⁽¹⁾ Amount isAmounts are included in interest expense in the consolidated statementstatements of earnings.

Earnings Per Share –- Net earnings per share (EPS) of Common Stock and Class B Common Stock is computed using the two class method. Basic net earnings per share is computed by dividing net earnings by the weighted-average number of common shares outstanding. Diluted net earnings per share is computed by dividing net earnings 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 per share of Common Stock assumes the conversion of Class B Common Stock, while the diluted net earnings 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 for each period are allocated based on the proportionate share of entitled cash dividends. The computation of diluted net earnings per share of Common Stock assumes the conversion of Class B Common Stock and, as such, the undistributed earnings are equal to net earnings for that computation.

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

Equity– Activity impacting total shareholders’ equity attributable to The Marcus Corporation and noncontrolling interests for the 1339 weeks ended March 30,September 28, 2017 and March 31,September 29, 2016 was as follows:

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 March 30,September 28, 2017 and December 29, 2016, respectively, the Company’s $70,000 and $93,000 of available for sale securities were valued using Level 1 pricing inputs and were included in other current assets. At March 30,September 28, 2017 and December 29, 2016, respectively, the Company’s $1,980,000$3,859,000 and $1,927,000 of trading securities 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 March 30,September 28, 2017 and December 29, 2016, respectively, the $46,000$28,000 and $6,000 asset related to the Company’s interest rate swap contract was valued using Level 2 pricing 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 March 30,September 28, 2017 and December 29, 2016, none of the Company’s fair value measurements were valued using Level 3 pricing inputs.

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

New Accounting Pronouncements -In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09,Revenue from Contracts with Customers, a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14,Revenue from Contracts with Customers: Deferral of Effective Date (ASU 2015-14), to defer the effective date of the new revenue recognition standard by one year toyear. The new standard is effective for the Company in fiscal years beginning after December 15, 2017.2018. The guidance may be adopted using either a full retrospective or modified retrospective approach. The Company has selected the modified retrospective method for adoption of ASU No. 2014-09 and its related ASU amendments. Under this method, the Company will recognize the cumulative effect of the changes in retained earnings at the date of adoption, but will not restate prior periods.

The Company has performed a review of the requirements of the new revenue standard and related ASUs and is monitoring the activity of the FASB as it relates to specific interpretive guidance. The Company is reviewing customer contracts and is in the process of applying the five-step model of the new revenue standard to each of its key identified revenue streams and is comparing the results to its current accounting practices. WhileThe Company believes that the adoption of the new standard will primarily impact its accounting for its loyalty programs, gift cards and customer incentives. The Company’s preliminary assessment is that the adoption of the new standard will have an immaterial impact on the Company’s overall operating results. The Company continues to assess all potential impacts of adopting this new revenue standard it currently believes the new standard will not have a significant impact on the Company’sits consolidated financial statements.statements and related disclosures.

In January 2016, the FASB issued ASU No. 2016-01,Recognition and Measurement of Financial Assets and Financial Liabilities, which primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements of financial instruments. The new standard is effective for the Company in fiscal 2018, with early adoption permitted for certain provisions of the statement. Entities must apply the standard, with certain exceptions, using a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year of adoption. The Company is currently assessing the impactdoes not believe the adoption of the new standard will have a material effect on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842), intended to improve financial reporting related to leasing transactions. ASU No. 2016-02 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 will also require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from the leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The new standard is effective for the Company in fiscal 2019 and early application is permitted. The Company is evaluating the effect that the guidance will have on its consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15,Statement of Cash Flows (Topic 230)— – Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new standard is effective for the Company beginning in fiscal 2018, with early adoption permitted. The standard must be applied using a retrospective transition method for each period presented. The Company is evaluatingdoes not believe the effect thatadoption of the guidancenew standard will have a material effect on its consolidated financial statements and related disclosures.statements.

In November 2016, the FASB issued ASU No. 2016-18,Statement of Cash Flows (Topic 230)— – Restricted CashCash.. ASU No. 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As such, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and ending of period total amount shown on the statement of cash flows. The new standard is effective for the Company in fiscal 2018 and must be applied on a retrospective basis. Early adoption is permitted including adoption in an interim period. The Company reported a $1,274,000$2,438,000 investing cash outflow and $2,073,000a $12,479,000 investing cash inflow, respectively, related to a change in restricted cash for the 1339 weeks ended March 30,September 28, 2017 and March 31,September 29, 2016. Subsequent to the adoption of ASU No. 2016-18, the change in restricted cash would be excluded from the change in cash flows from investing activities and included in the change in total cash, restricted cash and cash equivalents as reported in the statement of cash flows.

