THE MARCUS CORPORATION REPORTS INCREASED FISCAL 2008
REVENUES AND OPERATING INCOME
Both Marcus Theatres® and Marcus Hotels and Resorts contribute to the improvement
Milwaukee, Wis., July 24, 2008….. The Marcus Corporation (NYSE: MCS) today reported results for the fourth quarter and fiscal year ended May 29, 2008.
Fourth Quarter Fiscal 2008 Highlights
| • | Total revenues for the 13-week fourth quarter of fiscal 2008 were $89,463,000, compared to revenues of $92,201,000 for the 14-week fourth quarter of fiscal 2007. |
| • | Operating income was $9,288,000 for the 13-week fourth quarter of fiscal 2008, compared to operating income of $9,637,000 for the 14-week period in the prior year. |
| • | Net earnings were $4,030,000 or $0.14 per diluted common share for the 13-week fourth quarter of fiscal 2008, compared to net earnings of $5,471,000 or $0.18 per diluted common share for the 14-week fourth quarter of the prior year. |
| • | Last year’s results benefited from the additional 53rd week of operations (the 14-week quarter) that contributed approximately $9.5 million in revenues and $2.9 million in operating income to fourth quarter and fiscal 2007 results. Prior year results also benefited from historic tax credits related to the renovation of the Skirvin Hilton in Oklahoma City. |
Fiscal 2008 Highlights
| • | Total revenues were $371,075,000 for the 52-week fiscal 2008, a 13.3% increase from revenues of $327,631,000 for the 53-week fiscal 2007. |
| • | Operating income was $47,698,000 for the 52-week fiscal 2008, a 15.9% increase from operating income of $41,139,000 in the 53-week fiscal 2007. |
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| • | Net earnings were $20,486,000 or $0.68 per diluted common share for the 52-week fiscal 2008, compared to net earnings of $33,297,000 or $1.08 per diluted common share for the 53-week fiscal 2007. |
| • | In addition to the impact of the 53rd week, last year’s net earnings included pre-tax gains on the disposition of property, equipment and other assets of $14,541,000, or approximately $0.28 per diluted common share, related to the sale of surplus movie theatre and restaurant properties and development gains on the sale of units at the company’s condominium hotel project in Las Vegas. Prior year results also benefited from historic tax credits of approximately $0.25 per diluted common share related to the renovation of the Skirvin Hilton in Oklahoma City. |
“We are pleased to report double-digit increases in revenues and operating income over the prior year. This is especially significant in view of the fact that this was a 52-week fiscal year, compared to last year’s 53 weeks. New properties in both divisions were the major contributors to the improved performance,” said Stephen H. Marcus, chairman and chief executive officer of The Marcus Corporation.
Marcus noted that last year’s net earnings included $0.53 per diluted common share from gains and tax credits that the company did not have in fiscal 2008.
Marcus Theatres®
Marcus Theatres reported increased revenues and operating income for fiscal 2008, due primarily to the addition of 122 screens at 11 locations acquired from Cinema Entertainment Corporation in April 2007. An additional 83 screens at seven Nebraska locations acquired from Douglas Theatres on April 3, 2008 for approximately $40.5 million also contributed eight weeks of operating results to the division’s fourth quarter and fiscal 2008 results. “The integration of the Douglas Theatres locations went very smoothly and as we anticipated, these theatres are an excellent addition to our circuit,” said Marcus.
The extra week in last year’s fourth quarter included the traditionally strong Memorial Day holiday weekend and contributed approximately $5.3 million in revenues and $2.1 million in operating income to the division’s fiscal 2007 fourth quarter and year-end results.
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“In addition to the impact of the extra week in last year’s fourth quarter, we also had a difficult comparison in terms of film product. We had a somewhat lackluster March and April and we were up against three strong films in May of last year:Spider-Man 3, Shrek the Third andPirates of the Caribbean: Dead Man’s Chest. In fact, two of our top-five fiscal 2007 pictures were in the fourth quarter last year, compared to only one this year,” said Marcus.
