rates:
Finance leases	4.67	%
Operating leases	4.54	%

As of March 26, 2020, the Company had a build-to-suit 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 has recorded the development expenditures in other assets on the consolidated balance sheet. The project is currently on hold due to the COVID-19 pandemic, so a completion date is not known at this time.

Subsequent to March 26, 2020, the Company began actively working with landlords to discuss changes to the timing of lease payments and contract terms of leases due to the COVID-19 pandemic. The lease terms are being negotiated on a lease by lease basis with individual landlords. In conjunction with these lease discussions, the Company anticipates electing the policy election to account for lease concessions as if they were made under the enforceable rights included in the original agreement and are thus outside of the modification framework. Therefore, in making this election, the Company will not need to perform a lease-by-lease analysis to evaluate the enforceable rights and will instead simply treat the change as if the enforceable rights were included or excluded in the original agreement.

7. Income Taxes

The Company’s effective income tax rate, adjusted for ~~earnings~~losses from noncontrolling interests, for the 13 ~~and 39~~ weeks ended ~~September~~March 26, 2020 and March 28, 2019 was 25.3% and ~~23.4%~~0.7%, ~~respectively, and was 13.9% and 21.5% for~~respectively. The Company’s effective income tax rate during the 13 ~~and 39~~ weeks ended ~~September 27, 2018, respectively. During the 39 weeks ended September 27, 2018, the Company recorded income tax benefits related to~~March 28, 2019 was reduced by excess tax benefits on share-based ~~compensation as well as reductions in deferred tax liabilities related to tax accounting method changes the Company made subsequent to the Tax Cuts and Jobs Act of 2017.~~compensation. The Company does not include the income tax expense or benefit related to the net earnings or loss attributable to noncontrolling interests in its income tax expense as the entity is considered a pass-through entity and, as such, the income tax expense or benefit is attributable to its owners.

The Company has evaluated the provisions of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the CARES Act) that was signed subsequent to March 26, 2020. The CARES Act, among other things, includes provisions relating to 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. Based upon a preliminary review of these provisions, the Company believes it will be eligible for an income tax refund in the $15-25 million range in fiscal 2020 related to new rules for qualified improvement property expenditures and net operating loss carrybacks. The Company would also be able to apply any tax loss incurred in fiscal 2020 to prior year income for what may be a significant refund in fiscal 2021 when the Company’s fiscal 2020 tax return is filed.

6.8. Business Segment Information

The Company’s primary operations are reported in the following business segments: Theatres and Hotels/Resorts. Corporate items include amounts not allocable to the business segments. Corporate revenues consist principally of rent and the corporate operating loss includes general corporate expenses. Corporate information technology costs and accounting shared services costs are allocated to the business segments based upon several factors, including actual usage and segment revenues.

Following is a summary of business segment information for the 13 ~~and 39~~ weeks ended ~~September~~March 26, ~~2019~~2020 and ~~September 27, 2018~~March 28, 2019 (in thousands):

13 Weeks Ended September 26, 2019	Theatres		Hotels/ Resorts		Corporate Items			Total

13 Weeks Ended												Hotels/		Corporate
March 26, 2020										Theatres		Resorts		Items		Total
Revenues	$	136,802	$	74,572	$	88		$	211,462	$	109,211	$	50,160	$	89	$	159,460
Operating income (loss)		16,843		10,580		(5,036	)		22,387		(7,083)		(10,853)		(4,264)		(22,200)
Depreciation and amortization		13,438		5,451		337			19,226		13,510		5,412		111		19,033

13 Weeks Ended September 27, 2018		Theatres		Hotels/ Resorts		Corporate Items			Total
Revenues	$	95,009	$	75,492	$	98		$	170,599
Operating income (loss)		14,457		12,024		(4,068	)		22,413
Depreciation and amortization		9,867		4,616		86			14,569

39 Weeks Ended September 26, 2019	Theatres		Hotels/ Resorts		Corporate Items			Total

13 Weeks Ended												Hotels/		Corporate
March 28, 2019										Theatres		Resorts		Items		Total
Revenues	$	414,074	$	199,604	$	323		$	614,001	$	114,885	$	55,061	$	93	$	170,039
Operating income (loss)		57,656		11,443		(14,287	)		54,812		12,594		(3,153)		(4,491)		4,950
Depreciation and amortization		37,918		15,050		516			53,484		11,127		4,767		91		15,985

39 Weeks Ended September 27, 2018		Theatres		Hotels/ Resorts		Corporate Items			Total
Revenues	$	333,397	$	198,373	$	318		$	532,088
Operating income (loss)		66,317		15,737		(13,518	)		68,536
Depreciation and amortization		28,751		13,890		258			42,899

THE MARCUS CORPORATION

~~Item 2.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

Certain matters discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and elsewhere in this Form 10-Q are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995, including the ~~expectation that the Movie Tavern acquisition will be accretive to earnings, earnings per share and cash flows~~statements made in the ~~first 12 months following the closing~~“Impact of the ~~transaction.~~COVID-19 Pandemic” section of this MD&A. These forward-looking statements may generally be identified as such because the context of such statements include words such as we “believe,” “anticipate,” “expect” or words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which may cause results to differ materially from those expected, including, but not limited to, the following: (1) the adverse effects of the COVID-19 pandemic on our theatre and hotels and resorts businesses, results of operations, liquidity, cash flows, financial condition, access to credit markets and ability to service our existing and future indebtedness; (2) the duration of the COVID-19 pandemic and related shelter at home and social distancing requirements and the level of customer demand following the relaxation of such requirements; (3) the availability, in terms of both quantity and audience appeal, of motion pictures for our theatre division (particularly following the COVID-19 pandemic, during which the production of new movie content has essentially ceased), as well as other industry dynamics such as the maintenance of a suitable window between the date such motion pictures are released in theatres and the date they are released to other distribution channels; ~~(2)~~(4) the effects of adverse economic conditions in our markets, ~~particularly with respect~~including but not limited to, those caused by the COVID-19 pandemic; (5) the effects on our ~~hotels~~occupancy and ~~resorts division; (3)~~room rates caused by the COVID-19 pandemic and the effects on our occupancy and room rates of the relative industry supply of available rooms at comparable lodging facilities in our ~~markets; (4)~~markets once hotels and resorts are able to reopen; (6) the effects of competitive conditions in our markets; ~~(5)~~(7) our ability to achieve expected benefits and performance from our strategic initiatives and acquisitions; ~~(6)~~(8) the effects of increasing depreciation expenses, reduced operating profits during major property renovations, impairment losses, and preopening and start-up costs due to the capital intensive nature of our ~~businesses; (7)~~business; (9) the effects of weather conditions, particularly during the winter in the Midwest and in our other markets; ~~(8)~~(10) our ability to identify properties to acquire, develop and/or manage and the continuing availability of funds for such development; ~~(9)~~(11) the adverse impact on business and consumer spending on travel, leisure and entertainment resulting from terrorist attacks in the United States, or other incidents of violence in public venues such as hotels and movie ~~theatres; (10)~~theatres or epidemics (such as the COVID-19 pandemic); (12) a disruption in our business and reputational and economic risks associated with civil securities claims brought by shareholders; ~~and (11)~~(13) our ability to timely and successfully integrate the Movie Tavern operations into our own ~~circuit.~~circuit; and (14) our ability to achieve the additional revenues and operating income that we anticipate from our additional week of operations in fiscal 2020 and certain extraordinary events that are scheduled to take place in or near Milwaukee during fiscal 2020, such as the Democratic National Convention and The Ryder Cup, which may be significantly impacted by the COVID-19 pandemic. Our forward-looking statements are based upon our assumptions, which are based upon currently available information, including assumptions about our ability to manage difficulties associated with or related to the COVID-19 pandemic; the assumption that our theatre closures, hotel closures and restaurant closures are not expected to be permanent or to re-occur; the continued availability of our workforce following the temporary layoffs we have implemented as a result of the COVID-19 pandemic; and the temporary and long-term effects of the COVID-19 pandemic on our business. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this Form 10-Q and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

RESULTS OF OPERATIONS

General

We report our consolidated and individual segment results of operations on a ~~52- or~~52-or 53-week fiscal year ending on the last Thursday in December. Fiscal ~~2019~~2020 is a ~~52-week~~53-week year beginning on December ~~28, 2018~~27, 2019 and ending on December ~~26, 2019.~~31, 2020. Fiscal ~~2018~~2019 was a 52-week year beginning December ~~29, 2017~~28, 2018 and ended on December ~~27, 2018.~~26, 2019.

We divide our fiscal year into three 13-week quarters and a final quarter consisting of 13 or 14 weeks. The ~~third~~first quarter of fiscal 2020 consisted of the 13-week period beginning December 27, 2019 and ended on March 26, 2020. The first quarter of fiscal 2019 consisted of the 13-week period beginning on June 28, 2019 and ended on September 26, 2019. The third quarter of fiscal 2018 consisted of the 13-week period beginning June 29, 2018 and ended on September 27, 2018. The first three quarters of fiscal 2019 consisted of the 39-week period beginning on December 28, 2018 and ended on ~~September 26,~~March 28, 2019. ~~The first three quarters of fiscal 2018 consisted of the 39-week period beginning December 29, 2017 and ended on September 27, 2018.~~ Our primary operations are reported in the following two business segments: movie theatres and hotels and resorts.

Impact of the COVID-19 Pandemic

~~Implementation~~The recent outbreak of ~~New Accounting Standards~~the COVID-19 pandemic has had an unprecedented impact on the world and both of our business segments. The situation continues to be volatile and the social and economic effects are widespread. As an operator of movie theatres, hotels and resorts, restaurants and bars, each of which consists of spaces where customers and guests gather in close proximity, our businesses are significantly impacted by protective actions that federal, state and local governments have taken to control the spread of the pandemic. These actions include, among other things, declaring national and state emergencies, encouraging social distancing, restricting freedom of movement, mandating non-essential business closures and issuing shelter-in-place, quarantine and stay-at-home orders.

As a result of these measures, we temporarily closed all of our theatres on March 17, 2020, and we currently are not generating any revenues from our theatre operations (other than some limited online sales and curbside sales of popcorn, pizza and other assorted food and beverage items). We also temporarily closed all of our hotel division restaurants and bars at approximately the same time and closed five of our eight company-owned hotels and resorts on March 24, 2020 due to a significant reduction in occupancy at those hotels. We announced the closing of our remaining three company-owned hotels on April 8, 2020. We currently are not generating any revenues from our hotels and resorts operations.

~~During~~Maintaining a strong balance sheet has always been a core philosophy of The Marcus Corporation during our 85-year history. As a result, we believe we entered this global COVID-19 crisis with a strong financial position. At the end of fiscal 2019, our debt-to-capitalization ratio was a very modest 26%. As of March 26, 2020, we had a cash balance of $126.5 million, which reflects the borrowing of $220.0 million of our $225.0 million revolving credit facility. Even if our theatres and hotels remained closed for the remainder of fiscal 2020, which we believe is a very unlikely scenario, we believe we would have sufficient cash to sustain our operations, even without the new financing described below.

Nonetheless, the COVID-19 pandemic has had and may continue to have adverse effects on our business, results of operations, cash flows, financial condition, access to credit markets and ability to service our existing and future indebtedness, some of which may be significant. In light of the COVID-19 pandemic, we have been working to preserve cash and ensure sufficient liquidity to endure the impacts of the global crisis, even if prolonged. As a result, on April 29, 2020, we entered into the First Amendment to Credit Agreement (the “Amendment”) among the company and several banks, amending our existing credit agreement dated January 9, 2020 (the “Credit Agreement”). The Amendment provides a new $90.8 million 364-day Senior Term Loan A (the “Term Loan A”) to further solidify our already strong balance sheet. We used the proceeds from the Term Loan A to pay down borrowings under the Credit Agreement, to pay costs and expenses related to the Amendment and for general corporate purposes. With this additional financing, we have provided for an additional “insurance policy” to further enhance our liquidity, and we believe it positions us to continue to sustain our operations well into fiscal 2021, even in the unlikely scenario that some or all of our properties remain closed.

The Amendment, described in greater detail below in the Liquidity section of this MD&A, also amends certain covenants and other terms, including waiving our compliance with the consolidated fixed charge coverage ratio covenant until September 2021. In addition, during the period in which the Term Loan A is outstanding and testing of financial covenants under the Credit Agreement is suspended, the Amendment also provides for a facility fee on the total revolver commitment equal to 0.40% and that the specified margin for borrowings under the revolving credit facility is 2.1% for LIBOR borrowings and 1.1% for ABR borrowings. The Amendment also provides that the specified margin for borrowings under the Term Loan A is 2.5% for LIBOR borrowings and 1.5% for ABR borrowings, in each case, at all times. The Amendment also establishes new minimum EBITDA and consolidated liquidity covenants and includes additional limitations on share repurchases, capital expenditures and the incurrence of priority debt. The Amendment also requires us to temporarily suspend our quarterly dividend payments for the remainder of 2020 and limits the total amount of quarterly dividend payments during the first two quarters of fiscal 2021, unless the Term Loan A is repaid, and we are in compliance with prior financial covenants under the Credit Agreement, at which point we have the ability to declare quarterly dividend payments as deemed appropriate. Pursuant to the Amendment, all borrowings under the Credit Agreement will be secured by substantially all of our personal and real property assets, until such date as the Term Loan A is repaid and we are in compliance with prior financial covenants under the Credit Agreement, at which point the Credit Agreement will return to an unsecured facility.

In conjunction with the Amendment, we also entered into amendments to the purchase agreements for our outstanding 4.02% and 4.32% senior notes on April 29, 2020 that waive the consolidated fixed charge coverage ratio covenant until September 2021 and secures all borrowings under the senior notes by the majority of our assets, until such date as the Term Loan A is repaid and we are in compliance with prior financial covenants, at which point the senior notes will return to unsecured notes. The amendments to the senior notes also include an additional fee payable to each note holder equal to 0.725% per annum on outstanding borrowings until the notes return to unsecured status. Additionally, the amendments establish new minimum EBITDA and consolidated liquidity covenants and additional limitations on share repurchases, capital expenditures and the incurrence of priority debt substantially identical to those included in the Amendment.

Since the COVID-19 crisis began, we have been working proactively to preserve cash and ensure sufficient liquidity to withstand the impacts of the COVID-19 pandemic and ultimately emerge in a continued position of strength. In addition to temporarily suspending quarterly dividend payments as required by the Amendment, additional measures we have already taken and intend to take in the future to enhance liquidity include:

●

Discontinuing all non-essential operating and capital expenditures;

●

Temporarily laying off the majority of our hourly theatre and hotel associates, in addition to temporarily reducing property management and corporate office staff levels;

●

Temporarily reducing the salary of our chairman and president and chief executive officer (“CEO”) by 50%, as well as reducing the salary of all other executives and remaining divisional/corporate staff;

●

Temporarily eliminating all board of directors cash compensation;

●

Actively working with landlords and major suppliers to modify the timing and terms of certain contractual payments;

●

Evaluating the provisions of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) and utilizing the benefits, relief and resources under those provisions as appropriate; and

●

Evaluating the provisions of any subsequent federal or state legislation enacted as a response to the COVID-19 pandemic.

