Exhibit 99.2
THE MARCUS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information is based on the historical financial statements of The Marcus Corporation (the “Company”), adjusted to reflect the sale of substantially all of the assets of the Company’s limited-service lodging division.
On July 14, 2004, the Company signed a definitive agreement to sell its limited-service lodging division to La Quinta Corporation for the then-announced price of approximately $395 million in cash, excluding certain joint ventures and subject to certain adjustments. On September 3, 2004, the Company completed the sale of the limited-service lodging division for a total purchase price of approximately $412 million in cash, subject to certain post-close adjustments. The increase in the purchase price from the initially announced price reflected the purchase by the buyer of three additional joint-venture properties that were previously excluded from the transaction. For purposes of these pro forma financial statements, the proceeds from the sale were assumed to be used to pay off the Company’s short-term borrowings, with the excess amount assumed to be invested in short-term investments throughout the fiscal year.
The unaudited Pro Forma Consolidated Statement of Earnings for the Company’s year ended May 27, 2004 gives effect to these transactions as if they had occurred as of May 30, 2003. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of May 27, 2004 gives effect to these transactions as if they had been completed as of May 27, 2004. The pro forma adjustments are described in the accompanying notes and are based upon currently available information and certain assumptions that management believes are reasonable.
The pro forma financial information does not purport to represent what the Company’s results of operations or financial condition would actually have been had these transactions in fact occurred on such dates or to project the Company’s results of operations or financial condition for any future date or period. The pro forma financial information should be read in conjunction with the consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’ most recent annual report on Form 10-K.
THE MARCUS CORPORATION
Unaudited Pro Forma Consolidated Statement of Earnings
For the Year Ended May 27, 2004
(in thousands, excet per share data)
| Historical
| Limited Service
Lodging
Division (1)
| Pro Forma
Adjustments
| Pro Forma
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Revenues: | | | | | | | | | | | | | | |
| Rooms and telephone | | | $ | 175,112 | | $ | (115,879 | ) | $ | -- | | $ | 59,232 | |
| Theatre admissions | | | | 101,144 | | | -- | | | -- | | | 101,144 | |
| Theatre concessions | | | | 46,696 | | | -- | | | -- | | | 46,696 | |
| Food and beverage | | | | 36,602 | | | -- | | | -- | | | 36,602 | |
| Other revenues | | | | 49,653 | | | (11,902 | ) | | -- | | | 37,751 | |
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| Total revenues | | | | 409,207 | | | (127,781 | ) | | -- | | | 281,426 | |
Costs and expenses: | | |
| Rooms and telephone | | | | 81,837 | | | (57,828 | ) | | -- | | | 24,009 | |
| Theatre operations | | | | 77,944 | | | -- | | | -- | | | 77,944 | |
| Theatre concessions | | | | 10,209 | | | -- | | | -- | | | 10,209 | |
| Food and beverage | | | | 29,058 | | | -- | | | -- | | | 29,058 | |
| Advertising and marketing | | | | 28,484 | | | (11,609 | ) | | -- | | | 16,875 | |
| Administrative | | | | 41,900 | | | (16,354 | ) | | 1,196 | (2) | | 26,742 | |
| Depreciation and amortization | | | | 46,036 | | | (19,587 | ) | | -- | | | 26,449 | |
| Rent | | | | 2,443 | | | (598 | ) | | 228 | (3) | | 2,072 | |
| Property taxes | | | | 15,338 | | | (7,132 | ) | | 65 | (3) | | 8,272 | |
| Preopening expenses | | | | 423 | | | (14 | ) | | 14 | (4) | | 423 | |
| Other operating expenses | | | | 22,111 | | | (838 | ) | | 134 | (3) | | 21,406 | |
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| Total costs and expenses | | | | 355,783 | | | (113,960 | ) | | 1,636 | | | 243,459 | |
