-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PwwtWbA0FPScG6gqWakbe7259kX8fcTIPrst7+rvmK/F3rrERPgTp2Trw/UuhVOF sZDcSqNqlnvzmk7FTZBO4Q== /in/edgar/work/0000897069-00-000488/0000897069-00-000488.txt : 20001009 0000897069-00-000488.hdr.sgml : 20001009 ACCESSION NUMBER: 0000897069-00-000488 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000824 FILED AS OF DATE: 20001006 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARCUS CORP CENTRAL INDEX KEY: 0000062234 STANDARD INDUSTRIAL CLASSIFICATION: [7011 ] IRS NUMBER: 391139844 STATE OF INCORPORATION: WI FISCAL YEAR END: 0527 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12604 FILM NUMBER: 735793 BUSINESS ADDRESS: STREET 1: 250 EAST WISCONSIN AVE STREET 2: SUITE 1700 CITY: MILWAUKEE STATE: WI ZIP: 53202-4220 BUSINESS PHONE: 4142726020 MAIL ADDRESS: STREET 1: 250 EAST WISCONSIN AVENUE STREET 2: STE 1700 CITY: MILWAUKEE STATE: WI ZIP: 53202-4220 10-Q 1 0001.txt THE MARCUS CORPORATION FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 24, 2000 --------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 1-12604 ------- THE MARCUS CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Wisconsin 39-1139844 ----------------------------------------- --------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No. 250 East Wisconsin Avenue, Suite 1700 Milwaukee, Wisconsin 53202 ----------------------------------------- --------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (414) 905-1000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 12, 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 ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: 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 OCTOBER 2, 2000 - 17,245,406 CLASS B COMMON STOCK OUTSTANDING AT OCTOBER 2, 2000 - 11,894,377 THE MARCUS CORPORATION ---------------------- INDEX ----- PART I - FINANCIAL INFORMATION Page ---- Item 1. Consolidated Financial Statements: Balance Sheets (August 24, 2000 and May 25, 2000).............................. 3 Statements of Earnings (Thirteen weeks ended August 24, 2000 and thirteen weeks ended August 26, 1999).......................................... 5 Statements of Cash Flows (Thirteen weeks ended August 24, 2000 and thirteen weeks ended August 26, 1999).......................................... 6 Condensed Notes to Financial Statements......................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk..................................................... 14 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K................................ 14 Signatures...................................................... 15 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements THE MARCUS CORPORATION Consolidated Balance Sheets (Unaudited) (Audited) August 24, May 25, 2000 2000 ---- ---- (in thousands) ASSETS Current assets: Cash and cash equivalents $2,120 $2,935 Accounts and notes receivable 19,814 11,908 Receivables from joint ventures 3,464 2,468 Refundable income taxes - 3,020 Real estate and development costs 3,903 3,917 Other current assets 4,003 4,147 ----- ----- Total current assets 33,304 28,395 Property and equipment: Land and improvements 96,189 96,158 Buildings and improvements 557,707 514,734 Leasehold improvements 8,165 7,650 Furniture, fixtures and equipment 245,390 231,643 Construction in progress 11,596 48,152 ------ ------ Total property and equipment 919,047 898,337 Less accumulated depreciation and amortization 250,351 240,020 ------- ------- Net property and equipment 668,696 658,317 Other assets: Investments in joint ventures 2,135 2,025 Other 36,656 35,039 ------ ------ Total other assets 38,791 37,064 ------ ------ TOTAL ASSETS $740,791 $723,776 ======== ======== See accompanying notes to consolidated financial statements. 3 THE MARCUS CORPORATION Consolidated Balance Sheets (Unaudited) (Audited) August 24, May 25, 2000 2000 ---- ---- (in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $5,620 $4,228 Accounts payable 11,066 24,463 Income taxes 3,317 - Taxes other than income taxes 13,201 11,219 Accrued compensation 5,062 4,307 Other accrued liabilities 14,063 10,026 Current maturities on long-term debt 14,778 16,228 ------ ------ Total current liabilities 67,107 70,471 Long-term debt 299,061 286,344 Deferred income taxes 32,876 32,602 Deferred compensation and other 8,926 9,112 Shareholders' equity: Preferred Stock, $1 par; authorized 1,000,000 shares; none issued Common Stock, $1 par; authorized 50,000,000 shares; issued 19,288,753 shares at August 24, 2000, 19,072,617 shares at May 25, 2000 19,289 19,073 Class B Common Stock, $1 par; authorized 33,000,000 shares; issued and outstanding 11,900,760 at August 24, 2000, 12,116,896 at May 25, 2000 11,901 12,117 Capital in excess of par 40,793 40,774 Retained earnings 278,706 268,808 Accumulated other comprehensive los (222) (257) --- --- 350,467 340,515 Less cost of Common Stock in treasury (1,927,493 shares at August 24, 2000 and 1,708,247 shares at May 25, 2000) (17,646) (15,268) ------ ------ Total shareholders' equity 332,821 325,247 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $740,791 $723,776 ======== ======== See accompanying notes to consolidated financial statements. 