In January 2017, the FASB issued ASU No. 2017-01,Business Combinations (Topic 805)— – Clarifying the Definition of a Business,, which clarifies the definition of a business with the objective of adding guidance and providing a more robust framework to assist reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for the Company in fiscal 2018 and must be applied prospectively, with early adoption permitted. The Company is evaluatingdoes not believe the effectadoption of the new standard will have a material effect on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04,Intangibles—GoodwillIntangibles-Goodwill and Other (Topic 350)— – Simplifying the Test for Goodwill Impairment,, which eliminates Step 2 of the goodwill impairment test that had required a hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and recognize an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 is effective for the Company in fiscal 2020 and must be applied prospectively.prospectively, with early adoption permitted. The Company does not believe the new standard will have a material effect on its consolidated financial statements.

In February 2017, the FASB issued ASU No. 2017-05,“Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” ASU No. 2017-05 clarifies the scope and accounting of a financial asset that meets the definition of an “in-substance nonfinancial asset” and defines the term “in-substance nonfinancial asset.” It also covers the transfer of nonfinancial assets to another entity in exchange for a non-controlling ownership interest in that entity. The new guidance is effective for interim and annual periods beginning after December 15, 2017. The Company does not believe that the adoption of the new standard will have a material effect on its consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07,Compensation -– Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Benefit Cost.The ASU requires the service cost component of net periodic benefit cost to be presented in the same income statement line item as other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit cost are to be presented separately, in an appropriately titled line item outside of any subtotal of operating income or disclosed in the footnotes. The standard also limits the amount eligible for capitalization to the service cost component. The standard is effective for interimthe Company in fiscal 2018 and annual periods beginning after December 15, 2017 and the Companyit is currently assessing the impact this standard will have on its consolidated financial statements and related disclosures.

In May 2017, the FASB issued ASU No. 2017-09,Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, to provide clarity and reduce both the diversity in practice and cost and complexity when applying the guidance in Topic 718,Compensation - Stock Compensation. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU No. 2017-09 is effective for the Company in fiscal 2018 and must be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted. The Company does not believe the new standard will have a material effect on its consolidated financial statements.

2. Long-Term Debt and Capital Lease Obligations

Long-Term Debt - - During the 1339 weeks ended March 30,September 28, 2017, the Company issued $50,000,000 of unsecured senior notes privately placed with three institutional lenders. The notes bear interest at 4.32% per annum and mature in fiscal 2027. The Company used the net proceeds of the sale of the notes to repay outstanding indebtedness and for general corporate purposes.

Also during the 1339 weeks ended March 30,September 28, 2017, a note that matured in January 2017 with a balance of $24,226,000 was repaid and replaced with borrowings on the Company’s revolving credit facility and a new $15,000,000 mortgage note bearing interest at LIBOR plus 2.75%, effectively 3.75%4.0% at March 30,September 28, 2017, requiring monthly principal and interest payments and maturing in fiscal 2020. The mortgage note is secured by the related land, building and equipment.

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 an interest rate swap agreement on February 28, 2013 covering $25,000,000 of floating rate debt, which expires January 22, 2018, and requires the Company to pay interest at a defined rate of 0.96% while receiving interest at a defined variable rate of one-month LIBOR (1.0%(1.25% at March 30,September 28, 2017). The notional amount of the swap is $25,000,000. 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 loss and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. 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 of $159,000 ($96,000 net of tax) was reclassified into interest expense. As of June 16, 2016, the swap was considered ineffective for accounting purposes. As such, the $40,000$22,000 increase in the fair value of the swap for the 1339 weeks ended March 30,September 28, 2017 was recorded as a reduction to interest expense. The Company does not expect the interest rate swap to have a material effect on earnings within the next 11four months, at which time the agreement will expire.

