FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended May 28, 1998
OR
[_] 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)
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 53202-4220
(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:
Common Stock, $1 par value New York Stock Exchange
(Title of class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 such filing requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of August 7, 1998: $395,613,829.
Number of shares outstanding of each of the classes of the registrant's
capital stock as of August 7, 1998:
Common Stock, $1 par value: 18,517,345 shares
Class B Common Stock, $1 par value: 12,672,168 shares
DOCUMENTS INCORPORATED BY REFERENCE:
1998 Annual Report to Shareholders (incorporated by reference into Parts
I, II and IV); Proxy Statement for 1998 Annual Meeting of Shareholders (to
be filed with the Commission under Regulation 14A within 120 days after
the end of the registrant's fiscal year and, upon such filing, to be
incorporated by reference into Part III).
<PAGE>
PART I
Unless the context indicates otherwise, references to the number
of the Company's various facilities set forth in this Form 10-K Annual
Report are as of May 28, 1998.
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Annual Report on Form 10-K 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 the statement 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 which are
described in close proximity to such statements and which may cause actual
results to differ materially from those currently anticipated.
Shareholders, potential investors and other readers are urged to consider
these factors in evaluating the forward-looking statements and are
cautioned not to place undue reliance on such forward-looking statements.
The forward-looking statements included herein are made only as of the
date of this report and the Company undertakes no obligation to publicly
update such forward-looking statements to reflect subsequent events or
circumstances.
Item 1. Business.
The Marcus Corporation through its subsidiaries (collectively,
the "Company") is engaged in four business segments: limited-service
lodging; movie theatres; hotels and resorts; and restaurants.
The Company's limited-service lodging operations include a chain
of 156 Budgetel Inn limited-service facilities in 30 states and five
Woodfield Suites all-suite hotels in Wisconsin, Colorado and Ohio. Of the
156 Budgetel Inns, 106 are owned or operated by the Company and 50 are
franchised.
The Company operates 46 movie theatres with an aggregate of 361
screens throughout Wisconsin, Illinois, Minnesota and Ohio. The Company
also operates a family entertainment center, Funset Boulevard, in
Appleton, Wisconsin.
The Company's hotel and resort operations include the Pfister
and the Milwaukee Hilton, which are full-service hotels in Milwaukee,
Wisconsin, and the Grand Geneva Resort & Spa and the Miramonte Resort,
which are full-facility destination resorts in Lake Geneva, Wisconsin and
Indian Wells, California, respectively. The Company also manages three
hotels and a resort for third parties: the Mead Inn in Wisconsin Rapids,
Wisconsin, the Crowne-Plaza Northstar in Minneapolis, Minnesota, Beverly
Garland's Holiday Inn in North Hollywood, California and the Mission Point
Resort on Mackinac Island, Michigan.
The Company's restaurant division includes 31 KFC (Kentucky
Fried Chicken) restaurants in Wisconsin.
The Company is continuing its aggressive expansion plan that it
began in fiscal 1994. The Company's current plans include the following
goals:
- Converting Budgetel Inns to Baymont Inns and Baymont Inns &
Suites in fiscal 1999 and then increasing the total number
of Baymont Inns and Baymont Inns & Suites to over 400
within the next five years. Up to four Company-owned and
27 franchised properties are currently in development for
fiscal 1999. The Company currently believes that much of
this anticipated future growth will ultimately come from
its emphasis on opening new franchised Baymont Inns and
Baymont Inns & Suites.
- Increasing its number of movie theatre screens to 500 by
the year 2000, with expected continued expansion outside of
Wisconsin. Up to 66 new screens are currently planned to
be opened by the Company in fiscal 1999, including 16 new
screens recently completed at the Company's second location
in Columbus, Ohio. Other current expansions include 49 new
screens to be added to existing locations in Wisconsin,
Illinois and Minnesota and completion of the Company's
first large screen IMAX/R/ 2D/3D theatre at its new
Columbus location. The Company also has current plans to
add stadium seating to a majority of its existing screens
by the end of fiscal 2000.
- Adding one or two hotel properties each year over the next
few fiscal years, either Company-owned or managed for
others. In some cases, the Company may own only a partial
interest in the new properties. The Company recently
announced plans for the development of new hotels in
Madison, Wisconsin and Chicago, Illinois. The Madison
Hilton, which is a public/private endeavor with the City of
Madison, is anticipated to be a 222-room Company-owned
property scheduled to open in 2000. The 250-room downtown
Chicago luxury hotel is currently planned to be developed
and managed by the Company.
- Increasing its number of Woodfield Suites. The Company has
two Company-owned Woodfield Suites scheduled to open late
in fiscal 1999 and is evaluating additional sites.
- Expanding and enhancing the Company's KFC franchise. The
Company's first KFC/Taco Bell 2-in-1 unit, a conversion of
an existing KFC, opened in early fiscal 1998, and the
Company plans to open at least two additional 2-in-1
conversions in fiscal 1999.
The actual number, mix and timing of potential future new facilities and
expansions will depend in large part on continuing favorable industry and
general economic conditions, the Company's financial performance and
available capital, the competitive environment, evolving customer needs
and trends, and the availability of attractive opportunities. It is
likely that the Company's expansion goals will continue to evolve and
change in response to these and other factors and there can be no
assurance that these current goals will be achieved.
Business Segment Data
Certain business segment data for the Company's three most
recent fiscal years relating to the Company's four industry segments is
set forth in footnote 11 to the Notes to Consolidated Financial Statements
included on Page 31 of the Company's 1998 Annual Report to Shareholders,
which pages are incorporated by reference herein.
Limited-Service Lodging Operations
Budgetel Inns
The Company owns, operates or franchises 156 limited-service
facilities, with over 16,000 available rooms, under the name "Budgetel
Inns" in 30 states. Of this total, 50 Budgetel Inns are operated through
franchisees, 97 are Company-owned or operated and nine are operated under
joint venture agreements. During fiscal 1998, two new Company-owned units
and 11 new franchised units were opened, with an additional 27 franchised
units under construction or development at fiscal year-end. Depending
upon continuing favorable industry conditions and attractive
opportunities, the Company currently plans to add up to 31 new Budgetel
Inns in fiscal 1999 (including up to four Company-owned and up to 27
franchised facilities).
During fiscal 1998, the Company announced that it was changing
the name of Budgetel Inns to Baymont Inns and Baymont Inns & Suites. The
Company plans to convert Company-owned and franchised units to the Baymont
name by approximately October 31, 1998. The name change, which was
endorsed by the Budgetel Franchise Advisory Council and franchisees, is
intended to help expand the Company's customer base, increase revenue per
available room (RevPAR) and increase development opportunities.
Targeted at the business traveler, Budgetel Inns feature an
upscale, contemporary exterior appearance, are generally located in high
traffic commercial areas in close proximity to interstate highway exits
and major thoroughfares and vary in size between 60 and 150 rooms.
The Company believes that providing amenities not typically
associated with limited-service facilities distinguishes Budgetel Inns
from many of its competitors. These amenities include executive conference
centers, room-delivered complimentary continental breakfasts, king-sized
beds, free local telephone calls, incoming fax transmissions, non-smoking
rooms, in-room coffee makers, remote control cable televisions, extra-long
telephone cords and large working desks. Additional amenities, including
voice mail, hair dryers, irons and ironing boards and complimentary copies
of USA Today are being introduced in conjunction with the Baymont name
change. To enhance customer security, all Budgetel Inns feature "card
key" room locking systems and provide well-lighted parking areas and all-
night front desk staffing. The interior of each Budgetel Inn is
refurbished in accordance with a strict periodic schedule.