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Operating income | | | | 53,424 | | | (13,821 | ) | | (1,636 | ) | | 37,967 | |
Other income (expense): | | |
| Investment income | | | | 1,738 | | | 51 | | | 2,320 | (5) | | 4,109 | |
| Interest expense | | | | (16,874 | ) | | 345 | | | 325 | (6) | | (16,205 | ) |
| Gain on disposition of property and equipment and investments in | | |
| joint ventures | | | | 2,174 | | | 604 | | | -- | | | 2,778 | |
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| | | | | (12,962 | ) | | 1,000 | | | 2,645 | | | (9,317 | ) |
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Earnings from continuing operations before income taxes | | | | 40,462 | | | (12,821 | ) | | 1,008 | | | 28,649 | |
| Income taxes | | | | 15,851 | | | (5,023 | ) | | (417 | ) (7) | | 10,411 | |
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| Earnings from continuing operations | | | $ | 24,611 | | $ | (7,798 | ) | $ | 1,425 | | $ | 18,238 | |
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Earnings per common share from continuing operations: | | |
| Basic | | | $ | 0.83 | | $ | (0.26 | ) | $ | 0.05 | | $ | 0.62 | |
| Diluted | | | $ | 0.82 | | $ | (0.26 | ) | $ | 0.05 | | $ | 0.61 | |
| Common shares outstanding - basic | | | | 29,630 | | | | | | | | | 29,630 | |
| Common shares outstanding - diluted | | | | 29,850 | | | | | | | | | 29,850 | |
See Notes to Unaudited Pro Forma Consolidated Statement of Earnings
THE MARCUS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
| (1) | Reflects the historical results of operations of the limited-service lodging division for the period indicated. |
| (2) | Reflects an estimate of certain corporate information technology costs and accounting shared services costs previously allocated to the limited-service lodging division that are assumed to remain subsequent to the sale. |
| (3) | Reflects rent related expenses previously allocated to the limited-service lodging division that are assumed to remain subsequent to the sale. |
| (4) | Reflects preopening costs associated with a Company-owned hotel that was not included in the transaction. |
| (5) | The majority of the Company’s long-term debt, consisting primarily of senior notes, cannot be paid down without the Company incurring a significant pre-payment penalty. As a result, this adjustment reflects the assumption that excess proceeds from the sale were invested in a short-term tax-free obligation investment account throughout the fiscal year. The tax-free interest rate used for this adjustment (0.82%) was obtained directly from the bank where funds are currently being held and represents the average rate available on this type of investment during the time period coinciding with the Company’s fiscal year. |
| (6) | Reflects the assumption that a portion of the proceeds from the sale were used to pay down short-term borrowings of the Company, consisting primarily of commercial paper. |
| (7) | Reflects income tax effect of pro forma adjustments of 39.2%, adjusted for the tax-free status of the assumed investments in Note (5) above. |
THE MARCUS CORPORATION
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of May 27, 2004
(in thousands)
| Historical (1)
| Sale of
Limited Service
Lodging
| Pro Forma
Adjustments
| Pro Forma
|
|---|
ASSETS | | | | | | | | | | | | | | |
| Current assets: | | |
| Cash and cash equivalents | | | $ | 9,469 | | $ | 318,685 | (2) | $ | (35,408 | ) (7)(8) | $ | 292,746 | |
| Accounts and notes receivable, net of reserves | | | | 8,340 | | | -- | | | -- | | | 8,340 | |
| Receivables from joint ventures, net of reserves | | | | 2,666 | | | (877 | ) (3) | | -- | | | 1,789 | |
| Real estate and development costs | | | | 5,811 | | | -- | | | -- | | | 5,811 | |
| Other current assets | | | | 6,438 | | | -- | | | -- | | | 6,438 | |
| Assets of discontinued operations | | | | 266,326 | | | (264,185 | ) (4) | | (1,186 | ) (7) | | 955 | |
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| Total current assets | | | | 299,051 | | | 53,623 | | | (36,594 | ) | | 316,080 | |