Capital Lease Obligations - During fiscal 2012, the Company entered into a master licensing agreement with CDF2 Holdings, LLC, a subsidiary of Cinedigm Digital Cinema Corp (CDF2), whereby CDF2 purchased on the Company’s behalf, and then deployed and licensed back to the Company, digital cinema projection systems (the “systems”) for use by the Company in its theatres. As of March 30,September 28, 2017, 642 of the Company’s screens were utilizing the systems under a 10-year master licensing agreement with CDF2. Included in furniture, fixtures and equipment is $45,510,000 related to the digital systems as of March 30,September 28, 2017 and December 29, 2016, which is being amortized over the remaining estimated useful life of the assets. Accumulated amortization of the digital systems was $29,838,000$32,926,000 and $28,294,000 as of March 30,September 28, 2017 and December 29, 2016, 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. 840,Leases, requires that the Company consider the entire amount of the standard booking commitment minimum lease payments for purposes of determining the capital lease obligation. The maximum amount per year that the Company could be required to pay is approximately $6,163,000 until the obligation is fully satisfied.

The Company’s capital lease obligation 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 obligation and the amortization incurred related to 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 $5,636,000$5,822,000 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.

In conjunction with theatres acquired in December 2016, the Company became the obligor of several movie theatre and equipment leases with unaffiliated third parties that qualify for capital lease accounting. Included in buildings and improvements as of March 30,September 28, 2017 and December 29, 2016 is a preliminary value of $15,799,000 related to these leases, with accumulated amortization of $460,000$1,253,000 as of March 30,September 28, 2017. Included in furniture, fixtures and equipment as of March 30,September 28, 2017 and December 29, 2016 is a preliminary value of $1,712,000 related to these leases, with accumulated amortization of $71,000$194,000 as of March 30,September 28, 2017. The assets are being amortized over the remaining lease terms. The Company paid $775,000$874,000 and $2,424,000 in lease payments on these capital leases during the 13 and 39 weeks ended March 30, 2017.September 28, 2017, respectively.

3. Income Taxes

The Company’s effective income tax rate, adjusted for losses from noncontrolling interests, for the 13 and 39 weeks ended March 30,September 28, 2017 was 38.6% and March 31, 201637.8%, respectively, and was 37.7% and 39.3%,38.5% for the 13 and 39 weeks ended September 29, 2016, respectively. The Company does not include the income tax expense or benefit related to the net earnings or loss attributable to noncontrolling interest in its income tax expense as the entities are considered pass-through entities and, as such, the income tax expense or benefit is attributable to its owners.

4. 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 March 30,September 28, 2017 and March 31,September 29, 2016 (in thousands):

5. Subsequent Event – On October 20, 2017, the Company sold its 11% minority interest in The Westin® Atlanta Perimeter North in Atlanta, Georgia and recorded a preliminary pre-tax gain of approximately $4,906,000 during the fiscal 2017 fourth quarter.

THE MARCUS CORPORATION

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 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. These forward-looking statements may generally be identified as such because the context of such statements include words such as we “believe,” “anticipate,” “expect” or words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which may cause results to differ materially from those expected, including, but not limited to, the following: (1) the availability, in terms of both quantity and audience appeal, of motion pictures for our theatre division, as well as other industry dynamics such as the maintenance of a suitable window between the date such motion pictures are released in theatres and the date they are released to other distribution channels; (2) the effects of adverse economic conditions in our markets, particularly with respect to our hotels and resorts division; (3) the effects on our occupancy and room rates of the relative industry supply of available rooms at comparable lodging facilities in our markets; (4) the effects of competitive conditions in our markets; (5) our ability to achieve expected benefits and performance from our strategic initiatives and acquisitions; (6) 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) the effects of adverse weather conditions, particularly during the winter in the Midwest and in our other markets; (8) our ability to identify properties to acquire, develop and/or manage and the continuing availability of funds for such development; and (9) 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. 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 53-week fiscal year ending on the last Thursday in December. Fiscal 2017 is a 52-week year beginning on December 30, 2016 and ending on December 28, 2017. Fiscal 2016 was a 52-week year beginning on January 1, 2016 and ended on December 29, 2016.