Budgetel Inns has a national franchise program and has increased
its emphasis on opening more franchised Inns. Support offices in Atlanta,
Chicago and Dallas and a service office in Florida are intended to help
support expansion of the Budgetel Inn franchise. Franchisees pay an
initial franchise fee and annual marketing assessments, reservation system
assessments and royalty fees based on room revenues. The Company is
qualified to sell, and anticipates ultimately selling, franchises in all
50 states.
During fiscal 1998, the Company tested a new Inn and Suites
concept, which combines two-room suites along with traditional rooms at
the same facility. Due to positive results of four test sites in diverse
markets throughout the country, the Company currently plans to convert the
majority of its Company-owned properties to Baymont Inns and Suites. All
new Inns and Suites properties will feature lobby breakfasts, swimming
pools, 25-inch in-room televisions and fitness facilities.
Fiscal 1998 was the first full year the Company offered travel
agent commissions for all of its Budgetel Inns. The Company's "Pay-In-A-
Day" program benefits travel agents by issuing commission checks within 24
hours of the guest's check-out.
Woodfield Suites
The Company operates five mid-priced, all-suite hotels under the
name "Woodfield Suites." In addition to opening a Madison, Wisconsin
facility in early fiscal 1998, the Company has started construction of two
new Company-owned properties, one in Bannockburn (suburban Chicago),
Illinois, and another near the River Walk in San Antonio, Texas, which are
scheduled to open late in fiscal 1999. The San Antonio property will be
the prototype for future new construction.
Woodfield Suites offers all of its guests the use of a
centrally-located swimming pool, whirlpool and game room. Most suites
have a bedroom and separate living room and feature an extra-length bed,
sleeper sofa for additional guests, microwave, refrigerator, wet bar,
television and hair dryer. Some suites also have a kitchenette. All
guests receive a complimentary continental breakfast and are invited to a
complimentary cocktail hour. Meeting rooms and two-line telephones
equipped with dataports in every suite enhance Woodfield Suites' appeal
for business travelers.
Hotels and Resorts Operations
The Pfister Hotel
The Company owns and operates the Pfister Hotel in downtown
Milwaukee. The Pfister Hotel, a full service, luxury hotel, has 307 rooms
(including 80 luxury suites), three restaurants, two cocktail lounges, a
night club, an indoor swimming pool, an exercise facility and a 275-car
parking ramp. The Pfister has 20,000 square feet of banquet and
convention facilities. Banquet and meeting rooms accommodate up to 3,000
persons and the hotel features two large ballrooms, including one of the
largest ballrooms in the Milwaukee metropolitan area, with banquet seating
for 1,200 people. A portion of the Pfister's first-floor space is leased
for use by retail tenants. In fiscal 1998, the Pfister Hotel earned its
22nd consecutive four-diamond award from the American Automobile
Association. The Pfister is also a member of Preferred Hotels and Resorts
Worldwide Association, an organization of independent luxury hotels and
resorts, and the Association of Historic Hotels of America. During fiscal
1998, plans were finalized to create a full-service health club and a new
cocktail lounge on the top floor of the hotel, which will replace the
existing night club.
The Milwaukee Hilton
The Company owns and operates the 500-room Milwaukee Hilton.
All 500 guest rooms, bathrooms, public areas and a significant portion of
meeting space were remodeled in 1995. The Hilton franchise affiliation
has benefitted the Milwaukee Hilton through the Hilton's international
centralized reservation and marketing system, advertising cooperatives and
frequent stay programs. During fiscal 1999, the Company expects to begin
construction on a 250-room addition. The addition will include meeting
rooms, a family water park fun center and a skywalk to the Midwest Express
Center convention facility.
The Grand Geneva Resort & Spa
The Grand Geneva Resort & Spa in Lake Geneva, Wisconsin is a
full-facility destination resort located on 1,300 acres. The largest
convention resort in Wisconsin includes 355 guest rooms, 50,000 square
feet of banquet, meeting and exhibit space, three speciality restaurants,
two cocktail lounges, two championship golf courses, several ski-hills,
four indoor and five outdoor tennis courts, three swimming pools, a spa
and fitness complex, horse stables and an on-site airport. The Company
has plans underway for the development of a 100-unit vacation ownership
complex.
Miramonte Resort
The Miramonte Resort in Indian Wells, California, a boutique
luxury resort located on 11 landscaped acres, opened in January 1998
following an extensive renovation. The resort includes 14 two-story
Tuscan style buildings housing 226 guest rooms, one restaurant, one lounge
and 9,500 square feet of banquet, meeting and exhibit space, including a
5,000 square foot grand ballroom. Additionally, there is a fully equipped
fitness center and two outdoor swimming pools, each with an adjacent
jacuzzi spa and sauna. New amenities include outdoor meeting facilities,
a golf concierge and Rolls Royce limousine service.
Operated and Managed Hotels
The Company operates the Crowne Plaza-Northstar Hotel in
Minneapolis, Minnesota. The Crowne Plaza - Northstar Hotel is located in
downtown Minneapolis and has 226 rooms, 13 meeting rooms, 6,370 square
feet of ballroom and convention space, one restaurant, one cocktail lounge
and an exercise facility.
The Company manages the Mead Inn in Wisconsin Rapids, Wisconsin.
The Mead Inn has 154 guest rooms, 11 meeting rooms totaling 8,180 square
feet of meeting space, two cocktail lounges, two restaurants and an indoor
pool with a sauna and whirlpool. During fiscal 1998, the Company provided
planning and technical assistance for construction of a new 89-room tower
and expanded conference and health club facilities.
The Company manages Beverly Garland's Holiday Inn in North
Hollywood, California. The Beverly Garland has 255 rooms, including 12
suites, meeting space for up to 600, including an amphitheater and
ballroom, and an outdoor swimming pool and lighted tennis courts. The
mission-style hotel is located on seven acres near Universal Studios.
During fiscal 1998, the Company entered into a management
contract to operate the Mission Point Resort on Mackinac Island, Michigan.
The Mission Point Resort is a seasonal property and has 239 rooms, a 3,000
square foot health club and fitness center, three restaurants, tennis
courts, a swimming pool and a 575-seat theatre.
New Developments
After the end of fiscal 1998, the Company announced plans for
new hotels in Madison, Wisconsin and Chicago, Illinois. The Madison
Hilton, which is a public/private endeavor with the City of Madison, is
anticipated to be a 222-room Company-owned hotel located adjacent to the
new Monona Terrace Convention Center and is scheduled to open in 2000.
The 250-room downtown Chicago luxury hotel is currently planned to be
developed and managed by the Company and will feature 10,000 square feet
of meeting space, a fitness center and roof garden.
Theatre Operations
The Company operates 46 movie theatre locations with an
aggregate of 361 screens in Wisconsin, Illinois, Minnesota and Ohio for an
average of 7.8 screens per location, compared to an average of 7.4 screens
per location at the end of fiscal 1997 and 6.1 at the end of fiscal 1996.
The Company's facilities include 44 multi-screen complexes and two single-
screen theatres. The theatre division's long-term growth strategy is to
focus on multi-screen theatres having between 12 and 20 screens which
typically vary in seating capacity from 150 to 450 seats per screen.
