UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period endedSeptember ~~27, 2018~~26, 2019

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

For the transition period from __________ to __________

Commission File Number1-12604

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

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

Securities registered pursuant to Section 12(b) of the Act:

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

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.

~~Yes~~ x

No ¨

Yes x No ¨

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).

~~Yes~~ x

No ¨

Yes x No ¨

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).

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

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).

~~Yes~~ ¨

No x

Yes ¨ No x

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 2~~November 1, 2019~~, 2018~~ – ~~19,986,597~~22,988,399

CLASS B COMMON STOCK OUTSTANDING AT~~NOVEMBER 2~~November 1, 2019~~, 2018~~ – ~~8,346,417~~7,935,769

THE MARCUS CORPORATION

INDEX

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements:

	Consolidated Balance Sheets ~~(September 27, 2018~~ (September 26, 2019 and December ~~28, 2017)~~27, 2018)	3

	Consolidated Statements of Earnings ~~(13~~ (13 and 39 weeks ended September ~~27, 2018~~26, 2019 and September ~~28, 2017)~~27, 2018)	5

	Consolidated Statements of Comprehensive Income ~~(13~~ (13 and 39 weeks ended September ~~27, 2018~~26, 2019 and September ~~28, 2017)~~27, 2018)	6

	Consolidated Statements of Cash Flows ~~(39~~ (39 weeks ended September ~~27, 2018~~26, 2019 and September ~~28, 2017)~~27, 2018)	7

	Condensed Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2423

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39

Item 4.	Controls and Procedures	39

PART II – OTHER INFORMATION

Item 1A.	Risk Factors	3940

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

Item 4.	Mine Safety Disclosures	40

Item 6.	Exhibits	41

	Signatures	S-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 27, 2018		December 28, 2017		September 26, 2019		December 27, 2018

ASSETS
Current assets:
Cash and cash equivalents	$	7,346	$	16,248	$	7,451	$	17,114
Restricted cash		5,283		4,499		5,086		4,813
Accounts and notes receivable, net of reserves of $232 and $161, respectively		26,006		27,230
Accounts and notes receivable, net of reserves of $270 and $361, respectively						23,566		25,684
Refundable income taxes		3,531		15,335		─		5,983
Other current assets		15,202		13,409		18,820		15,355
Total current assets		57,368		76,721		54,923		68,949

Property and equipment:
Land and improvements		149,172		146,887		151,205		150,122
Buildings and improvements		768,384		759,166		757,324		745,886
Leasehold improvements		98,665		93,451		160,787		98,885
Furniture, fixtures and equipment		362,853		351,879		377,905		314,875
Finance lease right-of-use assets						74,348		72,631
Construction in progress		9,224		5,269		12,717		12,513
Total property and equipment		1,388,298		1,356,652		1,534,286		1,394,912
Less accumulated depreciation and amortization		541,161		496,588		601,497		554,869
Net property and equipment		847,137		860,064		932,789		840,043

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

Other assets:
Investments in joint ventures		4,751		4,239		3,617		4,069
Goodwill		43,388		43,492		75,797		43,170
Other		34,042		33,281		43,914		33,100
Total other assets		82,181		81,012		123,328		80,339

TOTAL ASSETS	$	986,686	$	1,017,797	$	1,340,143	$	989,331

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Balance Sheets

(in thousands, except share and per share data)	September 27, 2018			December 28, 2017			September 26, 2019			December 27, 2018

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	23,108		$	51,541		$	37,334		$	37,452
Income taxes								2,523			─
Taxes other than income taxes		17,675			19,638			19,575			18,743
Accrued compensation		16,732			15,627			19,218			17,547
Other accrued liabilities		46,269			53,291			46,353			59,645
Current portion of capital lease obligations		7,120			7,570
Current portion of finance lease obligations								2,697			5,912
Current portion of operating lease obligations								12,904			─
Current maturities of long-term debt		10,077			12,016			9,954			9,957
Total current liabilities		120,981			159,683			150,558			149,256

Capital lease obligations		22,989			28,282
Finance lease obligations								21,381			22,208

Operating lease obligations								221,047			─

Long-term debt		262,149			289,813			235,787			228,863

Deferred income taxes		38,374			38,233			41,103			41,977

Deferred compensation and other		59,157			56,662			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 22,841,846 shares at September 27, 2018 and 22,655,517 shares at December 28, 2017		22,842			22,656
Class B Common Stock, $1 par; authorized 33,000,000 shares; issued and outstanding 8,347,667 shares at September 27, 2018 and 8,533,996 shares at December 28, 2017		8,348			8,534
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		63,138			61,452			144,687			63,830
Retained earnings		433,022			403,206			458,915			439,178
Accumulated other comprehensive loss		(6,749	)		(7,425	)		(7,435	)		(6,758	)
		520,601			488,423			627,357			527,440
Less cost of Common Stock in treasury (2,861,396 shares at September 27, 2018 and 3,335,745 shares at December 28, 2017)		(37,670	)		(43,399	)
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		482,931			445,024			622,529			490,009
Noncontrolling interest		105			100			(29	)		110
Total equity		483,036			445,124			622,500			490,119

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	986,686		$	1,017,797		$	1,340,143		$	989,331

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Earnings

	September 27, 2018						September 28, 2017						September 26, 2019						September 27, 2018
(in thousands, except per share data)	13 Weeks			39 Weeks			13 Weeks			39 Weeks			13 Weeks			39 Weeks			13 Weeks			39 Weeks
Revenues:
Theatre admissions	$	52,422		$	185,035		$	50,246		$	166,222		$	69,753		$	211,777		$	52,422		$	185,035
Rooms		34,467			84,256			32,785			82,844			34,185			81,317			34,467			84,256
Theatre concessions		35,476			123,687			33,290			109,365			57,051			172,126			35,476			123,687
Food and beverage		19,333			53,972			18,670			52,487			20,170			54,568			19,333			53,972
Other revenues		19,813			59,362			18,827			53,629			22,872			66,234			19,813			59,362
		161,511			506,312			153,818			464,547			204,031			586,022			161,511			506,312
Cost reimbursements		9,088			25,776			8,557			23,424			7,431			27,979			9,088			25,776
Total revenues		170,599			532,088			162,375			487,971			211,462			614,001			170,599			532,088

Costs and expenses:
Theatre operations		48,644			164,452			44,403			145,844			66,971			199,542			48,644			164,452
Rooms		10,958			31,026			10,658			30,117			10,829			30,173			10,958			31,026
Theatre concessions		10,168			35,105			9,567			30,666			21,471			63,789			10,168			35,105
Food and beverage		14,966			43,930			15,125			44,093			15,842			44,353			14,966			43,930
Advertising and marketing		6,178			17,317			6,296			17,880			6,653			17,664			6,178			17,317
Administrative		16,813			52,653			16,448			50,370			18,053			54,862			16,813			52,653
Depreciation and amortization		14,569			42,899			12,993			37,544			19,226			53,484			14,569			42,899
Rent		2,815			8,351			3,113			9,718			6,806			19,087			2,815			8,351
Property taxes		5,018			15,011			5,052			14,575			5,666			16,527			5,018			15,011
Other operating expenses		8,969			27,032			8,300			24,255			10,127			31,729			8,969			27,032
Reimbursed costs		9,088			25,776			8,557			23,424			7,431			27,979			9,088			25,776
Total costs and expenses		148,186			463,552			140,512			428,486			189,075			559,189			148,186			463,552

Operating income		22,413			68,536			21,863			59,485			22,387			54,812			22,413			68,536

Other income (expense):
Investment income		442			433			119			229			187			835			442			433
Interest expense		(3,180	)		(10,000	)		(3,367	)		(9,454	)		(2,807	)		(8,959	)		(3,180	)		(10,000	)
Other expense		(497	)		(1,489	)		(428	)		(1,284	)		(481	)		(1,441	)		(497	)		(1,489	)
Loss on disposition of property, equipment and other assets		(359	)		(767	)		(449	)		(420	)		(129	)		(269	)		(359	)		(767	)
Equity earnings (losses) from unconsolidated joint ventures, net		30			282			(12	)		75
Equity earnings (loss) from unconsolidated joint ventures, net														(84	)		(252	)		30			282
		(3,564	)		(11,541	)		(4,137	)		(10,854	)		(3,314	)		(10,086	)		(3,564	)		(11,541	)

Earnings before income taxes		18,849			56,995			17,726			48,631			19,073			44,726			18,849			56,995
Income taxes		2,626			12,254			6,908			18,571			4,843			10,465			2,626			12,254
Net earnings		16,223			44,741			10,818			30,060			14,230			34,261			16,223			44,741
Net earnings (loss) attributable to noncontrolling interests		(8	)		70			(160	)		(495	)
Net earnings (loss) attributable to noncontrolling interest														(59	)		46			(8	)		70
Net earnings attributable to The Marcus Corporation	$	16,231		$	44,671		$	10,978		$	30,555		$	14,289		$	34,215		$	16,231		$	44,671

Net earnings per share – basic:
Common Stock	$	0.60		$	1.65		$	0.41		$	1.14		$	0.47		$	1.18		$	0.60		$	1.65
Class B Common Stock	$	0.52		$	1.47		$	0.36		$	1.02		$	0.43		$	1.02		$	0.52		$	1.47

Net earnings per share – diluted:
Common Stock	$	0.56		$	1.56		$	0.39		$	1.08		$	0.46		$	1.10		$	0.56		$	1.56
Class B Common Stock	$	0.51		$	1.44		$	0.37		$	1.01		$	0.43		$	1.01		$	0.51		$	1.44

Dividends per share:
Common Stock	$	0.150		$	0.450		$	0.125		$	0.375
Class B Common Stock	$	0.136		$	0.409		$	0.114		$	0.341

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Comprehensive Income

September 27, 2018 September 28, 2017
(in thousands) 13 Weeks 39 Weeks 13 Weeks 39 Weeks

Net earnings $ 16,223 $ 44,741 $ 10,818 $ 30,060

Other comprehensive income (loss), net of tax:

Change in unrealized gain on available for sale investments, net of tax benefit of $0, $0, $0 and $9, respectively - - - (14 )

Amortization of the net actuarial loss and prior service credit related to the pension, net of tax effect of $42, $125, $35 and $106, respectively 113 340 54 161

Fair market value adjustment of interest rate swap, net of tax effect of $70, $70, $0 and $0, respectively 192 191 - -

Reclassification adjustment on interest rate swap included in interest expense, net of tax effect of $17, $49, $0 and $0, respectively 46 134 - -

Other comprehensive income 351 665 54 147

Comprehensive income 16,574 45,406 10,872 30,207

Comprehensive income (loss) attributable to noncontrolling interests (8 ) 70 (160 ) (495 )

Comprehensive income attributable to The Marcus Corporation $ 16,582 $ 45,336 $ 11,032 $ 30,702

	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

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Cash Flows

39 Weeks Ended
(in thousands)
September 27,
2018
September 28,
2017

OPERATING ACTIVITIES:
Net earnings $ 44,741 $ 30,060
Adjustments to reconcile net earnings to net cash provided by operating activities:
Earnings on investments in joint ventures (282 ) (75 )
Distributions from joint ventures 65 351
Loss on disposition of property, equipment and other assets 767 420
Amortization of favorable lease right 250 250
Depreciation and amortization 42,899 37,544
Amortization of debt issuance costs 216 209
Shared-based compensation 1,950 1,867
Deferred income taxes 1 4,231
Deferred compensation and other 2,949 1,682
Contribution of the Company’s stock to savings and profit-sharing plan 1,130 1,024
Changes in operating assets and liabilities:
Accounts and notes receivable 1,224 (7,896 )
Other current assets (1,793 ) (2,220 )
Accounts payable (18,620 ) 1
Income taxes 12,749 (8,686 )
Taxes other than income taxes (1,963 ) 286
Accrued compensation 1,105 (1,036 )
Other accrued liabilities (10,318 ) (7,076 )
Total adjustments 32,329 20,876
Net cash provided by operating activities 77,070 50,936

INVESTING ACTIVITIES:
Capital expenditures (45,144 ) (87,265 )
Proceeds from disposals of property, equipment and other assets 86 4,558
Decrease (increase) in other assets (743 ) 584
Contribution in joint venture (295 ) —
Net cash used in investing activities (46,096 ) (82,123 )

FINANCING ACTIVITIES:
Debt transactions:
Proceeds from borrowings on revolving credit facilities 159,000 254,000
Repayment of borrowings on revolving credit facilities (177,000 ) (236,500 )
Proceeds from borrowings on long-term debt — 65,000
Principal payments on long-term debt (11,711 ) (35,894 )
Debt issuance costs — (370 )
Repayments of capital lease obligations (1,375 ) (782 )
Equity transactions:
Treasury stock transactions, except for stock options (2,566 ) (463 )
Exercise of stock options 6,902 2,083
Dividends paid (12,277 ) (10,122 )
Distributions to noncontrolling interest (65 ) —
Net cash provided by (used in) financing activities (39,092 ) 36,952

Net increase (decrease) in cash, cash equivalents and restricted cash (8,118 ) 5,765
Cash, cash equivalents and restricted cash at beginning of period 20,747 8,705
Cash, cash equivalents and restricted cash at end of period $ 12,629 $ 14,470

Supplemental Information:
Interest paid, net of amounts capitalized $ 10,321 $ 9,354
Income taxes paid (refunded) (448 ) 23,025
Change in accounts payable for additions to property and equipment (9,813 ) 8,942

	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	)

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 ~~27, 2018~~26, 2019

1. General

Basis of Presentation –- The unaudited consolidated financial statements for the 13 and 39 weeks ended September ~~27, 2018~~26, 2019 and September ~~28, 2017~~27, 2018 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 ~~27, 2018,~~26, 2019, 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 ~~28, 2017.~~

~~Immaterial Restatement of Prior Year Financial Statements~~ – Beginning in the fiscal 2018 first quarter, the Company began appropriately presenting cost reimbursements and reimbursed costs on a gross basis and presented two new line items in the consolidated statements of earnings. These cost reimbursements and reimbursed costs were previously reported on a net basis. Reimbursed costs primarily consist of payroll and related expenses at managed properties where the Company is the employer and may include certain operational and administrative costs as provided for in the Company's contracts with owners. These costs are reimbursed back to the Company. As these costs have no added markup, the revenue and related expense have no impact on operating income or net earnings. Cost reimbursements and reimbursed costs, which totaled $8,557,000 and $23,424,000 for the 13 and 39 weeks ended September 28, 2017, respectively, have been separately presented in the prior year statement of earnings to correct the prior year presentation. The Company believes this correction is immaterial to the consolidated financial statements.27, 2018.

Accounting Policies –- Refer to the Company’s audited consolidated financial statements (including footnotes) for the fiscal year ended December ~~28, 2017,~~27, 2018, 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 ~~27, 2018,~~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. ~~2014-09,~~2016-02,~~Revenue from Contracts with Customers~~Leases (Topic 842), which was adopted on December ~~29, 2017. These revenue recognition~~28, 2018. The lease policy updates are applied prospectively in the Company’s financial statements from December ~~29, 2017~~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 and $53,433,000 for the 13 and 39 weeks ended September 26, 2019, respectively, and $14,556,000 and $43,037,000 for the 13 and 39 weeks ended September 27, 2018, ~~respectively, and $12,946,000 and $37,368,000 for the 13 and 39 weeks ended September 28, 2017,~~ respectively.