The CARES Act, among other things, includes provisions relating to 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. Under the CARES Act: (i) for taxable years beginning before 2021, net operating loss carryforwards and carrybacks may offset 100% of taxable income; (ii) net operating losses arising in 2018, 2019 and 2020 taxable years may be carried back to each of the preceding five years to generate a refund; and (iii) for taxable years beginning in 2019 and 2020, the base for interest deductibility is increased from 30% to 50% of EBITDA. Based upon a preliminary review of these provisions, we believe we will be eligible to receive an income tax refund in the $15-25 million range in fiscal 2020 related to new rules for qualified improvement property expenditures and net operating loss carrybacks. We would also be able to apply any tax loss incurred in fiscal 2020 to prior year income for what may be a significant refund in fiscal 2021 when our fiscal 2020 tax return is filed. The Amendment allows us to consider additional borrowings from governmental authorities under provisions of the CARES Act or any other subsequent governmental actions that we could avail ourselves of if we deemed it necessary and appropriate. Although we intend to seek any available potential benefits under the CARES Act, we cannot predict the manner in which such benefits will be allocated or administered, and we cannot assure you that we will be able to access such benefits in a timely manner or at all.

It is also important to note our significant real estate ownership. In addition to our owned hotels, unlike most of our peers we own the underlying real estate for the majority of our theatres (representing over 60% of our screens), thereby reducing our monthly fixed lease payments. This real estate ownership is a significant advantage for us relative to our peers.

The COVID-19 pandemic and the fact that all of our theatres and the majority of our hotels were closed as of March 26, 2020 required us to review many of the assets on our balance sheet. We increased our allowances for bad debts and wrote off a portion of our food inventories in both our theatre and hotels and resorts divisions. We reviewed our indefinite life trade name intangible asset and determined that, as a result of a change in circumstances, the carrying value exceeded fair value, and we reported a pre-tax impairment charge of $2.2 million during the first quarter of fiscal ~~2019, we adopted Accounting Standards Update (“ASU”) No. 2016-02,~~~~Leases (Topic 842)~~~~, intended~~2020. We reviewed our long-lived assets, including property and equipment and operating lease right-of-use assets, for impairment due to ~~improve financial reporting related to leasing transactions. ASU No. 2016-02 requires a lessee to recognize a right-of-use (“ROU”) asset~~the change in circumstances and ~~a lease liability~~determined that an additional aggregate pre-tax impairment charge of $5.9 million was required during the first quarter of fiscal 2020 for most leases. The new guidance requires disclosures to help investors and other financial statement users better understand 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~~several theatre properties. We reviewed goodwill at the ~~adoption date~~theatre reporting unit level and ~~recognize~~determined that the fair value of our theatre reporting unit exceeded our carrying value as of March 26, 2020 and thus was not impaired as of that date. As a ~~cumulative-effect adjustment~~result of temporarily closing the majority of our properties, we also incurred approximately $5.5 million of nonrecurring expenses related primarily to ~~the opening balance of retained earnings in the period of adoption. We adopted the new accounting standard~~salary continuation payments to employees temporarily laid off.

The timing for when our theatres and hotels will reopen is uncertain as of the ~~first day~~date of ~~fiscal 2019 using~~this report. The majority of our theatres are currently required to be closed under various state and local governmental restrictions, and we will continue to monitor and follow those restrictions until lifted. We were encouraged by recent federal guidance for a phased reopening of the ~~modified retrospective approach, which results~~U.S. economy that included the reopening of movie theatres in phase one, albeit under strict social distancing guidelines. Prior to closing our theatres, we had announced a social distancing seating plan that effectively reduced each theatre auditorium’s capacity by 50%. Our current expectation is that, when we do reopen, we will open to similar capacity limitations. A reduction in capacity does not necessarily translate to an equal reduction in potential revenues. Reduced capacity may potentially impact attendance on $5 Tuesdays and on opening weekends of major new film releases, but other showings may be relatively unaffected given normal attendance counts, and based upon our past experience, we believe that customers impacted on those $5 Tuesdays and opening weekends may adapt to reduced seat availability by shifting their attendance to different days and times of day.

We believe that the exhibition industry has historically fared well during recessions, should one occur as a result of the COVID-19 pandemic, and we remain optimistic that the industry will rebound and benefit from pent-up social demand as home sheltering subsides and people seek togetherness with a return to normalcy. A return to “normalcy” may span multiple months driven by staggered theatre openings due to government limits, reduced operating hours, lingering social distancing requirements and a gradual ramp-up of consumer comfort with public gatherings. We are exploring a number of additional measures within our theatres to help support that consumer comfort. We also expect to initially reopen with older film product and other creative concepts to help excite consumers to return to theatres. We expect the film studios to work closely with the exhibition industry to provide the necessary product at favorable terms to facilitate a phased reopening. As described further below in the ~~cumulative effect~~Theatres section of ~~adoption recognized at~~this MD&A, a significant number of films originally scheduled to be released in March through June 2020 have been delayed until later in fiscal 2020 or fiscal 2021, further increasing the quality and quantity of films available during those future time periods. As of the date of ~~application,~~this report, most studios have kept their release schedule for films in place beginning in July 2020.

There has been some speculation that the COVID-19 pandemic may result in a change in how film studios may distribute their product in the future, including accelerating the release of films on alternate distribution channels such as premium video-on-demand and streaming services. In fact, in a couple of cases, films that were scheduled to be released to theatres have instead been released directly to these alternate channels. We believe that these select few instances are isolated and were a response to the immediate circumstances of nearly 100% of movie theatres being closed worldwide and do not reflect a change in permanent distribution plans of these studios. Other films with greater expected box office potential from these same studios were delayed rather than asreleased early and comments from the film community in general have been very supportive of the ~~earliest period presented.~~importance of the theatrical experience. The exhibition industry is an $11-$12 billion industry in the U.S. and approximately $40 billion worldwide, and the film studios derive a significant portion of their return on investment in film content from theatrical distribution. We believe distributing films in a movie theatre will continue to be an important component of their business model.

When we closed our hotels, it was not because of any governmental requirements to close. Our restaurants and bars within our hotels were required to close, but the hotels themselves were considered “essential businesses” under most definitions. We closed our hotels due to a significant drop in demand that made it financially prudent for us to close rather than stay open. As a result, ~~no adjustment~~the timing of reopening our hotels and resorts will likely be driven by an increase in demand, as individual and business travelers begin to travel more freely once again. The economic environment in place as this reopening happens will have a significant impact on the pace of our return to “normal” hotel operations. After past events such as 9/11 and the 2008 financial crisis, hotel demand softened for a period of time, particularly among business transient and group business travelers as travel budgets tightened in uncertain economic times. Whether the return to more normal demand is relatively rapid, as it was ~~made to prior period~~after 9/11, or occurs over the course of one or more years, as it was after the 2008 financial ~~information and disclosures.~~ crisis, is unknown at this time. We also do not know what social distancing or other measures might be required when we reopen that may limit our initial revenue potential.

~~In conjunction with~~We cannot assure that the ~~adoption~~impact of the ~~new standard, companies were able~~COVID-19 pandemic will not continue 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 reassessment of our prior conclusions related to lease identification, lease classification and initial direct costs. Topic 842 also provides practical expedients forhave an entity’s ongoing accounting. We made a policy election not to apply the lease recognition requirements for short-term leases. As a result, we did 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 which is reasonably certain to be exercised), but instead will recognize these lease payments as lease costs on a straight-line basis over the lease term.

Adoption 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~~adverse effect on both our ~~consolidated statements~~theatre and hotels and resorts businesses, results of ~~net earnings.~~operations, cash flows, financial condition, access to credit markets and ability to service our existing and future indebtedness, some of which may be significant.

Overall Results

The following table sets forth revenues, operating income (loss), other income (expense), net earnings (loss) and net earnings (loss) per common share for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 and fiscal ~~2018~~2019 (in millions, except for per share and variance percentage data):

First Quarter

Variance


F2020

F2019

Amt.

Pct.

Revenues

$
159.5

$
170.0

$
(10.5)

(6.2)
%
Operating income (loss)

(22.2)

5.0

(27.2)

(548.5)
%
Other income (expense)

(3.9)

(3.1)

(0.8)

(23.1)
%
Net loss attributable to noncontrolling interests

(0.1)

(0.1)

—

N/A

Net earnings (loss) attributable to The Marcus Corp.

(19.4)

1.9

(21.3)

(1,140.4)
%
Net earnings (loss) per common share - diluted

$
(0.64)

$
0.06

$
(0.70)

(1,166.7)
%
Third Quarter First Three Quarters
Variance Variance
F2019 F2018 Amt. Pct. F2019 F2018 Amt. Pct.
Revenues $ 211.5 $ 170.6 $ 40.9 24.0 % $ 614.0 $ 532.1 $ 81.9 15.4 %
Operating income 22.4 22.4 - - % 54.8 68.5 (13.7 ) -20.0 %
Other income (expense) (3.3 ) (3.6 ) 0.3 7.0 % (10.1 ) (11.5 ) 1.4 12.6 %
Net earnings (loss)
attributable to
noncontrolling interests (0.1 ) - (0.1 ) -637.5 % - 0.1 (0.1 ) -34.3 %
Net earnings attributable
to The Marcus Corp. $ 14.3 $ 16.2 $ (1.9 ) -12.0 % $ 34.2 $ 44.7 $ (10.5 ) -23.4 %

Net earnings per
common share – diluted: $ 0.46 $ 0.56 $ (0.10 ) -17.9 % $ 1.10 $ 1.56 $ (0.46 ) -29.5 %

Revenues ~~increased~~decreased during the ~~third~~first quarter ~~and~~of fiscal 2020 compared to the first ~~three quarters~~quarter of fiscal 2019 ~~compared~~due to ~~the third quarter and first three quarters of fiscal 2018 due primarily to increased~~decreased revenues from both our theatre division and hotels and resorts division. Operating income ~~(earnings~~(loss) (earnings/loss before other income/expense and income taxes) decreased during the ~~third~~first quarter of fiscal 2020 compared to the first quarter of fiscal 2019 ~~was even with operating income during the third quarter of fiscal 2018, as an increase~~due to a decrease in theatre division operating income ~~was~~and increased operating losses from our hotels and resorts division, partially offset by a decrease in ~~hotels and resorts division~~our operating ~~income and an increase in~~loss from corporate operating losses. Operating income decreased during the first three quarters of fiscal 2019 compared to the first three quarters of fiscal 2018 due to a decrease in both theatre division and hotels and resorts division operating income and an increase in corporate operating losses.items. Both of our ~~operating~~ divisions were negatively impacted by ~~nonrecurring expenses~~closures of the majority of our properties as a result of the COVID-19 pandemic during the first ~~three quarters of fiscal 2019. Net earnings attributable to The Marcus Corporation decreased during the third~~ quarter of fiscal ~~2019 compared to the third quarter of fiscal 2018 due primarily to increased income taxes.~~2020. Net earnings (loss) attributable to The Marcus Corporation decreased during the first ~~three quarters~~quarter of fiscal ~~2019~~2020 compared to the first ~~three quarters~~quarter of fiscal ~~2018~~2019 due to decreased operating income and investment income, partially offset by ~~increased investment income and~~ decreased interest expense and income taxes.
25
Our operating loss during the first quarter of fiscal 2020 was negatively impacted by nonrecurring expenses totaling approximately $5.5 million, or approximately $0.13 per diluted common share, related to expenses incurred (primarily payroll continuation payments to employees temporarily laid off) due to the closing of all of our movie theatres and the majority of our hotels and resorts during the last two weeks of the quarter. In addition, impairment charges related to intangible assets and several theatre locations negatively impacted our fiscal 2020 first quarter operating income by approximately $8.7 million, or approximately $0.21 per diluted common share.
On February 1, 2019, we acquired the assets of Movie ~~Tavern~~^®Tavern®, a New Orleans-based industry leading circuit known for its in-theatre dining concept ~~featuring chef-driven menus, premium quality food and drink and luxury seating.~~(the “Movie Tavern Acquisition”). Now branded Movie Tavern by Marcus, the acquired circuit consisted of 208 screens at 22 locations in nine states – Arkansas, Colorado, Georgia, Kentucky, Louisiana, New York, Pennsylvania, Texas and Virginia. The purchase price consisted of $30 million in cash, subject to certain adjustments, and 2,450,000 shares of our common stock ~~(157,056 of which have been placed in escrow to secure certain post-closing indemnification obligations of the seller under the asset purchase agreement),~~ for a total purchase price of approximately $139 million, based upon our closing share price on January 31, 2019. We financed the cash portion of the purchase price from existing sources of cash. The share portion of the purchase price was issued out of treasury stock. We anticipate that the acquired Movie Tavern business will be accretive to earnings, earnings per share and cash flow in the first 12 months following the closing of the transaction.
The acquisition increased our total number of screens by 23%, resulting in increased revenues from our theatre division during the third quarter and first three quarters of fiscal 2019 compared to the prior year periods.Operating income from our theatre division increased during the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018 due primarily to an increase in the average ticket price and concession sales per person from our comparable theatres and an increase in other revenues.Operating income from our theatre division during the fiscal 2019 first three quarters was unfavorably impacted by reduced attendance at our comparable theatres due to a weaker slate of movies during the first three quarters of fiscal 2019 compared to the first three quarters of 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~~Acquisition negatively impacted our operating income during the first ~~three quarters~~quarter of fiscal 2019 by approximately ~~$2.0~~$1.8 million, or ~~$0.05~~$0.04 per diluted common share.
We closed the InterContinental Milwaukee hotel in early January 2019 and began a substantial renovation project that converted this hotel into an experiential arts hotel named Saint ~~Kate~~^®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 the ~~third~~first quarter of fiscal 2019 ~~compared to the prior year period~~ were unfavorably impacted by ~~decreased cost reimbursements and~~this closing. Division revenues during the ~~negative impact~~first quarter of ~~comparing~~fiscal 2019 were also negatively impacted by a newly opened independent hotel (i.e. the Saint Kate) to a stabilized branded hotel (i.e. the InterContinental Milwaukee) last year, partially offset by increased room revenues and food and beverage revenues frommajor renovation occurring at our ~~other seven owned hotels. Revenues~~Hilton Madison hotel. Our operating loss from our hotels and resorts division during the first ~~three quarters~~quarter of fiscal 2019 ~~compared to the prior year period were unfavorably~~was negatively impacted by the closing of the renovated hotel for nearly six months and the impact of a major renovation at our Hilton Madison hotel during the first half of the year, offset by increased room revenues and food and beverage revenues from our other six owned hotels and increased cost reimbursements from managed hotels during the first three quarters of fiscal 2019 compared to the first three quarters of fiscal 2018. Decreased operating income from our hotels and resorts division during the third quarter and first three quarters of fiscal 2019 compared to the third quarter and first three quarters of fiscal 2018 was entirely due to preopening expenses ~~and initial start-up losses~~ related to the Saint Kate hotel ~~closure and conversion. These costs totaled~~conversion of approximately ~~$1.6~~$1.2 million, or ~~$0.04~~$0.03 per diluted common ~~share, and $5.5 million, or $0.13 per diluted common share, respectively, during the third quarter and first three quarters of fiscal 2019.~~
26
share.
Operating losses from our corporate items, which include amounts not allocable to the business segments, ~~increased~~decreased slightly during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018~~2019 due in part to reduced accruals for bonus and donation expenses as a result of operating losses this quarter, partially offset by increased non-cash long-term incentive compensation expenses. In addition, our fiscal 2019 third quarter 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 an investment ~~income~~loss of ~~$187,000 and $835,000, respectively,~~$695,000 during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to investment income of ~~$442,000 and $433,000~~$473,000 during the ~~third quarter and~~ first ~~three quarters of fiscal 2018. Investment income decreased during the third~~ quarter of fiscal ~~2019 and increased~~2019. The investment loss during the fiscal 2020 first ~~three quarters of fiscal 2019 compared to the same periods last year~~quarter was due to ~~changes~~decreases in the value of marketable ~~securities.~~securities resulting from significant market declines arising from the COVID-19 pandemic and its impact on the U.S. economy.