Multi-screen theatres allow the Company to offer a more diversified
selection of films to attract additional customers, exhibit movies in
larger or smaller auditoriums within the same theatre depending on the
popularity of the movie and benefit from the economies of having common
box office, concession, projection and lobby facilities. Most of the
Company's movie theatres feature exclusively first-run films.
The Company added 66 new screens during fiscal 1998, including a
new 12-plex in Menomonee Falls, Wisconsin and a 16-screen theatre in
Pickerington (Columbus), Ohio. During the final weeks of fiscal 1998, the
Company also completed the purchase of five suburban Minneapolis/St. Paul,
Minnesota theatres with a total of 38 screens (32 first-run and six budget
screens). Upon opening its new location in Menomonee Falls, the Company
converted an existing five-screen complex in that city into a budget-
oriented theatre. As of May 28, 1998, the Company operated 329 first-run
screens and 32 budget-oriented screens. The Company plans on opening up
to 66 additional new screens in fiscal 1999.
The results of the Company's movie theatre business and the
motion picture industry in general are largely dependent upon the box
office appeal and marketing of available first-run films. Movie
production has been stimulated by additional demand from ancillary markets
such as home video, pay-per-view and cable television, as well as
increased demand from foreign film markets. The annual number of first-
run film releases has more than doubled since the late 1970s. Fiscal 1998
featured such box office hits as Titanic, Men in Black, Good Will Hunting,
As Good as It Gets, Tomorrow Never Dies, Lost World, My Best Friend's
Wedding, Batman & Robin and Air Force One.
The Company obtains its films from the national motion picture
production and distribution companies and is not dependent on any single
motion picture supplier. Booking, advertising, refreshment purchases and
promotion are handled centrally by an administrative staff.
The Company strives to provide its movie patrons with high-
quality picture and sound presentation in clean, comfortable, attractive
and contemporary theatre environments. Substantially all of the Company's
movie theatre complexes feature either digital sound, Dolby or other
stereo sound systems; acoustical ceilings; side wall insulation;
engineered drapery folds to eliminate sound imbalance, reverberation and
distortion; tiled floors; loge seats; cup-holder chair-arms; and computer-
controlled heating, air conditioning and ventilation. Computerized box
offices permit all of the Company's movie theatres to sell tickets in
advance. Most of the Company's theatres are accessible to persons with
disabilities and provide wireless headphones for hearing-impaired
moviegoers. Other amenities at certain theatres include THX auditoriums,
which allow customers to hear the softest and loudest sounds, and touch-
screen, computerized, self-service ticket kiosks, which simplify advance
ticket purchases. The Company also operates an exclusive customer
information telephone system in Milwaukee and Madison, allowing customers
to call for information regarding the locations, times and titles of
movies being shown by the Company throughout each metropolitan area. The
Company is also testing Tele-ticketing, a new service that enables
moviegoers to reserve seats over the telephone using a credit card, at
three locations.
The Company has enhanced its offerings of amenities at certain
theatres by introducing stadium seating, a tiered seating system that
permits unobstructed viewing. The Company is now installing stadium
seating in all of its new theatres and is continuing an extensive program
to add stadium seating to a majority of its existing screens by the end of
fiscal 2000. The Company also intends to add two new large screen IMAX/R/
2D/3D theatres, the first scheduled to open in fall of 1998 in Columbus,
Ohio, and the second in 1999 in Addison (suburban Chicago), Illinois.
The Company sells food and beverage concessions at all of its
movie theatres. The Company believes that a wide variety of food and
beverage items, properly merchandised, increases concession revenue per
patron. Although popcorn still remains the traditional favorite with
moviegoers, the Company continues to upgrade its available concessions by
offering a wide range of choices. For example, some of the Company's
theatres offer hot dogs, pizza, ice cream, pretzel bites, frozen yogurt,
coffee, mineral water and juices.
In early fiscal 1997, the Company opened its first family
entertainment center, Funset Boulevard, adjacent to its 11-screen movie
theatre in Appleton, Wisconsin. Funset Boulevard features a 40,000 square
foot Hollywood-themed indoor amusement facility, including a restaurant,
party rooms, a laser tag center, virtual reality games, a miniature golf
course and an arcade.
Restaurant Operations
The Company has non-exclusive franchise rights to operate KFC
restaurants in the Milwaukee metropolitan area and in northeast Wisconsin.
The Company has operated KFC restaurants for 38 years and currently
operates 30 KFC restaurants and one KFC/Taco Bell 2-in-1 restaurant. The
Company is the largest operator of KFC restaurants in Wisconsin, based on
the number of facilities operated. The restaurants feature Kentucky Fried
Chicken and other franchisor-authorized food items.
Virtually all of the Company's KFC restaurants feature inside
seating for approximately 40 customers, drive-thru windows and updated
electronic equipment to better facilitate food preparation and order
processing. Fourteen locations in the Fox Valley and Milwaukee
metropolitan areas offer home delivery.
The Company's KFC locations operate under individual franchise
agreements, all of which were renewed in early fiscal 1998 for a term of
20 years. Franchise royalties approximate 4% of net sales and, in
addition, an initial flat fee of $20,000 is payable for each new KFC
restaurant.
The KFC franchisor specifies certain product requirements and
provides for certain approved suppliers of products and supplies in order
to maintain quality standards.
The Company is exploring various expansion and acquisition
opportunities for its KFC operations. Early in fiscal 1998, the Company
opened its first combined two-in-one KFC and Taco Bell location in
Milwaukee, Wisconsin. Additional two-in-one locations are under
consideration, with at least two additional two-in-one conversions planned
for fiscal 1999.
Competition
In each of its businesses the Company experiences intense
competition from national and/or regional chain and franchise operations,
some of which have substantially greater financial and marketing resources
than the Company. Most of the Company's facilities are located in close
proximity to other facilities which compete directly with those of the
Company.
The Company's Budgetel Inns compete with such national limited-
service lodging chains as Days Inn, Hampton Inn (owned by The Promus
Companies Incorporated), Fairfield Inn (owned by Marriott Corporation),
Red Roof Inn, La Quinta Inn, Comfort Inn and others, as well as a large
number of regional and local chains. The Company's Woodfield Suites
compete with such national chains as Embassy Suites, Comfort Suites,
AmeriSuites and Courtyard by Marriott, as well as other regional and local
all-suite facilities.
The Company's hotels and resorts compete with the hotels and
resorts operated by Hyatt Corporation, Marriott Corporation, Ramada Inns,
Holiday Inns and Wyndham Hotels, along with other regional and local
hotels and resorts.
In the restaurant business, the Company's KFC restaurants
compete locally with Hardee's, Boston Market, Popeye's and similar
national, as well as regional, fast food chains and individual restaurants
offering chicken.
The Company's movie theatres compete with large national movie
theatre operators, such as American Multi-Cinema, Cinemark, Regal Cinemas,
Loews/Cineplex and Carmike Cinemas, as well as with a wide array of
smaller first-run and discount exhibitors. Although movie exhibitors also
generally compete with the home video, pay-per-view and cable television
markets, the Company believes that such ancillary markets have assisted
the growth of the movie theatre industry by encouraging the production of
first-run movies released for initial movie theatre exhibition, which
establishes the demand for such movies in these ancillary markets.
The Company believes that the principal factors of competition
in each of its businesses, in varying degrees, are the price and quality
of its product, quality and location of its facilities, and customer
service. The Company believes that it is well positioned to compete on the
basis of these factors.