4 THE MARCUS CORPORATION Consolidated Statements of Earnings (Unaudited) (in thousands, except per share data) 13 Weeks Ended ------------------------ August 24, August 26, 2000 1999 ---- ---- Revenues: Rooms and telephone $53,069 $49,934 Theatre admissions 24,238 28,648 Theatre concessions 10,720 12,800 Food and beverage 8,086 7,029 Other income 12,715 9,306 ------ ----- Total revenues 108,828 107,717 Costs and expenses: Rooms and telephone 19,263 18,408 Theatre operations 18,567 22,011 Theatre concessions 2,568 3,031 Food and beverage 5,680 5,266 Advertising and marketing 7,898 6,359 Administrative 10,218 9,965 Depreciation and amortization 11,061 10,003 Rent 822 825 Property taxes 3,768 3,406 Pre-opening expenses 327 372 Other operating expenses 5,604 3,571 ----- ----- Total costs and expenses 85,776 83,217 ------ ------ Operating income 23,052 24,500 Other income (expense): Investment income 497 377 Interest expense (5,227) (4,880) Gain on disposition of property and equipment 256 1,327 --- ----- (4,474) (3,176) ----- ------- Earnings from continuing operations before income taxes 18,578 21,324 Income taxes 7,506 8,628 ----- ----- Earnings from continuing operations 11,072 12,696 Discontinued operations (Note 2): Income from discontinued operations, net of income taxes of $255,000 in 2000 and $322,000 in 1999 377 474 --- --- Net earnings $11,449 $13,170 ======= ======= Earnings per share - Basic and Diluted: Continuing operations $0.38 $0.42 Discontinued operations $0.01 $0.02 ----- ----- Net earnings per share $0.39 $0.44 ===== ===== Weighted Average Shares Outstanding: Basic 29,299 29,906 Diluted 29,338 29,946 See accompanying notes to consolidated financial statements. 5 THE MARCUS CORPORATION Consolidated Statements of Cash Flows (Unaudited)
13 Weeks Ended -------------------------- August 24, August 26, 2000 1999 ---- ---- (in thousands) OPERATING ACTIVITIES: Net earnings $11,449 $13,170 Adjustments to reconcile net earnings to net cash provided by operating activities: Earnings on investments in joint ventures, net of distributions (110) (273) Gain on disposition of property and equipment (256) (1,327) Depreciation and amortization 11,314 10,373 Deferred income taxes 274 1,064 Deferred compensation and other (186) 363 Changes in assets and liabilities: Accounts and notes receivable (7,906) (2,252) Real estate and development costs 14 - Other current assets 144 1,455 Accounts payable (13,397) (11,382) Income taxes 6,337 7,481 Taxes other than income taxes 1,982 2,385 Accrued compensation 755 699 Other accrued liabilities 4,037 5,811 ----- ----- Total adjustments 3,002 14,397 ----- ------ Net cash provided by operating activities 14,451 27,567 INVESTING ACTIVITIES: Capital expenditures, including business acquisitions (21,687) (20,800) Net proceeds from disposals of property, equipment and other assets 485 6,539 Increase in other assets (1,817) (1,052) Cash received from (advanced to) joint ventures (996) 20 --- -- Net cash used in investing activities (24,015) (15,293) FINANCING ACTIVITIES: Debt transactions: Net proceeds from issuance of notes payable and long-term debt 16,394 963 Principal payments on notes payable and long-term debt (3,735) (10,792) Equity transactions: Treasury stock transactions (2,360) (38) Dividends paid (1,550) (1,582) ----- ----- Net cash provided by (used in) financing activities 8,749 (11,449) ----- ------ Net increase (decrease) in cash and cash equivalents (815) 825 Cash and cash equivalents at beginning of year 2,935 3,499 ----- ----- Cash and cash equivalents at end of period $2,120 $4,324 ====== ======
See accompanying notes to consolidated financial statements. 6 THE MARCUS CORPORATION CONDENSED NOTES TO FINANCIAL STATEMENTS FOR THE THIRTEEN WEEKS ENDED AUGUST 24, 2000 (Unaudited) 1. General Accounting Policies - Refer to the Company's audited financial statements (including footnotes) for the fiscal year ended May 25, 2000, contained in the Company's Form 10-K Annual Report for such year, for a description of the Company's accounting policies. Basis of Presentation - The consolidated financial statements for the thirteen weeks ended August 24, 2000 and August 26, 1999 have been prepared by the Company without audit. In the opinion of management, all adjustments, consisting only of normal recurring accruals necessary to present fairly the unaudited interim financial information at August 24, 2000, 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. 2. Discontinued Operations The restaurant business segment has been presented as discontinued operations in the accompanying consolidated financial statements. KFC revenues for the thirteen weeks ended August 24, 2000 and August 26, 1999 were $5,939,000 and $6,653,000, respectively. 