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

Interest
Rate
Swaps

Available
for Sale
Investments
Pension
Obligation
Accumulated
Other
Comprehensive
Loss

(in thousands)
Balance at December 28, 2017 $ – $ (11 ) $ (7,414 ) $ (7,425 )
Amount reclassified to retained earnings on December 29, 2017 in connection with the adoption of ASU No. 2016-01 – 11 – 11
Balance at December 29, 2017 – – (7,414 ) (7,414 )
Amortization of the net actuarial loss and prior service credit – – 340 340
Other comprehensive income before reclassifications 191 – – 191
Amounts reclassified from accumulated other comprehensive loss 134 ⁽¹⁾ – – 134
Other comprehensive income 325 – 340 665
Balance at September 27, 2018 $ 325 $ – $ (7,074 ) $ (6,749 )

⁽¹⁾

~~Amount is included in interest expense in the consolidated statements of earnings.~~

Available
for Sale
Investments Pension
Obligation Accumulated
Other
Comprehensive
Loss
(in thousands)
Balance at December 29, 2016 $ 3 $ (5,069 ) $ (5,066 )
Change in unrealized gain on available for sale investments (14 ) – (14 )
Amortization of net actuarial loss and prior service credit – 161 161
Net other comprehensive income (loss) (14 ) 161 147
Balance at September 28, 2017 $ (11 ) $ (4,908 ) $ (4,919 )

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:

13 Weeks
Ended
September 27,
2018

13 Weeks
Ended
September 28,
2017

39 Weeks
Ended
September 27,
2018

39 Weeks
Ended
September 28,
2017

(in thousands, except per share data)
Numerator:
Net earnings attributable to
The Marcus Corporation $ 16,231 $ 10,978 $ 44,671 $ 30,555
Denominator:
Denominator for basic EPS 28,180 27,825 28,028 27,773
Effect of dilutive employee stock options 638 525 606 637
Denominator for diluted EPS 28,818 28,350 28,634 28,410
Net earnings per share - basic:
Common Stock $ 0.60 $ 0.41 $ 1.65 $ 1.14
Class B Common Stock $ 0.52 $ 0.36 $ 1.47 $ 1.02
Net earnings per share - diluted:
Common Stock $ 0.56 $ 0.39 $ 1.56 $ 1.08
Class B Common Stock $ 0.51 $ 0.37 $ 1.44 $ 1.01

	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)
Numerator:
Net earnings attributable to The Marcus Corporation	$	14,289	$	16,231	$	34,215	$	44,671
Denominator:
Denominator for basic EPS		30,918		28,180		30,566		28,028
Effect of dilutive employee stock options		443		638		518		606
Denominator for diluted EPS		31,361		28,818		31,084		28,634
Net earnings per share - basic:
Common Stock	$	0.47	$	0.60	$	1.18	$	1.65
Class B Common Stock	$	0.43	$	0.52	$	1.02	$	1.47
Net earnings per share - diluted:
Common Stock	$	0.46	$	0.56	$	1.10	$	1.56
Class B Common Stock	$	0.43	$	0.51	$	1.01	$	1.44

Shareholders’ Equity –- Activity impacting total shareholders’ equity attributable to The Marcus Corporation and noncontrolling interests for the 13 and 39 weeks ended September 26, 2019 and September 27, 2018 ~~and September 28, 2017~~ was as ~~follows:~~follows (in thousands, except per share data):

Total
Shareholders’
Equity
Attributable to
The Marcus
Corporation

Noncontrolling
Interests

(in thousands)
Balance at December 28, 2017 $ 445,024 $ 100
Net earnings attributable to The Marcus Corporation 44,671 –
Net earnings attributable to noncontrolling interests – 70
Distributions to noncontrolling interests – (65 )
Cash dividends (12,277 ) –
Exercise of stock options 6,902 –
Savings and profit sharing contribution 1,130 –
Treasury stock transactions, except for stock options (2,566 ) –
Share-based compensation 1,950 –
Cumulative effect of adopting ASU No. 2014-09, net of tax (2,568 ) –
Other comprehensive income, net of tax 665 –
Balance at September 27, 2018 $ 482,931 $ 105

	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
Cash Dividends:
$.15 Class B Common Stock		-		-			-			(1,183	)		-			-			(1,183	)		-			(1,183	)
$.16 Common Stock		-		-			-			(3,633	)		-			-			(3,633	)		-			(3,633	)
Exercise of stock options		-		-			(78	)		-			-			532			454			-			454
Purchase of treasury stock		-		-			-			-			-			(428	)		(428	)		-			(428	)
Savings and profit-sharing contribution		-		-			810			-			-			371			1,181			-			1,181
Reissuance of treasury stock		-		-			31			-			-			16			47			-			47
Issuance of non-vested stock		-		-			(127	)		-			-			127			-			-			-
Shared-based compensation		-		-			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		411		(411	)		-			-			-			-			-			-			-
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

Total
Shareholders’
Equity
Attributable to
The Marcus
Corporation
Noncontrolling
Interests
(in thousands)
Balance at December 29, 2016 $ 390,112 $ 1,535
Net earnings attributable to The Marcus Corporation 30,555 –
Net loss attributable to noncontrolling interests – (495 )
Cash dividends (10,122 ) –
Exercise of stock options 2,083 –
Savings and profit sharing contribution 1,024 –
Treasury stock transactions, except for stock options (463 ) –
Share-based compensation 1,867 –
Other comprehensive income, net of tax 147 –
Balance at September 28, 2017 $ 415,203 $ 1,040

	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	)
Cash Dividends:
$.14 Class B Common Stock		-		-			-			(1,163	)		-			-			(1,163	)		-			(1,163	)
$.15 Common Stock		-		-			-			(2,907	)		-			-			(2,907	)		-			(2,907	)
Exercise of stock options		-		-			(62	)		-			-			991			929			-			929
Purchase of treasury stock		-		-			-			-			-			(453	)		(453	)		-			(453	)
Savings and profit-sharing contribution		-		-			651			-			-			479			1,130			-			1,130
Reissuance of treasury stock		-		-			26			-			-			23			49			-			49
Issuance of non-vested stock		-		-			(108	)		-			-			108			-			-			-
Shared-based compensation		-		-			596			-			-			-			596			-			596
Conversions of Class B Common Stock		8		(8	)		-			-			-			-			-			-			-
Distributions to noncontrolling interest		-		-			-			-			-			-			-			(19	)		(19	)
Comprehensive income (loss)		-		-			-			9,821			(30	)		-			9,791			(15	)		9,776
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

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)
Unrecognized loss on interest rate swap agreements	$	(1,064	)	$	(149	)
Net unrecognized actuarial loss for pension obligation		(6,371	)		(6,609	)
	$	(7,435	)	$	(6,758	)

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 ~~27, 2018~~26, 2019 and December ~~28, 2017,~~27, 2018, respectively, the Company’s ~~$5,762,000~~$7,017,000 and ~~$4,053,000~~$5,302,000 of debt and equity 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 September 26, 2019 and December 27, 2018, ~~and December 28, 2017,~~ respectively, the ~~$444,000~~Company’s $1,441,000 and ~~$13,000 asset~~$205,000 liability related to the Company’s interest rate swap contracts was valued using Level 2 pricing ~~inputs.~~inputs and was included in deferred compensation and other in the consolidated balance sheets.

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 ~~27, 2018~~26, 2019 and December ~~28, 2017,~~27, 2018, none of the Company’s fair value measurements were valued using Level 3 pricing inputs. See Note 2 for further discussion on Level 3 assumptions used in regard to the acquisition.

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
September 27,
2018

13 Weeks
Ended
September 28,
2017

39 Weeks
Ended
September 27,
2018

39 Weeks
Ended
September 28,
2017

(in thousands)
Service cost $ 231 $ 192 $ 694 $ 574
Interest cost 341 339 1,023 1,017
Net amortization of prior service cost and actuarial loss 156 89 466 267
Net periodic pension cost $ 728 $ 620 $ 2,183 $ 1,858

	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 26, 2019 is as follows (in thousands):

	13 Weeks Ended September 26, 2019
	Reportable Segment
	Theatres		Hotels/Resorts		Corporate		Total
Theatre admissions	$	69,753	$	-	$	-	$	69,753
Rooms		-		34,185		-		34,185
Theatre concessions		57,051		-		-		57,051
Food and beverage		-		20,170		-		20,170
Other revenues⁽¹⁾		9,781		13,003		88		22,872
Cost reimbursements		217		7,214		-		7,431
Total revenues	$	136,802	$	74,572	$	88	$	211,462

⁽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.

	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

⁽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.

	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 and $37,048,000 as of September 26, 2019 and December 27, 2018, respectively. The Company had no contract assets as of September 26, 2019 and December 27, 2018. During the 13 and 39 weeks ended September 26, 2019, the Company recognized revenue of $4,042,000 and $18,747,000, respectively, that was included in deferred revenues as of December 27, 2018. The majority of the Company’s deferred revenue relates to non-redeemed gift cards, advanced ticket sales and the Company’s loyalty programs.

As of September 26, 2019, the amount of transaction price allocated to the remaining performance obligations under the Company’s advanced ticket sales was $4,680,000 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 26, 2019, 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 and is reflected in the Company’s consolidated balance sheet as part of deferred revenues, which is included in other accrued liabilities. The Company recognizes revenue as the gift cards are redeemed, which is expected to occur within the next two years.

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

New Accounting Pronouncements – ~~- In February 2016,~~On December 28, 2018, the ~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)~~Company adopted ASU No. 2016-02,Leases (Topic 842), which is intended to improve financial reporting related to leasing transactions. ~~ASU No. 2016-02~~ASC 842 requires a lessee to recognize ~~a right-of-use asset~~on the balance sheet assets and ~~a lease liability~~liabilities for ~~most operating leases~~rights and obligations created by leased assets with lease terms of more than 12 months. The new guidance ~~will~~ also ~~require~~requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from the leases. ~~In July 2018, the FASB also issued ASU No. 2018-11,~~~~Leases (Topic 842): Targeted Improvements,~~ which amends ASU No. 2016-02 and allows entities the option to initially apply Topic 842 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company plans to adopt the new accounting standard in fiscal 2019 using the optional transition method to apply the new guidance as of the first day of fiscal 2019 rather than as of the earliest period presented.

In conjunction with the adoption of the new standard, companies are able to elect several practical expedients to aid in the transition to Topic 842. The following three practical expedients must all be elected together, and the Company intends to elect these practical expedients upon adoption:

~~An entity need not reassess whether any expired or existing contracts are or contain leases.~~

~~An entity need not reassess the lease classification for any expired or existing leases.~~

~~An entity need not reassess initial direct costs for any existing leases.~~

The Company continues to finalize its inventory of leases, assess the additional practical expedients and analyze financial reporting implications. Upon adoption, the most significant impact of the amendments in ASU No. 2016-02 will be the recognition of the new right-of-use assets and lease liabilitiesSee Note 3 for assets currently subject to operating leases. The Company believes that the adoption of ASU No. 2016-02 will have a material impact on its consolidated balance sheet, but the adoption is not expected to have a material effect on its consolidated results of operations or cash flows.

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 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 the new standard will have a material effect on its consolidated financial statements.

In ~~February~~August 2018, the FASB issued ASU No. ~~2018-02,~~2018-14,~~Reclassification~~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). The purpose of ~~Certain Tax Effects from Accumulated Other Comprehensive Income~~.ASU No. 2018-13 is to improve the disclosures related to fair value measurements in the financial statements. The improvements include the removal, modification and addition of certain disclosure requirements primarily related to Level 3 fair value measurements. ASU No. 2018-13 is effective for the Company in fiscal 2020. The amendments in ASU No. ~~2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017.~~2018-13 should be applied prospectively. The ~~amendments in~~Company does not expect ASU No. 2018-02 also require certain disclosures about stranded tax effects. The new standard is effective for fiscal years beginning after December 15, 2018, and early adoption in any period is permitted. The Company plans2018-13 to ~~adopt the new accounting standard in fiscal 2019 and has determined that the adoption of ASU No. 2018-02 will not~~ have a ~~material effect~~significant impact on its consolidated financial statements.

2. Acquisition

On ~~December 29, 2017,~~February 1, 2019, the Company ~~adopted~~acquired 22 dine-in theatres with 208 screens located in nine Southern and ~~applied~~Eastern states from VSS-Southern Theatres LLC (Movie Tavern) for a total purchase price of $139,516,000, consisting of $30,000,000 in cash, subject to ~~all contracts 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. The Company elected the modified retrospective method for the adoption of ASU No. 2014-09certain adjustments, and ~~its related ASU amendments. Under this method, the Company recognized the cumulative effect~~2,450,000 shares of the ~~changes in retained earnings at the date~~company’s Common Stock with a value of ~~adoption, but did not restate the 13 or 39 weeks ended September 28, 2017, which continues to be reported under the accounting standards in effect for that time period.~~

The Company performed a review of the requirements of ASU No. 2014-09 and related ASUs in preparation for adoption of the new standard. The Company reviewed its key revenue streams and related customer contracts and has applied the five-step model of the standard to these revenue streams and compared the results to its current accounting practices. The majority of the Company’s revenues continue to be recognized in a manner consistent with historical practice. See Note 2 for further discussion.

~~On December 29, 2017, the Company adopted ASU No. 2016-01,~~~~Recognition and Measurement of Financial Assets and Financial Liabilities~~, which primarily affects the accounting for equity investments, financial liabilities under fair value option, and the presentation and disclosure requirements of financial instruments. Upon adoption, the Company made an immaterial cumulative effect adjustment to reclassify the unrealized loss of an equity investment previously classified as available for sale from accumulated other comprehensive loss to opening retained earnings. All future changes in fair value for this equity security will be recognized through net earnings. In addition, the Company holds two investments that were previously accounted for under the cost method of accounting, which under ASU No. 2016-01 were deemed to not have readily determinable fair values and thus were not impacted by the adoption of ASU No. 2016-01. The adoption of this standard did not have a material impact on such investments or the Company's consolidated financial statements.

~~On December 29, 2017, the Company adopted 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 standard must be applied using a retrospective transition method for each period presented. The adoption of the new standard did not have an effect$109,197,000, based on the Company’s ~~consolidated financial statements.~~

~~On December 29, 2017,~~closing share price as of January 31, 2019. Acquisition costs incurred as a result of the ~~Company adopted ASU No. 2016-18,~~~~Statement of Cash Flows (Topic 230) - Restricted Cash~~~~. ASU No. 2016-18 requires that a statement of cash flows explain the change~~Movie Tavern acquisition were approximately $1,283,000 and $1,507,000 during ~~the period~~fiscal 2019 and fiscal 2018, respectively, and were expensed as incurred and included in administrative expense in the ~~total~~consolidated statements of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As such, restricted cash and restricted cash equivalents are 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. ASU No. 2016-18 was applied on a retrospective basis and prior periods were adjusted to conform to the current period’s presentation. Upon adoption, the Company recorded a $2,438,000 decreaseearnings.

The preliminary purchase price allocation reflected in net cash used in investing activities for the 39 weeks ended September 28, 2017 related to reclassifying the changes in its restricted cash balance from investing activities to cash and cash equivalent balances within the consolidated statement of cash flows.

~~On December 29, 2017, the Company adopted 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 adoption of the new standard did not have an effect on the Company’s consolidated ~~financial statements.~~

~~On December 29, 2017, the Company adopted 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 adoption of the new standard did not have an effectbalance sheet on the ~~Company’s consolidated financial statements.~~

~~On December 29, 2017, the Company adopted 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. ASU No. 2017-07 was applied on a retrospective basis and the prior period was adjusted to conform to the current period’s presentation. During the 13 and 39 weeks ended September 28, 2017, expense of $428,000 and $1,284,000, respectively, was reclassified from operating income to other expense outside of operating income in the consolidated statement of earnings.

~~On December 29, 2017, the Company adopted 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. The adoption of the new standard did not have an effect on the Company’s consolidated financial statements.

~~On December 29, 2017, the Company early adopted ASU No. 2017-12,~~~~Targeted Improvements to Accounting for Hedging Activities~~~~, which amends the hedge accounting recognition and presentation requirements in Accounting Standards Codification 815,~~~~Derivatives and Hedging (Topic 815)~~. ASU No. 2017-12 is designed to improve the transparency and understandability of information about an entity’s risk management activities and to reduce the complexity of and simplifying the application of hedge accounting. The adoption of the new standard did not have an effect on the Company’s consolidated financial statements.