Seasonality
Historically, the Company's first and fourth fiscal quarters
have produced the strongest operating results, since such periods coincide
with the typical summer seasonality of the movie theatre industry and the
spring and summer strength of the travel and food service aspects of the
Company's business. In addition, the Company's historical method of
reporting on a 16 or 17-week fourth quarter has always contributed to the
larger results in such quarter.
Research and Development
Research and development expenditures for the Company are not
material.
Environmental Regulation
The Company does not expect federal, state or local
environmental legislation to have a material effect on the Company's
capital expenditures, earnings or competitive position. However, the
Company's activities in acquiring and selling real estate for business
development purposes have been complicated by the continued emphasis
placed by Company personnel on properly analyzing real estate sites for
potential environmental problems. This circumstance has resulted in, and
is expected to continue to result in, greater time and increased costs
involved in acquiring and selling properties associated with the Company's
various businesses.
Employees
As of the end of fiscal 1998, the Company had approximately
7,000 employees, a majority of whom were employed on a part-time basis. A
majority of the Company's hotel employees in Milwaukee, Wisconsin are
covered by collective bargaining agreements which expire in June 2002. A
number of the Company's hotel employees in Minneapolis, Minnesota are
covered by collective bargaining agreements which expire in April 2000.
Relations with employees have been satisfactory and there have been no
work stoppages due to labor disputes.
Item 2. Properties.
The Company owns a substantial portion of its facilities,
including the Pfister Hotel, the Milwaukee Hilton, the Grand Geneva Resort
and Spa and the Miramonte Resort, all of the Company-owned Budgetel Inns
and Woodfield Suites, the majority of its theatres and restaurants, and
leases the remainder. The Company also manages four hotel properties for
third parties. Additionally, the Company owns properties acquired for the
future construction and operation of new Company operating facilities.
Some of its properties are leased from entities owned by principal
shareholders of the Company. All of the Company's properties are suitably
maintained and adequately utilized to cover the respective business
segment served.
The operating properties owned, leased and franchised by the
Company as of May 28, 1998 are summarized in the following table:
<TABLE>
<CAPTION>
Leased
Total Number Leased From from Managed for Managed for
of Facilities Unrelated Related Related Unrelated Owned By
Business Segment in Operation Owned(1) Parties Parties Parties Parties Franchisees(2)
<S> <C> <C> <C> <C> <C> <C> <C>
Restaurants:
KFC 31 30 1 0 0 0 0
Movie Theatres: 46 33 12 1 0 0 0
Hotels and Resorts:
Hotels 5 2 0 0 0 3 0
Resorts 3 2 0 0 0 1 0
Limited-Service Lodging:
Budgetel 156 96 0 0 9 1 50
Woodfield Suites 5 5 0 0 0 0 0
----- ----- ----- ----- ----- ----- -----
TOTALS 246 168 13 1 9 5 50
===== ===== ===== ===== ===== ===== =====
_______________
(1) Two of the KFC restaurants, two of the movie theatres and two of the
Budgetel Inns are on land leased from unrelated parties under long-
term leases. One of the Budgetel Inns is located on land leased from
related parties. The Company's partnership interests in nine
Budgetel Inns that it manages and one movie theatre that it leases
are not included in this column.
(2) The Company manages one Budgetel Inn for a franchisee.
</TABLE>
Certain of the above individual properties or facilities are
subject to purchase money or construction mortgages or commercial lease
financing arrangements; none of these encumbrances are considered in the
aggregate to be material to the Company.
The terms of over 90% of the Company's operating property leases
expire on various dates after 1999 (assuming exercise by the Company of
all renewal and extension options).
Item 3. Legal Proceedings.
The Company does not believe that any pending legal proceeding
involving the Company is material to its business. No legal proceeding
required to be disclosed under this item was terminated during the fourth
quarter of the Company's 1998 fiscal year.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's
shareholders during the fourth quarter of the Company's 1998 fiscal year.
EXECUTIVE OFFICERS OF COMPANY
Each of the current executive officers of the Company is
identified below together with information about each such officer's age,
current position with the Company and employment history for at least the
past five years:
Name Position Age
Stephen H. Marcus Chairman of the Board, President
and Chief Executive Officer 63
Bruce J. Olson Group Vice President 48
H. Fred Delmenhorst Vice President-Human Resources 57
Thomas F. Kissinger General Counsel and Secretary 38
Douglas A. Neis Chief Financial Officer and Treasurer 39
Stephen H. Marcus has been Chairman of the Board of the Company
since December 1991 and President and Chief Executive Officer since
December 1988. Mr. Marcus has been employed by the Company for 37 years.
Bruce J. Olson has been employed in his present position with
the Company since July 1991. He was elected to serve on the Company's
Board of Directors in April 1996. Mr. Olson previously served as Vice
President-Administration and Planning for the Company from September 1987
until July 1991 and as Executive Vice President and Chief Operating
Officer of Marcus Theatres Corporation from August 1978 until October
1988, when he was appointed President of that corporation. Mr. Olson
joined the Company in 1974.
H. Fred Delmenhorst has been the Vice President-Human Resources
since he joined the Company in December 1984.
Thomas F. Kissinger joined the Company in August 1993 as
Secretary and Director of Legal Affairs and in August 1995 was promoted to
General Counsel and Secretary. Prior thereto, Mr. Kissinger was
associated with the law firm of Foley & Lardner for five years.
Douglas A. Neis joined the Company in February 1986 as
Controller of the Marcus Theatres division. In November 1987, Mr. Neis
was promoted to Controller of Marcus Restaurants. In July 1991, he was
appointed Vice President of Planning and Administration for Marcus
Restaurants. In September 1994, Mr. Neis was also named Director of
Technology for the Company and in September 1995 he was elected Corporate
Controller for the Company. In September 1996, Mr. Neis was promoted to
Chief Financial Officer and Treasurer of the Company.
The executive officers of the Company are generally elected
annually by the Board of Directors after the annual meeting of
shareholders. Each executive officer holds office until his successor has
been duly qualified and elected or until his earlier death, resignation or
removal.
<PAGE>
PART II
Item 5. Market for the Company's Common Equity and Related Shareholder
Matters.
The information required by this item is incorporated by
reference to the information pertaining thereto included on Page 34 of the
Company's 1998 Annual Report to Shareholders.
Item 6. Selected Financial Data.
The information required by this item is incorporated by
reference to the information pertaining thereto included on Page 33 of the
Company's 1998 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required by this item is incorporated by
reference to the information pertaining thereto included on Pages 14
through 21 of the Company's 1998 Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is incorporated by
reference to the information pertaining thereto included on Pages 22
through 32 and 34 of the Company's 1998 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company.
The information required by this item with respect to directors
is incorporated herein by reference to the information pertaining thereto
set forth under the caption entitled "Election of Directors" in the
definitive Proxy Statement for the Company's 1998 Annual Meeting of
Shareholders scheduled to be held September 28, 1998 (the "Proxy
Statement"). The required information with respect to executive officers
appears at the end of Part I of this Form 10-K.
Item 11. Executive Compensation.
The information required by this item is incorporated herein by
reference to the information pertaining thereto set forth under the
caption entitled "Executive Compensation" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated herein by
reference to the information pertaining thereto set forth under the
caption entitled "Stock Ownership of Management and Others" in the Proxy
Statement.
Item 13. Certain Relationships and Related Transactions.
The information required by this item, to the extent applicable,
is incorporated herein by reference to the information pertaining thereto
set forth under the caption entitled "Certain Transactions" in the Proxy
Statement.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1) Financial Statements.