3. Business Segment Information The Company's primary operations are reported in the following three business segments: limited-service lodging, theatres and hotels/resorts. Corporate items include amounts not allocable to the business segments and consist principally of rental revenue and general corporate expenses. Following is a summary of business segment information for the thirteen weeks ended August 24, 2000 and August 26, 1999 (in thousands): 13 Weeks Ended Limited-Service Corporate August 24, 2000 Lodging Theatres Hotels/Resorts Items Total - --------------- --------------- -------- -------------- ----- ----- Revenues $40,902 $35,894 $31,664 $368 $108,828 Operating Income 11,160 7,264 6,284 (1,656) 23,052 13 Weeks Ended Limited-Service Corporate August 26, 1999 Lodging Theatres Hotels/Resorts Items Total - --------------- --------------- -------- -------------- ----- ----- Revenues $39,880 $42,321 $25,125 $391 $107,717 Operating Income 10,350 9,837 5,580 (1,267) 24,500 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Special Note Regarding Forward-Looking Statements Certain matters discussed in this Management's Discussion and Analysis of Results of Operations and Financial Condition 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 the Company "believes," "anticipates," "expects" or words of similar import. Similarly, statements that describe the Company's future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties, including, but not limited to, the following: (i) the Company's ability to identify properties to acquire, develop and/or manage and continuing availability of funds for such development; (ii) the Company's ability to attract potential partners to assist in the acquisition and/or development of properties; (iii) the limited-service lodging division's ability to attract and retain quality franchise operators and to effectively execute its Baymont repositioning strategy; (iv) continuing consumer demand as a result of general economic conditions with respect to the hotels and resorts and limited-service lodging divisions; (v) continuing availability, in terms of both quality and quantity, of films for the theatre division; and (vi) competitive conditions in the markets served by the Company. 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 the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. RESULTS OF OPERATIONS General The Marcus Corporation reports consolidated and individual segment results of operations on a 52-or-53-week fiscal year ending on the last Thursday in May. Fiscal 2001 is a 53-week year for the Company and each of its divisions and the Company anticipates that its reported results for fiscal 2001 will be increased proportionately by the additional week of operations. Fiscal 2000 was a 52-week year for the Company. The Company divides its fiscal year into three 13-week quarters and a final quarter consisting of 13 or 14 weeks. The Company's primary operations are reported in the following three business segments: limited-service lodging, theatres and hotels/resorts. As a result of the Company's stated intention to dispose of its KFC restaurants, the restaurant business segment has been presented as discontinued operations in the accompanying financial statements. Revenues for the first quarter of fiscal 2001 ended August 24, 2000, totaled $108.8 million, an increase of $1.1 million, or 1.0%, from revenues of $107.7 million for the first quarter of fiscal 2000. Revenue increases from the Company's limited-service lodging and 8 hotels/resorts divisions during the quarter were partially offset by a decrease in theatre division revenues compared to the prior year same period. Earnings from continuing operations during the first quarter of fiscal 2001 were $11.1 million, or $.38 per share, a decrease of 12.8% and 9.5%, respectively, from earnings from continuing operations of $12.7 million, or $.42 per share, for the same quarter during the prior year. Net earnings during the first quarter of fiscal 2001 were $11.5 million, or $.39 per share, a decrease of 13.1% and 11.4%, respectively, from net earnings of $13.2 million, or $.44 per share, during the same quarter last year. All per share data presented herein is on a diluted basis. Operating income (earnings before other income/expense and income taxes) from continuing operations totaled $23.1 million during the first quarter of fiscal 2001, a decrease of $1.4 million, or 5.9%, compared to the prior year's same period. Operating income increases from the Company's limited-service lodging and hotels/resorts divisions during the quarter were offset by reduced operating income from the theatre division. The Company's interest expense, net of investment income, totaled $4.7 million for the first quarter of fiscal 2001, compared to $4.5 million during the same period last year. This increase was the result of increased long-term debt levels necessary to help finance the Company's capital expenditures and