Our interest expense totaled ~~$2.8~~$2.5 million for the ~~third~~first quarter of fiscal 2020 compared to $3.1 million for the first quarter of fiscal 2019, ~~compared to $3.2 million for the third quarter of fiscal 2018,~~ a decrease of approximately ~~$400,000,~~$600,000, or 11.7%. Our interest expense totaled $9.0 million for the first three quarters of fiscal 2019 compared to $10.0 million for the first three quarters of fiscal 2018, a decrease of approximately $1.0 million, or 10.4%17.8%. The decrease in interest expense during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 was due to reduced borrowing levels during the majority of the quarter compared to the ~~third~~first quarter of fiscal 2019 and a lower average interest rate during the first ~~three~~quarter of fiscal 2020 as a result of decreases in short-term interest rates on our variable rate debt. We expect our interest expense to increase during the remaining quarters of fiscal ~~2018.~~2020 due to increased borrowings, as discussed in the Liquidity section of this MD&A below. Changes in our borrowing levels due to variations in our operating results, capital expenditures, share repurchases and asset sale proceeds, among other items, may impact our actual reported interest expense in future periods, as would further changes in short-term interest rates and changes in the mix between fixed rate debt and variable rate debt in our debt portfolio.

We did not have any significant variations in other expenses, ~~losses~~gains on disposition of property, equipment and other assets or ~~net~~ equity ~~earnings (losses)~~losses from unconsolidated joint ventures during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018.~~2019. The timing of periodic sales and disposals of our property and equipment varies from quarter to quarter, resulting in variations in our reported gains or losses on disposition of property and equipment.

We reported an income tax benefit for the first quarter of fiscal 2020 of $6.6 million compared to income tax expense of $13,000 for the ~~third quarter and~~ first three quarters of fiscal 2019 of $4.8 million and $10.5 million, respectively, compared to $2.6 million and $12.3 million, respectively, during the third quarter and first three quarters of fiscal 2018. The increase in income tax expense during the third quarter of fiscal ~~2019 was due in part to the fact that last year we benefitted from reductions in deferred~~2019. The large income tax ~~liabilities~~benefit during the ~~third~~first quarter of fiscal ~~2018 related to tax accounting method changes we made during the quarter. The decrease in income tax expense during the first three quarters of fiscal 2019~~2020 was the result of the ~~reduced earnings~~significant loss before income taxes ~~partially offset by an increased effective income tax rate.~~due to the closing of the majority of our properties in March 2020 due to the COVID-19 pandemic. Our fiscal ~~2019~~2020 first ~~three quarters~~quarter effective income tax rate, after adjusting for ~~earnings~~a loss from noncontrolling interests that ~~are~~is not tax-effected because the entity involved is a tax pass-through entity, was ~~23.4% and~~25.3%, compared to our fiscal 2019 first quarter effective income tax rate of 0.7%, which benefitted from excess tax benefits on share-based compensation and nonrecurring adjustments specific to the first ~~three quarters, compared to our~~quarter of fiscal ~~2018 first three quarters effective income tax rate of 21.5%, which benefited from the reduction in deferred income tax liabilities described above.~~2019. We ~~continue to~~ anticipate that our effective income tax rate for the remaining ~~quarter~~quarters of fiscal ~~2019 will~~2020 may increase if we incur losses that can be carried back to prior years (that had a higher federal income tax rate) under provisions included in the ~~24-26% range, depending upon the amount of excess tax benefits on share-based compensation that we recognize and excluding any potential changes in federal and state income tax rates.~~CARES Act. Our actual fiscal ~~2019~~2020 effective income tax rate may be different from our estimated quarterly rates depending upon actual facts and circumstances. Comparisons of income taxes during our fourth quarter of fiscal 2019 will be negatively impacted by the fact that our fiscal 2018 fourth quarter income tax expense benefitted from additional $1.2 million of reductions in deferred income tax liabilities related to tax accounting method changes completed during the quarter.

The operating results of one majority-owned hotel, The Skirvin Hilton, are included in the hotels and resorts division revenue and operating income during the first quarters of fiscal ~~2019~~2020 and fiscal ~~2018 periods,~~2019, and the after-tax net earnings or loss attributable to noncontrolling interests is deducted from or added to net earnings on the consolidated statements of earnings. We reported net ~~earnings~~losses attributable to noncontrolling interests of ~~$46,000~~$148,000 and ~~$70,000,~~$66,000, respectively, during the first ~~three~~ quarters of fiscal ~~2019~~2020 and fiscal ~~2018.~~

2019.

Theatres

The following table sets forth revenues, operating income (loss) and operating margin for our theatre division for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 and fiscal ~~2018~~2019 (in millions, except for variance percentage and operating margin):

First Quarter

Variance


F2020

F2019

Amt.

Pct.

Revenues

$
109.2

$
114.9

$
(5.7)

(4.9)
%
Operating income (loss)

(7.1)

12.6

(19.7)

(156.2)
%
Operating margin (% of revenues)

(6.5)
%

11.0
%





                    Third Quarter                                      First Three Quarters
Variance Variance
F2019 F2018 Amt. Pct. F2019 F2018 Amt. Pct.
Revenues $ 136.8 $ 95.0 $ 41.8 44.0 % $ 414.1 $ 333.4 $ 80.7 24.2 %
Operating income 16.8 14.5 2.3 16.5 % 57.7 66.3 (8.6 ) -13.1 %
Operating margin
(% of revenues) 12.3 % 15.2 % 13.9 % 19.9 %

Our theatre division revenues ~~increased~~decreased during the ~~third~~first quarter ~~and~~of fiscal 2020 compared to the first ~~three quarters~~quarter of fiscal 2019 ~~compared~~due primarily to decreased attendance as a result of the closing of all of our theatres on March 17, 2020 in response to the ~~third quarter and first three quarters~~COVID-19 pandemic. The revenue impact of ~~fiscal 2018 due to~~ the ~~newly acquired Movie Tavern theatres, increased other revenues and increases~~decreased attendance was partially offset by an increase in our average ticket price and average concession revenues per person ~~at our comparable theatres, partially offset by the impact of decreased attendance due to a weaker film slate~~ during the first ~~three quarters~~quarter of fiscal 2020 compared to the first quarter of fiscal 2019.

In addition, our revenues during the first quarter of fiscal 2020 included an extra month of Movie Tavern revenues (Movie Tavern theatres were not acquired until February 1, 2019) and a new Movie Tavern theatre opened in Brookfield, Wisconsin during the fourth quarter of fiscal 2019.

Our theatre division operating income ~~increased~~(loss) and operating margin decreased during the ~~third~~first quarter of fiscal ~~2019~~2020 compared to the ~~third~~first quarter of fiscal ~~2018~~2019 due primarily to the impact of the ~~increased~~reduced attendance and revenues ~~described above.~~ at comparable theatres. In addition, our theatre division operating loss during the first quarter of fiscal 2020 was negatively impacted by nonrecurring expenses totaling approximately $2.8 million related to expenses incurred (primarily payroll continuation payments to employees temporarily laid off) due to the closing of all of our movie theatres during the quarter. Impairment charges related to intangible assets and several theatre locations also negatively impacted our theatre division fiscal 2020 first quarter operating loss by approximately $8.7 million. Our operating income and operating margin during the first quarter of fiscal 2019 was negatively impacted by approximately $1.8 million of acquisition and preopening expenses related to the Movie Tavern Acquisition.

Our theatre division operating margin ~~decreased~~also declined during the ~~third~~first quarter of fiscal 2020 compared to the first quarter of fiscal 2019 ~~compared~~due to the ~~third quarter~~inclusion of ~~fiscal 2018 due primarily to the inclusion~~an extra month of Movie Tavern operating results. Our Movie Tavern theatres ~~will~~ have a lower operating margin than our legacy theatres ~~because~~due to the fact that 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 ~~will~~ also ~~contribute~~contributes to lower operating margins, as food and labor costs are generally higher for those items compared to traditional concession items. ~~Our fiscal 2019 third quarter operating margin was also negatively impacted by higher film costs compared to the prior year period due to a change in film mix (discussed below).~~

Our theatre division operating income and operating margin decreased during the first three quarters of fiscal 2019 compared to the first three quarters of fiscal 2018 due to reduced attendance and revenues at comparable theatres during the first three quarters of fiscal 2019 compared to the first three quarters of fiscal 2018, driven primarily by a weaker film slate during the first quarter of fiscal 2019. 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, due 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 the first quarter of 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 theatre division operating margin also declined during the first three quarters of fiscal 2019 compared to the first three quarters of fiscal 2018 due to the impact of the Movie Tavern theatres described above.

As described above, our operating income and operating margin were also negatively impacted during the first three quarters of fiscal 2019 by approximately $2.0 million of acquisition and preopening expenses related to the Movie Tavern acquisition (approximately $60,000 of which was incurred during the third quarter of fiscal 2019).

The following table provides a further breakdown of the components of revenues for the theatre division for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 and fiscal ~~2018~~2019 (in millions, except for variance percentage):

First Quarter

Variance


F2020

F2019

Amt.

Pct.

Admission revenues

$
55.4

$
59.0

$
(3.6)

(6.1)
%
Concession revenues

45.9

47.2

(1.3)

(2.6)
%
Other revenues

7.7

8.5

(0.8)

(10.1)
%

109.0

114.7

(5.7)

(4.9)
%
Cost reimbursements

0.2

0.2

—

(4.7)
%
Total revenues

$
109.2

$
114.9

$
(5.7)

(4.9)
%
Third Quarter First Three Quarters
Variance Variance
F2019 F2018 Amt.   Pct. F2019 F2018 Amt. Pct.
Admission revenues $ 69.8 $ 52.4 $ 17.4 33.1 % $ 211.8 $ 185.0 $ 26.8 14.5 %
Concession revenues 57.0 35.5 21.5 60.8 % 172.1 123.7 48.4 39.2 %
Other revenues 9.8 6.9 2.9 41.9 % 29.5 23.6 5.9 25.2 %
136.6 94.8 41.8 44.1 % 413.4 332.3 81.1 24.4 %
Cost reimbursements 0.2 0.2 - -0.5 % 0.7 1.1 (0.4 ) -40.4 %
   Total revenues $ 136.8 $ 95.0 $ 41.8 44.0 % $ 414.1 $ 333.4 $ 80.7 24.2 %

As described above, the decreases in revenues are due to the temporary closing of all of our theatres on ~~February 1, 2019, we acquired 22 theatres and 208 screens~~March 17, 2020 in ~~conjunction with our~~response to the COVID-19 pandemic. Conversely, the extra month of Movie Tavern ~~acquisition, contributing a large portion of the increase to~~operations favorably impacted our admission and concession revenues during the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018. The Movie Tavern theatres were responsible for the entire increase to our admission and concession revenues during the first three quarters of fiscal 2019 compared to the first three quarters of fiscal 2018. Excluding the Movie Tavern theatres, admission revenues and concession revenues for comparable theatres increased 6.3% and 9.4%, respectively, during the third quarter of fiscal ~~2019 compared to~~2020. Excluding the ~~third quarter of fiscal 2018. Excluding the~~acquired and newly built Movie Tavern theatres, admission revenues and concession revenues for comparable theatres decreased ~~5.7%~~14.8% and ~~1.7%~~13.7%, respectively, during the first ~~three quarters~~quarter of fiscal ~~2019~~2020 compared to the first ~~three quarters~~quarter of fiscal ~~2018.~~2019.
29
According to data received from Rentrak (a national box office reporting service for the theatre industry) and compiled by us to evaluate our fiscal ~~2019 third~~2020 first quarter ~~and first three quarters~~ results, United States box office receipts (excluding new builds for the top 10 theatre circuits) ~~increased 3.0%~~decreased 17.0% during our fiscal ~~2019 third~~2020 first quarter, ~~and decreased 6.2%~~indicating that our decrease in admission revenues during ~~our~~the first ~~three quarters~~quarter of fiscal ~~2019. As a result, our increase in admission revenues~~2020 of 14.8% for our comparable theatres outperformed the industry by ~~3.3~~2.2 percentage points during the third quarter of fiscal 2019 and our decrease in admission revenues for our comparable theatres outperformed the industry by 0.5 percentage points during the first three quarters of fiscal 2019.points. Our goal is to continue our past pattern of outperforming the industry, but with the majority of our renovations now completed for our legacy 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. A favorable film mix that included family-oriented films and a major horror film (both genres have historically performed very well in our legacy Midwestern markets) likely contributed to our third quarter outperformance. During the first quarter of fiscal 2019, we believe colder and snowier weather in the Midwest negatively impacted the performance of our comparable theatres compared to the U.S. averages, negatively impacting our first three quarters comparisons. As discussed further ~~in our fiscal 2019 first quarter Form 10-Q,~~below, we ~~also~~ believe film mix ~~negatively~~favorably impacted our relative performance versus the nation during the fiscal 2020 period.

We did not include the performance of our Movie Tavern theatres, which we acquired in February 2019, in the comparison to the industry above because we did not own Movie Tavern during the entire fiscal 2019 first quarter. ~~As a result,~~Based upon data available to us from the previous owner for the month of January 2019, however, we believe that our ~~year-to-date performance versus~~Movie Tavern theatres outperformed the industry ~~while positive, is less robust than~~by over ten percentage points during the first quarter of fiscal 2020 compared to the equivalent first quarter of fiscal 2019. We believe that this outperformance was attributable to investments we have made in new features and amenities in select theatres and our ~~third~~implementation of innovative operating and marketing strategies that have increased attendance, including our $5 Tuesday promotion and our customer loyalty program. Adding the Movie Tavern theatres to our comparable theatres, we believe our combined theatre circuit outperformed the industry by approximately four percentage points during the first quarter ~~outperformance.~~

of fiscal 2020 compared to the first quarter of fiscal 2019.