The consolidated financial statements of the Company as of May
28, 1998 and May 29, 1997 and for each of the three years in the period
ended May 28, 1998, together with the report thereon of Ernst & Young LLP,
dated July 22, 1998, appear on Pages 22 through 32 of the Company's 1998
Annual Report to Shareholders, and are incorporated herein by reference.
(a)(2) Financial Statement Schedules.
All schedules are omitted because they are inapplicable, not
required under the instructions or the financial information is included
in the consolidated financial statements or notes thereto.
(a)(3) Exhibits.
The exhibits filed herewith or incorporated by reference herein
are set forth on the attached Exhibit Index.*
(b) Reports on Form 8-K.
The Company did not file a Form 8-K with the Securities and
Exchange Commission during the fourth quarter of fiscal 1998.
__________________
* Exhibits to this Form 10-K will be furnished to shareholders upon
advance payment of a fee of $0.20 per page, plus mailing expenses.
Requests for copies should be addressed to Thomas F. Kissinger,
General Counsel and Secretary, The Marcus Corporation, 250 East
Wisconsin Avenue, Suite 1700, Milwaukee, Wisconsin 53202.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
THE MARCUS CORPORATION
Date: August 25, 1998 By: /s/ Stephen H. Marcus
Stephen H. Marcus,
Chairman of the Board and
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Company and in the capacities as of the date indicated above.
By: /s/ Stephen H. Marcus By: /s/ Daniel F. McKeithan, Jr.
Stephen H. Marcus, Chairman Daniel F. McKeithan, Jr.,
of the Board and President Director
(Chief Executive Officer
By: /s/ Douglas A. Neis By: /s/ Diane Marcus Gershowitz
Douglas A. Neis, Treasurer Diane Marcus Gershowitz,
and Controller (Chief Director
Financial and Accounting
Officer)
By: /s/ Bruce J. Olson By: /s/ Timothy E. Hoeksema
Bruce J. Olson, Director Timothy E. Hoeksema, Director
By: /s/ Philip L. Milstein By: /s/ Allan H. Selig
Philip L. Milstein, Director Allan H. Selig, Director
<PAGE>
EXHIBIT INDEX
3.1 Restated Articles of Incorporation. [Incorporated by reference to
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended November 13, 1997.]
3.2* Bylaws, as amended as of September 28, 1995. [Incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the fiscal year ended May 30, 1996.]
4.1 Senior Note Purchase Agreement dated May 31, 1990, between the
Company and The Northwestern Mutual Life Insurance Company.
[Incorporated by reference to Exhibit 4 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1990.]
4.2 The Marcus Corporation Note Purchase Agreement dated October 25,
1996. [Incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
November 14, 1996.]
4.3 First Supplement to Note Purchase Agreements dated May 15, 1998.
4.4 Other than as set forth in Exhibits 4.1, 4.2 and 4.3, the Company
has numerous instruments which define the rights of holders of
long-term debt. These instruments, primarily promissory notes,
have arisen from the purchase of operating properties in the
ordinary course of business. These instruments are not being filed
with this Annual Report on Form 10-K in reliance upon Item
601(b)(4)(iii) of Regulation S-K. Copies of these instruments will
be furnished to the Securities and Exchange Commission upon
request.
10.1 The Company is the guarantor and/or obligor under various loan
agreements in connection with operating properties (primarily
Budgetel Inns) which were financed through the issuance of
industrial development bonds. These loan agreements and the
additional documentation relating to these projects are not being
filed with this Annual Report on Form 10-K in reliance upon Item
601(b)(4)(iii) of Regulation S-K. Copies of these documents will
be furnished to the Securities and Exchange Commission upon
request.
10.2 Comprehensive Image Enhancement Agreement dated October 12, 1988,
between the Company and KFC Corporation. [Incorporated by
reference to Exhibit 10.11 to the Company's Annual Report on Form
10-K for the fiscal year ended May 25, 1989.]
10.3 Form of individual Kentucky Fried Chicken franchise agreement
between the Company and KFC Corporation. [Incorporated by
reference to Exhibit 10.3 to the Company's Annual Report on Form
10-K for the fiscal year ended May 29, 1997.]
10.4* The Marcus Corporation 1995 Equity Incentive Plan, as amended.
10.5* The Marcus Corporation 1994 Nonemployee Director Stock Option
Plan. [Incorporated by reference to Exhibit A to the Company's
1994 Proxy Statement.]
13 The Company's 1998 Annual Report to Shareholders, to the extent
incorporated by reference herein.
21 Subsidiaries of the Company as of May 28, 1998.
23.1 Consent of Ernst & Young LLP.
27.1 Financial Data Schedule for the fiscal year ended May 28, 1998.
27.2 Restated Financial Data Schedule for the fiscal year ended May 29,
1997.
27.3 Restated Financial Data Schedule for the nine months ended
February 6, 1997.
27.4 Restated Financial Data Schedule for the fiscal year ended May 30,
1996.
99 Proxy Statement for the 1998 Annual Meeting of Shareholders. (The
Proxy Statement for the 1998 Annual Meeting of Shareholders will
be filed with the Securities and Exchange Commission under
Regulation 14A within 120 days after the end of the Company's
fiscal year. Except to the extent specifically incorporated by
reference, the Proxy Statement for the 1998 Annual Meeting of
Shareholders shall not be deemed to be filed with the Securities
and Exchange Commission as part of this Annual Report on Form 10-
K.)
__________
* This exhibit is a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this form
pursuant to Item 14(c) of Form 10-K.
Exhibit 4.3
THE MARCUS CORPORATION
FIRST SUPPLEMENT TO NOTE PURCHASE AGREEMENTS
Dated as of May 15, 1998
Re: $5,000,000 6.66% Series B Senior Notes, Tranche A,
due May 15, 2013
and
$25,000,000 6.70% Series B Senior Notes, Tranche B,
due May 15, 2013
<PAGE>
FIRST SUPPLEMENT TO NOTE PURCHASE AGREEMENTS
Dated as of
May 15, 1998
To the Purchaser named in
Schedule A hereto which is
a signatory of this Agreement
Ladies and Gentlemen:
This First Supplement to Note Purchase Agreements (the "First
Supplement") is between The Marcus Corporation (the "Company") whose
address is 250 East Wisconsin Avenue, Suite 1700, Milwaukee, Wisconsin
53202 and the institutional investors named on Schedule A attached hereto
(the "Purchasers").
Reference is hereby made to those certain Note Purchase Agreements
dated as of October 25, 1996 (the "Note Agreements") between the Company
and the purchasers listed on Schedule A thereto. All capitalized terms
not otherwise defined herein shall have the same meaning as specified in
the Note Agreements. Reference is further made to Section 4.11 thereof
which requires that, prior to the delivery of any Additional Notes, the
Company and each Additional Purchaser shall execute and deliver a
Supplement.
The Company hereby agrees with you as follows:
1. The Company has authorized the issue and sale of $5,000,000
aggregate principal amount of its 6.66% Series B Senior Notes, Tranche A
due May 15, 2013 (the "Tranche A Notes") and $25,000,000 aggregate
principal amount of its 6.70% Series B Senior Notes, Tranche B due May 15,
2013 (the "Tranche B Notes" and together with the Tranche A Notes, the
"Series B Notes"). The Series B Notes, together with the Series A Notes
initially issued pursuant to the Note Agreements and each Series of
Additional Notes which may from time to time be issued pursuant to the
provisions of Section 2.2 of the Notes Agreements, are collectively
referred to as the "Notes" (such term shall also include any such notes
issued in substitution therefor pursuant to Section 13 of the Note
Agreements). The Tranche A Notes and the Tranche B Notes shall be
substantially in the forms set out in Exhibit 1 and Exhibit 2 hereto,
respectively, with such changes therefrom, if any, as may be approved by
you and the Company.