~~Note 2 – Revenue Recognition~~

~~Revenue Recognition Policy~~

Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance of obligations by transferring the promised services to the customer. A service is transferred to a customer when, or as, the customer obtains control of that service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company’s progress in satisfying the performance obligation in a manner that depicts the transfer of the services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised service. The amount of revenue recognized reflects the consideration entitled to in exchange for those services.

~~The disaggregation of revenues by business segment for the 13 and 39 weeks ended September 27, 2018~~acquisition date 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

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

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

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 using 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.

~~(1)~~

~~Included in other revenues is an immaterial amount related to rental income that is not considered contract revenue from contracts with customers under ASC No. 2014-09.~~

3. Leases

The Company ~~recognizes revenue from its rooms~~determines if an arrangement is a lease at inception. The Company evaluates each lease for classification as ~~earned on the close of business each day. Revenue from theatre admissions, theatre concessions and food and beverage sales are recognized~~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 ~~time~~inception of ~~sale.~~the lease and when a modification is made to a lease. The Company leases real estate and equipment with lease terms of one year to 45 years, some of which include options to extend and/or terminate the lease. The exercise of lease renewal options is done at the Company’s sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term and related right-of-use asset and lease liability. The depreciable life of the asset is limited to the expected term. The Company’s lease agreements do not contain any residual value guarantees or any restrictions or covenants.

Revenues from advanced ticket and gift card sales are recorded as deferred revenue and are recognized when tickets or gift cards are redeemed. Gift card breakage income is recognized based upon historical redemption patterns and represents the balance of gift cards for which the Company believes the likelihood of redemption by the customer is remote. Gift card breakage income is recorded in other revenues in the consolidated statements of earnings. The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements.

Other revenues include management fees for theatres and hotels under management agreements. The management fees are recognized as earned based on the terms of the agreements. The management fees include variable consideration that is recognized based onRight-of-use assets represent the Company’s right to ~~invoice as~~use an underlying asset for the ~~amount invoiced corresponds directly~~lease term and lease liabilities represent the obligation to make lease payments arising from the ~~value transferred to the customer. Other revenues also include family entertainment center revenues~~lease. Operating lease right-of-use assets and ~~revenues from Hotels/Resorts outlets such as spa, ski, golf and parking, each of which~~labilities are recognized at commencement date of the ~~time~~lease based on the present value of ~~sale. In addition, other revenues include pre-show advertising income~~lease payments over the lease term. When readily determinable, the Company uses the implicit rate in the ~~Company’s theatres. Pre-show advertising revenue includes variable consideration, primarily~~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 ~~attendance levels, that is allocated~~the information available at the lease commencement date, including the fixed rate the Company could borrow for a similar amount, over a similar lease term with similar collateral. The Company recognizes right-of-use assets for all assets subject to ~~distinct time periods that make up~~operating leases in an amount equal to the ~~overall performance obligation. The adoption~~operating lease liabilities, adjusted for the balances of ~~ASU No. 2014-09 did not have an effect on how revenue~~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 ~~for these arrangements.~~on a straight-line basis over the lease term.

~~Cost reimbursements primarily consist~~The majority of ~~payroll and related expenses at managed properties where the Company is the employer and may include certain operational and administrative costs as provided for in~~ the Company’s ~~contracts~~lease agreements include fixed rental payments. For those leases with ~~owners. These costs~~variable payments based on increases in an index subsequent to lease commencement, such payments are ~~reimbursed back to~~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. As these costs have no added markup,~~Company’s performance or use of the ~~revenue and related expense have no impact on operating income or net earnings. The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements.~~underlying asset, are also expensed as incurred.

The ~~timing of the Company’s revenue recognition may differ from the timing of payment by customers. However, the~~ Company typically receives payment within a very short period of time of when the revenue is recognized. The Company records a receivable when revenue is recognized prior to payment and it has an unconditional right to payment. Alternatively, when payment precedes the provision for the related services, deferred revenue is recorded until the performance obligation is satisfied.

~~Revenues do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales tax.~~

~~Adoption of ASU No. 2014-09~~

~~Due to adoption of ASU No. 2014-09,~~adopted ASC 842 on the first day of fiscal ~~2018,~~2019 using the modified retrospective approach. Under this method, the Company ~~recorded~~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 ~~one-time~~ cumulative effect adjustment to ~~the balance sheet as follows:~~

Balance at
December 28,
2017

Cumulative
Adjustment

Balance at
December 29,
2017

(in thousands)
Refundable income taxes $ 15,335 $ 945 $ 16,280
Other accrued liabilities 53,291 3,296 56,587
Deferred compensation and other 56,662 217 56,879
Retained earnings 403,206 (2,568 ) 400,638

~~The one-time cumulative effect adjustment to the balance sheet is due to a change in~~retained earnings. Finance lease accounting for the Company’s loyalty programs. The Company offers a customer loyalty program to its theatre customers called Magical Movie Rewards. The program allows members to earn points for each dollar spent and access special offers available only to members. The rewards are redeemable at any Marcus Theatre box office, concession stand or food and beverage venue. The Company also offers a customer loyalty program to its Hotels and Resorts customers which allows members to earn points for each dollar spent in its restaurants. The rewards are redeemable at any of the Company’s hotel outlets including spas, restaurants, and golf. Under ASU No. 2014-09, the portion of Theatre admission revenues, Theatre concession revenues and Food and beverage revenues attributable to loyalty points earned by customers are deferred as a reduction of these revenues until related reward redemption. Through December 28, 2017, the Company recorded the estimated incremental cost of redeeming loyalty points at the time they were earned in Advertising and marketing expense. The change had the effect of an immaterial reduction of theatre admission revenues and a corresponding immaterial increase in theatre concession revenues with an offsetting increase in other long-term liabilities based upon historical customer reward redemption patterns.

In accordance with ASU No. 2014-09, the Company has concluded that it is the principal (as opposed to agent) in the arrangement with third-party internet ticketing companies in regards to sale of internet tickets to customers, and therefore, recognizes ticket fee revenue based on a gross transaction price. As such, internet ticket fee revenue is deferred and recognized when the related film exhibition takes place on a gross transaction price basis. Through December 28, 2017, the Company recorded internet ticket fee revenues net of third-party commission or service fees. The change had the effect of increasing other revenues and other operating expense but had no impact on net earnings or cash flows from operations.

remained substantially unchanged. The adoption of ~~ASU No. 2014-09~~ASC 842 had the following effect on ~~our consolidated statement of earnings for~~ the 13Company’s financial statements as follows (all relating to operating lease right-of-use assets and ~~39 weeks ended September 27, 2018 (in thousands)~~obligations):

For the 13 Weeks Ended
September 27, 2018

For the 39 Weeks Ended
September 27, 2018

As Reported ASU No.
2014-09
Impact
Adjusted⁽¹⁾
As
Reported ASU No.
2014-09
Impact
Adjusted⁽¹⁾

Revenues:
Theatre admissions $ 52,422 $ (605 ) $ 53,027 $ 185,035 $ (1,961 ) $ 186,996
Theatre concessions 35,476 503 34,973 123,687 1,467 122,220
Food and beverage 19,333 3 19,330 53,972 23 53,949
Other revenues 19,813 904 18,909 59,362 3,609 55,753
Total revenues 170,599 805 169,794 532,088 3,138 528,950

Costs and expenses:
Theatre operations 48,644 165 48,479 164,452 479 163,973
Theatre concessions 10,168 159 10,009 35,105 469 34,636
Advertising and marketing 6,178 (496 ) 6,674 17,317 (1,549 ) 18,866
Other operating expenses 8,969 910 8,059 27,032 3,514 23,518
Total costs and expenses 148,186 738 147,448 463,552 2,913 460,639

Operating income 22,413 67 22,346 68,536 225 68,311
Income taxes 2,626 9 2,617 12,254 48 12,206
Net earnings attributable to The Marcus Corporation 16,231 58 16,173 44,671 177 44,494

~~(1)~~

~~The amounts reflect each affected financial statement line item as they would have been reported under US GAAP prior to the adoption of ASU No. 2014-09.~~

~~The adoption of ASU No. 2014-09 had the following effect on our consolidated balance sheet as of September 27, 2018 (in thousands):~~

As Reported
ASU No. 2014-09
Impact
Adjusted⁽¹⁾
Refundable income taxes $ 3,531 $ 945 $ 2,586
Total current assets 57,368 945 56,423
Total assets 986,686 945 985,741
Other accrued liabilities 46,269 3,639 42,630
Total current liabilities 120,981 3,639 117,342
Deferred compensation and other 59,157 99 59,058
Retained Earnings 433,022 (2,793 ) 435,815
Shareholders’ equity attributable to The Marcus Corporation 482,931 (2,793 ) 485,724
Total equity 483,036 (2,793 ) 485,829
Total liabilities and shareholders’ equity 986,686 945 985,741

~~(1)~~

~~The amounts reflect each affected financial statement line item as they would have been reported under US GAAP prior to the adoption of ASU No. 2014-09.~~

The Company had deferred revenue from contracts with customers of $28,643,000 and $36,007,000 as of September 27, 2018 and December 29, 2017, respectively, which includes the one-time cumulative effect adjustment to the balance sheet on the first day of fiscal 2018. The Company had no contract assets as of September 27, 2018 and December 28, 2017. During the 13 and 39 weeks ended September 27, 2018, respectively, the Company recognized revenue of $1,699,000 and $16,688,000 that was included in deferred revenues as of December 29, 2017. The decrease in deferred revenue from December 29, 2017 to September 27, 2018 was due to theatre gift card redemptions and advanced movie ticket redemptions during the 39 weeks ended September 27, 2018, offset by an increase in advanced sales/deposits for group events in the hotels and resorts division.

A significant majority of the Company’s revenue is recorded in less than one year from the original contract. As of September 27, 2018, the amount of transaction price allocated to the remaining performance obligations under the Company’s advanced tickets sales was $4,396,000 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 1.3 years. As of September 27, 2018, the amount of transaction price allocated to the remaining performance obligations under the Hotels and Resorts loyalty program was $192,000, of which, $73,000 is reflected in the Company’s consolidated balance sheet in deferred compensation and other. The Company recognizes revenue upon reward redemption, which is expected to occur within the next two years.

	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 of the Company’s adoption of ~~ASU No. 2014-09,~~ASC 842, the Company elected ~~to use~~ the following practical expedients: ~~(i)~~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 ~~adjust~~apply the ~~promised amount of consideration~~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 ~~effects~~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

In fiscal 2018, the Company entered into a build-to-suit lease arrangement in which the Company is responsible for the construction of a ~~significant financing component~~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 when the Company ~~expects, at contract inception, that~~has access to the ~~period between the Company's transfer of a promised product or service~~right-of-use asset, which is expected to ~~a customer and when the customer pays for that product or service will~~ be one year or less; (ii) not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer; (iii) to expense costs as incurred for costs to obtain contracts when the amortization period would have been one year or less, which mainly includes internal sales and development compensation; (iv) not to disclose remaining performance obligations when the remaining performance obligations have original expected durations of one year or less; and (v) not to disclose remaining performance obligations when variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms a single performance obligation (which exists in the Company’s management fee contracts and its pre-show advertising contracts).upon project completion.

~~3. Long-Term Debt and Capital Lease Obligations~~

~~Long-Term Debt~~Digital Cinema Projection Systems - During ~~the 39 weeks ended September 28, 2017,~~fiscal 2012, the Company ~~issued $50,000,000~~entered into a master licensing agreement with CDF2 Holdings, LLC, a subsidiary 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 39 weeks ended September 28, 2017, a note that matured in January 2017 with a balance of $24,226,000 was repaid and replaced with borrowings~~Cinedigm Digital Cinema Corp (CDF2), whereby CDF2 purchased on the Company’s ~~revolving credit facility~~behalf, and ~~a new $15,000,000 mortgage note bearing interest at LIBOR plus 2.75%, requiring monthly principal~~then deployed and ~~interest payments and maturing in fiscal 2020. The mortgage note is secured~~licensed back to the Company, digital cinema projection systems (the “systems”) for use by the Company 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 ~~land, building~~to the digital systems as of September 26, 2019 and ~~equipment.~~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 $6,163,000 until the obligation is fully satisfied.

The Company’s finance 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 $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.

4. Long-Term Debt

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% at September ~~27, 2018)~~26, 2019). 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% at September ~~27, 2018)~~26, 2019). 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 ~~27, 2018,~~26, 2019, the interest rate swaps were considered highly effective. The fair value of the interest rate swaps on September 26, 2019 and December 27, 2018, respectively, was ~~an asset~~a liability of ~~$444,000~~$1,441,000 and $205,000, and was included in deferred compensation and other ~~long term assets~~ in the consolidated balance ~~sheet.~~sheets. The Company does not expect the interest rate swaps to have a material effect on earnings within the next 12 months.

The Company had an interest rate swap that expired in January 2018. The swap agreement covered $25,000,000 of floating rate debt that required the Company to pay interest at a defined fixed rate of 0.96% while receiving interest at a defined variable rate of one-month LIBOR. The Company’s interest rate swap agreement was considered effective and qualified as a cash flow hedge from inception through June 16, 2016, at which time the derivative was undesignated and the balance in accumulated other comprehensive loss was reclassified into interest expense. As of June 16, 2016, the swap was considered ineffective for accounting purposes and the change in fair value was recorded as an increase or decrease in interest expense. As such, the $13,000 decrease in fair value of the swap for the 39 weeks ended September 27, 2018 was recorded to interest expense.

~~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 September 27, 2018, 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 September 27, 2018 and December 28, 2017, which is being amortized over the remaining estimated useful life of the assets. Accumulated amortization of the digital systems was $39,103,000 and $34,471,000 as of September 27, 2018 and December 28, 2017, 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 $5,140,000 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.

The Company is 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 September 27, 2018 and December 28, 2017 is $25,648,000 related to these leases, with accumulated amortization of $3,701,000 and $2,300,000 as of September 27, 2018 and December 28, 2017, respectively. Included in furniture, fixtures and equipment as of September 27, 2018 and December 28, 2017 is $1,712,000 related to these leases, with accumulated amortization of $438,000 and $255,000 as of September 27, 2018 and December 28, 2017, respectively. The assets are being amortized over the shorter of the estimated useful lives or the remaining lease terms. The Company paid $808,000 and $2,424,000, respectively, in lease payments on these capital leases during the 13 and 39 weeks ended September ~~27, 2018,~~26, 2019, a note that was scheduled to mature in January 2020 with a balance of $14,638,000, was repaid and ~~$874,000 and $2,424,000, respectively, during 13 and 39 weeks ended September 28, 2017.~~replaced with borrowings on the Company’s revolving credit facility.

4.5. Income Taxes

The Company’s effective income tax rate, adjusted for earnings ~~(losses)~~ from noncontrolling interests, for the 13 and 39 weeks ended September ~~27, 2018~~26, 2019 was 25.3% and 23.4%, respectively, and was 13.9% and 21.5%~~, respectively, and was 38.6% and 37.8%~~ for the 13 and 39 weeks ended September ~~28, 2017,~~27, 2018, respectively. The decrease in the Company’s effective income tax rate was primarily the result of the reduction in the federal tax rate from 35% to 21% resulting from the December 22, 2017 signing of the Tax Cuts and Jobs Act of 2017. Additionally, duringDuring the 39 weeks ended September 27, 2018, the Company recorded income tax benefits related to excess tax benefits on share-based compensation as well as ~~for~~ reductions in deferred tax liabilities related to tax accounting method changes the Company made subsequent to the Tax ~~Cut~~Cuts and Jobs Act of 2017. The Company does not include the income tax expense or benefit related to the net earnings or loss attributable to noncontrolling ~~interest~~interests in its income tax expense as the ~~entities are~~entity is considered a pass-through ~~entities~~entity and, as such, the income tax expense or benefit is attributable to its owners.