The five top-performing films for Marcus Theatres in fiscal 2008 wereHarry Potter and the Order of the Phoenix, National Treasure: Book of Secrets, Iron Man, TransformersandAlvin and the Chipmunks.
“While the quality and quantity of the movies are the primary drivers behind Marcus Theatres’ results, we made good progress on our initiatives to expand ancillary revenues and broaden our audience base. We recently celebrated the one-year anniversary of the Marcus Majestic Cinema, our totally new entertainment concept in Brookfield, Wis. Several of the creative food and beverage concepts developed for this theatre are now being introduced into other locations. We are also generating additional revenues by providing film buying services for 177 screens at 18 locations operated by other owners. Including these theatres, we now buy and book films for 855 screens every week. We expanded our alternative programming capabilities with the installation of digital projectors. This digital network at 22 of our locations enables us to show live performances such as ‘The Metropolitan Opera Live in HD’ and concerts by stars like Celine Dion and Garth Brooks, which attract a wider audience. From sporting events to opera, this presents an opportunity for our audiences to enjoy unique live events from around the world,” said Marcus.
“On the technology front, we introduced digital 3D into our circuit during the year and rolled-out the technology into an additional 12 locations in time for the July 11, 2008 opening ofJourney to the Center of the Earth.The creative potential of this new entertainment format was demonstrated with the incredible success of theHannah Montana/Miley Cyrus: Best of Both Worlds Concert in February,” added Marcus.
“At this point in the summer, our comparable fiscal 2009 first quarter theatre performance is ahead of last year.The Dark Knight andMamma Mia!contributed to a record box office week, on the heels of a number of other summer hits includingSex and the City, Kung Fu Panda, Get Smart, Incredible Hulk, Wall-EandHancock.
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Rounding out the summer movie slate are other potential hits opening over the next few weeks, includingTheX-Files: I Want to Believe, Step Brothers, The Mummy: Tomb of the Dragon Emperor andPineapple Express. I am also pleased to report that our newly acquired theatres are performing as expected,” he added.
Marcus Hotels and Resorts
“Marcus Hotels and Resorts reported a 10.9% increase in revenues and a 36.5% increase in operating income for the year, driven by the addition of new properties and increased revenues from management contracts. Revenue per available room (RevPAR) for comparable company-owned properties increased 9.6% for the quarter and 7.2% for the full year,” said Marcus.
He noted that the improved performance of the company’s newest properties, including the InterContinental Milwaukee and the Skirvin Hilton in Oklahoma City, contributed to these strong results.
The division continued to move forward with its growth strategies in fiscal 2008. “We opened our newest managed property, the 256-room Hilton Minneapolis/Bloomington in the Twin Cities area in January. During the year, we were also selected to manage three very distinctive new properties that showcase the range of our capabilities. The first project is a luxury boutique hotel in Carmel, Indiana that will be the centerpiece of a master-planned city-center development. The second is the four-star Venturella Resort and Spa in Orlando that is currently undergoing an extensive $22 million renovation. The third new management contract is for the 7th Wave Resort, a $150 million water park project in the Providence, R.I. area that is expected to open in 2010. We are also providing preopening and technical services for all three new properties,” said Marcus.
“In addition to new projects, we also continue to invest in maintaining and enhancing our existing properties. We completed the renovation of the meeting space, guest rooms in the historic building and parking ramp at the Pfister Hotel in fiscal 2008. Capital expenditures for fiscal 2009 will include updating the guest rooms and other areas at the Grand Geneva Resort & Spa and the Hilton Milwaukee City Center,” said Marcus.
“The new projects added during the year, combined with our existing portfolio of 20 company-owned and managed properties, are helping to increase our visibility as a hotel management company experienced in
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diverse types of properties. Our successful relationships with a number of leading hotel investment companies and our well-established operations infrastructure are proving to be a competitive advantage for us in the market. We are also gaining traction with branded concepts we may introduce into additional new properties. These include the ChopHouse and Mason Street Grill restaurant concepts now at seven locations and our relaxing and rejuvenating WELL Spas, located in three of our properties,” Marcus noted.