Our average ticket price increased ~~9.2% and 5.2%, respectively,~~7.0% during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018,~~2019, due in part to the ~~addition~~extra month of Movie Tavern theatres in certain markets where competitive pricing is slightly higher than in our legacy Midwestern markets. Excluding all Movie Tavern theatres, our average ticket price at comparable theatres increased ~~6.2% and 2.8%, respectively,~~6.0% during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018.~~2019. At the beginning of the second quarter of fiscal 2019, we implemented selected ticket price increases at certain locations ~~in order~~ to reflect the competitive market in which those theatres operate. In addition, we enacted a modest price increase for our proprietary premium large format (“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 price during the fiscal 2019 periods. The fact that our top performing films during the fiscal 2019 periods performed particularly well in our PLF screens (with a corresponding price premium), and that we have more PLF screens this year than we did the prior year also contributed to our increased average ticket price during the thirdfirst quarter ~~and first three quarters~~ of fiscal ~~2019 compared to the prior year periods.~~2020.

~~Conversely, we~~We also believe that a change in film product mix had a ~~small unfavorable~~favorable impact on our average ticket price during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018. Two~~2019. This year’s top two films, Star Wars: The Rise of Skywalker and Bad Boys for Life, attracted a more adult audience and performed extremely well in our PLF screens, with a corresponding price premium, favorably impacting our average ticket price during the first quarter of fiscal 2020. In addition, only one of our top ~~three performing~~five films during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019,~~2020 (#5, Sonic the Hedgehog) was aimed at a younger audience. Conversely, two of our top five films last year, How toTrain Your Dragon: The ~~Lion King~~Hidden Worldand~~Toy Story 4~~The Lego Movie 2: The Second Part, were animated films that generally appeal to a younger audience (resulting in a higher percentage of lower-priced children’s tickets sold), negatively impacting our average ticket price during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019 compared to the prior year, when only one of our top five films (~~~~Incredibles 2~~) was aimed at a younger audience. A similar film mix change in our fiscal 2019 first quarter (more films aimed at a younger audience than the prior year) also negatively impacted our average ticket price comparison for the first three quarters of fiscal 2019 compared to the first three quarters of fiscal 2018.2019. The ~~overall net~~ increase in average ticket price favorably impacted our admission revenues of our comparable theatres by approximately ~~$3.2~~$2.5 million ~~and $4.7 million, respectively,~~ during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018.~~

2019.

Our concession revenues ~~increased~~decreased during the ~~third~~first quarter ~~and~~of fiscal 2020 compared to the first ~~three quarters~~quarter of fiscal 2019 ~~compared to the third quarter and first three quarters of fiscal 2018~~ due to the ~~addition~~mid-March closure of all of our theatres, partially offset by revenues from the new Movie Tavern theatre that opened during the fourth quarter of fiscal 2019, the extra month of operations for the acquired Movie Tavern theatres and an increase in our average concession revenues per ~~person, partially offset by decreased attendance at comparable theatres during the first three quarters of fiscal 2019.~~person. Our average concession revenues per person increased by ~~31.8% and 28.0%, respectively,~~10.9% during the ~~third~~first quarter ~~and~~of fiscal 2020 compared to the first ~~three quarters~~quarter of fiscal 2019, ~~compared to the third quarter and first three quarters of fiscal 2018,~~ due in ~~large~~ part to the ~~addition~~extra month of operations for the Movie Tavern theatres. Excluding all Movie Tavern theatres, our average concession revenues per person at comparable theatres increased ~~9.3% and 7.3%, respectively,~~7.4% during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018.~~2019. The increase in our average concession revenues per person contributed approximately ~~$3.2 million and $8.0~~$2.2 million to our comparable theatre concession revenues during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018.~~

2019.

A change in concession product mix, including increased sales of non-traditional food and beverage items from our increased number ofTake Five^SMLounge^SM,Zaffiro’s® Express,Reel ~~Sizzle~~Sizzle®® and in-theatre dining outlets were the primary reasons for our increased average concession sales per person during the fiscal ~~2019 periods. Conversely, we~~2020 first quarter. We believe that the above-described change in film product mix during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019 may have slightly reduced~~2020 favorably impacted the growth of our overall average concession sales per person during the fiscal ~~2019 periods,~~2020 first quarter, as ~~family-oriented and animated~~adult-oriented films such as ~~the films in~~ our top ~~three~~four films during ~~the third~~this year’s first quarter ~~of fiscal 2019 identified above~~ tend ~~not~~ to contribute more to sales of non-traditional food and beverage items ~~as much as adult-oriented films. We expect the recently-acquired Movie Tavern theatres will continue~~compared to ~~have a significant (20% or more) favorable impact on our overall average concession sales per person,~~family-oriented and animated films such 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~~two films in our ~~theatres that do not offer a dine-in option.~~

~~Other revenues increased by approximately $2.9 million and $5.9 million, respectively,~~top five during the ~~third~~first quarter ~~and first three quarters~~ of fiscal 2019 described above.

Other revenues decreased by approximately $800,000 during the first quarter of fiscal 2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018. These increases were primarily~~2019. This decrease was due to reduced internet surcharge ticketing fees and decreased lobby and preshow advertising income ~~from~~as a result of the mid-March closure of all of our ~~new Movie Tavern locations.~~theatres.

Total theatre attendance ~~increased 22.0% and 8.7%, respectively,~~decreased 12.2% during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018.~~2019. Excluding the acquired and newly-built Movie Tavern theatres, comparable theatre attendance ~~increased 0.2%~~decreased 19.5% during the ~~third~~ quarter, ~~of fiscal 2019, and decreased 8.2% during the first three quarters of fiscal 2019. The decrease in attendance at comparable theatres during the first three quarters of fiscal 2019 was~~ due primarily to a weaker early March 2020 film slate compared to the prior year and the fact that we closed all of our theatres in mid-March in response to the COVID-19 pandemic. Attendance at comparable theatres increased significantly during January, decreased in February, and was declining during the first half of ~~fiscal 2019. Attendance and admission revenues increased during July and September 2019 and decreased during August 2019 compared~~March prior to our theatre closures due to the ~~prior year periods.~~

fact that last year’s top film during the quarter, Captain Marvel, was released during March 2019. January 2020 benefited from strong 2019 holdover films such as Star Wars: The Rise of Skywalker and Jumanji: The Next Level.

Our highest grossing films during the fiscal ~~2019 third~~2020 first quarter includedStar Wars: The ~~Lion King~~Rise of Skywalker,~~Spider-Man: Far From Home~~Bad Boys for Life,~~Toy Story 4~~Jumanji: The Next Level,~~It Chapter Two~~1917 and~~Fast and Furious Presents: Hobbs & Shaw~~Sonic the Hedgehog. We believe our theatre circuit outperformed on all four of our top films during the quarter. The film slate during the ~~third~~first quarter of fiscal ~~2019~~2020 was weighted ~~significantly~~ more towards blockbuster movies compared to the prior year, as evidenced by the fact that our top five films during our fiscal ~~2019 third~~2020 first quarter accounted for ~~57%~~46% of our total box office results, compared to ~~38%~~39% for the top five films during the ~~third~~first quarter of fiscal ~~2018,~~2019, both expressed as a percentage of the total admission revenues for the period. This increased reliance on blockbuster films during the fiscal ~~2019 third~~2020 first quarter had the effect of slightly increasing our film rental costs during the period, as generally the better a particular film performs, the greater the film rental cost tends to be as a percentage of box office receipts.

~~Movie Tavern performance to date has generally met our expectations, after adjusting~~The film product release schedule for the weaker film slate in 2019 thus far, and the integration is progressing on schedule. We introduced our popular $5 Tuesday movie program at these locations, as well as other promotional and marketing initiatives, immediately following our acquisition. During the second quarterremainder of fiscal ~~2019, we introduced our Magical Movie Rewards~~^® ~~loyalty program at all Movie Tavern locations. Data available~~2020 has been changing in response to ~~us for prior year performance~~the closure of nearly 100% of the ~~Movie Tavern~~movie theatres ~~indicates that these theatres have outperformed~~in the ~~national box office on a relative basis by an increasing percentage during each~~U.S. As of the ~~first,~~date of this report, the film studios have postponed the majority of their scheduled releases during our fiscal 2020 second ~~and third quarters~~quarter. Beginning in July 2020, however, there are a significant number of ~~fiscal 2019 compared to the same periods of fiscal 2018 – an indication that our programs are having an impact on their performance.~~

~~Film product performance for the fourth quarter of fiscal 2019 has started off slightly worse than the same period of fiscal 2018. Top performing films during this period-to-date included~~~~Joker~~,~~The Addams Family~~,~~Maleficent: Mistress of Evil~~ ~~and~~~~Terminator: Dark Fate~~~~. Other~~ films scheduled to be released during the ~~fiscal 2019 fourth quarter~~second half of the year that may generate substantial box office interest, ~~include~~~~Doctor Sleep~~,~~Ford V. Ferrari~~,~~Frozen II~~,~~A Beautiful Day in~~including multiple films that were originally scheduled for the ~~Neighborhood~~,first half of fiscal 2020. Films currently scheduled for release during the second half of fiscal 2020 include ~~Jumanji:~~Tenet, Mulan, The ~~Next Level~~SpongeBob Movie: Sponge on the Run, Wonder Woman 1984, The Quiet Place Part II, The Conjuring: The Devil Made Me Do It, Halloween Kills, Black Widow, Godzila vs. Kong, Soul, No Time to Die, Free Guy, West Side Story, Coming 2 America, Dune, The Croods 2 and~~Cats~~Top Gun: Maverick.. The ~~most~~ anticipated film ~~during the fourth quarter of fiscal 2019 is~~~~Star Wars: The Rise of Skywalker~~,slate for 2021, which will ~~mark the end of the most recent trilogy.~~also now include several films originally scheduled for 2020, is currently expected to be very strong. Revenues for the theatre business and the motion picture industry in general are heavily dependent on the general audience appeal of available films, together with studio marketing, advertising and support campaigns and the maintenance of the current “windows” between the date a film is released in theatres and the date a motion picture is released to other channels, including video on-demand and DVD. These are factors over which we have no control.

~~Comparisons of theatre division operating income during~~We ended the ~~fourth~~first quarter of fiscal 2019 to the prior year will benefit from the fact that we incurred approximately $1.7 million in acquisition and preopening expenses during the fourth quarter of fiscal 2018 related to the Movie Tavern acquisition.

~~We ended the third quarter of fiscal 2019~~2020 with a total of 1,104 company-owned screens in 90 theatres and six managed screens in one theatre, compared to 1,092 company-owned screens in 89 theatres and ~~6 managed screens in one theatre, compared to 884 company-owned screens in 67 theatres and 6~~six managed screens in one theatre at the end of the ~~third quarter of fiscal 2018. In addition to the screens added due to the Movie Tavern acquisition, we opened one new~~~~Ultra~~~~Screen DLX~~^® ~~at an existing Marcus Wehrenberg theatre during the~~ first quarter of fiscal 2019. ~~During our fiscal 2019 second quarter, we completed the addition of DreamLounger~~^SM recliner seating to three Movie Tavern theatres and early in our fiscal 2019 fourth quarter, we completed the addition of DreamLoungers to another Movie Tavern theatre and another Marcus Wehrenberg theatre. We ~~converted 11 Movie Tavern auditoriums to our~~~~Super~~~~Screen DLX~~^® ~~concept during the second quarter of fiscal 2019 and converted 9 Movie Tavern auditoriums and one Marcus Wehrenberg auditorium to our~~~~Super~~Screen DLX concept during the third quarter of fiscal 2019. We expect to convert three additional auditoriums to our proprietary PLF concepts during the fourth quarter of fiscal 2019, including two Movie Tavern auditoriums. We also opened a new eight-screen Movie Tavern by Marcus theatre in Brookfield, Wisconsin early in our fiscal 2019 fourth quarter ~~which includes~~and added four new screens to an existing Movie Tavern theatre during the first quarter of fiscal 2020. We also completed the addition of DreamLounger^SM recliner seating and ~~one~~added a new SuperScreen ~~DLX auditorium.~~DLX® to that same Movie Tavern theatre during the first quarter of fiscal 2020. During the first quarter of fiscal 2020, we began projects that would add DreamLounger recliner seating to another Movie Tavern theatre and add DreamLounger recliner seating, as well as Reel Sizzle and Take Five Lounge outlets, to a Marcus Wehrenberg theatre, but those projects have temporarily been put on hold as a result of the COVID-19 pandemic. We also have temporarily stopped construction of a new nine-screen theatre in Tacoma, Washington. We currently expect to restart these projects when conditions warrant.

Hotels and Resorts

The following table sets forth revenues, operating ~~income~~loss and operating margin for our hotels and resorts division for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 and fiscal ~~2018~~2019 (in millions, except for variance percentage and operating margin):

First Quarter

Variance


F2020

F2019

Amt.

Pct.

Revenues

$
50.2

$
55.1

$
(4.9)

(8.9)
%
Operating loss

(10.9)

(3.2)

(7.7)

(244.2)
%
Operating margin (% of revenues)

(21.6)
%

(5.7)
%





Third Quarter First Three Quarters
Variance Variance
F2019 F2018 Amt. Pct. F2019 F2018 Amt. Pct.
Revenues $ 74.6 $ 75.5 $ (0.9 ) -1.2 % $ 199.6 $ 198.4 $ 1.2 0.6 %
Operating income 10.6 12.0 (1.4 ) -12.0 % 11.4 15.7 (4.3 ) -27.3 %
Operating margin
(% of revenues) 14.2 % 15.9 % 5.7 % 7.9 %

The following table provides a further breakdown of the components of revenues for the hotels and resorts division for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 and fiscal ~~2018~~2019 (in millions, except for variance percentage):

First Quarter

Variance


F2020

F2019

Amt.

Pct.