During the fiscal year ended December 28, 2017, the Company was able to make a reasonable estimate of the impact of the Tax Cuts and Jobs Act of 2017, including the reduction in the corporate tax rate and the provisions related to executive compensation and 100% bonus depreciation on qualifying property. However, given the Act’s broad and complex changes, further clarification, interpretation and regulatory guidance could affect the assumptions the Company used in making its reasonable estimate. Following the guidance of the U.S. Securities and Exchange Commission's Staff Accounting Bulletin No. 118, any adjustments to the Company's estimate will be reported as a component of income tax expense and disclosed in the period when any such adjustments have been determined within the one-year measurement period. During the 39 weeks ended September 27, 2018, the Company did not make any adjustment to the estimates recorded in fiscal 2017.

5.6. 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 ~~27, 2018~~26, 2019 and September ~~28, 2017~~27, 2018 (in thousands):

13 Weeks Ended September 26, 2019	Theatres		Hotels/ Resorts		Corporate Items			Total
Revenues	$	136,802	$	74,572	$	88		$	211,462
Operating income (loss)		16,843		10,580		(5,036	)		22,387
Depreciation and amortization		13,438		5,451		337			19,226

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

13 Weeks Ended
September 27, 2018
Theatres
Hotels/
Resorts
Corporate
Items Total
Revenues⁽¹⁾ $ 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
Revenues	$	414,074	$	199,604	$	323		$	614,001
Operating income (loss)		57,656		11,443		(14,287	)		54,812
Depreciation and amortization		37,918		15,050		516			53,484

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

13 Weeks Ended
September 28, 2017
Theatres
Hotels/
Resorts
Corporate
Items Total
Revenues⁽¹⁾ $ 90,273 $ 71,952 $ 150 $ 162,375
Operating income (loss) 15,861 9,659 (3,657 ) 21,863
Depreciation and amortization 8,399 4,512 82 12,993

39 Weeks Ended
September 27, 2018
Theatres
Hotels/
Resorts
Corporate
Items Total
Revenues⁽¹⁾ $ 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

39 Weeks Ended
September 28, 2017
Theatres
Hotels/
Resorts
Corporate
Items Total
Revenues⁽¹⁾ $ 296,636 $ 190,903 $ 432 $ 487,971
Operating income (loss) 58,576 12,803 (11,894 ) 59,485
Depreciation and amortization 24,000 13,270 274 37,544

~~(1)~~

Revenues include cost reimbursements of $9,088 for the 13 weeks ended September 27, 2018 (Theatres - $218, Hotels/Resorts - $8,870); $8,557 for the 13 weeks ended September 28, 2017 (Theatres - $500, Hotels/Resorts - $8,057); $25,776 for the 39 weeks ended September 27, 2018 (Theatres - $1,084, Hotels/Resorts - $24,692); and $23,424 for the 39 weeks ended September 28, 2017 (Theatres - $1,659, Hotels/Resorts - $21,765).

~~6. Subsequent Event~~

On November 1, 2018, the Company entered into an asset purchase agreement with VSS-Southern Theatres LLC (Movie Tavern) pursuant to which the Company will acquire substantially all of the assets and assume certain limited liabilities of its Movie Tavern branded movie theatre business (the “Movie Tavern Business”). The Movie Tavern Business consists of 22 dine-in theatres located in Texas, Pennsylvania, Georgia, Louisiana, New York, Colorado, Arkansas, Kentucky and Virginia.

The purchase price for the Movie Tavern Business consists of $30,000,000 in cash, subject to certain adjustments, and 2,450,000 shares of the Company’s Common Stock. The assets purchased will consist primarily of leasehold improvements, furniture, fixtures and equipment and certain intangible assets. The transaction is expected to close in the first fiscal quarter of 2019, subject to certain customary closing conditions and approvals, including, among others, early termination or expiration of the applicable waiting period under the Hart-Scott-Rodino Act.

2322

THE MARCUS CORPORATION

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

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, including the expectation that the ~~acquisition of the~~ Movie Tavern ~~Business~~acquisition will be accretive to earnings, earnings per share and cash flows in the first 12 months following the closing of the transaction. 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 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; (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; (10) a disruption in our business and reputational and economic risks associated with civil securities claims brought by shareholders; and (11) our ability to timely and successfully integrate the Movie Tavern ~~Business~~operations into our own circuit. 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 ~~2018~~2019 is a 52-week year beginning on December ~~29, 2017~~28, 2018 and ending on December ~~27, 2018.~~26, 2019. Fiscal ~~2017~~2018 was a 52-week year beginning December ~~30, 2016~~29, 2017 and ended on December ~~28, 2017.~~27, 2018.

We divide our fiscal year into three 13-week quarters and a final quarter consisting of 13 or 14 weeks. The third 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 on June 29, 2018 and ended on September 27, 2018. The ~~third quarter~~first three quarters of fiscal ~~2017~~2019 consisted of the ~~13-week~~39-week period beginning on ~~June 30, 2017~~December 28, 2018 and ended on September ~~28, 2017.~~26, 2019. The first three quarters of fiscal 2018 consisted of the 39-week period beginning on December 29, 2017 and ended on September 27, 2018. ~~The first three quarters of fiscal 2017 consisted of the 39-week period beginning on December 30, 2016 and ended on September 28, 2017.~~ Our primary operations are reported in the following two business segments: movie theatres and hotels and resorts.

Implementation of New Accounting Standards

During the first quarter of fiscal ~~2018,~~2019, we adopted Accounting Standards Update ~~(ASU)~~(“ASU”) No. ~~2014-09,~~2016-02,~~Revenue from Contracts with Customers~~Leases (Topic 842)(, intended to improve financial reporting related to leasing transactions. ASU No. ~~2014-09), a comprehensive new revenue recognition model that~~2016-02 requires a ~~company~~lessee to recognize ~~revenue~~a right-of-use (“ROU”) asset and a lease liability for most leases. The new guidance requires disclosures to ~~depict~~help investors and other financial statement users better understand the ~~transfer~~amount, timing and uncertainty of ~~goods~~cash flows arising from the leases. Leases are now classified as finance or ~~services~~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 Improvementsamended ASU No. 2016-02 and allows entities the option to ~~customers~~initially apply Topic 842 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in ~~an amount that reflects~~ the ~~consideration to which~~period of adoption. We adopted the ~~company expects to be entitled in exchange for those goods or services. We selected~~new accounting standard as of the first day of fiscal 2019 using the modified retrospective ~~method for adoption of ASU No. 2014-09 and its related ASU amendments. Under this method, we recognized~~approach, which results in the cumulative effect of ~~the changes in retained earnings~~adoption recognized at the date of application, rather than as of the earliest period presented. As a result, no adjustment was made to prior period financial information and disclosures.

In conjunction with the adoption of the new standard, companies were able to elect several practical expedients to aid in the transition to Topic 842. We elected the package of practical expedients which permits us to forego reassessment of our prior conclusions related to lease identification, lease classification and initial direct costs. Topic 842 also provides practical expedients for an entity’s ongoing accounting. We made a policy election not to apply the lease recognition requirements for short-term leases. As a result, we did not ~~restate prior periods.~~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 ~~primarily impacted our accounting for our loyalty programs and internet ticket fee revenue. Adopting this new standard during the first quarter of fiscal 2018 has had the following impact~~did not have a material effect on our ~~financial statements:~~

In accordance with the new guidance, the portion of theatre admission revenues, theatre concession revenues and food and beverage revenues attributable to loyalty points earned by customers will be deferred as a reduction of these revenues until reward redemption. Through December 28, 2017, we recorded the estimated incremental cost of redeeming loyalty points at the time they were earned in advertising and marketing expense. Our adoption of the standard will result in an immaterial reduction of theatre admission revenues and a corresponding immaterial increase in theatre concession revenues with an offsetting increase in other long-term liabilities based upon historical customer reward redemption patterns.

Prior to the adoption of the new standard, we recorded internet ticket fee revenues net of third-party commission or service fees. In accordance with ASU No. 2014-09, we believe that we are the principal (as opposed to agent) in the arrangement with third-party internet ticketing companies in regards to sale of internet tickets to customers, and therefore, we will now recognize ticket fee revenue based on a gross transaction price. This change will have the effect of increasing other revenues and other operating expense but will have no impact on net earnings or cash flows from operations.

~~We recorded a one-time cumulative effect reduction to retained earnings, net of income taxes, of approximately $2.6 million during fiscal 2018 related to the adoption of ASU No. 2014-09.~~

~~In addition, we adopted ASU No. 2017-07,~~~~Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Benefit Cost~~, during the first quarter of fiscal 2018. The ASU requires the service cost component of net periodic benefit costs 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 now presented separately in other expense outside of operating income and our prior year results have been restated to conform to the new presentation. As a result of the adoption of ASU No. 2017-07, $497,000 and $1,489,000, respectively, of other expenses were excluded from operating income during the third quarter and first three quarters of fiscal 2018 and $428,000 and $1,284,000, respectively, of other expenses were excluded from operating income during the third quarter and first three quarters of fiscal 2017.

~~Finally, beginning in the fiscal 2018 first quarter, we began appropriately presenting cost reimbursements and reimbursed costs on a gross basis and presented two new line items to the~~ consolidated statements of earnings. These cost reimbursements and reimbursed costs were previously reported on a net basis. Reimbursed costs primarily consist of payroll and related expenses at managed properties where we are the employer and may include certain operational and administrative costs as provided for in our contracts with owners. As these costs have no added markup, the revenue and related expense have no impact on operating income or net earnings. The vast majority of our cost reimbursements relate to our hotels and resorts division due to the larger number of management contracts in that division. Our prior year results were restated to conform to the new presentation. Cost reimbursements and reimbursed costs totaled $9.1 million for the third quarter of fiscal 2018 and $8.6 million for the third quarter of fiscal 2017. Cost reimbursements and reimbursed costs totaled $25.8 million for the first three quarters of fiscal 2018 and $23.4 million for the first three quarters of fiscal 2017. We believe this correction is immaterial to the consolidated financial statements.

Overall Results

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 three quarters of fiscal ~~2018~~2019 and fiscal ~~2017~~2018 (in millions, except for per share and variance percentage data):

Third Quarter First Three Quarters
Variance Variance
F2018 F2017 Amt. Pct. F2018 F2017 Amt. Pct.
Revenues $ 170.6 $ 162.4 $ 8.2 5.1 % $ 532.1 $ 488.0 $ 44.1 9.0 %
Operating income 22.4 21.9 0.5 2.5 % 68.5 59.5 9.0 15.2 %
Other income (expense) (3.6 ) (4.1 ) 0.5 13.9 % (11.5 ) (10.9 ) (0.6 ) -6.3 %
Net earnings (loss) attributable to noncontrolling interests - (0.2 ) 0.2 95.0 % 0.1 (0.5 ) 0.6 114.1 %
Net earnings attributable to The Marcus Corp. $ 16.2 $ 11.0 $ 5.2 47.9 % $ 44.7 $ 30.6 $ 14.1 46.2 %

Net earnings per common share – diluted: $ 0.56 $ 0.39 $ 0.17 43.6 % $ 1.56 $ 1.08 $ 0.48 44.4 %
26
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 during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017~~2018 due primarily to increased revenues from ~~both~~ our theatre ~~division and our hotels and resorts~~ division. Operating income (earnings before other income/expense and income taxes) ~~and net earnings attributable to The Marcus Corporation increased~~during the third quarter of fiscal 2019 was even with operating income during the third quarter of fiscal 2018, ~~compared to the third quarter of fiscal 2017 due to improved~~as an increase in theatre division operating ~~results from our~~income was offset by a decrease in hotels and resorts ~~division.~~division operating income and an increase in corporate operating losses. Operating income ~~and net earnings attributable to The Marcus Corporation increased~~decreased during the first three quarters of fiscal ~~2018~~2019 compared to the first three quarters of fiscal ~~2017~~2018 due to ~~improved operating results from~~a decrease in both ~~our~~ theatre division and ~~our~~ hotels and resorts ~~division.~~division operating income and an increase in corporate operating losses. Both of our operating divisions were negatively impacted by nonrecurring expenses during the first three quarters of fiscal 2019. Net earnings attributable to The Marcus Corporation ~~also increased during the fiscal 2018 periods compared to the fiscal 2017 periods due to a lower effective income tax rate.~~
~~Operating results from our theatre division were unfavorably impacted by higher film costs and several one-time costs~~decreased during the third quarter of fiscal ~~2018. Operating results~~2019 compared to the third quarter of fiscal 2018 due primarily to increased income taxes. Net earnings attributable to The Marcus Corporation decreased during the first three quarters of fiscal 2019 compared to the first three quarters of fiscal 2018 due to decreased operating income, partially offset by increased investment income and decreased interest expense and income taxes.
25
On February 1, 2019, we acquired the assets of Movie 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. 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 ~~were favorably~~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 ~~increased~~reduced attendance ~~from~~at our comparable theatres due to a ~~stronger~~weaker slate of movies during the first three quarters of fiscal ~~2018~~2019 compared to the first three quarters of fiscal ~~2017, as well as an increase in our average ticket price and~~2018, partially offset by increased concession sales per person due to our expanded food and beverage ~~offerings. Two new theatres also favorably~~offerings as well as an increase in our average ticket price and other revenues. Acquisition and preopening expenses related to the Movie Tavern acquisition negatively impacted our operating income during the first three quarters of fiscal 2019 by approximately $2.0 million, or $0.05 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^® – 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 quarter of fiscal 2019 compared to the prior year period were unfavorably impacted by decreased cost reimbursements and the negative impact of comparing a newly opened independent hotel (i.e. the Saint Kate) to a stabilized branded hotel (i.e. the InterContinental Milwaukee) last year, partially offset by increased room revenues and ~~operating income~~food and beverage revenues from our ~~theatre~~other seven owned hotels. Revenues from our hotels and resorts division during the first three quarters of fiscal ~~2018~~2019 compared to the prior year period were unfavorably 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 ~~2017.~~
~~Revenues~~2018. Decreased operating income from our hotels and resorts division were favorably impacted by increased room revenues, food and beverage revenues and other revenues, including management fees, during the first three quarters of fiscal 2018 compared to the first three quarters of fiscal 2017. Comparisons of our operating income 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 ~~our operating income~~preopening expenses and initial start-up losses related to the Saint Kate hotel closure and conversion. These costs totaled approximately $1.6 million, or $0.04 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 2017 from our hotels and resorts division were favorably impacted by the increased revenues, strong cost controls and the fact that our fiscal 2017 results included preopening expenses and start-up operating losses from our~~SafeHouse® restaurant and bar that we opened in downtown Chicago, Illinois, adjacent to our AC Chicago Downtown Hotel, on March 1, 2017.~~2019.
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Operating losses from our corporate items, which include amounts not allocable to the business segments, increased during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017~~2018 due in part to increased ~~legal expense and increased pension and 401(k) expenses. Increased~~ long-term incentive compensation ~~expenses resulting from~~expenses. In addition, our ~~improved financial performance and stock performance during the past several years also contributed to increased~~fiscal 2019 third quarter operating ~~losses~~loss from our corporate items was negatively impacted by non-recurring items totaling approximately $550,000 related to a depreciation adjustment and a payroll tax audit settlement.
We recognized investment income of $187,000 and $835,000, respectively, during the third quarter and first three quarters of fiscal ~~2018, as did an increase in our accrual for contributions~~2019 compared to ~~our charitable foundation during the fiscal 2018 periods.~~
~~We did not have any significant variations in~~ investment income ~~or net equity earnings (loss) from unconsolidated joint ventures~~of $442,000 and $433,000 during the third quarter and first three quarters of fiscal 2018. Investment income decreased during the third quarter of fiscal 2019 and increased during the first three quarters of fiscal 2019 compared to the same periods last year due to changes in the value of marketable securities.
Our interest expense totaled $2.8 million for the third quarter of fiscal 2019 compared to $3.2 million for the third quarter of fiscal 2018, a decrease of approximately $400,000, 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%. The decrease in interest expense during the third quarter and first three quarters of fiscal 2019 was due to reduced borrowing levels compared to the third quarter and first three quarters of fiscal 2017. We recognized losses on disposition of property, equipment and other assets during the third quarter and first three quarters of fiscal 2018 of $359,000 and $767,000, respectively, due primarily to losses related to old theatre seats and other items disposed of in conjunction with theatre renovations during the period. We recognized losses on disposition of property, equipment and other assets during the third quarter and first three quarters of fiscal 2017 of $449,000 and $420,000, respectively, due primarily to losses related to old theatre seats and other items disposed of in conjunction with theatre renovations during the periods, as well as a write off of disposed equipment at one of our hotels during the first quarter of fiscal 2017. These losses during the first three quarters of fiscal 2017 were partially offset by several gains related to the sale of two theatres and the sale of our equity interest in a hotel during fiscal 2017. 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.
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Our interest expense totaled $3.2 million for the third quarter of fiscal 2018 compared to $3.4 million for the third quarter of fiscal 2017, a decrease of approximately $200,000, or 5.6%. Our interest expense totaled $10.0 million for the first three quarters of fiscal 2018 compared to $9.5 million for the first three quarters of fiscal 2017, an increase of approximately $500,000, or 5.8%. The decrease in interest expense during the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017 is due to lower borrowing levels during the fiscal 2018 period, partially offset by a higher average interest rate. The increase in interest expense during the first three quarters of fiscal 2018 compared to the first three quarters of fiscal 2017 was due primarily to a higher average interest rate during fiscal 2018, as a result of increases in short-term interest rates on our variable rate debt. In addition, on March 1, 2018, we entered into two interest rate swap agreements, effectively converting $50.0 million in variable rate borrowings to a fixed rate.2018. 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 increases~~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 on disposition of property, equipment and other assets or net equity earnings (losses) from unconsolidated joint ventures during the third quarter and first three quarters of fiscal 2019 compared to the third quarter and first three quarters of fiscal 2018. 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 income tax expense for the third quarter and first three quarters of fiscal ~~2018~~2019 of $4.8 million and $10.5 million, respectively, compared to $2.6 million and $12.3 ~~million, respectively, compared to $6.9 million and $18.6~~ million, respectively, during the third quarter and first three quarters of fiscal ~~2017.~~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 tax liabilities during the third 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 ~~2018 compared to the first three quarters of fiscal 2017, despite an increase in earnings before income taxes,~~2019 was the result of the ~~reduction in the federal~~reduced earnings before income taxes, partially offset by an increased effective income tax ~~rate from 35% to 21% resulting from the December 22, 2017 signing of the Tax Cuts and Jobs Act of 2017.~~rate. Our fiscal ~~2018~~2019 first three quarters effective income tax rate, after adjusting for earnings from noncontrolling interests that are not tax-effected because the ~~entities~~entity involved ~~are~~is a tax pass-through ~~entities,~~entity, was ~~21.5%,~~23.4% and benefitted from excess tax benefits on share-based compensation and nonrecurring adjustments specific to the first three quarters, compared to our fiscal ~~2017~~2018 first three quarters effective income tax rate of ~~37.8%. Our fiscal 2018~~21.5%, which benefited from the reduction in deferred income tax ~~expense was also favorably impacted during the fiscal 2018 third quarter by income tax benefits related~~liabilities described above. We continue to excess tax benefits on share-based compensation as well as for reductions in deferred tax liabilities related to tax accounting method changes we made subsequent to the Tax Cut and Jobs Act of 2017. As of the date of this report, we anticipate that our effective income tax rate for the ~~final~~remaining quarter of fiscal ~~2018~~2019 will ~~likely return to our expected 25-26%~~be in the 24-26% range, depending upon the amount of excess tax benefits on share-based compensation that we recognize and excluding any ~~changes in our liability for unrecognized tax benefits,~~ potential ~~further~~ changes in federal and state income tax ~~rates or other one-time tax benefits.~~rates. Our actual fiscal ~~2018~~2019 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.