2. Subject to the terms and conditions hereof and as set forth in
the Note Agreements and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to you, and
you agree to purchase from the Company, Series B Notes in the principal
amount set forth opposite your name on Schedule A hereto at a price of
100% of the principal amount thereof on the closing date hereafter
mentioned.
3. Delivery of the $30,000,000 in aggregate principal amount of the
Series B Notes will be made at the offices of Chapman and Cutler, 111 West
Monroe, Chicago, Illinois 60603, against payment therefor in Federal
Reserve or other funds current and immediately available at the principal
office of Bank One Milwaukee, N.A., 111 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202 (ABA Number 075-0000-19) for credit to the First American
Finance Corporation Account, Account Number 550-2510-15 with telephonic
confirmation to Ms. Debbie Ludkee at (414) 905-1160 in the amount of the
purchase price at 11:00 A.M., Milwaukee, Wisconsin time, on May 22, 1998
or such later date (not later than [May 27, 1998)] as shall mutually be
agreed upon by the Company and the Purchasers of the Series B Notes (the
"Closing").
4. (a) Required Prepayments.
(i) Tranche A Notes. On May 15, 2003 and on each May 15
thereafter to and including May 15, 2012, the Company will prepay
$454,545 principal amount (or such lesser principal amount as shall
then be outstanding) of the Tranche A Notes at par and without
payment of the Make-Whole Amount or any premium. The entire
remaining principal amount of the Tranche A Notes shall become due
and payable on May 15, 2013. For purposes of this Section 4(a)(i),
any prepayment of less than all of the outstanding Tranche A Notes
pursuant to Section 4(b) shall be deemed to be applied first to the
amount of principal scheduled to be repaid on May 15, 2013, and then
to the remaining scheduled principal payments, if any, in inverse
chronological order.
(ii) Tranche B Notes. On May 15, 2007 and on each May 15
thereafter to and including May 15, 2012, the Company will prepay
$3,571,429 principal amount (or such lesser principal amount as shall
then be outstanding) of the Tranche B Notes at par and without
payment of the Make-Whole Amount or any premium. The entire
remaining principal amount of the Tranche B Notes shall become due
and payable on May 15, 2013. For purposes of this Section 4(a)(ii),
any prepayment of less than all of the outstanding Tranche B Notes
pursuant to Section 4(b) shall be deemed to be applied first to the
amount of principal scheduled to be repaid on May 15, 2013, and then
to the remaining scheduled principal payments, if any, in inverse
chronological order.
(b) Application of Prepayments. In the event of a purchase of
the Series B Notes pursuant to Section 8.5 of the Note Agreements or a
Partial Redemption of the Series B Notes all required prepayments on the
Series B Notes shall be adjusted as provided in Section 8.1(c) of the Note
Agreements.
(c) Optional Prepayments. The Series B Notes are subject to
prepayment at the option of the Company in the manner and with the effect
set forth in Section 8.2 of the Note Agreements.
(d) Allocation of Partial Prepayments. In the case of each
partial prepayment of the Series B Notes pursuant to the provisions of
Section 8.2 of the Note Agreements, the principal amount of the Series B
Notes to be prepaid shall be allocated among all of the Notes of such
Series at the time outstanding in proportion, as nearly as practicable, to
the respective unpaid principal amounts thereof. In the case of each
required prepayment of the Series B Notes pursuant to Section 4(a), the
principal amount of the Tranche to be prepaid shall be allocated among all
of the Notes of such Tranche at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof.
(e) Make-Whole Amount for Series B Notes. The term "Make-Whole
Amount" means, with respect to any Series B Note of any Tranche, an amount
equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Series B
Note of such Tranche over the amount of such Called Principal, provided
that the Make-Whole Amount may in no event be less than zero. For the
purposes of determining the Make-Whole Amount, the following terms have
the following meanings:
"Called Principal" means, with respect to any Series B Note of
any Tranche, the principal of such Series B Note of such Tranche that is
to be prepaid pursuant to Section 8.2 of the Note Agreements or has become
or is declared to be immediately due and payable pursuant to Section 12.1
of the Note Agreements, as the context requires.
"Discontinued Value" means, with respect to the Called Principal
of any Series B Note of any Tranche, the amount obtained by discounting
all Remaining Scheduled Payments with respect to such Called Principal
from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted financial
practice and at a discount factor (applied on the same periodic basis as
that on which interest on the Series B Note of such Tranche is payable)
equal to the Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal
of any Series B Note of any Tranche, 0.50% over the yield to maturity
implied by (i) the yields reported, as of 10:00 A.M. (New York City time)
on the second Business Day preceding the Settlement Date with respect to
such Called Principal, on the display designated as "PX-1" on the
Bloomberg Financial Markets Services Screen (or such other display as may
replace PX-1 of the Bloomberg Financial Markets Services Screen) for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement
Date, or (ii) if such yields are not reported as of such time or the
yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day preceding
the Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill quotations
to bond-equivalent yields in accordance with accepted financial practice
and (b) interpolating linearly between (1) the actively traded U.S.
Treasury security with the maturity closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with the maturity closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum of
the products obtained by multiplying (a) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by (b)
the number of years (calculated to the nearest one-twelfth year) that will
elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Series B Note of any Tranche, all payments of such Called
Principal and interest thereon that would be due after the Settlement Date
with respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Series B Note of such Tranche, then the amount
of the next succeeding scheduled interest payment will be reduced by the
amount of interest accrued to such Settlement Date and required to be paid
on such Settlement Date pursuant to Section 8.2 of the Note Agreements or
12.1 of the Note Agreements.
"Settlement Date" means, with respect to the Called Principal of
any Series B Note of any Tranche, the date on which such Called Principal
is to be prepaid pursuant to Section 8.2 of the Note Agreements or has
become or is declared to be immediately due and payable pursuant to
Section 12.1 of the Note Agreements, as the context requires.
5. The obligations of each Purchaser to purchase and pay for the
Series B Notes to be sold to such Purchaser at the Closing is subject to
the fulfillment to such Purchaser's satisfaction, prior to the Closing, of
the conditions set forth in Section 4 of the Note Agreements, and to the
following additional conditions:
(a) Except as supplemented by the representations and
warranties set forth in Exhibit A hereto, each of the representations and
warranties of the Company set forth in Section 5 of the Note Agreements
shall be correct as of the date of Closing and the Company shall have
delivered to each Purchaser an Officer's Certificate, dated the date of
the Closing certifying that such condition has been fulfilled.
(b) Contemporaneously with the Closing, the Company shall sell
to each Purchaser, and each Purchaser shall purchase, the Notes to be
purchased by such Purchaser at the Closing as specified in Schedule A.
(c) A Private Placement Number shall have been obtained for the
Series B Notes.
6. Each Purchaser represents and warrants that the representations
and warranties set forth in Section 6 of the Note Agreements are true and
correct on the date hereof with respect to the Series B Notes purchased by
such Purchaser.
7. The Company and each purchaser agrees to be bound by and comply
with the terms and provision of the Note Agreements for the benefit of the
holders of the Series B Notes as fully and as completely as if each
Purchaser were an original signatory to the Note Agreements.