Room revenues

$
17.0

$
18.9

$
(1.9)

(10.3)
%
Food and beverage revenues

13.6

15.8

(2.2)

(13.7)
%
Other revenues

11.0

12.2

(1.2)

(9.7)
%

41.6

46.9

(5.3)

(11.3)
%
Cost reimbursements

8.6

8.2

0.4

(4.9)
%
   Total revenues

$
50.2

$
55.1

$
(4.9)

(8.9)
%

Third Quarter First Three Quarters
Variance Variance
F2019 F2018 Amt.   Pct. F2019 F2018 Amt. Pct.
Room revenues $ 34.2 $ 34.5 $ (0.3 ) -0.8 % $ 81.3 $ 84.2 $ (2.9 ) -3.5 %
Food/beverage revenues 20.2 19.3 0.9 4.3 % 54.6 54.0 0.6 1.1 %
Other revenues 13.0 12.8 0.2 1.4 % 36.4 35.5 0.9 2.6 %
67.4 66.6 0.8 1.1 % 172.3 173.7 (1.4 ) -0.8 %
Cost reimbursements 7.2 8.9 (1.7 ) -18.7 % 27.3 24.7 2.6 10.7 %
   Total revenues $ 74.6 $ 75.5 $ (0.9 ) -1.2 % $ 199.6 $ 198.4 $ 1.2 0.6 %

Our first quarter is typically the weakest quarter of our fiscal year for our hotels and resorts division due to the traditionally reduced level of travel at our predominantly Midwestern portfolio of owned properties. Division revenues decreased during the ~~third~~first quarter of fiscal 2020 compared to the first quarter of fiscal 2019 ~~compared to the third quarter of fiscal 2018~~ due entirely to ~~variations~~COVID-19 related cancellations in ~~cost reimbursements from managed properties. Division~~March 2020. In addition, due to extremely low occupancy rates, we closed five of our eight company-owned hotels and resorts on March 24, 2020, further reducing revenues ~~increased~~ during the fiscal 2020 first ~~three quarters of fiscal 2019 compared to the first three quarters of fiscal 2018 due in part to an increase in cost reimbursements, partially offset by the fact that~~quarter. Last year, we closed the former InterContinental Milwaukee hotel ~~was closed~~ during the ~~majority~~first week of ~~the first six months of fiscal 2019 as it underwent~~January to begin a major renovation that converted this hotel into 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).~~ Excluding this hotel, ~~and cost reimbursements from managed properties,~~ total revenues during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019 increased~~2020 decreased by ~~1.7% and 2.7%, respectively,~~12.2% compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018, due primarily to increased room revenues and food and beverage revenues at our seven other owned hotels and resorts.~~
2019.
Room revenues decreased during the ~~third~~first quarter ~~and~~of fiscal 2020 compared to the first ~~three quarters~~quarter of fiscal 2019 ~~compared~~due to COVID-19 related cancellations during March 2020 and the ~~third quarter~~closure of five company-owned hotels and ~~first three quarters of fiscal 2018 due entirely to~~resorts for the ~~closing~~final two days of the ~~InterContinental hotel and its reopening as a new independent hotel,~~quarter, partially offset by ~~increased revenue per available~~ room ~~or RevPAR, at our remaining seven company-owned hotels.~~revenues from the Saint Kate, which was not open last year during the first quarter. Excluding the Saint Kate, room revenues during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019 increased~~2020 decreased by ~~0.7% and 1.1%, respectively,~~14.4% compared to the ~~third~~first quarter ~~and first three quarters~~ of 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.~~2019. Food and beverage revenues ~~increased~~decreased during the ~~third~~first quarter ~~and~~of fiscal 2020 compared to the first ~~three quarters~~quarter of fiscal 2019 ~~compared~~due to the ~~third quarter~~loss of March banquet and ~~first three quarters of fiscal 2018 despite having a closed hotel for most~~catering revenues as groups cancelled due to the COVID-19 pandemic. In addition, our restaurants and bars were required to close during the last 10 days of the ~~first half of~~ fiscal ~~2019.~~2020 quarter due to the COVID-19 pandemic. Excluding the Saint Kate, food and beverage revenues during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019 increased~~2020 decreased by ~~3.0% and 4.0%, respectively,~~19.8% compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018,~~2019. Other revenues decreased due primarily to ~~increased banquet and catering~~reduced revenues ~~and once again despite the negative impact~~ from our ~~Hilton Madison hotel while it was under renovation. Other revenues~~condo hotels and decreased management fees. Cost reimbursements increased during the first ~~three quarters~~quarter of fiscal ~~2019~~2020 compared to the first ~~three quarters of fiscal 2018 due in part to increased management fees and revenues from our laundry facility. Cost reimbursements also increased during the first three quarters~~quarter of fiscal 2019 ~~compared~~due to the ~~first three quarters~~addition of ~~fiscal 2018 due to an increase in the number of~~a new large management ~~contracts in this division.~~
contract last year.
Our hotels and resorts division operating ~~income decreased~~loss increased and operating margin declined during our fiscal 2020 first quarter compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal 2019 ~~compared~~due primarily to the ~~third~~impact of the revenue losses described above. In addition, our hotels and resorts division operating loss during the first quarter ~~and first three quarters~~ of fiscal ~~2018~~2020 was negatively impacted by nonrecurring expenses totaling approximately $2.7 million related to expenses incurred (primarily payroll continuation payments to employees temporarily laid off) due ~~entirely~~ to ~~$1.6~~the closing of five of our eight company-owned hotels and resorts during the quarter. Our operating loss during the first quarter of fiscal 2019 was negatively impacted by approximately $1.2 million ~~and $5.5 million, respectively,~~ of preopening expenses ~~and initial startup losses~~ related to ~~the closing and~~our conversion of the InterContinental Milwaukee hotel into the Saint Kate. We also had approximately $500,000 of additional depreciation and amortization attributable to this hotel during the third quarter and first three quarters of fiscal 2019 due to the new investment made at this property. Excluding this hotel, our fiscal 2019 third quarter and first three quarters operating income would have improved by approximately $700,000, or 6%, during the third quarter of fiscal 2019 and $1.8 million, or 11%, during the first three quarters of fiscal 2019, both compared to the prior year periods. Again excluding this hotel, our operating margin was 18.1% and 9.9%, respectively, during the third quarter and first three quarters of fiscal 2019 compared to 17.2% and 8.8%, respectively, during the third quarter and first three quarters of fiscal 2018. This same-hotel improvement can be attributed to increased revenues and a continued focus on cost controls and operating efficiency and was achieved despite the fact that the renovation at the Hilton Madison hotel negatively impacted our operating results during the fiscal 2019 periods.

Initial guest and community reaction to the new Saint Kate hotel has been very favorable. As an independent hotel, we expect that it will take a period of time for this hotel to ramp up, particularly with group business, and as a result, it is likely that our fiscal 2019 fourth quarter comparisons of Saint Kate to a stabilized branded hotel during the prior year will once again be unfavorable. We believe that over time, the Saint Kate will achieve a higher average daily room rate than the hotel it replaced, ultimately outperforming the previous hotel.

The following table sets forth certain operating statistics for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 and fiscal ~~2018,~~2019, including our average occupancy percentage (number of occupied rooms as a percentage of available rooms), our average daily room rate, or ADR, and our total revenue per available room, or RevPAR, for company-owned properties:

First Quarter⁽¹⁾

Variance


F2020

F2019

Amt.

Pct.

Occupancy percentage

55.6
%

64.6
%

(9.0)
pts
(13.9)
%
ADR

$
129.20

$
130.05

$
(0.85)

(0.7)
%
RevPAR

$
71.84

$
84.05

$
(12.21)

(14.5)
%
                      Third Quarter⁽¹⁾                 First Three Quarters⁽¹⁾
Variance Variance
F2019 F2018 Amt. Pct. F2019 F2018 Amt. Pct.
Occupancy pct. 83.0 % 83.5 % -0.5 pts -0.6 % 75.2 % 75.7 %     -0.5 pts -0.6 %
ADR $ 172.12 $ 170.06 $ 2.06 1.2 % $ 155.91 $ 153.47 $ 2.44 1.6 %
RevPAR $ 142.84 $ 142.03 $ 0.81 0.6 % $ 117.19 $ 116.09 $ 1.10 0.9 %

(1) These operating statistics represent averages of our seven distinct comparable 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 ~~former InterContinental Milwaukee hotel (now the~~ Saint ~~Kate), as this hotel~~Kate, which was closed ~~for the majority of~~last year during the first ~~half of fiscal 2019 and was not comparable to the prior year stabilized branded hotel during the third quarter of fiscal 2019.~~quarter.

RevPAR ~~increased~~decreased at ~~the three largest~~six of our seven comparable company-owned properties during ~~both~~ the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2019~~2020 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018. As noted above, our~~2019. Our Hilton Madison hotel experienced an increase in RevPAR because it was undergoing a major renovation during the ~~first half of~~ fiscal 2019 ~~negatively impacting our overall operating statistics.~~first quarter. Excluding the Hilton Madison hotel, our remaining six comparable company-owned hotels experienced a RevPAR ~~increase~~decrease of ~~2.8%~~17.5% during the first ~~three quarters~~quarter of fiscal ~~2019~~2020 compared to the prior year period. According to data received from Smith Travel Research and compiled by us in order to evaluate our fiscal ~~2019 third~~2020 first quarter ~~and first three quarters~~ results, comparable “upper upscale” hotels throughout the United States experienced ~~an increase~~a decrease in RevPAR of ~~1.4% and 1.0%, respectively,~~20.9% during our fiscal ~~2019 third~~2020 first quarter ~~and first three quarters~~ compared to the same ~~periods~~weeks last year. Data received from Smith Travel Research for our various “competitive sets” – hotels identified in our specific markets that we deem to be competitors to our hotels – indicates that these hotels experienced ~~an increase~~a decrease in RevPAR of ~~3.2% and 3.6%, respectively,~~25.1% during our ~~third~~fiscal 2020 first quarter. Thus, we believe we outperformed the industry and our competitive sets during the fiscal 2020 first quarter.
A decline in group business contributed significantly to our reduced revenues during the first quarter ~~and~~of fiscal 2020 compared to the first ~~three quarters~~quarter of fiscal 2019, ~~compared~~as groups were among the first customer segments to ~~the fiscal 2018 comparable periods.~~

~~An increase~~begin cancelling as COVID-19 pandemic concerns grew. As described above, a decrease in group business ~~at several of~~subsequently led to a corresponding decrease in banquet and catering revenues. Although cancellations significantly impacted our ~~hotels~~occupancy rates during the first quarter, our comparable ADR decreased only slightly during the first quarter of fiscal ~~2019 third quarter~~2020 compared to the prior year period contributed to our increased RevPAR performance for our comparable company-owned hotels. The increase in group business also accounted for the majority of the increase in banquet and catering revenues described above.
Our comparable hotel RevPAR growth of 0.6% and 0.9% during the third quarter and first three quarters of fiscal 2019 compared to the third quarter and first three quarters of fiscal 2018 was entirely the result of an increase in our comparable ADR. Fourquarter. Two of our seven comparable company-owned hotels (including the Hilton Madison hotel, but excluding the Saint Kate) reported increased ADR during the ~~third~~fiscal 2020 first quarter ~~and first three quarters of fiscal 2019~~ compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2018.~~2019. It is generally more difficult to increase ADR during our slower winter season, as overall occupancy is at its lowest.
Early in our fiscal 2020 second quarter, we closed our remaining three company-owned hotels. Looking to future periods, ~~although~~ our company-owned hotels have experienced a ~~slight~~significant decrease in group bookings ~~during~~for the ~~third~~second quarter of fiscal ~~2019~~2020 compared to the same period last ~~year,~~year. As of the date of this report, our group room revenue bookings for ~~future periods in fiscal 2019 and~~the second half of fiscal 2020 - commonly referred to in the hotels and resorts industry as “group pace” - is running ~~ahead of~~slightly behind our group room revenue bookings for ~~future periods~~the second half last year at this ~~time.~~time and it is possible group pace may worsen if we receive additional cancellations in the coming months. Group pace for fiscal 2021 is currently running behind where we were last year at this time for fiscal 2020. Banquet and catering revenue pace for ~~future periods in fiscal 2019 and~~the second half of fiscal 2020 is ~~also~~ currently ~~ahead of~~about even with where we were last year at this same ~~time.~~time and is slightly ahead for fiscal 2021 compared to where we were last year at this time for fiscal 2020.

~~Nationally, the pace of~~Forecasting what future 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~~or decline will ~~experience~~be when our hotels reopen is very limited overall growth in RevPAR in calendar 2019 and 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 at this time. Hotel revenues have historically tracked very closely with traditional macroeconomic statistics such as the Gross Domestic ~~Product. We also continue~~Product, so we will be monitoring the economic environment very closely. After past shocks to ~~monitor~~the system, such as 9/11 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. Several~~existing hotels. As of ~~our markets, including Oklahoma City, Oklahoma, Chicago, Illinois and~~the date of this report, it was still uncertain what it will look like when Milwaukee Wisconsin, have experienced an increase in room supply over the past several years that may be an impediment to any substantial increases in ADR in the near term. We believe that our hotels are less impacted by additional room supply than other hotels in the markets in which we compete, particularly in the Milwaukee market, due in large part to recent renovations that we have made to our hotels. Milwaukee was recently awardedhosts the Democratic National Convention in August 2020 (moved from July 2020). The status of the ~~summer of~~Ryder Cup in September 2020, which ~~we believe will not only favorably impact that future year’s results (group pace~~ is ~~up significantly for 2020), but has the potential~~scheduled to ~~have a positive long-term impact on the overall market.~~be held approximately one hour north of Milwaukee, is also uncertain at this time. Overall, we generally expect our revenue trends to track or exceed the overall industry trends, particularly in our respective markets.

Our hotels and resorts division operating results during the first ~~three quarters~~quarter of fiscal ~~2019~~2020 benefited from ~~three~~a new management ~~contracts~~contract added during fiscal ~~2018~~2019 – 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 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 the468-room Hyatt Regency Schaumburg hotel in Schaumburg, Illinois. This 468-room hotel recently completed a $15 million renovation and offers upscale accommodations, robust amenities and more than 30,000 square feet of indoor and outdoor meeting and event space, including a 3,100 square foot starlit terrace. This is our first Hyatt-branded hotel under management. Conversely, ~~in May 2019,~~ we ceased ~~managing~~management of 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~~and the Sheraton Chapel Hill Hotel in Chapel Hill, North Carolina, ~~sold~~during fiscal 2019, partially offsetting the ~~hotel, and~~impact of the new contract. All of our managed hotels closed early in our fiscal 2020 second quarter due to extremely low occupancy as a result ~~our contract to manage this hotel was terminated. As~~ of the ~~date~~COVID-19 pandemic. In addition, early in our fiscal 2020 second quarter, we ceased management of ~~this filing,~~the Hilton Garden Inn Houston NW/Willowbrook in Houston, Texas.

During our ~~current portfolio~~fiscal 2020 first quarter, Michael R. Evans joined us as the new president of Marcus® Hotels & Resorts. Mr. Evans is a proven lodging industry executive with more than 20 years of experience in the hospitality industry with companies such as Marriott International, Inc. and MGM Resorts International. We believe that Mr. Evans’ proven development, operating and leadership experience and strong roots in the hospitality industry make him extremely qualified to build on our hotels and resorts ~~includes 20 owned and managed properties across the country.~~

~~Comparisons~~division’s long history of hotels and resorts division operating income during the fourth quarter of fiscal 2019 to the prior year same period will benefit from the fact that we incurred approximately $500,000 of preopening expenses and $3.7 million in accelerated depreciation during the fourth quarter of fiscal 2018 related to the conversion of the InterContinental Milwaukee hotel to the Saint Kate. Conversely, as described above, we anticipate that we may incur additional initial start-up losses at the Saint Kate of approximately $1 million during the fourth quarter of fiscal 2019 compared to the results last year of the stabilized branded hotel that it replaced, negatively impacting fiscal 2019 fourth quarter operating income comparisons to the prior year.