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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 fiscal ~~2018~~2019 and fiscal ~~2017~~2018 periods, 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. The operating results of The Lincoln Marriott Cornhusker Hotel were also included in the hotels and resorts division revenue and operating income during the fiscal 2018 and fiscal 2017 periods, but because this hotel was not wholly-owned during the third quarter and first three quarters of fiscal 2017, the after-tax net earnings or loss attributable to noncontrolling interests for this property was deducted from or added to net earnings on the consolidated statements of earnings during the fiscal 2017 periods. During the fourth quarter of fiscal 2017, we purchased the noncontrolling interest of The Lincoln Marriott Cornhusker Hotel from its former minority owner. We reported net earnings attributable to noncontrolling interests of $46,000 and $70,000, respectively, during the first three quarters of fiscal ~~2018 compared to a net loss of $495,000 during the first three quarters of~~2019 and fiscal ~~2017.~~2018.

Theatres

The following table sets forth revenues, operating income and operating margin for our theatre division for the third quarter and first three quarters of fiscal ~~2018~~2019 and fiscal ~~2017~~2018 (in millions, except for variance percentage and operating margin):

Third Quarter First Three Quarters                     Third Quarter                                      First Three Quarters
Variance Variance Variance Variance
F2018 F2017 Amt. Pct. F2018 F2017 Amt. Pct. F2019 F2018 Amt. Pct. F2019 F2018 Amt. Pct.
Revenues $ 95.0 $ 90.3 $ 4.7 5.2 % $ 333.4 $ 296.6 $ 36.8 12.4 % $ 136.8 $ 95.0 $ 41.8 44.0 % $ 414.1 $ 333.4 $ 80.7 24.2 %
Operating income 14.5 15.9 (1.4 ) -8.9 % 66.3 58.6 7.7 13.2 % 16.8 14.5 2.3 16.5 % 57.7 66.3 (8.6 ) -13.1 %
Operating margin (% of revenues) 15.2 % 17.6 % 19.9 % 19.7 % 12.3 % 15.2 % 13.9 % 19.9 %

Our theatre division revenues increased during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017 due primarily to increased attendance at comparable theatres~~2018 due to ~~a stronger film slate, new~~the newly acquired Movie Tavern theatres, ~~that we opened during fiscal 2017,~~increased other revenues and ~~an increase~~increases in our average ticket price and average concession revenues per person ~~resulting in increased admission revenues and concession revenues. In addition,~~at our ~~adoption~~comparable theatres, partially offset by the impact of the new revenue recognition accounting standard and our change in the presentation of cost reimbursements for managed theatres (described above) resulted in an increase in theatre division revenues of $500,000 and $2.5 million, respectively,decreased attendance due to a weaker film slate during the ~~third quarter and~~ first three quarters of fiscal ~~2018~~2019.
Our theatre division operating income increased during the third quarter of fiscal 2019 compared to the ~~restated~~ third quarter ~~and first three quarters~~ of fiscal ~~2017.~~2018 due primarily to the impact of the increased revenues described above. Our theatre division operating margin decreased during the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018 due primarily to the inclusion of Movie Tavern operating results. Our Movie Tavern theatres will have a lower operating margin than our legacy theatres because all 22 acquired theatres are leased rather than owned (rent expense is generally significantly higher than depreciation expense). In addition, the fact that a larger portion of Movie Tavern revenues are derived from the sale of in-theatre food and beverage will also contribute 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).
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Our theatre division operating income and operating margin decreased during the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017 due primarily to increased depreciation, higher film costs and several one-time costs. Depreciation costs have increased due to our significant recent investments in many of our theatres. Film costs increased during the fiscal 2018 third quarter primarily due to an unfavorable mix of films compared to the prior year. The top films of the fiscal 2018 third quarter film slate were summer blockbuster films and film costs, expressed as a percentage of admission revenues, are generally greater for blockbuster films. Our top film during the third quarter of fiscal 2017 was a less expensive September film. In addition, comparisons to last year were negatively impacted by the fact that our fiscal 2017 third quarter film cost benefitted from a one-time adjustment for prior periods related to an arrangement with a particular studio.
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~~Our theatre division operating income and operating margin increased during the~~ first three quarters of fiscal ~~2018~~2019 compared to the first three quarters of fiscal ~~2017~~2018 due ~~primarily~~ to ~~the increased~~reduced attendance and revenues described above, partially offset by higher film costs and depreciation costs. The increase in theatre division revenues related to our adoption of the new revenue recognition standard described above and our change in the presentation of cost reimbursements for managedat comparable theatres both without a related material change in operating income, negatively impacted our operating margin during the fiscal 2018 periods compared to the fiscal 2017 periods. Preopening expenses of approximately $800,000 related to the opening of two new theatres negatively impacted our operating income and operating margin during the first three quarters of fiscal ~~2017.~~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 quarter and first three quarters of fiscal ~~2018~~2019 and fiscal ~~2017~~2018 (in millions, except for variance percentage):

Third Quarter First Three Quarters Third Quarter First Three Quarters
Variance Variance Variance Variance
F2018 F2017 Amt.   Pct. F2018 F2017 Amt. Pct. F2019 F2018 Amt.   Pct. F2019 F2018 Amt. Pct.
Admission revenues $ 52.4 $ 50.2 $ 2.2 4.3 % $ 185.0 $ 166.2 $ 18.8 11.3 % $ 69.8 $ 52.4 $ 17.4 33.1 % $ 211.8 $ 185.0 $ 26.8 14.5 %
Concession revenues 35.5 33.3 2.2 6.6 % 123.7 109.4 14.3 13.1 % 57.0 35.5 21.5 60.8 % 172.1 123.7 48.4 39.2 %
Other revenues 6.9 6.3 0.6 10.5 % 23.6 19.3 4.3 21.7 % 9.8 6.9 2.9 41.9 % 29.5 23.6 5.9 25.2 %
94.8 89.8 5.0 5.6 % 332.3 294.9 37.4 12.7 % 136.6 94.8 41.8 44.1 % 413.4 332.3 81.1 24.4 %
Cost reimbursements 0.2 0.5 (0.3 ) -56.4 % 1.1 1.7 (0.6 ) -34.7 % 0.2 0.2 - -0.5 % 0.7 1.1 (0.4 ) -40.4 %
Total revenues $ 95.0 $ 90.3 $ 4.7 5.2 % $ 333.4 $ 296.6 $ 36.8 12.4 % $ 136.8 $ 95.0 $ 41.8 44.0 % $ 414.1 $ 333.4 $ 80.7 24.2 %

~~We opened new~~As described above, on February 1, 2019, we acquired 22 theatres and 208 screens in ~~April 2017 and June 2017 that favorably impacted~~conjunction with our Movie Tavern acquisition, contributing a large portion of the increase to 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 ~~2018~~2019 compared to the first three quarters of fiscal ~~2017.~~2018. Excluding ~~these two new~~the Movie Tavern theatres, ~~(as well as two nearby theatres that are no longer comparable to last year because their pricing policies were significantly changed),~~ admission revenues and concession revenues for comparable theatres increased ~~10.4%~~6.3% and ~~11.5%~~9.4%, respectively, during the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018. Excluding the Movie Tavern theatres, admission revenues and concession revenues for comparable theatres decreased 5.7% and 1.7%, respectively, during the first three quarters of fiscal ~~2018~~2019 compared to the first three quarters of fiscal ~~2017.~~2018.

Conversely, the change in how we recognize revenue related to our Magical Movie Rewards customer loyalty program as a result of our adoption of the new revenue recognition accounting standard (discussed above) resulted in a decrease in admission revenues of approximately $600,000 and $2.0 million, respectively, and an increase in concession revenues of approximately $500,000 and $1.5 million, respectively, during the third quarter and first three quarters of fiscal 2018. Excluding the impact of these changes in revenue recognition from the fiscal 2018 periods, admission revenues increased 5.5% and 12.5%, respectively, and concession revenues increased 5.1% and 11.8%, respectively, during the third quarter and first three quarters of fiscal 2018 compared to the third quarter and first three quarters of fiscal 2017.
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According to data received from Rentrak (a national box office reporting service for the theatre industry) and compiled by us to evaluate our fiscal ~~2018~~2019 third quarter and first three ~~quarter~~quarters results, United States box office receipts ~~(including~~(excluding new ~~theatres)~~builds for the top 10 theatre circuits) increased ~~6.9%~~3.0% during our fiscal ~~2018~~2019 third quarter and ~~increased 10.0%~~decreased 6.2% during our ~~fiscal 2018~~ first three quarters ~~indicating that~~of fiscal 2019. As a result, our increase in admission revenues for our comparable theatres outperformed the industry by 3.3 percentage points during the third quarter of fiscal ~~2018 underperformed~~2019 and our decrease in admission revenues for our comparable theatres outperformed the industry by ~~1.4~~0.5 percentage points ~~and our admission revenues~~ during the first three quarters of fiscal ~~2018 outperformed~~2019. Our goal is to continue our past pattern of outperforming the industry, ~~by 2.5 percentage points, both after adjusting~~but with the majority of our renovations now completed for ~~the above described impact of the change~~our legacy circuit, our ability to do so in ~~accounting for revenues related to our loyalty program. Even though we slightly underperformed the industry during the most recent~~any given quarter ~~we have still outperformed the industry average during 16 of the last 19 quarters. We believe our underperformance of the industry average during the third quarter of fiscal 2018 can~~will likely be ~~attributed to an unfavorable~~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 ~~league baseball~~horror film (both genres have historically performed very well in ~~several~~our legacy Midwestern markets) likely contributed to our third quarter outperformance. During the first quarter of ~~our key markets, as further discussed below. The~~fiscal 2019, we believe colder and snowier weather in the Midwest negatively impacted the performance of our ~~Marcus Wehrenberg~~comparable theatres ~~which we acquired in December 2016, many of which have subsequently undergone significant renovations, continued~~compared to ~~be particularly strong during~~ the ~~third quarter and~~U.S. averages, negatively impacting our first three quarters ofcomparisons. As discussed further in our fiscal ~~2018 compared to~~2019 first quarter Form 10-Q, we also believe film mix negatively impacted our relative performance versus the ~~prior year, contributing to~~nation during the fiscal 2019 first quarter. As a result, our year-to-date ~~outperformance of~~performance versus the industry, ~~average.~~while positive, is less robust than our third quarter outperformance.

Our average ticket price increased ~~1.3%~~9.2% and ~~4.6%~~5.2%, respectively, during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017. The~~2018, due in part to the addition of Movie Tavern theatres in certain markets where competitive pricing is slightly higher than in our legacy Midwestern markets. Excluding Movie Tavern, our average ticket price at comparable theatres increased 6.2% and 2.8%, respectively, during the third quarter and first three quarters of fiscal 2019 compared to the third quarter and first three quarters of fiscal 2018. At the beginning of the second quarter of fiscal 2019, we implemented selected ticket price increases ~~were partially attributable~~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 ~~we implemented~~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 ~~October 2017. In addition, the fact~~our PLF screens (with a corresponding price premium), and that we have ~~increased our number of premium large format (PLF)~~more PLF screens ~~along with a corresponding price premium,~~this year than we did the prior year also contributed to our increased average ticket price during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the prior year periods.
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Conversely, we believe that a change in film product mix had ana small unfavorable impact on our average ticket price during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017. Our~~2018. Two of our top ~~film~~three performing films during the third quarter and first three quarters of fiscal ~~2018 was the PG-rated family movie~~2019,~~Incredibles 2~~The Lion KingandToy Story 4 were films that generally appeal to a younger audience (resulting in a higher percentage of lower-priced children’s tickets sold), ~~compared to~~negatively impacting our ~~top film~~average ticket price during the third quarter and first three quarters of fiscal ~~2017, which~~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 ~~R-rated film~~It ~~(resulting in a higher percentage of higher-priced adult tickets sold). The increase in~~prior year) also negatively impacted our average ticket price contributed approximately $650,000, or 30%, to our comparable theatre admission revenues during the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017. The increase in average ticket price contributed approximately $7.6 million, or 44%, to our comparable theatre admission revenues duringcomparison for the first three quarters of fiscal ~~2018~~2019 compared to the first three quarters of fiscal ~~2017.~~2018. The overall net increase in average ticket price favorably impacted our admission revenues of our comparable theatres by approximately $3.2 million and $4.7 million, respectively, during the third quarter and first three quarters of fiscal 2019 compared to the third quarter and first three quarters of fiscal 2018.