We divide our fiscal year into three 13-week quarters and a final quarter consisting of 13 or 14 weeks. The firstthird quarter of fiscal 2017 consisted of the 13-week period beginning Decemberon June 30, 20162017 and ended on March 30,September 28, 2017. The firstthird quarter of fiscal 2016 consisted of the 13-week period beginning on July 1, 2016 and ended on September 29, 2016. The first three quarters of fiscal 2017 consisted of the 39-week period beginning on December 30, 2016 and ended on September 28, 2017. The first three quarters of fiscal 2016 consisted of the 39-week period beginning on January 1, 2016 and ended on March 31,September 29, 2016. Our primary operations are reported in the following two business segments: movie theatres and hotels and resorts.

The following table sets forth revenues, operating income, other income (expense), net earnings and net earnings per common share for the third quarter and first quarterthree quarters of fiscal 2017 and fiscal 2016 (in millions, except for per share and variance percentage data):

Revenues increased during the third quarter and first quarterthree quarters of fiscal 2017 compared to the third quarter and first quarterthree quarters of fiscal 2016 due to increased revenues from both our theatre division and hotels and resorts division. Operating income (earnings before other income/expense and income taxes) and net earnings attributable to The Marcus Corporation increaseddecreased during the firstthird quarter of fiscal 2017 compared to the third quarter of fiscal 2016 due to decreased operating income from both our theatre and hotels and resorts divisions. Operating income and net earnings attributable to The Marcus Corporation increased during the first quarterthree quarters of fiscal 2017 compared to the first three quarters of fiscal 2016 due to record operating results from our theatre division, partially offset by a small increasedecrease in operating lossincome from our hotels and resorts division.

Operating results from our theatre division were favorably impacted by a stronger slate of movies during the fiscal 2017 first quarter compared to the first quarter of fiscal 2016, increased attendance resulting from positive customer response to our recent investments and pricing strategies, and increased concession sales per person due to our expanded food and beverage offerings. New theatres also favorably impacted revenues and operating income from our theatre division during the third quarter and first quarterthree quarters of fiscal 2017 compared to the third quarter and first quarterthree quarters of fiscal 2016. In mid-October 2016, we opened a newly renovated theatre in Country Club Hills, Illinois. In mid-December 2016, our theatre division acquired Wehrenberg Theatres® (which we refer to as Wehrenberg or Marcus Wehrenberg), a Midwestern theatre circuit consisting of 14 theatres with 197 screens, plus an 84,000 square foot retail center. In April 2017, we opened a new theatre in Shakopee, Minnesota. On June 30, 2017, the first day of our fiscal 2017 third quarter, we opened our first stand-alone all in-theatre dining location, brandedBistroPlex^SM and located in Greendale, Wisconsin.

Operating results from our theatre division were unfavorably impacted by a weaker slate of movies during the fiscal 2017 second and third quarters compared to the second and third quarters of fiscal 2016, but were favorably impacted by a stronger slate of movies during the fiscal 2017 first quarter compared to the first quarter of fiscal 2016. Increased attendance resulting from positive customer response to our recent investments and pricing strategies and increased concession sales per person due to our expanded food and beverage offerings partially offset the negative impact of the weaker slate of movies during the third quarter of fiscal 2017 and contributed to our improved operating results during the first three quarters of fiscal 2017 compared to the same periods in fiscal 2016. Increased preopening expenses related to new theatres during the fiscal 2017 periods negatively impacted comparisons to the fiscal 2016 periods.

Revenues from our hotels and resorts division were favorably impacted during the third quarter and first three quarters of fiscal 2017 by revenues from our newSafeHouse® restaurant and bar that we opened on March 1, 2017 in downtown Chicago, Illinois adjacent to our AC Chicago Downtown Hotel. Increased room revenues during the fiscal 2017 periods, due in part to new villas that we opened during the second quarter of fiscal 2017 at the Grand Geneva Resort & Spa, also contributed to the increased roomtotal revenues during the fiscal 2017 periods, partially offset by slightly reduced food and beverage revenues for comparable hotels during the third quarter and first quarterthree quarters of fiscal 2017 compared to the third quarter and first quarterthree quarters of fiscal 2016. Operating results from our hotels and resorts division were unfavorably impacted by preopening expenses and start-up operating losses from our newSafeHouse® restaurant and bar that we opened in downtown Chicago, Illinois, adjacent to our AC Chicago Downtown Hotel. The new location opened on March 1, 2017.during the fiscal 2017 periods.