We continue to explore additional potential growth opportunities and we would also consider opportunities to monetize selected existing owned hotels in the future. The extent of any impact from these opportunities would likely depend upon the timing and nature of the growth opportunity (pure management contract, management contract with equity, joint venture investment, or other opportunity) or divestiture (management retained, equity interest retained, etc.).

success.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our movie theatre and hotels and resorts businesses, when open and operating normally, each generate significant and consistent daily amounts of cash, subject to previously-noted seasonality, because each segment’s revenue is derived predominantly from consumer cash purchases. WeUnder normal circumstances, we believe that these relatively consistent and predictable cash sources, as well as the availability of ~~approximately $110 million of~~ unused credit lines, ~~as of the end of our fiscal 2019 third quarter, will~~would be adequate to support the ongoing operational liquidity needs of our ~~businesses~~businesses. A detailed description of our liquidity situation as of March 26, 2020 is described in detail above in the “Impact of the COVID-19 Pandemic” section of this MD&A.

We and several banks are party to the Credit Agreement, which provides for a revolving credit facility that matures on January 9, 2025, with an initial maximum aggregate amount of availability of $225 million. On April 29, 2020, we entered into the Amendment to our Credit Agreement.

The Amendment amends the Credit Agreement to provide for an initial $90.8 million term loan facility that matures on April 28, 2021. The term loan facility may be increased by our company from time to time prior to 180 days after April 29, 2020 up to an aggregate amount of $100 million, provided that certain conditions are satisfied, including the consent of each lender participating in such increase. We will use borrowings under the term loan facility to pay down revolving loans, to pay costs and expenses related to the Amendment, and for general corporate purposes.

Borrowings under the Credit Agreement bear interest at a variable rate equal to: (i) LIBOR, subject to a 1% floor, plus a specified margin; 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 plus a specified margin based upon our consolidated debt to capitalization ratio as of the most recent determination date. Pursuant to the Amendment, as of April 29, 2020: (A) in respect of revolving loans, (1) our company is charged a facility fee equal to 0.40% of the total revolving credit facility commitment and (2) the specified margin is 2.1% for LIBOR borrowings and 1.1% for ABR borrowings, which specified margin will remain in effect until the end 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 is suspended (the “Specified Period”); and (B) in respect of term loans, the specified margin is 2.5% for LIBOR borrowings and 1.5% for ABR borrowings, in each case, at all times.

The Amendment also amends the Credit Agreement to modify various restrictions and covenants applicable to our company and certain of our subsidiaries. Among other modifications, the Amendment amends the Credit Agreement to include restrictions on our ability and certain of our subsidiaries to incur additional indebtedness, pay dividends and other distributions, and make voluntary prepayments on or defeasance of our 4.02% Senior Notes due August 2025 and 4.32% Senior Notes due February 2027. Further, the Amendment amends the Credit Agreement to: (i) suspend testing of the minimum consolidated fixed charge coverage ratio of 3.0 to 1.0 until the earlier to occur of (a) the end of our fiscal third quarter in 2021 and (b) the last day of our fiscal quarter in which we provide notice to the administrative agent that we are reinstating the testing of such ratio; (ii) add a covenant requiring our consolidated EBITDA to be greater than (a) negative $57 million as of June 25, 2020 for the fiscal quarter then ending, (b) negative $90 million as of September 24, 2020 for the two consecutive fiscal quarters then ending, (c) negative $65 million as of December 31, 2020 for the three consecutive fiscal quarters then ending, (d) negative $40 million as of April 1, 2021 for the four consecutive fiscal quarters then ending, and (e) $42 million as of July 1, 2021 for the four consecutive fiscal quarters then ending; (iii) add a covenant requiring our consolidated liquidity to be greater than (a) $102 million as of June 25, 2020, (b) $67 million as of September 24, 2020, (c) $78.5 million as of December 31, 2020, (d) $83 million as of April 1, 2021, and (e) $103.5 million as of July 1, 2021, which minimum liquidity amounts will be reduced by $50 million for each such testing date if the term loans are paid in full as of such date; and (iv) add a covenant prohibiting our company and certain of our subsidiaries from incurring or making capital expenditures, in the aggregate for our company and such subsidiaries, (a) during the ~~remainder~~period from April 1, 2020 through December 31, 2020, in excess of $22.5 million plus certain adjustments, or (b) during our 2021 fiscal ~~2019.~~year, in excess of $50 million plus certain adjustments.

Pursuant to the Amendment, we are required to apply net cash proceeds received from certain events, including certain asset dispositions, casualty losses, condemnations, equity issuances, capital contributions, and the incurrence of certain debt, to prepay outstanding term loans. In addition, if, at any time during the Specified Period our company and certain of our subsidiaries’ aggregate unrestricted cash on hand exceeds $125 million, the Amendment requires us to prepay revolving loans under the Credit Agreement by the amount of such excess, without a corresponding reduction in the revolving commitments under the Credit Agreement.

In connection with the Amendment: (i) our company and certain of our subsidiaries pledged, subject to certain exceptions, security interests and liens in and on (a) substantially all of their respective personal property assets and (b) certain of their respective real property assets, in each case, to secure the Credit Agreement and related obligations; and (ii) certain subsidiaries of the Company have guaranteed our obligations under the Credit Agreement. The foregoing security interests, liens and guaranties will remain in effect until the Collateral Release Date (as defined in the Amendment).

On April 29, 2020, our company and 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”). Pursuant to the Note Purchase Agreements, we previously issued and sold $50 million in aggregate principal amount of our 4.02% Senior Notes due August 2025 and $50 million in aggregate principal amount of our 4.32% Senior Notes due February 2027 (collectively, the “Notes”) in private placements exempt from the registration requirements of the Securities Act of 1933, as amended.

The Note Amendments amend certain covenants and other terms of the Note Purchase Agreements to: (i) suspend testing of the consolidated fixed charge coverage ratio of 2.50 to 1.0 until the earlier to occur of (a) the end of our fiscal third quarter in 2021 and (b) the last day of our fiscal quarter in which we provide notice to the administrative agent that we are reinstating the testing of such ratio; (ii) add a covenant requiring our consolidated EBITDA to be greater than (a) negative $57 million as of June 25, 2020 for the fiscal quarter then ending, (b) negative $90 million as of September 24, 2020 for the two consecutive fiscal quarters then ending, (c) negative $65 million as of December 31, 2020 for the three consecutive fiscal quarters then ending, (d) negative $40 million as of April 1, 2021 for the four consecutive fiscal quarters then ending, and (e) $42 million as of July 1, 2021 for the four consecutive fiscal quarters then ending; (iii) add a covenant requiring our consolidated liquidity to be greater than (a) $102 million as of June 25, 2020, (b) $67 million as of September 24, 2020, (c) $78.5 million as of December 31, 2020, (d) $83 million as of April 1, 2021, and (e) $103.5 million as of July 1, 2021, which minimum liquidity amounts will be reduced by $50 million for each such testing date if the term loans under the Credit Agreement are paid in full as of such date; and (iv) add a covenant prohibiting our company and certain of our subsidiaries from incurring or making capital expenditures, in the aggregate for our company and such subsidiaries, (a) during the period from April 1, 2020 through December 31, 2020, in excess of $22.5 million plus certain adjustments, or (b) during our 2021 fiscal year, in excess of $50 million plus certain adjustments.

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), we are required to pay a fee to each Note holder in an amount equal to 0.725% of the aggregate principal amount of Notes held by such holder. Such fee is payable quarterly (0.18125% of the aggregate principal amount of the Notes per quarter) commencing with the fiscal quarter ending June 25, 2020.

In connection with the Note Amendments: (i) our company and certain of our subsidiaries have pledged, subject to certain exceptions, security interests and liens in and on (a) substantially all of their respective personal property assets and (b) certain of their respective real property assets, in each case, to secure the Notes and related obligations; and (ii) certain subsidiaries of our have guaranteed our obligations under the Note Purchase Agreements and the Notes. The foregoing security interests, liens and guaranties will remain in effect until the Collateral Release Date.

The Note Purchase Agreements contain customary events of default. If an event of default under the Note Purchase Agreements occurs and is continuing, then, among other things, all Notes then outstanding become immediately due and payable and the Note holders may exercise their rights and remedies against the pledged collateral.

We believe that the actions that have been taken 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 resume operations as currently expected.

Financial Condition

Net cash used in operating activities totaled $16.6 million during the first quarter of fiscal 2020, compared to net cash provided by operating activities ~~totaled $86.0~~of $8.0 million during the first ~~three quarters~~quarter of the fiscal ~~2019, compared to $77.1~~2019. The $24.6 million ~~during the first three quarters of fiscal 2018. The $8.9 million increase~~decrease in net cash provided by operating activities was due primarily to reduced net earnings and the ~~favorable~~unfavorable timing in the payment of accounts payable and ~~the collection~~payment of ~~other assets,~~income taxes, partially offset by the ~~unfavorable~~favorable timing in the ~~payment~~collection of ~~income taxes and other accrued liabilities~~accounts receivable during the first ~~three quarters~~quarter of fiscal ~~2019.~~2020.

Net cash used in investing activities during the first ~~three quarters~~quarter of fiscal ~~2019~~2020 totaled ~~$86.2~~$10.2 million, compared to $46.1 million during the first ~~three quarters~~quarter of fiscal ~~2018.~~2019. The ~~increase~~decrease in net cash used in investing activities of ~~$40.1~~$35.9 million was primarily the result of the ~~$30.3~~$29.6 million cash consideration in the Movie Tavern ~~acquisition and an increase in capital expenditures.~~Acquisition during the first quarter of fiscal 2019. We did not incur any acquisition-related capital expenditures during the first ~~three quarters~~quarter of fiscal ~~2018. An increase~~2020. A decrease in ~~other assets primarily related to development~~capital expenditures ~~of a previously-described new theatre (that will subsequently be reimbursed by the landlord)~~ also contributed to the ~~increase~~decrease in net cash used in investing activities during the first ~~three quarters~~quarter of fiscal ~~2019~~2020 compared to the first ~~three quarters~~quarter of fiscal ~~2018.~~2019. Total cash capital expenditures (including normal continuing capital maintenance and renovation projects) totaled ~~$50.1~~$10.0 million during the first ~~three quarters~~quarter of fiscal ~~2019~~2020 compared to ~~$45.1~~$13.7 million during the first ~~three quarters~~quarter of fiscal ~~2018.~~

2019.

Fiscal ~~2019~~2020 first ~~three quarters~~quarter cash capital expenditures included approximately ~~$21.8~~$7.2 million incurred in our theatre division, including costs associated with the addition of four new screens, DreamLounger recliner seating and a SuperScreen DLX auditorium at an existing Movie Tavern theatre. We also began projects to add DreamLounger recliner seating, as well as Reel Sizzle and Take Five Lounge outlets, to an existing Marcus Wehrenberg theatre and DreamLounger recliner seating to an existing Movie Tavern theatre. We also incurred capital expenditures in our hotels and resorts division during the first quarter of fiscal 2020 of approximately $2.4 million, consisting primarily of normal maintenance capital projects. Fiscal 2019 first quarter cash capital expenditures included approximately $4.9 million incurred in our theatre division, including costs associated with the addition of DreamLounger recliner seating and new~~Ultra~~UltraS~~Screen~~creen andSuperScreen DLX auditoriums to existing theatres. We also incurred capital expenditures in our hotels and resorts division during the first ~~three quarters~~quarter of fiscal 2019 of approximately ~~$28.3~~$8.6 million, consisting primarily of costs associated with the ~~renovation~~conversion of the Saint Kate and renovation of the Hilton Madison ~~hotels,~~hotel, as well as normal maintenance capital projects at our other properties. Fiscal 2018 first three quarters cash capital expenditures included approximately $37.0 million incurred in our theatre division, including costs associated with the addition of DreamLounger recliner seating, new~~UltraScreen and~~~~Super~~~~Screen DLX auditoriums and new~~~~Zaffiro’s Express~~ ~~and~~~~Take Five Lounge~~outlets to existing theatres. We also incurred capital expenditures in our hotels and resorts division during the first three quarters of fiscal 2018 of approximately $8.1 million, consisting primarily of normal maintenance capital projects.

Net cash ~~used in~~provided by financing activities during the first ~~three quarters~~quarter of fiscal ~~2019~~2020 totaled ~~$9.2~~$132.4 million compared to ~~$39.1~~$29.4 million during the first ~~three quarters~~quarter of fiscal ~~2018. We~~2019. As described above, we drew down on the full amount available under our revolving credit facility during the first quarter of fiscal 2020 (after taking into consideration outstanding letters of credit that reduce revolver availability). As a result, we added $188.0 million of new short-term borrowings, and we made $49.0 million of repayments on short-term borrowings during the first quarter of fiscal 2020 (net increase in borrowings on our credit facility of $139.0 million). During fiscal 2019, we used excess cash during ~~both periods~~the first quarter to reduce our borrowings under our revolving credit facility. As short-term borrowings became due, we replaced them as necessary with new short-term borrowings. WeDuring the fiscal 2019 first quarter, we also used borrowings from our revolving credit facility to fund the cash consideration in the Movie Tavern ~~acquisition.~~Acquisition. As a result, we added ~~$246.0~~$73.0 million of new short-term borrowings, and we made ~~$215.0~~$38.0 million of repayments on short-term borrowings during the first ~~three quarters~~quarter of fiscal 2019 (net increase in borrowings on our credit facility of ~~$31.0~~$35.0 million) compared to $159.0 million of new short-term borrowings and $177.0 million of repayments on short-term borrowings made during the first three quarters of fiscal 2018 (net decrease in borrowings on our credit facility of $18.0 million).

We did not issue any new long-term debt during ~~either~~ the first ~~three~~ quarters of fiscal ~~2019 or~~2020 and fiscal ~~2018.~~2019. As described above, we did incur $90.8 million of new debt early in our fiscal 2020 second quarter, the majority of which was used to repay existing borrowings under our revolving credit facility. Principal payments on long-term debt were ~~$24.2 million~~$177,000 during the first ~~three quarters~~quarter of fiscal ~~2019 and included the repayment of a $14.6 million mortgage note on a hotel,~~2020 compared to payments of ~~$11.7 million~~$217,000 during the first ~~three quarters~~quarter of fiscal ~~2018.~~2019. Our debt-to-capitalization ratio (excluding our finance and operating lease obligations) was ~~0.28~~0.37 at ~~September~~March 26, ~~2019,~~2020, compared to ~~0.33~~0.26 at December ~~27, 2018.~~26, 2019.