Our concession revenues increased during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017~~2018 due to the addition of new Movie Tavern theatres ~~an increase in attendance at comparable theatres,~~and an increase in our average concession revenues per person, ~~and~~partially offset by decreased attendance at comparable theatres during the ~~above-described increase related to the change in accounting for loyalty program revenues.~~first three quarters of fiscal 2019. Our average concession revenues per person increased by ~~3.5%~~31.8% and ~~6.3%~~28.0%, respectively, during ~~our~~the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017.~~2018, due in large part to the addition of the Movie Tavern theatres. Excluding Movie Tavern, our average concession revenues per person at comparable theatres increased 9.3% and 7.3%, respectively, during the third quarter and first three quarters of fiscal 2019 compared to the third quarter and first three quarters of fiscal 2018. The increase in our average concession revenues per person contributed approximately ~~$1.2~~$3.2 million ~~or 53%,~~and $8.0 million to our comparable theatre concession revenues during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter ~~of fiscal 2017. The increase in our average concession revenues per person contributed approximately $6.0 million, or 48%, to our comparable theatre concession revenues during the~~and first three quarters of fiscal ~~2018 compared to the first three quarters of fiscal 2017.~~2018.

A change in concession product mix, including increased sales of non-traditional food and beverage items from our increased number ofTake Five Lounge^SM,Zaffiro’s® Express,Reel Sizzle® and in-theatre dining outlets ~~as well as modest selected price increases we introduced in October 2017,~~ were the primary reasons for our increased average concession sales per person during the fiscal ~~2018~~2019 periods. Conversely, we believe that the ~~above described~~above-described change in film product mix during the third quarter and first three quarters of fiscal ~~2018 likely~~2019 may have slightly reduced the growth of our overall average concession sales per person during the fiscal ~~2018 third quarter,~~2019 periods, as family-oriented and animated films such as the films in our top ~~film~~three films during the third quarter of fiscal ~~2018 described~~2019 identified above tend not to contribute 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 to have a significant (20% or more) favorable impact on our overall average concession sales per person, as the average concession sales per person at these dine-in theatres are, on average, more than double the average concession sales per person we generally achieve at our theatres that do not offer a dine-in option.

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Other revenues increased by approximately ~~$600,000~~$2.9 million and ~~$4.3~~$5.9 million, respectively, during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017. All of the increase during the third quarter of fiscal 2018 and approximately $3.5 million of the increase during the first three quarters of fiscal 2018 related~~2018. These increases were primarily due to ~~the change in how we now report~~ internet surcharge ticketing ~~fees. Prior to the new revenue recognition standard, we recorded these~~ fees net of third-party commission or service fees. Under the new guidance that we adopted in the first quarter of fiscal 2018 (discussed above), we are recognizing ticket fee revenues based on a gross transaction price. This change had the effect of increasing other revenues and ~~increasing other operating expense, but had no impact on operating income or net earnings. The remaining increase in other revenues is attributable primarily to increased~~ preshow advertising ~~income.~~income from our new Movie Tavern locations.

Total theatre attendance increased ~~3.0%~~22.0% and ~~6.4%~~8.7%, respectively, during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017.~~2018. Excluding the new theatres and, correspondingly, two theatres that are no longer comparable to last year because their pricing policies were significantly changed as a result of the new theatres we opened nearby,Movie Tavern, comparable theatre attendance increased ~~5.9%~~0.2% during the third quarter of fiscal 2019, and decreased 8.2% during the first three quarters of fiscal 2018 compared to the first three quarters of fiscal 2017, due to a stronger film slate in the fiscal 2018 periods. We believe a combination of several additional factors continue to contribute to our overall increase2019. The decrease in attendance ~~and our above-described industry outperformance~~at comparable theatres during the first three quarters of fiscal ~~2018. In addition~~2019 was due primarily to a weaker film slate during the ~~$5 Tuesday promotion that continued to perform well, we believe our~~first half of fiscal ~~2018 third quarter and first three quarters attendance was favorably impacted by increased attendance at theatres that have added our spacious new DreamLounger~~^SM ~~electric all-recliner seating, our proprietary~~~~Ultra~~~~Screen DLX® and~~~~Super~~~~Screen DLX~~^SM PLF screens and our unique food and beverage outlets described above, particularly at our Marcus Wehrenberg theatres. We also believe that we continue to recognize the benefits of our customer loyalty program, introduced in March 2014 and which now has nearly three million members.
2019. Attendance and admission revenues increased during ~~eight of the 13 weeks of the third quarter of fiscal 2018~~July and September 2019 and decreased during August 2019 compared to the comparable weeks during the third quarter of fiscal 2017, with the majority of the increases occurring in July and August, led by the strong carryover of two films that opened during the fiscal 2018 second quarter,~~Incredibles 2~~ ~~and~~~~Jurassic World: Fallen Kingdom~~~~, and stronger films in August compared to a relatively weak film slate during August 2017. Conversely, last year’s top film,~~It, opened in September, creating a very challenging comparison in September 2018. We also believe that the film mix during the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017 may have had a negative impact on our comparative performance versus the overall industry numbers, particularly during August and September. One of the top films during those two months,~~Crazy Rich Asians~~, performed extremely well on the east and west coasts, but generally underperformed in our Midwestern markets. We also believe that the fact that the major league baseball teams in three of our key markets, Milwaukee, Chicago and St. Louis, were competing for the playoffs during the final month of their season, September 2018, had a negative impact on our attendance compared to the industry as a whole.prior year periods.
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Our highest grossing films during the fiscal ~~2018~~2019 third quarter ~~were~~included~~Incredibles 2~~The Lion King,~~Jurassic World: Fallen Kingdom~~Spider-Man: Far From Home,~~Ant-Man and the Wasp~~Toy Story 4,~~Mission: Impossible – Fallout~~It Chapter Two and~~Hotel Transylvania 3: Summer Vacation~~Fast and Furious Presents: Hobbs & Shaw. The film slate during the third quarter of fiscal ~~2018~~2019 was weighted ~~slightly less~~significantly more towards ~~strong~~ blockbuster movies compared to the prior year, as evidenced by the fact that our top five films during our fiscal ~~2018~~2019 third quarter accounted for ~~37%~~57% of our total ~~admission revenues,~~box office results, compared to ~~48%~~38% for the top five films during the third quarter of fiscal ~~2017,~~2018, both expressed as a percentage of the total admission revenues for the period. ~~Under normal circumstances, this reduced~~This increased reliance on blockbuster films during the fiscal ~~2018 period should have~~2019 third quarter had the effect of ~~reducing~~increasing our film rental costs during the period, ~~but~~ as ~~noted above, this was not~~generally the ~~case during~~better a particular film performs, the ~~third~~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 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 quarter of fiscal ~~2018 due~~2019, we introduced our Magical Movie Rewards^® loyalty program at all Movie Tavern locations. Data available to us for prior year performance of the ~~unusual change in~~Movie Tavern theatres indicates that these theatres have outperformed the ~~film product mix~~national box office on a relative basis by an increasing percentage during each of the first, second and third quarters of fiscal 2019 compared to the ~~prior year.~~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 ~~2018~~2019 has ~~through the date of this report, produced admission revenues greater~~started off slightly worse than the same period of fiscal ~~2017.~~2018. Top performing films during this ~~period have~~period-to-date included ~~films such as~~~~Venom~~Joker,~~A Star is Born~~The Addams Family,~~Halloween~~Maleficent: Mistress of Evil, and~~Bohemian Rhapsody~~Terminator: Dark Fate. Other films scheduled to be released during the ~~traditionally busy November and December time period~~fiscal 2019 fourth quarter that may generate substantial box office interest include~~Dr. Suess’ The Grinch~~Doctor Sleep,~~Fantastic Beasts: The Crimes of Grindelwald~~Ford V. Ferrari,~~Ralph Breaks the Internet: Wreck-It~~,~~Creed~~Frozen II,~~Mary Poppins Returns~~A Beautiful Day in the Neighborhood,~~Bumblebee~~,~~Aquaman~~Jumanji: The Next Level and~~Holmes and Watson~~Cats. ~~Comparisons to last year’s December~~The most anticipated film ~~slate may be challenging due to~~during the ~~strong performance~~fourth quarter of ~~the films~~fiscal 2019 isStar Wars: The ~~Last Jedi~~Rise of Skywalker~~and~~~~Jumanji: Welcome to~~, which will mark the ~~Jungle~~~~during December 2017. We also have seen some negative impact on October 2018 attendance in our Milwaukee market due to~~end of the ~~impact of playoff baseball.~~most recent trilogy. 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 ~~film~~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 the fourth 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 ~~first three quarters~~third quarter of fiscal ~~2018~~2019 with a total of ~~884~~1,092 company-owned screens in 6789 theatres and 6 managed screens in one theatre, compared to 884 company-owned screens in 67 theatres and 116 managed screens in ~~two theatres~~one theatre at the end of the ~~first three quarters~~third quarter of fiscal ~~2017. We~~2018. In addition to the screens added due to the Movie Tavern acquisition, we opened aone new ~~10-screen~~UltraScreen DLX^® at an existing Marcus Wehrenberg theatre ~~in Shakopee, Minnesota in April 2017 and a new eight-screen all in-theatre dining theatre, branded~~~~BistroPlex~~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 ~~Greendale, Wisconsin in late June 2017.~~our fiscal 2019 fourth quarter, we completed the addition of DreamLoungers to another Movie Tavern theatre and another Marcus Wehrenberg theatre. We ~~ceased managing one five-screen theatre~~converted 11 Movie Tavern auditoriums to ourSuperScreen DLX^® concept during the second quarter of fiscal ~~2018~~2019 and ~~we closed~~converted 9 Movie Tavern auditoriums and ~~sold one eight-screen budget-oriented theatre during the second quarter of fiscal 2017.~~
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~~We converted~~ one Marcus Wehrenberg ~~theatre~~auditorium to all-DreamLounger recliner seating during the first quarter of fiscal 2018, four more theatres, including one Marcus Wehrenberg theatre, to all-DreamLounger recliner seating during the second quarter of fiscal 2018, and one theatre to all-DreamLounger recliner seatingourSuperScreen DLX concept during the third quarter of fiscal ~~2018.~~2019. We ~~are currently in the process of converting one more theatre~~expect to ~~all-DreamLounger recliner seating, with completion expected~~convert three additional auditoriums to our proprietary PLF concepts during the fourth quarter of fiscal ~~2018. We opened~~2019, including two ~~new~~~~Zaffiro’s Express~~ ~~outlets and one new~~~~Take Five Lounge~~ ~~outlet during the second quarter of fiscal 2018.~~Movie Tavern auditoriums. We also ~~converted five existing screens to~~~~Ultra~~~~Screen~~opened a new eight-screen Movie Tavern by Marcus theatre in Brookfield, Wisconsin early in our fiscal 2019 fourth quarter which includes DreamLounger recliner seating and oneSuperScreen DLX ~~auditoriums during the second quarter of fiscal 2018 and one existing screen to a~~~~Super~~~~Screen DLX auditorium during the third quarter of fiscal 2018. We have also begun construction on our second~~~~BistroPlex~~ ~~to be located in Brookfield, Wisconsin.~~
On November 1, 2018, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with VSS-Southern Theatres LLC, Movie Tavern, Inc., Movie Tavern Theatres, LLC and TGS Beverage Company, LLC (collectively, “Sellers”) pursuant to which we will acquire substantially all of the assets and assume certain limited liabilities of Sellers’ Movie Tavern branded movie theatre business (the “Movie Tavern Business”). The Movie Tavern Business consists of 22 dine-in theatres located in Texas, Pennsylvania, Georgia, Louisiana, New York, Colorado, Arkansas, Kentucky and Virginia.
The purchase price for the Movie Tavern Business consists of $30 million in cash, subject to certain adjustments, and 2,450,000 shares of our common stock. We will finance the cash portion of the purchase price from existing sources of cash. The transaction is expected to close in the first quarter of fiscal 2019. Completion of the transaction is subject to certain customary closing conditions and approvals, including, among others, early termination or expiration of the applicable waiting period under the Hart-Scott-Rodino Act. 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.
There are representations and warranties contained in the Purchase Agreement which were made by the parties to each other as of specific dates. The assertions embodied in these representations and warranties were made solely for purposes of the Purchase Agreement and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating its terms. Moreover, certain representations and warranties may not be accurate or complete as of any specified date because they are subject to a contractual standard of materiality that is different from certain standards generally applicable to shareholders or were used for the purpose of allocating risk between the parties rather than establishing matters as facts. Based upon the foregoing reasons, investors should not rely on the representations and warranties as statements of factual information.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is filed as Exhibit 2.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.auditorium.

Hotels and Resorts

The following table sets forth revenues, operating income and operating margin for our hotels and resorts division for the third quarter and first three quarters of fiscal ~~2018~~2019 and fiscal ~~2017~~2018 (in millions, except for variance percentage and operating margin):

Third Quarter First Three Quarters Third Quarter First Three Quarters
Variance Variance Variance Variance
F2018 F2017 Amt. Pct. F2018 F2017 Amt. Pct. F2019 F2018 Amt. Pct. F2019 F2018 Amt. Pct.
Revenues $ 75.5 $ 71.9 $ 3.6 4.9 % $ 198.4 $ 190.9 $ 7.5 3.9 % $ 74.6 $ 75.5 $ (0.9 ) -1.2 % $ 199.6 $ 198.4 $ 1.2 0.6 %
Operating income 12.0 9.7 2.3 24.5 % 15.7 12.8 2.9 22.9 % 10.6 12.0 (1.4 ) -12.0 % 11.4 15.7 (4.3 ) -27.3 %
Operating margin (% of revenues) 15.9 % 13.4 % 7.9 % 6.7 % 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 quarter and first three quarters of fiscal ~~2018~~2019 and fiscal ~~2017~~2018 (in millions, except for variance percentage):

Third Quarter First Three Quarters
Variance Variance
F2018 F2017 Amt. Pct. F2018 F2017 Amt. Pct.
Room revenues $ 34.5 $ 32.8 $ 1.7 5.1 % $ 84.2 $ 82.8 $ 1.4 1.7 %
Food/beverage revenues 19.3 18.6 0.7 3.6 % 54.0 52.5 1.5 2.8 %
Other revenues 12.8 12.4 0.4 3.1 % 35.5 33.8 1.7 4.9 %
66.6 63.8 2.8 4.3 % 173.7 169.1 4.6 2.7 %
Cost reimbursements 8.9 8.1 0.8 10.1 % 24.7 21.8 2.9 13.4 %
Total revenues $ 75.5 $ 71.9 $ 3.6 4.9 % $ 198.4 $ 190.9 $ 7.5 3.9 %
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 %

Division revenues decreased during the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018 due entirely to variations in cost reimbursements from managed properties. Division revenues increased during the 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 the former InterContinental Milwaukee hotel was closed during the majority of the first six months of fiscal 2019 as it underwent 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 quarter and first three quarters of fiscal 2019 increased by 1.7% and 2.7%, respectively, compared to the third 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.