We did not have any significant variations in investment income or net equity earnings (losses) from unconsolidated joint ventures during the third quarter and first quarterthree quarters of fiscal 2017 compared to the third quarter and first quarterthree quarters of fiscal 2016. LossesWe recognized a loss on disposition of property, equipment and other assets increased by approximately $286,000of $449,000 and $420,000, respectively, during the third quarter and first quarterthree quarters of fiscal 2017 compareddue primarily to our disposal of old theatre seats and other items in conjunction with our significant number of theatre renovations during the first quarter of fiscal 2016 due to aperiods, as well as our write off of disposed equipment at one of our hotels.hotels during the first quarter of fiscal 2017, partially offset by our sale of two theatres (one that had previously closed and one that had been operating prior to the sale) and our sale of the minority equity interest we held in a hotel. We recognized a small gain of $239,000 on disposition of property, equipment and other assets during the third quarter of fiscal 2016 related primarily to our sale of an unused piece of land. We recognized losses on disposition of property, equipment and other assets during the first three quarters of fiscal 2016 totaling $478,000 primarily due to our disposal of old theatre seats and other items in conjunction with prior theatre renovations. The timing of periodic sales and disposals of our property and equipment may vary from quarter to quarter, resulting in variations in our reported gains or losses on disposition of property and equipment.

Our interest expense totaled $2.9$3.4 million for the firstthird quarter of fiscal 2017 compared to $2.4$2.1 million for the firstthird quarter of fiscal 2016, an increase of approximately $500,000,$1.3 million, or 21.4%58.3%. Our interest expense totaled $9.5 million for the first three quarters of fiscal 2017 compared to $7.0 million for the first three quarters of fiscal 2016, an increase of approximately $2.5 million, or 35.2%. The increase in interest expense during the fiscal 2017 periodperiods was due entirelyprimarily to payments we made on the approximately $17.5 million of capital lease obligations we assumed in the Wehrenberg acquisition. AnWe also experienced an increase in our total borrowings under long-term debt agreements during the third quarter and first quarterthree quarters of fiscal 2017 compared to the first quartercomparable periods of fiscal 2016, wasfurther contributing to our increased interest expense during the fiscal 2017 periods, partially offset by a lower average interest rate during fiscal 2017, as we had a greater percentage of lower-cost variable rate debt in our debt portfolio during the first quarter of fiscal 2017.2017 periods compared to the fiscal 2016 periods. 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 changes in the mix between fixed rate debt and variable rate debt in our debt portfolio.

We reported income tax expense for the third quarter and first quarterthree quarters of fiscal 2017 of $5.7$6.9 million an increase of approximately $2.2and $18.6 million, or 61.8%,respectively, compared to income tax expense of $3.5$8.7 million forand $18.2 million, respectively, during the third quarter and first quarterthree quarters of fiscal 2016. The increase in income tax expense for the first three quarters of fiscal 2017 compared to the first three quarters of fiscal 2016 was the result of increased earnings, partially offset by the fact that our fiscal 2017 first quarterthree quarters effective income tax rate, after adjusting for a losslosses from noncontrolling interests that isare not tax-effected because the entities involved are tax pass-through entities, was 37.7%37.8%, compared to our fiscal 2016 first quarterthree quarters effective income tax rate of 39.3%38.5%. As of the date of this report, we anticipate that our effective income tax rate for the remaining quartersquarter of fiscal 2017 will remain close to our historical 38-40%38%-40% average, excluding any changes in our liability for unrecognized tax benefits or potential changes in federal and state income tax rates. Our actual fiscal 2017 effective income tax rate may be different from our estimated quarterly rates depending upon actual facts and circumstances.

The operating results of two majority-owned hotels of which we are the majority owner, The Skirvin Hilton and The Lincoln Marriott Cornhusker Hotel, are included in the hotels and resorts division revenue and operating income, and the after-tax net earnings or loss attributable to noncontrolling interests in these hotels is deducted from or added to net earnings on the consolidated statements of earnings. We reported a net losslosses attributable to noncontrolling interests of $336,000$495,000 and $282,000, respectively, during the first quarterthree quarters of fiscal 2017 compared to a net loss of $172,000 duringand the first quarterthree quarters of fiscal 2016.

Theatres

The following table sets forth revenues, operating income and operating margin for our theatre division for the third quarter and first quarterthree quarters of fiscal 2017 and fiscal 2016 (in millions, except for variance percentage and operating margin):