higher short-term interest rates. Limited-Service Lodging Total revenues for the first quarter of fiscal 2001 for the limited-service lodging division were $40.9 million, an increase of $1.0 million, or 2.6%, compared to revenues of $39.9 million during the same period in fiscal 2000. The limited-service lodging division's operating income for the fiscal 2001 first quarter totaled $11.2 million, an increase of $900,000, or 7.8%, over operating income of $10.3 million during the same period of fiscal 2000. Compared to the end of the first quarter of fiscal 2000, two fewer Company-owned or operated and six new franchised Baymont Inns & Suites were in operation at the end of the fiscal 2001 first quarter. As a result of the sale of two Baymont Inns during the second quarter of fiscal 2000 (one of which was sold to a franchisee), fiscal 2001 first quarter revenues were negatively impacted by $800,000 compared to the same period during the prior year. The Company's comparable Baymont Inns & Suites experienced a 5.3 percentage point decline in occupancy percentage and a 11.9% average daily rate increase during the first quarter of fiscal 2001, compared to the same quarter last year. The primary factor contributing to the decline in occupancy has been the significant increase in the industry supply of limited-service lodging rooms during the past three years. The significant increase in the average daily rate is the result of the Company's efforts to reposition the Baymont Inns & Suites brand from the lower-priced economy segment of the lodging industry to the mid-price segment of the industry. The result of the average daily rate increases and occupancy decline was a 3.5% 9 increase in the division's revenue per available room, or RevPAR, for comparable BaymontInns during the fiscal 2001 first quarter, compared to the same quarter last year. Subject to changes in economic and industry conditions, the Company believes that RevPAR should continue to improve during fiscal 2001 as market awareness of the Baymont brand continues to increase. The limited-service lodging division's increased operating results during the first quarter of fiscal 2001 compared to the prior year's same period represent the third consecutive quarterly increase after nine straight quarters of decreased operating income dating back to the first quarter of fiscal 1998. In addition to the impact of the RevPAR increase during the fiscal 2001 first quarter, increased revenues from franchising contributed to the division's improvement during the quarter. At the end of the fiscal 2001 first quarter, the Company owned or operated 95 Baymont Inns & Suites and franchised an additional 76 Inns, bringing the total number of Baymont Inns & Suites in operation to 171. In addition, there were 30 approved franchised locations in development at the end of the first quarter, including 13 under construction and scheduled to open in fiscal 2001 or shortly thereafter. One Company-owned Baymont Inn & Suites is under construction and expected to open during the fiscal 2001 third quarter. The Company also owned and operated seven Woodfield Suites all-suite hotels during the first quarter of fiscal 2001, compared to six locations during the same period last year. The division's seventh Company-owned Woodfield Suites, located in San Antonio, Texas, opened early during the third quarter of fiscal 2000. Revenues and operating income from Woodfield Suites increased during the first quarter of fiscal 2001 compared to the same period of fiscal 2000 due to results from the new location and a year-to-date RevPAR increase of 1.8% for comparable Woodfield Suites. Theatres The theatre division's fiscal 2001 first quarter revenues were $35.9 million, a decrease of $6.4 million, or 15.2%, from revenues of $42.3 million during the same fiscal 2000 period. Operating income for the first quarter of fiscal 2001 totaled $7.3 million, a decrease of $2.5 million, or 26.2%, from operating income of $9.8 million during the same period last year. Consistent with the seasonal nature of the motion picture exhibition industry, the first quarter of the Company's fiscal year is typically the busiest period for its theatre division. Total box office receipts for the fiscal 2001 first quarter were $24.2 million, a decrease of $4.4 million, or 15.4%, from box office receipts of $28.6 million during the same period last year. The decrease in box office receipts for the first quarter of fiscal 2001 compared to the same period during the prior year was despite a 5.1% increase in average ticket prices and the Company's operation of 45 additional screens, representing a 10.2% increase over the prior year. Concession revenues for the fiscal 2001 first quarter totaled $10.7 million, a decrease of $2.1 million, or 16.3%, from concession revenues of $12.8 million during the same quarter last year. The Company's average concession sales per person increased 4.0% during the quarter compared to last year's same period. 