~~Division~~Room revenues decreased during the third quarter and first three quarters of fiscal 2019 compared to the third quarter and first three quarters of fiscal 2018 due entirely to the closing of the InterContinental hotel and its reopening as a new independent hotel, partially offset by increased revenue per available room, or RevPAR, at our remaining seven company-owned hotels. Excluding the Saint Kate, room revenues during the third quarter and first three quarters of fiscal 2019 increased by 0.7% and 1.1%, respectively, compared to the third 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. Food and beverage revenues increased during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017 due to increased room revenues,~~2018 despite having a closed hotel for most of the first half of fiscal 2019. Excluding the Saint Kate, food and beverage revenues other revenues and increased cost reimbursements from our managed hotels. Room revenues increased due primarily to increased group business during the fiscal 2018 periods compared to the fiscal 2017 periods. Food and beverage revenues increased during the first three quarters of fiscal 2018 primarily due to our~~SafeHouse~~ restaurant and bar in Chicago, Illinois, which opened on March 1, 2017. Other revenues increased during the fiscal 2018 periods due to increased management fees and rental income. Cost reimbursements, described above, also increased during the third quarter and first three quarters of fiscal ~~2018~~2019 increased by 3.0% and 4.0%, respectively, compared to the third quarter and first three quarters of fiscal ~~2017~~2018, due primarily to increased banquet and catering revenues, and once again despite the negative impact from our Hilton Madison hotel while it was under renovation. Other revenues increased during the first three quarters of fiscal 2019 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 of fiscal 2019 compared to the first three quarters of fiscal 2018 due to an increase in the number of management contracts in this division.

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Our hotels and resorts division operating income decreased and operating margin ~~increased~~declined during the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017~~2018 due ~~in part~~entirely to $1.6 million and $5.5 million, respectively, of preopening expenses and initial startup losses related to the closing and 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 ~~management fees, improved performance at several owned hotels~~revenues and ~~overall strong~~a continued focus on cost ~~control management. In addition, comparisons to the fiscal 2017 periods were also favorably impacted by~~controls and operating efficiency and was achieved despite the fact that the ~~prior year~~renovation at the Hilton Madison hotel negatively impacted our operating results ~~included preopening expenses~~during the fiscal 2019 periods.

Initial guest and ~~startup operating losses related~~community reaction to the new~~SafeHouse~~ ~~Chicago.~~ 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 quarter and first three quarters of fiscal ~~2018~~2019 and fiscal ~~2017,~~2018, 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:

Third Quarter⁽¹⁾ First Three Quarters⁽¹⁾
Variance Variance
F2018 F2017 Amt. Pct. F2018 F2017 Amt. Pct.
Occupancy pct. 84.1 % 82.0 % 2.1 pts 2.6% 76.2 % 76.2 % - pts - %
ADR $ 168.58 $ 164.47 $ 4.11 2.5% $ 151.62 $ 149.75 $ 1.87 1.2 %
RevPAR $ 141.81 $ 134.85 $ 6.96 5.2% $ 115.48 $ 114.05 $ 1.43 1.3 %
                      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 ~~eight~~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 was closed for the majority of the first half of fiscal 2019 and was not comparable to the prior year stabilized branded hotel during the third quarter of fiscal 2019.

RevPAR increased at ~~all eight~~the three largest of our seven comparable company-owned properties during both the third quarter and first three quarters of fiscal ~~2018~~2019 compared to the third quarter and first three quarters of fiscal ~~2017 and four~~2018. As noted above, our Hilton Madison hotel was undergoing a major renovation during the first half of fiscal 2019, negatively impacting our ~~eight~~overall operating statistics. Excluding the Hilton Madison, our remaining six comparable company-owned ~~properties~~hotels experienced a RevPAR increase of 2.8% during the first three quarters of fiscal ~~2018~~2019 compared to the ~~first three quarters of fiscal 2017.~~prior year period. According to data received from Smith Travel Research and compiled by us in order to evaluate our fiscal ~~2018~~2019 third quarter and first three quarters results, comparable “upper upscale” hotels throughout the United States experienced an increase in RevPAR of ~~2.1%~~1.4% and 1.0%, respectively, during ~~both~~ our fiscal 2019 third quarter and first three quarters ~~of fiscal 2018~~ compared to the same periods 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 in RevPAR of ~~6.5%~~3.2% and ~~2.5%~~3.6%, respectively, during our third quarter and first three quarters of fiscal ~~2018~~2019 compared to the fiscal ~~2017~~2018 comparable periods.

~~We believe~~An increase in group business at several of our hotels during the fiscal 2019 third quarter compared to the prior year period contributed to our increased ~~occupancy percentage~~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. Four of our seven comparable company-owned hotels (including the Hilton Madison, but excluding the Saint Kate) reported increased ADR during the third quarter and first three quarters of fiscal 2019 compared to the third quarter and first three quarters of fiscal 2018.
Looking to future periods, although our company-owned hotels experienced a slight decrease in group bookings during the third quarter of fiscal ~~2018~~2019 compared to the ~~third quarter of fiscal 2017, along with the resulting RevPAR outperformance versus the industry, was due primarily to increased group business. We also believe the~~ same baseball dynamic that negatively impacted our theatre business may have resulted in increased revenues for our Milwaukee hotels. We believe our slight RevPAR underperformance of our competitive sets during the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017 was likely due to the fact that several hotels in our competitive sets had favorable comparisons to the priorperiod last year, due to renovations and other unusual circumstances. Seven of our eight company-owned hotels reported increased ADR during the fiscal 2018 third quarter compared to the third quarter of fiscal 2017 and five of our eight company-owned hotels reported increased ADR during the first three quarters of fiscal 2018 compared to the first three quarters of fiscal 2017.
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~~Looking to future periods, as of the date of this report,~~ our group room revenue bookings for ~~the remaining period~~future periods in fiscal ~~2018~~2019 and fiscal 2020 - commonly referred to in the hotels and resorts industry as “group pace” - is running ~~slightly~~ ahead of our group room revenue bookings for ~~the remaining period of fiscal 2017~~future periods last year at this time. ~~In addition, our group~~Banquet and catering revenue pace for future periods in fiscal 2019 and fiscal 2020 is also ~~running~~currently ahead of where we were last year at this ~~time for fiscal 2018. The impact of playoff baseball in Milwaukee also benefitted our October 2018 hotel results.~~same time.

~~We generally expect our modestly favorable revenue trends to continue in future periods~~Nationally, the pace of RevPAR growth has been declining over the past several years and ~~to track or exceed the overall industry trends, particularly in our respective markets. Many~~many published reports by those who closely follow the hotel industry ~~including Smith Travel Research, continue to~~ suggest that the United States lodging industry will ~~continue to achieve slow but steady~~experience very limited overall growth in RevPAR ~~during the remaining period of 2018~~in calendar 2019 and ~~throughout 2019. There also appears to be~~calendar 2020, with some improvement in sentiment regarding the positive impact that recent regulatory and tax reforms are having on our business customers, which may be contributing to our improved group pace and we hope will result in increased business travel in the future.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 hotel revenues have historically tracked very closely with traditional macroeconomic statistics such as the Gross Domestic Product. We also continue to monitor hotel supply in our markets, as increased supply without a corresponding increase in demand may have a negative impact on our results. Several of our markets, including Oklahoma City, Oklahoma, Chicago, Illinois and 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 awarded the Democratic National Convention in the summer of 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 to have a positive long-term impact on the overall market. 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 of fiscal 2019 benefited from three management contracts added during fiscal 2018 – the Murieta Inn and Spa in Rancho Murieta, California (added January 2018), along with the DoubleTree by Hilton Hotel El Paso Downtown (added April 2018) and Courtyard by Marriott El Paso Downtown/Convention Center (added August 2018), both in El Paso, Texas. In addition, toon April 1, 2019, we assumed management of the ~~fact that~~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 ~~began~~ceased managing the ~~new Omaha Marriott Downtown at The Capitol District hotel~~Heidel House Resort & Spa in ~~Omaha, Nebraska and~~Green Lake, Wisconsin, after the owners of this resort decided to close this property permanently. Early in our fiscal 2019 third quarter, the owners of the Sheraton Chapel Hill Hotel in Chapel Hill, North Carolina ~~during~~sold the ~~second half~~hotel, and as a result our contract to manage this hotel was terminated. As of ~~fiscal 2017,~~the date of this filing, our current portfolio of hotels and resorts division operating results are beginning to show the benefits and should benefit in future periods from three new management contracts that we have recently obtained. In January 2018, we commenced management of the newly-opened Murieta Inn and Spa in Rancho Murieta, California. In April 2018, we commenced management of the DoubleTree by Hilton Hotel El Paso Downtown in El Paso, Texas. In August 2018, we commenced management of the newly opened Courtyard by Marriott El Paso Downtown/Convention Center. These new management contracts have increased our portfolio to 21includes 20 owned and managed properties across the country.

~~Conversely,~~Comparisons of hotels and resorts division operating income during the fourth quarter of fiscal ~~2017, we ceased management of the Sheraton Madison Hotel in Madison, Wisconsin and The Westin Atlanta Perimeter North in Atlanta, Georgia due~~2019 to the ~~sale~~prior year same period will benefit from the fact that we incurred approximately $500,000 of ~~these properties. The loss~~preopening expenses and $3.7 million in accelerated depreciation during the fourth quarter of ~~these management contracts has partially offset~~fiscal 2018 related to the ~~benefits~~conversion of ~~the new management contracts described above. The timing and possible disruption of business from our planned renovations at~~ the InterContinental Milwaukee hotel ~~and~~to the ~~Hilton Madison~~Saint Kate. Conversely, as described above, we anticipate that we may incur additional initial start-up losses at ~~Monona Terrace may also have a slight negative impact on our operating results~~the Saint Kate of ~~those two hotels~~approximately $1 million during the ~~remainder~~fourth quarter of fiscal ~~2018 and first half~~2019 compared to the results last year of the stabilized branded hotel that it replaced, negatively impacting fiscal ~~2019.~~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. ~~We will consider many factors as we actively review~~The extent of any impact from these opportunities ~~to execute this strategy, including income tax considerations,~~would likely depend upon the ability to retain management, pricing and individual market considerations. Execution of this strategy is also dependent upon a favorable hotel transactional market. In addition, we continue to explore potential growth opportunities. The timing and nature of the ~~opportunities may vary and include pure~~growth opportunity (pure management ~~contracts,~~contract, management ~~contracts~~contract with equity, ~~and~~ joint venture ~~investments.~~investment, or other opportunity) or divestiture (management retained, equity interest retained, etc.).
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LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our movie theatre and hotels and resorts businesses 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. We believe that these relatively consistent and predictable cash sources, as well as the availability of approximately ~~$108~~$110 million of unused credit lines as of the end of our fiscal ~~2018~~2019 third quarter, will be adequate to support the ongoing operational liquidity needs of our businesses during the remainder of fiscal ~~2018.~~2019.

Financial Condition

Net cash provided by operating activities totaled $86.0 million during the first three quarters of fiscal 2019, compared to $77.1 million during the first three quarters of fiscal ~~2018, compared to $50.9 million during the first three quarters of the fiscal 2017.~~2018. The ~~$26.2~~$8.9 million increase in cash provided by operating activities was due primarily to ~~increased net earnings and depreciation and amortization, as well as~~ the favorable timing in the payment of accounts payable and the collection of ~~accounts and notes receivable and payment of income taxes,~~other assets, partially offset by the unfavorable timing in the payment of ~~accounts payable~~income taxes and other accrued liabilities during the first three quarters of fiscal ~~2018 compared to the first three quarters of fiscal 2017.~~2019.

Net cash used in investing activities during the first three quarters of fiscal ~~2018~~2019 totaled ~~$46.1~~$86.2 million, compared to ~~$82.1~~$46.1 million during the first three quarters of fiscal ~~2017.~~2018. The ~~decrease~~increase in net cash used in investing activities of $40.1 million was primarily the result of ~~decreased capital expenditures during~~ the ~~first three quarters of fiscal 2018 compared to~~$30.3 million cash consideration in the ~~first three quarters of fiscal 2017. Total cash capital expenditures (including normal continuing capital maintenance~~Movie Tavern acquisition and renovation projects) totaled $45.1 million during the first three quarters of fiscal 2018 compared to $87.3 million during the first three quarters of fiscal 2017. Approximately $23.5 million of our capital expenditures during the first three quarters of fiscal 2017 were related to the development of the previously-described new theatres, accounting for over one-half of the decreasean increase in capital ~~expenditures during the fiscal 2018 period.~~expenditures. We did not incur any acquisition-related capital expenditures during the first three quarters of fiscal ~~2018 or~~2018. An increase in other assets primarily related to development expenditures of a previously-described new theatre (that will subsequently be reimbursed by the landlord) also contributed to the increase in net cash used in investing activities during the first three quarters of fiscal ~~2017.~~2019 compared to the first three quarters of fiscal 2018. Total cash capital expenditures (including normal continuing capital maintenance and renovation projects) totaled $50.1 million during the first three quarters of fiscal 2019 compared to $45.1 million during the first three quarters of fiscal 2018.

Fiscal 2019 first three quarters cash capital expenditures included approximately $21.8 million incurred in our theatre division, including costs associated with the addition of DreamLounger recliner seating and newUltraScreen andSuperScreen DLX auditoriums to existing theatres. We also incurred capital expenditures in our hotels and resorts division during the first three quarters of fiscal 2019 of approximately $28.3 million, consisting primarily of costs associated with the renovation of the Saint Kate and Hilton Madison hotels, 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, newUltraScreen andSuperScreen DLX auditoriums and newZaffiro’s Express andTake Five Loungeoutlets 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. Fiscal 2017 first three quarters cash capital expenditures included approximately $69.5 million incurred in our theatre division, including previously-described new theatre development costs and costs associated with the addition of DreamLounger recliner seating,~~Super~~~~Screen DLX auditorium conversions and new~~~~Zaffiro’s Express~~ ~~and~~~~Reel Sizzle~~ outlets to existing theatres. We also incurred capital expenditures in our hotels and resorts division during the first three quarters of fiscal 2017 of approximately $17.5 million, including costs associated with the development of our new~~SafeHouse~~ ~~Chicago location and the development of new villas at the Grand Geneva Resort & Spa.~~
37

Net cash used in financing activities during the first three quarters of fiscal ~~2018~~2019 totaled ~~$39.1~~$9.2 million, compared to ~~net cash provided by financing activities of $37.0~~$39.1 million during the first three quarters of fiscal ~~2017.~~2018. We used excess cash during both periods 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. We also used borrowings from our revolving credit facility to fund the cash consideration in the Movie Tavern acquisition. As a result, we added ~~$159.0~~$246.0 million of new short-term borrowings and we made $215.0 million of repayments on short-term borrowings during the first three quarters of fiscal 2019 (net increase in borrowings on our credit facility of $31.0 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) compared to $254.0 million of new short-term borrowings and $236.5 million of repayments on short-term borrowings made during the first three quarters of fiscal 2017 (net increase in borrowings on our credit facility of $17.5 million).

We did not issue any new long-term debt during either the first three quarters of fiscal 2019 or fiscal 2018. ~~Conversely, proceeds from the issuance of~~Principal payments on long-term debt ~~totaled $65.0~~were $24.2 million during the first three quarters of fiscal ~~2017~~2019 and included the issuance of $50 million of senior notes. In addition, we repaid a mortgage note that matured in January 2017 with a balance of $24.2 million as of December 29, 2016 during the first three quarters of fiscal 2017 and replaced it with borrowings under our revolving credit facility and the issuancerepayment of a ~~$15.0~~$14.6 million mortgage note ~~bearing interest at LIBOR plus 2.75%, requiring monthly principal and interest~~on a hotel, compared to payments ~~and maturing in fiscal 2020. Principal payments on long-term debt were~~of $11.7 million during the first three quarters of fiscal ~~2018~~2018. Our debt-to-capitalization ratio (excluding our finance and operating lease obligations) was 0.28 at September 26, 2019, compared to ~~$35.9~~0.33 at December 27, 2018.