The execution hereof shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this agreement may be
executed in any number of counterparts, each executed counterpart
constituting an original but all together only one agreement.
THE MARCUS CORPORATION
By: /s/ Stephen H. Marcus
Its: President
Accepted as of May 22, 1998 Printed Name: Stephen H. Marcus
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
By: CIGNA INVESTMENTS, INC.
By: /s/ Stephen A. Osborn
Name: Stephen A. Osborn
Title: Managing Director
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Gary A. Poliner
Its: Authorized Representative
Printed Name: Gary A. Poliner
Exhibit 10.4
THE MARCUS CORPORATION
1995 EQUITY INCENTIVE PLAN
AMENDED THROUGH JUNE 26, 1997
(Sections 6(a)(ii) and 6(e)(v) amended in their entirety)
<PAGE>
THE MARCUS CORPORATION
1995 EQUITY INCENTIVE PLAN
AMENDED THROUGH JUNE 26, 1997
(Sections 6(a)(ii) and 6(e)(v) amended in their entirety)
Section 1. Purpose
The purpose of The Marcus Corporation 1995 Equity Incentive Plan
(the "Plan") is to promote the best interests of The Marcus Corporation
(the "Company") and its shareholders by providing key employees of the
Company and its Affiliates (as defined below) with an opportunity to
acquire a, or increase their, proprietary interest in the Company. It is
intended that the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those key
employees who are primarily responsible for shaping and carrying out the
long-range plans of the Company and securing the Company's continued
growth and financial success.
Section 2. Definitions
As used in the Plan, the following terms shall have the
respective meanings set forth below:
(a) "Affiliate" shall mean any entity that, directly or through
one or more intermediaries, is controlled by, controls, or is under common
control with, the Company.
(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock or Performance Share granted under the Plan.
(c) "Award Agreement" shall mean any written agreement,
contract or other instrument or document evidencing any Award granted
under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Commission" shall mean the Securities and Exchange
Commission.
(f) "Committee" shall mean the Compensation and Nominating
Committee of the Board of Directors of the Company (or any other committee
thereof designated by such Board to administer the Plan); provided,
however, that the Committee is composed of not less than two directors,
each of whom is a "disinterested person" within the meaning of Rule 16b-3.
(g) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(h) "Fair Market Value" shall mean, with respect to any
property (including, without limitation, any Shares or other securities),
the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee.
(i) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code (or any successor provision thereto).
(j) "Key Employee" shall mean any officer or other key employee
of the Company or of any Affiliate who is responsible for or contributes
to the management, growth or profitability of the business of the Company
or any Affiliate as determined by the Committee in its discretion.
(k) "Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive
Stock Option.
(l) "Option" shall mean an Incentive Stock Option or a Non-
Qualified Stock Option.
(m) "Participating Key Employee" shall mean a Key Employee
designated to be granted an Award under the Plan.
(n) "Performance Period" shall mean, in relation to Performance
Shares, any period for which a performance goal or goals have been
established.
(o) "Performance Share" shall mean any right granted under
Section 6(d) of the Plan that will be paid out as a Share (which, in
specified circumstances, may be a Share of Restricted Stock).
(p) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization or government or political subdivision thereof.
(q) "Released Securities" shall mean Shares of Restricted Stock
with respect to which all applicable restrictions have expired, lapsed or
been waived.
(r) "Restricted Securities" shall mean Awards of Restricted
Stock or other Awards under which issued and outstanding Shares are held
subject to certain restrictions.
(s) "Restricted Stock" shall mean any Share granted under
Section 6(c) of the Plan or, in specified circumstances, a Share paid in
connection with a Performance Share under Section 6(e) of the Plan.
(t) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission under the Exchange Act, or any successor rule or regulation
thereto.
(u) "Shares" shall mean shares of common stock of the Company,
$1 par value, and such other securities or property as may become subject
to Awards pursuant to an adjustment made under Section 4(b) of the Plan.
(v) "Stock Appreciation Right" shall mean any right granted
under Section 6(b) of the Plan.
Section 3. Administration
The Plan shall be administered by the Committee; provided,
however, that if at any time the Committee shall not be in existence, the
functions of the Committee as specified in the Plan shall be exercised by
those members of the Board of Directors of the Company who qualify as
"disinterested persons" under Rule 16b-3. Subject to the terms of the
Plan and applicable laws and without limitation by reason of enumeration,
the Committee shall have full discretionary power and authority to: (i)
designate Participating Key Employees; (ii) determine the type or types of
Awards to be granted to each Participating Key Employee under the Plan;
(iii) determine the number of Shares to be covered by (or with respect to
which payments, rights or other matters are to be calculated in connection
with) Awards granted to Participating Key Employees; (iv) determine the
terms and conditions of any Award granted to a Participating Key Employee;
(v) determine whether, to what extent and under what circumstances Awards
granted to Participating Key Employees may be settled or exercised in
cash, Shares, other securities, other Awards or other property, and the
method or methods by which Awards may be settled, exercised, canceled,
forfeited or suspended; (vi) determine whether, to what extent and under
what circumstances cash, Shares, other Awards and other amounts payable
with respect to an Award granted to Participating Key Employees under the
Plan shall be deferred either automatically or at the election of the
holder thereof or of the Committee; (vii) interpret and administer the
Plan and any instrument or agreement relating to, or Award made under, the
Plan (including, without limitation, any Award Agreement); (viii)
establish, amend, suspend or waive such rules and regulations and appoint
such agents as it shall deem appropriate for the proper administration of
the Plan; and (ix) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of
the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or
with respect to the Plan or any Award shall be within the sole discretion
of the Committee, may be made at any time or from time to time, and shall
be final, conclusive and binding upon all Persons, including the Company,
any Affiliate, any Participating Key Employee, any holder or beneficiary
of any Award, any shareholder and any employee of the Company or of any
Affiliate.
Section 4. Shares Available for Award
(a) Shares Available. Subject to adjustment as provided in
Section 4(b):
(i) Number of Shares Available. The number of Shares with
respect to which Awards may be granted under the Plan shall be
500,000, subject to the limitations set forth in Section 6(c)(i).
(ii) Accounting for Awards. The number of Shares covered
by an Award under the Plan, or to which such Award relates, shall be
counted on the date of grant of such Award against the number of
Shares available for granting Awards under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any
Shares delivered pursuant to an Award may consist, in whole or in
part, of authorized and unissued Shares or of treasury Shares.
(b) Adjustments. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of
cash, Shares, other securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment
is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to
be made available under the Plan, then the Committee may, in such manner
as it may deem equitable, adjust any or all of (i) the number and type of
Shares subject to the Plan and which thereafter may be made the subject of
Awards under the Plan; (ii) the number and type of Shares subject to
outstanding Awards; and (iii) the grant, purchase or exercise price with
respect to any Award, or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding Award; provided, however, in each
case, that with respect to Awards of Incentive Stock Options no such
adjustment shall be authorized to the extent that such authority would
cause the Plan to violate Section 422(b) of the Code (or any successor
provision thereto); and provided further that the number of Shares subject
to any Award payable or denominated in Shares shall always be a whole
number.
Section 5. Eligibility
Any Key Employee, including any executive officer or employee-
director of the Company or of any Affiliate, who is not a member of the
Committee shall be eligible to be designated a Participating Key Employee.