We repurchased approximately ~~30,000~~8,600 shares of our common stock for approximately ~~$1.1 million~~$274,000 in conjunction with the payment of income taxes on vested restricted stock during the first quarter of fiscal 2020, compared to 11,000 shares repurchased for approximately $428,000 in conjunction with the exercise of stock options during the first ~~three quarters~~quarter of fiscal ~~2019, compared to 83,000 shares repurchased for approximately $2.9 million in conjunction with the exercise of stock options during the first three quarters of fiscal 2018.~~2019. As of ~~September~~March 26, ~~2019,~~2020, approximately ~~2.8~~2.7 million shares remained available for repurchase under prior Board of Directors repurchase authorizations. We expect that we will execute any future repurchases on the open market or in privately-negotiated transactions, depending upon a number of factors, including prevailing market conditions.

As described above, the Amendment currently restricts our ability to repurchase shares in the open market until such time as we have paid off the new Term Loan A and returned to compliance with our prior covenants under the Credit Agreement.

In conjunction with the Movie Tavern ~~acquisition,~~Acquisition, we issued 2,450,000 shares of our common stock to the seller during the first quarter of fiscal ~~2019 (157,056 of which have been placed in escrow to secure certain post-closing indemnification obligations of the seller under the asset purchase agreement).~~2019. This non-cash transaction reduced treasury stock and increased capital in excess of par by the value of the shares at closing of approximately $109.2 million.

Dividend payments during the first ~~three quarters~~quarter of fiscal ~~2019~~2020 totaled ~~$14.5~~$5.1 million compared to dividend payments of ~~$12.3~~$4.8 million during the first ~~three quarters~~quarter of fiscal ~~2018.~~2019. The increase in dividend payments was primarily the result of ~~an increased number of outstanding shares and~~ a ~~6.7%~~6.3% increase in our regular quarterly dividend payment rate initiated in March ~~2019.~~

2020. As described above, the Amendment requires us to temporarily suspend our quarterly dividend payments for the remainder of 2020 and limits the total amount of quarterly dividend payments during the first two quarters of fiscal 2021, unless the Term Loan A is repaid and we are in compliance with prior financial covenants under the Credit Agreement, at which point we have the ability to declare quarterly dividend payments as we deem appropriate.

We ~~believe~~previously indicated that we expected our ~~total~~full-year fiscal 2020 capital expenditures, ~~for fiscal 2019 will~~(excluding any significant unidentified acquisitions), to be ~~approximately $60-$70 million, barring our pursuance of any growth opportunities that could arise~~ in the ~~remaining months~~$65-$85 million range. As described above, in response to the COVID-19 pandemic and ~~depending upon~~ the ~~timing~~temporary closure of all of our ~~payments on~~theatres and hotels, we have temporarily discontinued all non-essential capital expenditures and paused several ofprojects that we had begun during the ~~various projects incurred by our two divisions. Some~~first quarter of ~~the payments on projects undertaken during fiscal 2019 may carry over to~~ fiscal 2020. The Amendment also restricts the amount of capital expenditures that we may incur during the remainder of fiscal 2020 and first half of fiscal 2021. As a result, we now believe our fiscal 2020 capital expenditures may be in the $20-$30 million range. Once the restrictions on our capital expenditures are removed, the actual timing and extent of the implementation of all of our current expansion plans will depend in large part on industry and general economic conditions, our financial performance and available capital, the competitive environment, evolving customer needs and trends, and the availability of attractive opportunities. It is likely that our plans will continue to evolve and change in response to these and other factors.

Critical Accounting Policy Update

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. If we are unable to achieve our forecasted cash flow or if market conditions worsen, our goodwill could be impaired at a later date.

~~Item 3.~~
Item 3.     Quantitative and Qualitative Disclosures About Market Risk
We have not experienced any material changes in our market risk exposures since December ~~27, 2018.~~26, 2019.

~~Item 4.~~
Item 4.     Controls and Procedures
a. ~~Evaluation of disclosure controls and procedures~~
Based on their evaluations and the evaluation of management, as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

b. ~~Changes in internal control over financial reporting~~
There were no significant changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15 of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
a.     Evaluation of disclosure controls and procedures
Based on their evaluations and the evaluation of management, as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
b.     Changes in internal control over financial reporting
There were no significant changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15 of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION
~~Item 1A.~~
Item 1A. Risk Factors
~~Risk~~There have been no material changes from the risk factors ~~relating to us are contained~~disclosed in ~~Item 1A of our~~the Company’s Annual Report on Form 10-K for the ~~fiscal~~ year ended December ~~27, 2018. No material change to such~~26, 2019, except for the addition of the risk factors set forth below:
The COVID-19 Pandemic Has Had and May Continue to Have Adverse Effects on Our Theatre and Hotels and Resorts Businesses, Results of Operations, Liquidity, Cash Flows, Financial Condition, Access to Credit Markets and Ability to Service Our Existing and Future Indebtedness, Some of Which May be Significant.
The recent outbreak of the COVID-19 pandemic has ~~occurred during~~had an unprecedented impact on the world and both of our business segments. The situation continues to be volatile and the social and economic effects are widespread. As an operator of movie theatres, hotels and resorts, restaurants and bars, each of which consists of spaces where customers and guests gather in close proximity, our businesses are significantly impacted by protective actions that federal, state and local governments have taken to control the spread of the pandemic. These actions include, among other things, declaring national and state emergencies, encouraging social distancing, restricting freedom of movement, mandating non-essential business closures and issuing shelter-in-place, quarantine and stay-at-home orders.
As a result of these measures, we temporarily closed all of our theatres on March 17, 2020, and we currently are not generating any revenues from our theatre operations (other than some limited online sales and curbside sales of popcorn, pizza and other assorted food and beverage items). We also temporarily closed all of our hotel restaurants and bars at approximately the same time and closed five of our eight company-owned hotels and resorts on March 24, 2020 due to a significant reduction in occupancy at those hotels. We announced the closing of our remaining three company-owned hotels on April 8, 2020. We currently are not generating any revenues from our hotels and resorts operations.
We have also (i) temporarily suspended quarterly dividend payments, (ii) halted all non-essential operating and capital expenditures, (iii) temporarily laid-off the majority of our hourly theatre and hotel associates, in addition to temporarily reducing property management and corporate office staff levels, (iv) temporarily reduced salaries of all remaining employees, including a 50% salary reduction for our chairman and president and CEO, and (iv) taken additional measures to preserve cash and improve liquidity. Additionally, we have sought and received a waiver of our compliance with the consolidated fixed charge coverage ratio covenant in our existing Credit Agreement and all of our senior notes, in each case, until September 2021.
Although we believe the closure of our theatres and hotels is temporary, we cannot predict when the effects of the COVID-19 pandemic will subside or when our businesses will return to normal levels. The longer and more severe the pandemic, including repeat or cyclical outbreaks beyond the one we are currently experiencing, the more severe the adverse effects will be on our businesses, results of operations, liquidity, cash flows, financial condition, access to credit markets and ability to service our existing and future indebtedness.
Even when the COVID-19 pandemic subsides, we cannot guarantee that we will recover as rapidly as other industries. For example, once federal, state and local government restrictions are lifted, it is unclear how quickly patrons will return to our theatres and hotels, which may be a function of continued concerns over safety and/or depressed consumer sentiment due to adverse economic conditions, including job losses, among other things. Even once theatres and hotels are reopened, a single case of COVID-19 in a theatre or hotel could result in additional costs and further closures. If we do not respond appropriately to the pandemic, or if customers do not perceive our response to be adequate, we could suffer damage to our reputation, which could adversely affect our businesses.

39 ~~weeks~~

Furthermore, the effects of the pandemic on our businesses could be long-lasting and could continue to have adverse effects on our businesses, results of operations, liquidity, cash flows and financial condition, some of which may be significant, and may adversely impact our ability to operate our businesses after our temporary closure ends on the same terms as we conducted business prior to the pandemic. Significant impacts on our businesses caused by the COVID-19 pandemic may include, among others:

●

lack of availability of films in the short- or long-term, including as a result of (i) major film distributors releasing scheduled films on alternative channels or (ii) disruptions of film production;

●

decreased attendance at our theatres after they reopen, including due to (i) continued safety and health concerns or (ii) a change in consumer behavior in favor of alternative forms of entertainment;

●

reduced travel from our various leisure, business transient and group business customers;

●

cancellation of major events that were expected to benefit our hotels and resorts division, including the Democratic National Convention in August 2020 and the Ryder Cup in September 2020;

●

our inability to negotiate favorable rent payment terms with our landlords;

●

unavailability of employees and/or their inability or unwillingness to conduct work under any revised work environment protocols;

●

increased risks related to employee matters, including increased employment litigation and claims relating to terminations or furloughs caused by theatre and hotel closures;

●

reductions and delays to planned operating and capital expenditures;

●

potential impairment charges;

●

our inability to generate significant cash flow from operations if our theatres and/or hotels and resorts continue to experience demand at levels significantly lower than historical levels, which could lead to a substantial increase in indebtedness and negatively impact our ability to comply with the financial covenants, if applicable, in our debt agreements;

●

our inability to access lending, capital markets and other sources of liquidity, if needed, on reasonable terms, or at all, or obtain amendments, extensions and waivers;

●

our inability to effectively meet our short- and long-term obligations; and

●

our inability to service our existing and future indebtedness.

Additionally, although we intend to seek available benefits under the CARES Act, or any subsequent governmental relief bills, we cannot predict the manner in which any benefits under the CARES Act, or any subsequent governmental relief bills, will be allocated or administered and we cannot assure you that we will be able to access such benefits in a timely manner or at all. Accessing these benefits and our response to the COVID-19 pandemic have required our management team to devote extensive resources and are likely to continue to do so in the near future, which negatively affects our ability to implement our business plan and respond to opportunities.

The Duration of the COVID-19 Pandemic and Related Shelter-in-Place and Social Distancing Requirements and the Level of Customer Demand Following the Relaxation of Such Requirements May Adversely Affect Our Financial Results.

As noted above, due to the COVID-19 pandemic, our operations at our theatres and hotels and resorts have been suspended temporarily, and there is uncertainty as to when we will be permitted to reopen our facilities. Because we operate in several different jurisdictions, we may be able to reopen some, but not all, of our theatres and hotels and resorts within a certain timeframe. Our current expectation is that, when we do reopen, we will open to capacity limitations. A reduction in capacity does not necessarily translate to an equal reduction in potential revenues. Reduced capacity may potentially impact attendance on $5 Tuesdays and on opening weekends of major new film releases, but based upon our past experience, we believe that customers will adapt to reduced seat availability by shifting their attendance to different days and times of day. However, fears and concerns regarding the COVID-19 pandemic could cause our customers to avoid assembling in public spaces for some time despite the relaxation of shelter-in-place and social distancing measures. Although we believe we have sufficient resources to fund our operations well into 2021 in the unlikely event that shelter-in-place, stay-at-home and social distancing requirements last substantially beyond the currently mandated closure periods, we have no control over and cannot predict the length of the closure of our theatres and hotels and resorts due to the COVID-19 pandemic. If we are unable to generate revenues due to a prolonged period of closure or experience significant declines in our businesses volumes upon reopening, this would negatively impact our ability to remain in compliance with our debt covenants and meet our payment obligations. In such an event, we would either seek covenant waivers or attempt to amend our covenants, though there is no certainty that we would be successful in such efforts. Additionally, we could seek additional liquidity through the issuance of new debt. Our ability to obtain additional financing and the terms of any such additional financing would depend in part on factors outside of our control.

In addition to the specific risks described above, the COVID-19 pandemic (including federal, state and local governmental responses, broad economic impacts and market disruptions) has heightened the materiality of the other risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended ~~September~~December 26, 2019.

~~Item 2.~~
Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth information with respect to purchases made by us or on our behalf of our Common Stock during the periods indicated. All of these repurchases were made in conjunction with the ~~exercise~~payment of income taxes on vested restricted stock ~~options and the purchase of shares in the open market and~~ pursuant to the publicly announced repurchase authorization described below.






Total Number of

Maximum

Shares

Number of

Purchased as

Shares that May

Total Number of

Part of Publicly

Yet be Purchased

Shares

Average Price

Announced

Under the Plans
Period

Purchased

Paid per Share

Programs (1)

or Programs (1)
December 27 - January 30

—

$
—

—

2,756,561
January 31 - February 27

8,551

32.06

8,551

2,748,010
February 28 - March 26

—

—

—

2,748,010
Total

8,551

$
32.06

8,551

2,748,010
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)
June 28 – July 25 10,783 $ 32.85 10,783 2,760,050
July 26 – August 29 3,489 35.35 3,489 2,756,561
August 30 – September 26 — — — 2,756,561

Total 14,272 $ 33.46 14,272 2,756,561

(1) Through ~~September~~March 26, ~~2019,~~2020, our Board of Directors had authorized the repurchase of up to approximately 11.7 million shares of our outstanding Common Stock. Under these authorizations, we may repurchase shares of our Common Stock from time to time in the open market, pursuant to privately negotiated transactions or otherwise. As of ~~September~~March 26, ~~2019,~~2020, we had repurchased approximately 8.9million shares of our Common Stock under these authorizations. The repurchased shares are held in our treasury pending potential future issuance in connection with employee benefit, option or stock ownership plans or other general corporate purposes. These authorizations do not have an expiration date.

~~Item 4.~~
Item 4.     Mine Safety Disclosures
Not applicable.

~~Item 6.~~
Item 6. Exhibits
~~31.1~~

3.1
By-Laws of The Marcus Corporation, as amended on April 9, 2020

4.1
First Amendment to Credit Agreement, dated April 29, 2020, among The Marcus Corporation, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. [Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K dated April 30, 2020.]

4.2
First Amendment to Note Purchase Agreement date as of June 27, 2013, dated April 29, 2020, among The Marcus Corporation and the several purchasers listed in the schedules attached thereto. [Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K dated April 30, 2020.]

4.3
First Amendment to Note Purchase Agreement dated as of December 21, 2016, dated April 29, 2020, among The Marcus Corporation and the several purchasers listed in the schedules attached thereto. [Incorporated by reference to our Current Report on Form 8-K dated April 30, 2020.]

31.1
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32
Written Statement of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350.
~~101~~
101.INS
The ~~following materials from The Marcus Corporation’s Quarterly Report on Form 10-Q for~~instance document does not appear in the ~~quarter ended September 26, 2019 are filed herewith, formatted in~~interactive data file because its XBRL (Extensible Business Reporting Language)~~: (i)~~ tags are embedded within the ~~Consolidated Balance Sheets, (ii)~~Inline XBRL document.

101.SCH
Inline XBRL Taxonomy Extension Schema Document.

101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document

104
Cover Page Interactive Data File (embedded within the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Condensed Notes to Consolidated Financial Statements.Inline XBRL document).

