General (Policies)

3 Months Ended

Aug. 29, 2013

Basis of Presentation – The unaudited consolidated financial statements for the 13 weeks ended August 29, 2013 have been prepared by the Company. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to present fairly the unaudited interim financial information at August 29, 2013, 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 May 30, 2013.

Depreciation and Amortization

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 $8,207,000 and $8,259,000 for the 13 weeks ended August 29, 2013 and August 30, 2012, respectively.

Accumulated Other Comprehensive Loss

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

	Swap Agreements		Available for Sale Investments		Pension Obligation		Accumulated Other Comprehensive Loss
	(in thousands)

Balance at May 30, 2013	$	18	$	(10)	$	(3,836)	$	(3,828)
Other comprehensive income (loss) before reclassifications		241		(1)		-		240
Amounts reclassified from accumulated other comprehensive loss ⁽¹⁾		27		-		-		27
Net other comprehensive income (loss)		268		(1)		-		267
Balance at August 29, 2013	$	286	$	(11)	$	(3,836)	$	(3,561)

	Swap Agreements		Available for Sale Investments		Pension Obligation		Accumulated Other Comprehensive Loss
	(in thousands)

Balance at May 31, 2012	$	(58)	$	(8)	$	(4,073)	$	(4,139)
Other comprehensive income (loss) before reclassifications		-		-		-		-
Amounts reclassified from accumulated other comprehensive loss ⁽¹⁾		17		-		-		17
Net other comprehensive income		17		-		-		17
Balance at August 30, 2012	$	(41)	$	(8)	$	(4,073)	$	(4,122)

⁽¹⁾

Amounts are included in interest expense in the consolidated statements of earnings

Earnings Per Share

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 August 29, 2013		13 Weeks Ended August 30, 2012
	(in thousands, except per share data)
Numerator:
Net earnings attributable to The Marcus Corporation	$	13,431	$	10,679
Denominator:
Denominator for basic EPS		27,071		28,921
Effect of dilutive employee stock options		23		43
Denominator for diluted EPS		27,094		28,964
Net earnings per share – basic:
Common Stock	$	0.51	$	0.38
Class B Common Stock	$	0.47	$	0.35
Net earnings per share – diluted:
Common Stock	$	0.50	$	0.37
Class B Common Stock	$	0.46	$	0.34

Equity

Equity- Activity impacting total shareholders' equity attributable to The Marcus Corporation and noncontrolling interests for the 13 weeks ended August 29, 2013 was as follows:

	Total Shareholders’ Equity
	Attributable to The Marcus		Noncontrolling
	Corporation		Interests
	(in thousands)
Balance at May 30, 2013	$	306,702	$	9,994
Net earnings attributable to The Marcus Corporation		13,431		-
Net loss attributable to noncontrolling interests		-		(585)
Distributions to noncontrolling interests		-		(1,060)
Cash dividends		(2,233)		-
Exercise of stock options		261		-
Treasury stock transactions, except for stock options		(554)		-
Share-based compensation		386		-
Other comprehensive income, net of tax		267		-
Balance at August 29, 2013	$	318,260	$	8,349

Fair Value Measurements

Fair Value Measurements – Certain financial assets and liabilities are recorded at fair value in the consolidated financial statements. 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 August 29, 2013 and May 30, 2013, the Company’s $70,000 and $71,000, respectively, of available for sale 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 August 29, 2013 and May 30, 2013, respectively, the $474,000 and $30,000 asset related to the Company’s interest rate swap contract was valued using Level 2 pricing inputs.

Level 3 – Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which result in the use of management estimates. At August 29, 2013 and May 30, 2013, none of the Company’s fair value measurements were valued using Level 3 pricing inputs.

Defined Benefit Plan

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 August 29, 2013		13 Weeks Ended August 30, 2012
	(in thousands)
Service cost	$	176	$	178
Interest cost		293		275
Net amortization of prior service cost and actuarial loss		67		71
Net periodic pension cost	$	536	$	524

- Definition

Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements.

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