Property and equipment, net | | | | 396,551 | | | -- | | | -- | | | 396,551 | |
Other assets: | | |
| Investments in joint ventures | | | | 4,300 | | | -- | | | -- | | | 4,300 | |
| Goodwill | | | | 11,222 | | | -- | | | -- | | | 11,222 | |
| Other | | | | 33,745 | | | -- | | | -- | | | 33,745 | |
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| Total other assets | | | | 49,267 | | | -- | | | -- | | | 49,267 | |
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| TOTAL ASSETS | | | $ | 744,869 | | $ | 53,623 | | $ | (36,594 | ) | $ | 761,898 | |
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LIABILITIES AND SHAREHOLDERS' EQUITY | | |
| Current liabilities: | | |
| Notes payable | | | $ | 2,066 | | $ | -- | | $ | -- | | $ | 2,066 | |
| Accounts payable | | | | 15,621 | | | -- | | | -- | | | 15,621 | |
| Income taxes | | | | 1,311 | | | -- | | | -- | | | 1,311 | |
| Taxes other than income taxes | | | | 8,146 | | | -- | | | -- | | | 8,146 | |
| Accrued compensation | | | | 6,135 | | | -- | | | -- | | | 6,135 | |
| Other accrued liabilities | | | | 12,336 | | | -- | | | -- | | | 12,336 | |
| Current maturities of long-term debt | | | | 25,738 | | | -- | | | -- | | | 25,738 | |
| Liabilities of discontinued operations | | | | 16,723 | | | -- | | | (12,976 | ) (7) | | 3,747 | |
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| Total current liabilities | | | | 88,075 | | | -- | | | (12,976 | ) | | 71,352 | |
Long-term debt | | | | 207,282 | | | -- | | | (23,618 | ) (8) | | 183,664 | |
Deferred income taxes | | | | 40,410 | | | (21,506 | ) (5) | | -- | | | 18,904 | |
Deferred compensation and other | | | | 15,379 | | | -- | | | -- | | | 15,379 | |
Shareholders' equity | | | | 393,722 | | | 75,129 | (6) | | -- | | | 468,851 | |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | | $ | 744,869 | | $ | 53,623 | | $ | (36,594 | ) | $ | 758,151 | |
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See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
THE MARCUS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
| (1) | In accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the historical May 27, 2004 balance sheet of The Marcus Corporation has been restated to reflect the presentation of its limited-service lodging division as a discontinued operation. As a result, the assets and liabilities of the limited-service lodging division were separately classified as relating to discontinued operations. |
| (2) | Reflects the receipt of cash proceeds from the sale of substantially all of the assets of the limited-service lodging division, net of estimated transaction related costs and estimated taxes. The adjustment does not reflect any potential income tax deferrals that may be available to the Company at a later date, which if realized, would have the effect of increasing the net cash proceeds received. The likelihood of the Company realizing any such tax deferrals cannot be determined at this time. |
| (3) | Reflects the receipt of joint venture debt owed to the Company and assumed paid off in conjunction with the sale of certain joint ventures included in the transaction. |
| (4) | Reflects the decrease in assets resulting from the sale. |
| (5) | Reflects an estimated reduction in deferred income taxes related to the difference between the book and tax basis of the assets sold. The adjustment does not reflect any potential tax deferrals that could be available to the Company at a later date. |
| (6) | Reflects the estimated gain on sale of substantially all of the assets of the limited-service lodging division, net of taxes and subject to post-closing adjustments. |
| (7) | Reflects the elimination of all remaining assets and liabilities of the limited-service lodging division, with the exception of certain assets and liabilities related to joint venture hotels not included in the sale. |
| (8) | Reflects the assumption that proceeds from the sale were used to pay down short-term borrowings of the Company, consisting primarily of commercial paper. |