“Looking ahead, a challenging hotel demand environment driven by current economic conditions will require our close attention in the coming months,” Marcus said.
Balance Sheet
Gregory S. Marcus, president of The Marcus Corporation, said the company repurchased a total of 828,000 common shares in fiscal 2008. During the year, the Board extended the share repurchase program by authorizing the purchase of an additional 2,000,000 shares of common stock. He also noted that during the fiscal 2008 fourth quarter, the company closed on $60 million in private placement senior notes, bearing interest at 5.89% to 6.55%, and amended its revolving credit facility, increasing its capacity to $175 million and extending its term for another five years.
“One of the core philosophies of our company is to continually invest in our businesses, in both good times and bad, to achieve steady long-term growth. The investments we made in our two businesses over the last several years were positive contributors to our fiscal 2008 performance. With our strong balance sheet and additional credit facilities, we are well positioned to pursue additional growth opportunities in the months and years ahead,” said Marcus.
Conference Call and Webcast
Marcus Corporation management will host a conference call today, July 24, 2008, at 10:00 a.m. Central/11:00 a.m. Eastern time to discuss the fourth quarter results. Interested parties can listen to the call live on the Internet through the investor relations section of the company’s Web site:www.marcuscorp.com, or by dialing 1-617-847-8704 and entering the passcode 89590193. Listeners should dial in to the call at least 5 – 10 minutes prior
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to the start of the call or should go to the Web site at least 15 minutes prior to the call to download and install any necessary audio software. The call will be available for telephone replay through Thursday, July 31, 2008 by dialing 1-888-286-8010 and entering the passcode 92433313. The Webcast of the conference call will be archived on the company’s Web site until the next earnings release.
About The Marcus Corporation
Headquartered in Milwaukee, Wis., The Marcus Corporation is a leader in the lodging and entertainment industries. The Marcus Corporation’s movie theatre division, Marcus Theatres®, currently owns or manages 678 screens at 56 locations in Wisconsin, Illinois, Minnesota, Ohio, North Dakota, Iowa and Nebraska, and one family entertainment center in Wisconsin. The company’s lodging division, Marcus Hotels and Resorts, owns or manages 20 hotels, resorts and other properties in ten states, with three additional properties under development. For more information, visit the company’s Web site atwww.marcuscorp.com.
Certain matters discussed in this press release are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements will 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 that could 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 increasing depreciation expenses and preopening and start-up costs due to the capital intensive nature of our businesses; (3) the effects of adverse economic conditions in our markets, particularly with respect to our hotels and resorts division; (4) the effects of adverse weather conditions, particularly during the winter in the Midwest and in our other markets; (5) the effects on our occupancy and room rates from the relative industry supply of available rooms at comparable lodging facilities in our markets; (6) the effects of competitive conditions in our markets; (7) our ability to identify properties to acquire, develop and/or manage and continuing availability of funds for such development; (8) the adverse impact on business and consumer spending on travel, leisure and entertainment resulting from terrorist attacks in the United States, the United States’ responses thereto and subsequent hostilities; and (9) the successful integration of the Douglas Theatre Company theatres into our theatre 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 press release and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