We repurchased approximately 30,000 shares of our common stock for approximately $1.1 million in conjunction with the exercise of stock options during the first three quarters of fiscal ~~2017 (including the mortgage note repayment described above). Our debt-to-capitalization ratio (excluding our capital lease obligations) was 0.36 at September 27, 2018,~~2019, compared to ~~0.40 at December 28, 2017.~~
~~We repurchased approximately~~ 83,000 shares ~~of our common stock~~repurchased for approximately $2.9 million in conjunction with the exercise of stock options during the first three quarters of fiscal ~~2018, compared to 29,000 shares repurchased for approximately $850,000 in conjunction with the exercise of stock options during the first three quarters of fiscal 2017.~~2018. As of September ~~27, 2018,~~26, 2019, approximately 2.8 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.

In conjunction with the Movie Tavern 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). 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 of fiscal ~~2018~~2019 totaled ~~$12.3~~$14.5 million compared to dividend payments of ~~$10.1~~$12.3 million during the first three quarters of fiscal ~~2017.~~2018. The increase in dividend payments was the result of an increased number of outstanding shares and a ~~20.0%~~6.7% increase in our regular quarterly dividend payment rate initiated in March ~~2018.~~2019.

We believe our total capital expenditures for fiscal ~~2018~~2019 will ~~approximate $55-~~be approximately $60-$6570 million, barring our pursuance of any growth opportunities that could arise in the remaining months and depending upon the timing of our payments on several of the various projects incurred by our two divisions. Some of the payments on projects undertaken during fiscal ~~2018~~2019 may carry over to fiscal ~~2019.~~2020. 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.

38
Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have not experienced any material changes in our market risk exposures since December ~~28, 2017.~~27, 2018.

Item 4. Controls and Procedures

a.       ~~Evaluation of disclosure 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.
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~~

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.
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. Risk Factors

Risk factors relating to us are contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December ~~28, 2017.~~27, 2018. No material change to such risk factors has occurred during the 39 weeks ended September ~~27, 2018.~~26, 2019.

39
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 of stock options and the purchase of shares in the open market and pursuant to the publicly announced repurchase authorization described below.
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 29 – July 26 1,173 $ 33.31 1,173 2,837,624
July 27 – August 30 50,924 37.51 50,924 2,786,700
August 31 – September 27 – – – –
Total 52,097 $ 37.42 52,097 2,786,700
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 ~~27, 2018,~~26, 2019, 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 ~~27, 2018,~~26, 2019, we had repurchased approximately 8.9 million 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. Mine Safety Disclosures

Not applicable.

40

Item 6. Exhibits

~~2.1~~ Asset Purchase Agreement, dated as of November 1, 2018, by and among MMT Texnv, LLC, MMT Lapagava, LLC, The Marcus Corporation, Movie Tavern, Inc., Movie Tavern Theaters, LLC, TGS Beverage Company, LLC, and VSS-Southern Theatres LLC. [Schedules and exhibits have been omitted and The Marcus Corporation agrees to furnish supplementally to the Securities and Exchange Commission a Copy of any omitted schedules and exhibits upon request.
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 The following materials from The Marcus Corporation’s Quarterly Report on Form 10-Q for the quarter ended September ~~27, 2018~~26, 2019 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Condensed Notes to Consolidated Financial Statements.

41

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 ~~6, 2018~~5, 2019 By: /s/ Gregory S. Marcus
Gregory S. Marcus
President and Chief Executive Officer

DATE:  November ~~6, 2018~~5, 2019 By: /s/ Douglas A. Neis
Douglas A. Neis
Executive Vice President, Chief Financial
Officer and Treasurer
~~S-1~~

	39 Weeks Ended
(in thousands)	September 27, 2018			September 28, 2017

OPERATING ACTIVITIES:
Net earnings	$	44,741		$	30,060
Adjustments to reconcile net earnings to net cash provided by operating activities:
Earnings on investments in joint ventures		(282	)		(75	)
Distributions from joint ventures		65			351
Loss on disposition of property, equipment and other assets		767			420
Amortization of favorable lease right		250			250
Depreciation and amortization		42,899			37,544
Amortization of debt issuance costs		216			209
Shared-based compensation		1,950			1,867
Deferred income taxes		1			4,231
Deferred compensation and other		2,949			1,682
Contribution of the Company’s stock to savings and profit-sharing plan		1,130			1,024
Changes in operating assets and liabilities:
Accounts and notes receivable		1,224			(7,896	)
Other current assets		(1,793	)		(2,220	)
Accounts payable		(18,620	)		1
Income taxes		12,749			(8,686	)
Taxes other than income taxes		(1,963	)		286
Accrued compensation		1,105			(1,036	)
Other accrued liabilities		(10,318	)		(7,076	)
Total adjustments		32,329			20,876
Net cash provided by operating activities		77,070			50,936

INVESTING ACTIVITIES:
Capital expenditures		(45,144	)		(87,265	)
Proceeds from disposals of property, equipment and other assets		86			4,558
Decrease (increase) in other assets		(743	)		584
Contribution in joint venture		(295	)		—
Net cash used in investing activities		(46,096	)		(82,123	)

FINANCING ACTIVITIES:
Debt transactions:
Proceeds from borrowings on revolving credit facilities		159,000			254,000
Repayment of borrowings on revolving credit facilities		(177,000	)		(236,500	)
Proceeds from borrowings on long-term debt		—			65,000
Principal payments on long-term debt		(11,711	)		(35,894	)
Debt issuance costs		—			(370	)
Repayments of capital lease obligations		(1,375	)		(782	)
Equity transactions:
Treasury stock transactions, except for stock options		(2,566	)		(463	)
Exercise of stock options		6,902			2,083
Dividends paid		(12,277	)		(10,122	)
Distributions to noncontrolling interest		(65	)		—
Net cash provided by (used in) financing activities		(39,092	)		36,952

Net increase (decrease) in cash, cash equivalents and restricted cash		(8,118	)		5,765
Cash, cash equivalents and restricted cash at beginning of period		20,747			8,705
Cash, cash equivalents and restricted cash at end of period	$	12,629		$	14,470

Supplemental Information:
Interest paid, net of amounts capitalized	$	10,321		$	9,354
Income taxes paid (refunded)		(448	)		23,025
Change in accounts payable for additions to property and equipment		(9,813	)		8,942

	Interest Rate Swaps			Available for Sale Investments			Pension Obligation			Accumulated Other Comprehensive Loss
	(in thousands)
Balance at December 28, 2017	$	–		$	(11	)	$	(7,414	)	$	(7,425	)
Amount reclassified to retained earnings on December 29, 2017 in connection with the adoption of ASU No. 2016-01		–			11			–			11
Balance at December 29, 2017		–			–			(7,414	)		(7,414	)
Amortization of the net actuarial loss and prior service credit		–			–			340			340
Other comprehensive income before reclassifications		191			–			–			191
Amounts reclassified from accumulated other comprehensive loss		134	⁽¹⁾		–			–			134
Other comprehensive income		325			–			340			665
Balance at September 27, 2018	$	325		$	–		$	(7,074	)	$	(6,749	)

	13 Weeks Ended September 27, 2018		13 Weeks Ended September 28, 2017		39 Weeks Ended September 27, 2018		39 Weeks Ended September 28, 2017
	(in thousands, except per share data)
Numerator:
Net earnings attributable to
The Marcus Corporation	$	16,231	$	10,978	$	44,671	$	30,555
Denominator:
Denominator for basic EPS		28,180		27,825		28,028		27,773
Effect of dilutive employee stock options		638		525		606		637
Denominator for diluted EPS		28,818		28,350		28,634		28,410
Net earnings per share - basic:
Common Stock	$	0.60	$	0.41	$	1.65	$	1.14
Class B Common Stock	$	0.52	$	0.36	$	1.47	$	1.02
Net earnings per share - diluted:
Common Stock	$	0.56	$	0.39	$	1.56	$	1.08
Class B Common Stock	$	0.51	$	0.37	$	1.44	$	1.01

	Total Shareholders’ Equity Attributable to The Marcus Corporation			Noncontrolling Interests
	(in thousands)
Balance at December 28, 2017	$	445,024		$	100
Net earnings attributable to The Marcus Corporation		44,671			–
Net earnings attributable to noncontrolling interests		–			70
Distributions to noncontrolling interests		–			(65	)
Cash dividends		(12,277	)		–
Exercise of stock options		6,902			–
Savings and profit sharing contribution		1,130			–
Treasury stock transactions, except for stock options		(2,566	)		–
Share-based compensation		1,950			–
Cumulative effect of adopting ASU No. 2014-09, net of tax		(2,568	)		–
Other comprehensive income, net of tax		665			–
Balance at September 27, 2018	$	482,931		$	105

	Total Shareholders’ Equity Attributable to The Marcus Corporation			Noncontrolling Interests
	*(in thousands)*
Balance at December 29, 2016	$	390,112		$	1,535
Net earnings attributable to The Marcus Corporation		30,555			–
Net loss attributable to noncontrolling interests		–			(495	)
Cash dividends		(10,122	)		–
Exercise of stock options		2,083			–
Savings and profit sharing contribution		1,024			–
Treasury stock transactions, except for stock options		(463	)		–
Share-based compensation		1,867			–
Other comprehensive income, net of tax		147			–
Balance at September 28, 2017	$	415,203		$	1,040

	Balance at December 28, 2017		Cumulative Adjustment			Balance at December 29, 2017
	*(in thousands)*
Refundable income taxes	$	15,335	$	945		$	16,280
Other accrued liabilities		53,291		3,296			56,587
Deferred compensation and other		56,662		217			56,879
Retained earnings		403,206		(2,568	)		400,638

	For the 13 Weeks Ended September 27, 2018							For the 39 Weeks Ended September 27, 2018
	As Reported		ASU No. 2014-09 Impact			Adjusted⁽¹⁾		As Reported		ASU No. 2014-09 Impact			Adjusted⁽¹⁾
Revenues:
Theatre admissions	$	52,422	$	(605	)	$	53,027	$	185,035	$	(1,961	)	$	186,996
Theatre concessions		35,476		503			34,973		123,687		1,467			122,220
Food and beverage		19,333		3			19,330		53,972		23			53,949
Other revenues		19,813		904			18,909		59,362		3,609			55,753
Total revenues		170,599		805			169,794		532,088		3,138			528,950

Costs and expenses:
Theatre operations		48,644		165			48,479		164,452		479			163,973
Theatre concessions		10,168		159			10,009		35,105		469			34,636
Advertising and marketing		6,178		(496	)		6,674		17,317		(1,549	)		18,866
Other operating expenses		8,969		910			8,059		27,032		3,514			23,518
Total costs and expenses		148,186		738			147,448		463,552		2,913			460,639

Operating income		22,413		67			22,346		68,536		225			68,311
Income taxes		2,626		9			2,617		12,254		48			12,206
Net earnings attributable to The Marcus Corporation		16,231		58			16,173		44,671		177			44,494

	As Reported		ASU No. 2014-09 Impact			Adjusted⁽¹⁾
Refundable income taxes	$	3,531	$	945		$	2,586
Total current assets		57,368		945			56,423
Total assets		986,686		945			985,741
Other accrued liabilities		46,269		3,639			42,630
Total current liabilities		120,981		3,639			117,342
Deferred compensation and other		59,157		99			59,058
Retained Earnings		433,022		(2,793	)		435,815
Shareholders’ equity attributable to The Marcus Corporation		482,931		(2,793	)		485,724
Total equity		483,036		(2,793	)		485,829
Total liabilities and shareholders’ equity		986,686		945			985,741

13 Weeks Ended September 28, 2017	Theatres		Hotels/ Resorts		Corporate Items			Total
Revenues⁽¹⁾	$	90,273	$	71,952	$	150		$	162,375
Operating income (loss)		15,861		9,659		(3,657	)		21,863
Depreciation and amortization		8,399		4,512		82			12,993

39 Weeks Ended September 28, 2017	Theatres		Hotels/ Resorts		Corporate Items			Total
Revenues⁽¹⁾	$	296,636	$	190,903	$	432		$	487,971
Operating income (loss)		58,576		12,803		(11,894	)		59,485
Depreciation and amortization		24,000		13,270		274			37,544

	Third Quarter											First Three Quarters
							Variance											Variance
	F2018			F2017			Amt.		Pct.			F2018			F2017			Amt.			Pct.
Revenues	$	170.6		$	162.4		$	8.2		5.1	%	$	532.1		$	488.0		$	44.1			9.0	%
Operating income		22.4			21.9			0.5		2.5	%		68.5			59.5			9.0			15.2	%
Other income (expense)		(3.6	)		(4.1	)		0.5		13.9	%		(11.5	)		(10.9	)		(0.6	)		-6.3	%
Net earnings (loss) attributable to noncontrolling interests		-			(0.2	)		0.2		95.0	%		0.1			(0.5	)		0.6			114.1	%
Net earnings attributable to The Marcus Corp.	$	16.2		$	11.0		$	5.2		47.9	%	$	44.7		$	30.6		$	14.1			46.2	%

Net earnings per common share – diluted:	$	0.56		$	0.39		$	0.17		43.6	%	$	1.56		$	1.08		$	0.48			44.4	%

	Third Quarter												First Three Quarters											Third Quarter											First Three Quarters
							Variance												Variance											Variance											Variance
	F2018			F2017			Amt.			Pct.			F2018			F2017			Amt.		Pct.			F2019			F2018			Amt.		Pct.			F2019			F2018			Amt.			Pct.
Revenues	$	95.0		$	90.3		$	4.7			5.2	%	$	333.4		$	296.6		$	36.8		12.4	%	$	136.8		$	95.0		$	41.8		44.0	%	$	414.1		$	333.4		$	80.7			24.2	%
Operating income		14.5			15.9			(1.4	)		-8.9	%		66.3			58.6			7.7		13.2	%		16.8			14.5			2.3		16.5	%		57.7			66.3			(8.6	)		-13.1	%
Operating margin (% of revenues)		15.2	%		17.6	%								19.9	%		19.7	%							12.3	%		15.2	%							13.9	%		19.9	%

	Third Quarter⁽¹⁾											First Three Quarters⁽¹⁾
							Variance											Variance
	F2018			F2017			Amt.			Pct.		F2018			F2017			Amt.			Pct.
Occupancy pct.		84.1	%		82.0	%		2.1	pts		2.6%		76.2	%		76.2	%		-	pts		-	%
ADR	$	168.58		$	164.47		$	4.11			2.5%	$	151.62		$	149.75		$	1.87			1.2	%
RevPAR	$	141.81		$	134.85		$	6.96			5.2%	$	115.48		$	114.05		$	1.43			1.3	%

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 29 – July 26		1,173	$	33.31		1,173		2,837,624
July 27 – August 30		50,924		37.51		50,924		2,786,700
August 31 – September 27		–		–		–		–
Total		52,097	$	37.42		52,097		2,786,700

~~2.1~~	Asset Purchase Agreement, dated as of November 1, 2018, by and among MMT Texnv, LLC, MMT Lapagava, LLC, The Marcus Corporation, Movie Tavern, Inc., Movie Tavern Theaters, LLC, TGS Beverage Company, LLC, and VSS-Southern Theatres LLC. [Schedules and exhibits have been omitted and The Marcus Corporation agrees to furnish supplementally to the Securities and Exchange Commission a Copy of any omitted schedules and exhibits upon request.

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	The following materials from The Marcus Corporation’s Quarterly Report on Form 10-Q for the quarter ended September ~~27, 2018~~26, 2019 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Condensed Notes to Consolidated Financial Statements.

DATE: November ~~6, 2018~~5, 2019	By:	/s/ Gregory S. Marcus
		Gregory S. Marcus
		President and Chief Executive Officer


DATE: November ~~6, 2018~~5, 2019	By:	/s/ Douglas A. Neis
		Douglas A. Neis
		Executive Vice President, Chief Financial
		Officer and Treasurer