10 Total theatre attendance for the first quarter decreased 19.5% compared to the same quarter last year. Total theatre attendance at the Company's comparable locations decreased 26.4% compared to last year's same period. The decline in total attendance and the resulting decreases in box office receipts and concession revenues during the first quarter were primarily the result of fewer quality films during the first quarter of fiscal 2001 compared to the first quarter of fiscal 2000. The first quarter of fiscal 2000 included 11 films with box office receipts in excess of $1 million, including the box office blockbusters Star Wars I: The Phantom Menace, Austin Powers 2: The Spy Who Shagged Me and Tarzan. Fiscal 2001 first quarter films included only seven movies with box office receipts in excess of $1 million, including The Perfect Storm and Mission Impossible 2. The Company does not expect box office receipts to improve during the fiscal 2001 second quarter, due in part to a lack of quality films carried over from the August time period and adverse effects on September 2000 theatre attendance as a result of television coverage of the summer Olympics. Revenues for the theatre business and the motion picture industry in general are heavily dependent upon the general audience appeal of available films, together with studio marketing, advertising and support campaigns, factors over which the Company has no control. The Company opened 17 new screens at five existing theatres during the first quarter of fiscal 2001, including its second large UltraScreen, which opened at a Madison, Wisconsin location. The Company ended the first quarter with a total of 487 total screens in 50 theatres compared to 442 screens in 49 theatres at the end of the same period last year. The Company closed one six-screen theatre early in the second quarter of fiscal 2001. The Company has three new screens at an existing location in development, including another UltraScreen, and is reviewing additional development and acquisition opportunities. The Company also continues to retrofit existing theatres with stadium seating and digital sound. Currently 82% of its first-run auditoriums now offer these popular features, which is the highest percentage of any top-20 theatre chain in the United States. Hotels and Resorts Total revenues from the hotels and resorts division during the first quarter of fiscal 2001 increased by $6.5 million, or 26.0%, to $31.7 million, compared to revenues of $25.1 million during the previous year's comparable period. Operating income increased by $700,000, or 12.6%, to $6.3 million during the fiscal 2001 first quarter, compared to operating income of $5.6 million during the first quarter of fiscal 2000. With four of the Company's five owned-properties located in the Midwest, the first quarter of the Company's fiscal year is typically the strongest period for its hotels and resorts division. Increases in RevPAR at the Company's comparable owned hotels/resorts and continued improved operating results from the Company's Miramonte Resort were the primary reasons for the division's revenue and operating income increases during the fiscal 2001 first quarter compared to the prior year's same period. Excluding the Hotel Phillips, which was purchased by the Company in May 2000, and the Milwaukee Hilton City Center, which opened additional rooms during the first quarter of fiscal 2001, the division's total RevPAR for 11 comparable Company-owned properties increased 8.2% during fiscal 2001's first quarter compared to the same quarter last year. The Company opened the rooms portion of its extensive addition to the Hilton Milwaukee City Center in late-June 2000, contributing to the overall increase in total division revenues during the fiscal 2001 first quarter compared to the same period last year. A family water park and fun center, Paradise Landing, built in conjunction with the Hilton room addition, opened early in the second quarter of fiscal 2001. Construction also continues on the division's new Company-owned Hilton Madison at Monona Terrace. The projected opening of the property, which will be connected to the new Monona Terrace Convention Center, is currently March 2001. The Company operated the newly-acquired Hotel Phillips in Kansas City, Missouri during the first quarter prior to closing the property in September 2000 for a major renovation. The Company expects the Hotel Phillips to reopen during the first quarter of fiscal 2002. Sales from the Company's vacation ownership development at the Grand Geneva Resort & Spa also contributed to the increase in division revenues during the first quarter of fiscal 2001 compared to the prior year's same quarter. The development's first two buildings, consisting of 18 units available for sale, a sales center and a model unit, opened during the first quarter of fiscal 2001. The Company has also recently begun construction on the third building in this