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THE MARCUS CORPORATION
Consolidated Statements of Earnings
(Unaudited)
(In thousands, except per share data)
| 13 Weeks Ended
May 29, 2008 | 14 Weeks Ended
May 31, 2007 | 52 Weeks Ended
May 29, 2008 | 53 Weeks Ended
May 31, 2007 |
|---|
| Revenues: | | | | | | | | | | | | | | |
| Rooms and telephone | | | $ | 22,797 | | $ | 23,887 | | $ | 94,077 | | $ | 88,369 | |
| Theatre admissions | | | | 27,342 | | | 27,037 | | | 114,703 | | | 98,184 | |
| Theatre concessions | | | | 13,903 | | | 13,636 | | | 56,849 | | | 49,018 | |
| Food and beverage | | | | 12,846 | | | 14,459 | | | 54,902 | | | 49,183 | |
| Other revenues | | | | 12,575 | | | 13,182 | | | 50,544 | | | 42,877 | |
|
| |
| |
| |
| |
| Total revenues | | | | 89,463 | | | 92,201 | | | 371,075 | | | 327,631 | |
Costs and expenses: | | |
| Rooms and telephone | | | | 8,688 | | | 9,371 | | | 34,661 | | | 32,949 | |
| Theatre operations | | | | 24,068 | | | 23,480 | | | 95,694 | | | 81,085 | |
| Theatre concessions | | | | 3,205 | | | 2,995 | | | 14,002 | | | 10,853 | |
| Food and beverage | | | | 10,347 | | | 11,679 | | | 42,918 | | | 38,505 | |
| Advertising and marketing | | | | 5,407 | | | 5,425 | | | 20,307 | | | 19,608 | |
| Administrative | | | | 9,545 | | | 10,358 | | | 37,007 | | | 34,464 | |
| Depreciation and amortization | | | | 7,562 | | | 7,308 | | | 31,259 | | | 26,913 | |
| Rent | | | | 1,606 | | | 940 | | | 5,145 | | | 3,413 | |
| Property taxes | | | | 3,229 | | | 2,127 | | | 14,124 | | | 9,473 | |
| Preopening expenses | | | | 94 | | | 2,077 | | | 412 | | | 5,293 | |
| Other operating expenses | | | | 6,424 | | | 6,804 | | | 27,848 | | | 23,936 | |
|
| |
| |
| |
| |
| Total costs and expenses | | | | 80,175 | | | 82,564 | | | 323,377 | | | 286,492 | |
|
| |
| |
| |
| |
Operating income | | | | 9,288 | | | 9,637 | | | 47,698 | | | 41,139 | |
Other income (expense): | | |
| Investment income | | | | 504 | | | 926 | | | 1,486 | | | 3,110 | |
| Interest expense | | | | (3,655 | ) | | (4,085 | ) | | (15,157 | ) | | (13,921 | ) |
| Gain on disposition of property, equipment and other assets | | | | 35 | | | 453 | | | 83 | | | 14,541 | |
| Equity earnings (losses) from unconsolidated joint ventures | | | | (89 | ) | | 9 | | | (411 | ) | | (1,366 | ) |
|
| |
| |
| |
| |
| | | | | (3,205 | ) | | (2,697 | ) | | (13,999 | ) | | 2,364 | |
|
| |
| |
| |
| |
Earnings from continuing operations | | |
| before income taxes | | | | 6,083 | | | 6,940 | | | 33,699 | | | 43,503 | |
| Income taxes | | | | 2,053 | | | 1,238 | | | 13,213 | | | 9,576 | |
|
| |
| |
| |
| |
| Earnings from continuing operations | | | | 4,030 | | | 5,702 | | | 20,486 | | | 33,927 | |
Losses from discontinued operations, | | |
| net of income taxes | | | | -- | | | (231 | ) | | -- | | | (630 | ) |
|
| |
| |
| |
| |
Net earnings | | | $ | 4,030 | | $ | 5,471 | | $ | 20,486 | | $ | 33,297 | |
|
| |
| |
| |
| |
Earnings per common share - diluted: | | |
| Continuing operations | | | $ | 0.14 | | $ | 0.19 | | $ | 0.68 | | $ | 1.10 | |
| Discontinued operations | | | $ | -- | | $ | (0.01 | ) | $ | -- | | $ | (0.02 | ) |