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE MARCUS CORPORATION

DATE: ~~November 5, 2019~~May 12, 2020
By:
/s/ Gregory S. Marcus
Gregory S. Marcus
President and Chief Executive Officer
DATE: ~~November 5, 2019~~May 12, 2020
By:
/s/ Douglas A. Neis
Douglas A. Neis
Executive Vice President, Chief Financial Officer and Treasurer

S-1

~~Wisconsin~~		~~39-1139844~~
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 East Wisconsin Avenue, Suite 1900 Milwaukee, Wisconsin		53202-4125
(Address of principal executive offices)		(Zip Code)

~~Registrant’s telephone number, including area code:~~ ~~(414) 905-1000~~


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	MCS	New York Stock Exchange

Large accelerated filer	¨ ⌧	Accelerated filer	x ☐
Non-accelerated filer	¨ ◻	Smaller reporting company	¨ ☐
		Emerging growth company	¨ ☐


Yes¨ No x	☐		No	☒

	x
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	¨
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~THE MARCUS CORPORATION~~
~~(Exact name of registrant as specified in its charter)~~
Wisconsin

	September 26, 2019						September 27, 2018
(in thousands, except per share data)	13 Weeks			39 Weeks			13 Weeks			39 Weeks
Revenues:
Theatre admissions	$	69,753		$	211,777		$	52,422		$	185,035
Rooms		34,185			81,317			34,467			84,256
Theatre concessions		57,051			172,126			35,476			123,687
Food and beverage		20,170			54,568			19,333			53,972
Other revenues		22,872			66,234			19,813			59,362
		204,031			586,022			161,511			506,312
Cost reimbursements		7,431			27,979			9,088			25,776
Total revenues		211,462			614,001			170,599			532,088

Costs and expenses:
Theatre operations		66,971			199,542			48,644			164,452
Rooms		10,829			30,173			10,958			31,026
Theatre concessions		21,471			63,789			10,168			35,105
Food and beverage		15,842			44,353			14,966			43,930
Advertising and marketing		6,653			17,664			6,178			17,317
Administrative		18,053			54,862			16,813			52,653
Depreciation and amortization		19,226			53,484			14,569			42,899
Rent		6,806			19,087			2,815			8,351
Property taxes		5,666			16,527			5,018			15,011
Other operating expenses		10,127			31,729			8,969			27,032
Reimbursed costs		7,431			27,979			9,088			25,776
Total costs and expenses		189,075			559,189			148,186			463,552

Operating income		22,387			54,812			22,413			68,536

Other income (expense):
Investment income		187			835			442			433
Interest expense		(2,807	)		(8,959	)		(3,180	)		(10,000	)
Other expense		(481	)		(1,441	)		(497	)		(1,489	)
Loss on disposition of property, equipment and other assets		(129	)		(269	)		(359	)		(767	)
Equity earnings (loss) from unconsolidated joint ventures, net		(84	)		(252	)		30			282
		(3,314	)		(10,086	)		(3,564	)		(11,541	)

Earnings before income taxes		19,073			44,726			18,849			56,995
Income taxes		4,843			10,465			2,626			12,254
Net earnings		14,230			34,261			16,223			44,741
Net earnings (loss) attributable to noncontrolling interest		(59	)		46			(8	)		70
Net earnings attributable to The Marcus Corporation	$	14,289		$	34,215		$	16,231		$	44,671

Net earnings per share – basic:
Common Stock	$	0.47		$	1.18		$	0.60		$	1.65
Class B Common Stock	$	0.43		$	1.02		$	0.52		$	1.47

Net earnings per share – diluted:
Common Stock	$	0.46		$	1.10		$	0.56		$	1.56
Class B Common Stock	$	0.43		$	1.01		$	0.51		$	1.44

	39 Weeks Ended
(in thousands)	September 26, 2019			September 27, 2018
OPERATING ACTIVITIES:
Net earnings	$	34,261		$	44,741
Adjustments to reconcile net earnings to net cash provided by operating activities:
Losses (earnings) on investments in joint ventures		252			(282	)
Distributions from joint ventures		200			65
Loss on disposition of property, equipment and other assets		269			767
Amortization of favorable lease right		-			250
Depreciation and amortization		53,484			42,899
Amortization of debt issuance costs		232			216
Share-based compensation		2,594			1,950
Deferred income taxes		(572	)		1
Deferred compensation and other		592			2,949
Contribution of the Company’s stock to savings and profit-sharing plan		1,181			1,130
Changes in operating assets and liabilities:
Accounts and notes receivable		2,118			1,224
Other assets		11,057			(1,793	)
Accounts payable		(7,524	)		(18,620	)
Income taxes		8,506			12,749
Taxes other than income taxes		626			(1,963	)
Accrued compensation		1,671			1,105
Other accrued liabilities		(22,989	)		(10,318	)
Total adjustments		51,697			32,329
Net cash provided by operating activities		85,958			77,070

INVESTING ACTIVITIES:
Capital expenditures		(50,097	)		(45,144	)
Acquisition of theatres, net of cash acquired and working capital assumed		(30,287	)		-
Proceeds from disposals of property, equipment and other assets		22			86
Capital contribution in joint venture		-			(743	)
Other investing activities		(5,809	)		(295	)
Net cash used in investing activities		(86,171	)		(46,096	)

FINANCING ACTIVITIES:
Debt transactions:
Proceeds from borrowings on revolving credit facility		246,000			159,000
Repayment of borrowings on revolving credit facility		(215,000	)		(177,000	)
Principal payments on long-term debt		(24,203	)		(11,711	)
Repayments of capital lease obligations		(1,908	)		(1,375	)
Equity transactions:
Treasury stock transactions, except for stock options		(747	)		(2,566	)
Exercise of stock options		1,344			6,902
Dividends paid		(14,478	)		(12,277	)
Distributions to noncontrolling interest		(185	)		(65	)
Net cash used in financing activities		(9,177	)		(39,092	)

Net decrease in cash, cash equivalents and restricted cash		(9,390	)		(8,118	)
Cash, cash equivalents and restricted cash at beginning of period		21,927			20,747
Cash, cash equivalents and restricted cash at end of period	$	12,537		$	12,629

Supplemental Information:
Interest paid, net of amounts capitalized	$	9,540		$	10,321
Income taxes paid (refunded)		2,530			(448	)
Change in accounts payable for additions to property, equipment and other assets		7,406			(9,813	)

	39 Weeks Ended September 26, 2019
	Reportable Segment
	Theatres		Hotels/Resorts		Corporate		Total
Theatre admissions	$	211,777	$	-	$	-	$	211,777
Rooms		-		81,317		-		81,317
Theatre concessions		172,126		-		-		172,126
Food and beverage		-		54,568		-		54,568
Other revenues⁽¹⁾		29,525		36,386		323		66,234
Cost reimbursements		646		27,333		-		27,979
Total revenues	$	414,074	$	199,604	$	323	$	614,001

	13 Weeks Ended September 27, 2018
	Reportable Segment
	Theatres		Hotels/Resorts		Corporate		Total
Theatre admissions	$	52,422	$	-	$	-	$	52,422
Rooms		-		34,467		-		34,467
Theatre concessions		35,476		-		-		35,476
Food and beverage		-		19,333		-		19,333
Other revenues⁽¹⁾		6,893		12,822		98		19,813
Cost reimbursements		218		8,870		-		9,088
Total revenues	$	95,009	$	75,492	$	98	$	170,599

	39 Weeks Ended September 27, 2018
	Reportable Segment
	Theatres		Hotels/Resorts		Corporate		Total
Theatre admissions	$	185,035	$	-	$	-	$	185,035
Rooms		-		84,256		-		84,256
Theatre concessions		123,687		-		-		123,687
Food and beverage		-		53,972		-		53,972
Other revenues ⁽¹⁾		23,591		35,453		318		59,362
Cost reimbursements		1,084		24,692		-		25,776
Total revenues	$	333,397	$	198,373	$	318	$	532,088

Other current assets	$	4,862
Property and equipment		95,564
Operating lease right-of-use-assets		159,011
Other (long-term assets)		9,710
Goodwill		32,697
Taxes other than income		(206	)
Other accrued liabilities		(3,322	)
Operating lease obligations		(158,800	)
Total	$	139,516

	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

Lease Cost	Classification	13 Weeks Ended September 26, 2019		39 Weeks Ended September 26, 2019
		(in thousands)
Finance lease costs:
Amortization of finance lease assets	Depreciation and amortization	$	952	$	2,814
Interest on lease liabilities	Interest expense		284		870
		$	1,236	$	3,684

Operating lease costs:
Operating lease costs	Rent expense	$	6,386	$	17,752
Variable lease cost	Rent expense		362		1,157
Short-term lease cost	Rent expense		58		178
		$	6,806	$	19,087

Other Information	39 Weeks Ended September 26, 2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases	$	1,908
Operating cash flows from finance leases		870
Operating cash flows from operating leases		18,140
Right of use assets obtained in exchange for new lease obligations:
Finance lease liabilities		1,716
Operating lease liabilities, including from acquisitions		163,416

Fiscal Year	Operating Leases			Finance Leases
2019 (excluding the 39 weeks ended September 26, 2019)	$	4,649		$	1,020
2020		25,154			3,584
2021		24,485			2,992
2022		25,056			2,946
2023		23,538			2,836
2024 and thereafter		221,983			16,948
Total lease payments		324,865			30,326
Less: amount representing interest		(90,914	)		(6,248	)
Total lease liabilities	$	233,951		$	24,078

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


	First Quarter
						Variance
	F2020		F2019		Amt.		Pct.
Revenues	$	159.5	$	170.0	$	(10.5)	(6.2)	%
Operating income (loss)		(22.2)		5.0		(27.2)	(548.5)	%
Other income (expense)		(3.9)		(3.1)		(0.8)	(23.1)	%
Net loss attributable to noncontrolling interests		(0.1)		(0.1)		—	N/A
Net earnings (loss) attributable to The Marcus Corp.		(19.4)		1.9		(21.3)	(1,140.4)	%
Net earnings (loss) per common share - diluted	$	(0.64)	$	0.06	$	(0.70)	(1,166.7)	%

	Third Quarter												First Three Quarters
							Variance												Variance
	F2019			F2018			Amt.			Pct.			F2019			F2018			Amt.			Pct.
Revenues	$	211.5		$	170.6		$	40.9			24.0	%	$	614.0		$	532.1		$	81.9			15.4	%
Operating income		22.4			22.4			-			-	%		54.8			68.5			(13.7	)		-20.0	%
Other income (expense)		(3.3	)		(3.6	)		0.3			7.0	%		(10.1	)		(11.5	)		1.4			12.6	%
Net earnings (loss) attributable to noncontrolling interests		(0.1	)		-			(0.1	)		-637.5	%		-			0.1			(0.1	)		-34.3	%
Net earnings attributable to The Marcus Corp.	$	14.3		$	16.2		$	(1.9	)		-12.0	%	$	34.2		$	44.7		$	(10.5	)		-23.4	%

Net earnings per common share – diluted:	$	0.46		$	0.56		$	(0.10	)		-17.9	%	$	1.10		$	1.56		$	(0.46	)		-29.5	%

	Third Quarter											First Three Quarters
							Variance											Variance
	F2019			F2018			Amt.		Pct.			F2019			F2018			Amt.			Pct.
Revenues	$	136.8		$	95.0		$	41.8		44.0	%	$	414.1		$	333.4		$	80.7			24.2	%
Operating income		16.8			14.5			2.3		16.5	%		57.7			66.3			(8.6	)		-13.1	%
Operating margin (% of revenues)		12.3	%		15.2	%							13.9	%		19.9	%


	First Quarter⁽¹⁾
							Variance
	F2020			F2019			Amt.			Pct.
Occupancy percentage		55.6	%		64.6	%		(9.0)	pts	(13.9)	%
ADR	$	129.20		$	130.05		$	(0.85)		(0.7)	%
RevPAR	$	71.84		$	84.05		$	(12.21)		(14.5)	%

	Third Quarter⁽¹⁾												First Three Quarters⁽¹⁾
							Variance												Variance
	F2019			F2018			Amt.			Pct.			F2019			F2018			Amt.			Pct.
Occupancy pct.		83.0	%		83.5	%		-0.5	pts		-0.6	%		75.2	%		75.7	%		-0.5	pts		-0.6	%
ADR	$	172.12		$	170.06		$	2.06			1.2	%	$	155.91		$	153.47		$	2.44			1.6	%
RevPAR	$	142.84		$	142.03		$	0.81			0.6	%	$	117.19		$	116.09		$	1.10			0.9	%


				Total Number of	Maximum
				Shares	Number of
				Purchased as	Shares that May
	Total Number of			Part of Publicly	Yet be Purchased
	Shares	Average Price		Announced	Under the Plans
Period	Purchased	Paid per Share		Programs (1)	or Programs (1)
December 27 - January 30	—	$	—	—	2,756,561
January 31 - February 27	8,551		32.06	8,551	2,748,010
February 28 - March 26	—		—	—	2,748,010
Total	8,551	$	32.06	8,551	2,748,010

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)
June 28 – July 25		10,783	$	32.85		10,783		2,760,050
July 26 – August 29		3,489		35.35		3,489		2,756,561
August 30 – September 26		—		—		—		2,756,561

Total		14,272	$	33.46		14,272		2,756,561

~~31.1~~
3.1	By-Laws of The Marcus Corporation, as amended on April 9, 2020

4.1	First Amendment to Credit Agreement, dated April 29, 2020, among The Marcus Corporation, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. [Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K dated April 30, 2020.]

4.2	First Amendment to Note Purchase Agreement date as of June 27, 2013, dated April 29, 2020, among The Marcus Corporation and the several purchasers listed in the schedules attached thereto. [Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K dated April 30, 2020.]

4.3	First Amendment to Note Purchase Agreement dated as of December 21, 2016, dated April 29, 2020, among The Marcus Corporation and the several purchasers listed in the schedules attached thereto. [Incorporated by reference to our Current Report on Form 8-K dated April 30, 2020.]

31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	Written Statement of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350.

~~101~~ 101.INS	The ~~following materials from The Marcus Corporation’s Quarterly Report on Form 10-Q for~~instance document does not appear in the ~~quarter ended September 26, 2019 are filed herewith, formatted in~~interactive data file because its XBRL (Extensible Business Reporting Language)~~: (i)~~ tags are embedded within the ~~Consolidated Balance Sheets, (ii)~~Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document.

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (embedded within the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Condensed Notes to Consolidated Financial Statements.Inline XBRL document).


DATE: ~~November 5, 2019~~May 12, 2020	By:	/s/ Gregory S. Marcus
		Gregory S. Marcus
		President and Chief Executive Officer


DATE: ~~November 5, 2019~~May 12, 2020	By:	/s/ Douglas A. Neis
		Douglas A. Neis
		Executive Vice President, Chief Financial Officer and Treasurer