development. Although the vacation ownership development did not have a material impact on division operating income during the first quarter of fiscal 2001, the Company believes that the development will ultimately add to division operating income in fiscal 2001. Discontinued Operations The Company continues to actively pursue the sale of the Company's 30 KFC and KFC/Taco Bell 2-in-1 restaurants. As a result, the Company continues to account for the restaurant operations as discontinued operations in the Company's consolidated financial statements because of its belief that a sale will be consummated during fiscal 2001. Revenues from discontinued operations totaled $5.9 million for the first quarter of fiscal 2001, a decrease of $700,000, or 10.7%, from fiscal 2000 first quarter revenues of $6.6 million. During the first quarter of fiscal 2001, the Company had income from discontinued operations, net of applicable income taxes, of $377,000, a decrease of approximately $100,000, or 20.5%, from income from discontinued operations during the same period last year. KFC revenues and operating results were negatively impacted during the first quarter of fiscal 2001 by ineffective national promotions and reduced local advertising, resulting in reduced guest counts and average guest checks. The Company believes that KFC revenues and operating income should improve in future quarters during fiscal 2001. This is based upon the Company's assessment of the currently proposed KFC national marketing program for the remainder of fiscal 2001 and the fact that sales were reduced during the last three quarters of fiscal 2000 due to an ineffective sandwich promotion. 12 FINANCIAL CONDITION The Company's lodging, movie theatre and restaurant businesses each generate significant and consistent daily amounts of cash because each segment's revenue is derived predominantly from consumer cash purchases. The Company believes that these consistent and predictable cash sources, together with the availability to the Company of $31 million of unused credit lines as of the end of the first quarter, should be adequate to support the ongoing operational liquidity needs of the Company's businesses. Net cash provided by operating activities decreased by $13.1 million during the first quarter of fiscal 2001 to $14.5 million, compared to $27.6 million during the prior year's first quarter, due primarily to reduced earnings, timing differences in payments of accounts payable and increases in accounts and notes receivable. Depreciation and amortization (a non-cash expense) increased as a result of the Company's increased capital spending program. Net cash used in investing activities during the fiscal 2001 first quarter totaled $24.0 million, compared to $15.3 million during the fiscal 2000 first quarter. The increase in net cash used in investing activities was primarily the result of slightly increased capital expenditures and reduced net proceeds from disposals of property, equipment and other assets, which totaled $500,000 during fiscal 2001 compared to $6.5 million during fiscal 2000. Capital expenditures to support the Company's continuing expansion program totaled $21.7 million during the first quarter of fiscal 2001 compared to $20.8 million during the prior year's first quarter. Fiscal 2001 first quarter capital expenditures included approximately $9 million incurred in the theatre division to fund screen additions to existing theatres, stadium seating retrofits and costs carried over from projects opened during the fourth quarter of fiscal 2000. In addition, capital expenditures of approximately $3 million were incurred in the limited-service lodging division and approximately $10 million were incurred by the hotels and resorts division to fund its major construction projects. Net cash provided by financing activities during the first quarter of fiscal 2001 totaled $8.7 million compared to net cash used in financing activities of $11.4 million during the first quarter of fiscal 2000. The Company funded a portion of its capital expansion program during fiscal 2000 with the net proceeds from disposals of assets. As a result of the reduced net proceeds from disposals of assets and reduced net cash provided by operating activities during the fiscal 2001 first quarter compared to the same period last year, the Company's net proceeds from issuance of notes payable and long-term debt totaled $16.4 million during the first quarter of fiscal 2001 compared to only $1.0 million during the same period last year. The Company's principal payments on notes payable and long-term debt totaled $3.7 million during the first quarter of fiscal 2001 compared to $10.8 million during the same period last year. Additionally, during the first quarter of fiscal 2001, the Company repurchased 225,000 of its common shares pursuant to its stock repurchase program at a cost of $2.4 million, compared to 9,000 shares repurchased during the first quarter of fiscal 2000 at a