|
| |
| |
| |
| |
| Net earnings per share | | | $ | 0.14 | | $ | 0.18 | | $ | 0.68 | | $ | 1.08 | |
|
| |
| |
| |
| |
Weighted average shares outstanding - diluted | | | | 29,776 | | | 30,791 | | | 30,230 | | | 30,807 | |
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THE MARCUS CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
| (Unaudited)
May 29,
2008
| (Audited)
May 31,
2007
|
|---|
Assets: | | | | | | | | |
Cash and cash equivalents | | | $ | 13,440 | | $ | 12,018 | |
| Cash held by intermediaries | | | | -- | | | 5,749 | |
| Accounts and notes receivable | | | | 18,870 | | | 19,956 | |
| Refundable income taxes | | | | 632 | | | 5,939 | |
| Deferred income taxes | | | | 1,327 | | | 1,056 | |
| Condominium units held for sale | | | | 6,947 | | | 7,320 | |
| Other current assets | | | | 6,205 | | | 6,340 | |
| Assets of discontinued operations | | | | -- | | | 975 | |
| Property and equipment, net | | | | 587,828 | | | 559,785 | |
| Other assets | | | | 82,926 | | | 79,245 | |
|
| |
| |
| Total Assets | | | $ | 718,175 | | $ | 698,383 | |
|
| |
| |
Liabilities and Shareholders’ Equity: | | |
| Accounts and notes payable | | | $ | 17,182 | | $ | 24,481 | |
| Taxes other than income taxes | | | | 12,819 | | | 11,215 | |
| Other current liabilities | | | | 30,670 | | | 31,466 | |
| Current maturities of long-term debt | | | | 31,922 | | | 57,250 | |
| Liabilities of discontinued operations | | | | -- | | | 2,731 | |
| Long-term debt | | | | 252,992 | | | 199,425 | |
| Deferred income taxes | | | | 29,461 | | | 29,376 | |
| Deferred compensation and other | | | | 25,636 | | | 22,930 | |
| Shareholders’ equity | | | | 317,493 | | | 319,509 | |
|
| |
| |
Total Liabilities and Shareholders’ Equity | | | $ | 718,175 | | $ | 698,383 | |
|
| |
| |
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THE MARCUS CORPORATION
Business Segment Information
(Unaudited)
(In thousands)
| Theatres
| Hotels/
Resorts
| Corporate
Items
| Continuing
Operations
Total
| Discontinued
Operations
| Total
|
|---|
13 Weeks Ended May 29, 2008 | | | | | | | | | | | | | | | | | | | | |
| Revenues | | | $ | 43,760 | | $ | 45,269 | | $ | 434 | | $ | 89,463 | | | -- | | $ | 89,463 | |
| Operating income (loss) | | | | 6,802 | | | 4,837 | | | (2,351 | ) | | 9,288 | | | -- | | | 9,288 | |
| Depreciation and amortization | | | | 3,912 | | | 3,481 | | | 169 | | | 7,562 | | | -- | | | 7,562 | |
14 Weeks Ended May 31, 2007 | | |
| Revenues | | | $ | 43,908 | | $ | 47,965 | | $ | 328 | | $ | 92,201 | | $ | 125 | | $ | 92,326 | |
| Operating income (loss) | | | | 9,272 | | | 2,876 | | | (2,511 | ) | | 9,637 | | | (239 | ) | | 9,398 | |
| Depreciation and amortization | | | | 3,111 | | | 4,032 | | | 165 | | | 7,308 | | | -- | | | 7,308 | |
52 Weeks Ended May 29, 2008 | | |
| Revenues | | | $ | 181,058 | | $ | 188,520 | | $ | 1,497 | | $ | 371,075 | | | -- | | $ | 371,075 | |
| Operating income (loss) | | | | 35,334 | | | 21,556 | | | (9,192 | ) | | 47,698 | | | -- | | | 47,698 | |
| Depreciation and amortization | | | | 15,128 | | | 15,450 | | | 681 | | | 31,259 | | | -- | | | 31,259 | |
53 Weeks Ended May 31, 2007 | | |
| Revenues | | | $ | 156,451 | | $ | 169,942 | | $ | 1,238 | | $ | 327,631 | | $ | 4,060 | | $ | 331,691 | |
| Operating income (loss) | | | | 34,561 | | | 15,792 | | | (9,214 | ) | | 41,139 | | | (224 | ) | | 40,915 | |
| Depreciation and amortization | | | | 11,826 | | | 14,336 | | | 751 | | | 26,913 | | | 12 | | | 26,925 | |
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.
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