cost of $112,000. Assuming a sale of the restaurant business is consummated, the Company will consider using a portion of the anticipated proceeds from the sale to fund its stock repurchase program. Any such repurchases are expected to be executed on the open market or in privately 13 negotiated transactions depending upon a number of factors, including prevailing market conditions. At the end of the first quarter, there were 2.1 million shares available for repurchase under existing Board of Directors authorizations. As of September 28, 2000, the Company had purchased an additional 125,000 of its shares during the second quarter of fiscal 2001. The Company anticipates that it may need to issue additional long-term debt to help fund the Company's ongoing expansion plans in fiscal 2001. In addition to the Company's existing credit lines, the Company has the ability to issue up to $45 million of additional senior notes under an existing private placement program and currently anticipates doing so during the second quarter of fiscal 2001. Proceeds from the anticipated issuance would be used to repay existing debt under its revolving credit lines and to fund the Company's capital expenditure and stock repurchase programs. The actual timing and extent of the implementation of the Company's current expansion plans will depend in large part on continuing favorable industry and general economic conditions, the competitive environment, evolving customer needs and trends and the availability of attractive opportunities. It is likely that the Company's current expansion goals will continue to evolve and change in response to these and other factors. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company has not experienced any material changes in its market risk exposure since May 25, 2000. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a. Exhibits -------- Exhibit 10. The Marcus Corporation Nonemployee Director Annual Retainer Policy, Effective October 4, 1999 Exhibit 27. Financial Data Schedule b. Reports on Form 8-K ------------------- No Form 8-K was filed by the Company during the quarter to which this Form 10-Q relates. 14 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 ---------------------- (Registrant) DATE: October 6, 2000 By: /s/ Stephen H. Marcus ----------------------------------------------- Stephen H. Marcus, Chairman of the Board, President and Chief Executive Officer DATE: October 6, 2000 By: /s/ Douglas A. Neis ----------------------------------------------- Douglas A. Neis Chief Financial Officer and Treasurer 15 THE MARCUS CORPORATION FORM 10-Q FOR 13 WEEKS ENDED AUGUST 24, 2000 EXHIBIT INDEX Exhibit Description - ------- ----------- 10 The Marcus Corporation Nonemployee Director Annual Retainer Policy, Effective October 4, 1999 27 Financial Data Schedule 16 EX-10 2 0002.txt NONEMPLOYEE DIRECTOR ANNUAL RETAINER POLICY EXHIBIT 10 THE MARCUS CORPORATION NONEMPLOYEE DIRECTOR ANNUAL RETAINER POLICY Effective October 4, 1999 Each director of The Marcus Corporation (the "Company") who is not an officer or employee of the Company or any of its subsidiaries (a "Nonemployee Director") shall be paid an annual retainer fee of $5,000 in cash and 392 shares (subject to equitable adjustment to prevent dilution in the event of stock splits and other similar transactions) of Common Stock, $1 par value, of the Company (the "Restricted Stock"). The Restricted Stock may not be sold, transferred or otherwise alienated or hypothecated until the date two years after the grant date of the Restricted Stock (the "Release Date"). Upon the Release Date, the foregoing restrictions on the Restricted Stock shall terminate and such Restricted Stock shall be free of such restrictions and freely transferable, except as otherwise provided under the Securities Act of 1933, as amended (the "Securities Act"), including subject to continued compliance with Rule 144 of the Securities Act. If a Nonemployee Director's service as a director of the Company is terminated because of death, disability or retirement prior to the Release Date, the foregoing restrictions on the Restricted Stock shall terminate on the date of death or the effective date of the disability or retirement and such Restricted Stock shall be free of such restrictions and freely transferable, except as otherwise provided under the Securities Act. The Company may place such legends on certificates for Restricted Stock, and enter into such Restricted Stock Agreements with a Nonemployee Director, as are necessary to effect the intent of the foregoing. EX-27 3 0003.txt FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCUS CORPORATION'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 3-MOS MAY-31-2001 MAY-26-2000 AUG-24-2000 2,120 0 23,278 0 0 33,304 919,047 250,351 740,791 67,107 299,061 0 0 31,190 301,631 740,791 108,828 108,828 51,682 85,776 0 0 5,227 18,578 7,506 11,072 377 0 0 11,449 0.39 0.39
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