Ben Marcus, Stephen H. Marcus, Diane Marcus Gershowitz and any other
person who beneficially owns, directly or indirectly (taking into account
stock ownership attributed to such person pursuant to Section 425(d) of
the Code), stock possessing more than five percent (5%) of the total
combined voting power of all classes of stock of the Company or of any
Affiliate of the Company shall not be eligible to receive Awards under the
Plan.
Section 6. Awards
(a) Option Awards. The Committee is hereby authorized to grant
Options to Key Employees with the terms and conditions as set forth below
and with such additional terms and conditions, in either case not
inconsistent with the provisions of the Plan, as the Committee shall
determine in its discretion.
(i) Exercise Price. The exercise price per Share of an
Option granted pursuant to this Section 6(a) shall be determined by
the Committee; provided, however, that such exercise price shall not
be less than 100% of the Fair Market Value of a Share on the date of
grant of such Option.
(ii) Option Term. The term of each Option shall be fixed
by the Committee; provided, however, that in no event shall the term
of any Option exceed a period of ten years from the date of its
grant.
(iii) Exercisability and Method of Exercise. An Option
shall become exercisable in such manner and within such period or
periods and in such installments or otherwise as shall be determined
by the Committee. The Committee also shall determine the method or
methods by which, and the form or forms, including, without
limitation, cash, Shares, other securities, other Awards, other
property or any combination thereof, having a Fair Market Value on
the exercise date equal to the relevant exercise price, in which
payment of the exercise price with respect to any Option may be made
or deemed to have been made.
(iv) Incentive Stock Options. The terms of any Incentive
Stock Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code (or any successor provision
thereto) and any regulations promulgated thereunder. Notwithstanding
any provision in the Plan to the contrary, no Incentive Stock Option
may be granted hereunder after the tenth anniversary of the adoption
of the Plan by the Board of Directors of the Company.
(b) Stock Appreciation Right Awards. The Committee is hereby
authorized to grant Stock Appreciation Rights to Key Employees. Subject
to the terms of the Plan and any applicable Award Agreement, a Stock
Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the excess of (i) the
Fair Market Value of one Share on the date of exercise over (ii) the grant
price of the Stock Appreciation Right as specified by the Committee, which
shall not be less than 100% of the Fair Market Value of one Share on the
date of grant of the Stock Appreciation Right. Subject to the terms of
the Plan, the grant price, term, methods of exercise, methods of
settlement (including whether the Participating Key Employee will be paid
in cash, Shares, other securities, other Awards, or other property or any
combination thereof), and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee in its
discretion. The Committee may impose such conditions or restrictions on
the exercise of any Stock Appreciation Right as it may deem appropriate,
including, without limitation, restricting the time of exercise of the
Stock Appreciation Right to specified periods as may be necessary to
satisfy the requirements of Rule 16b-3.
(c) Restricted Stock Awards.
(i) Issuance. The Committee is hereby authorized to grant
Awards of Restricted Stock to Key Employees; provided, however, that
the aggregate number of Shares of Restricted Stock granted under the
Plan to all Participating Key Employees as a group shall not exceed
50,000 Shares (such number of Shares subject to adjustment in
accordance with the terms of Section 4(b) hereof) of the total number
of Shares available for Awards under Section 4(a)(i).
(ii) Restrictions. Shares of Restricted Stock granted to
Participating Key Employees shall be subject to such restrictions as
the Committee may impose in its discretion (including, without
limitation, any limitation on the right to vote a Share of Restricted
Stock or the right to receive any dividend or other right or
property), which restrictions may lapse separately or in combination
at such time or times, in such installments or otherwise, as the
Committee may deem appropriate in its discretion.
(iii) Registration. Any Restricted Stock granted under
the Plan to a Participating Key Employee may be evidenced in such
manner as the Committee may deem appropriate in its discretion,
including, without limitation, book-entry registration or issuance of
a stock certificate or certificates. In the event any stock
certificate is issued in respect of Shares of Restricted Stock
granted under the Plan to a Participating Key Employee, such
certificate shall be registered in the name of the Participating Key
Employee and shall bear an appropriate legend (as determined by the
Committee) referring to the terms, conditions and restrictions
applicable to such Restricted Stock.
(iv) Payment of Restricted Stock. At the end of the
applicable restriction period relating to Restricted Stock granted to
a Participating Key Employee, one or more stock certificates for the
appropriate number of Shares, free of restrictions imposed under the
Plan, shall be delivered to the Participating Key Employee or, if the
Participating Key Employee received stock certificates representing
the Restricted Stock at the time of grant, the legends placed on such
certificates shall be removed.
(v) Forfeiture. Except as otherwise determined by the
Committee in its discretion, upon termination of employment of a
Participating Key Employee (as determined under criteria established
by the Committee in its discretion) for any reason during the
applicable restriction period, all Shares of Restricted Stock still
subject to restriction shall be forfeited by the Participating Key
Employee; provided, however, that the Committee may, when it finds
that a waiver would be in the best interests of the Company, waive in
whole or in part any or all remaining restrictions with respect to
Shares of Restricted Stock held by a Participating Key Employee.
(d) Performance Share Awards.
(i) Issuance. The Committee is hereby authorized to grant
Awards of Performance Shares to Key Employees.
(ii) Performance Goals and Other Terms. The Committee
shall determine in its discretion the Performance Period, the
performance goal or goals to be achieved during any Performance
Period, the proportion of payments, if any, to be made for
performance between the minimum and full performance levels, the
restrictions applicable to Shares of Restricted Stock received upon
payment of Performance Shares if Performance Shares are paid in such
manner, and any other terms, conditions and rights relating to a
grant of Performance Shares. Performance goals established by the
Committee may be based on one or more measures such as return on
shareholders' equity, earnings or any other standard or standards
deemed relevant by the Committee, measured internally or relative to
other organizations and before or after extraordinary items.
(iii) Rights and Benefits During the Performance
Period. The Committee may provide that, during a Performance Period,
a Participating Key Employee shall be paid cash amounts, with respect
to each Performance Share held by such Participating Key Employee, in
the same manner, at the same time, and in the same amount paid, as a
cash dividend on a Share. Participating Key Employees shall have no
voting rights with respect to Performance Shares held by them.
(iv) Adjustments with Respect to Performance Shares. Any
other provision of the Plan to the contrary notwithstanding, the
Committee may in its discretion at any time or from time to time
adjust performance goals (up or down) and minimum or full performance
levels (and any intermediate levels and proportion of payments
related thereto), adjust the manner in which performance goals are
measured, or shorten any Performance Period or waive in whole or in
part any or all remaining restrictions with respect to Shares of
Restricted Stock issued in payment of Performance Shares, if the
Committee determines that conditions, including but not limited to,
changes in the economy, changes in competitive conditions, changes in
laws or governmental regulations, changes in generally accepted
accounting principles, changes in the Company's accounting policies,
acquisitions or dispositions by the Company or its Affiliates, or the
occurrence of other unusual, unforeseen or extraordinary events, so
warrant.
(v) Payment of Performance Shares. As soon as is
reasonably practicable following the end of the applicable
Performance Period, one or more certificates representing the number
of Shares equal to the number of Performance Shares payable shall be
registered in the name of and delivered to the Participating Key
Employee; provided, however, that any Shares of Restricted Stock
payable in connection with Performance Shares shall, pending the
expiration, lapse, or waiver of the applicable restrictions, be
evidenced in the manner as set forth in Section 6(c)(iii) hereof.
(e) General.
(i) No Consideration for Awards. Awards shall be granted
to Participating Key Employees for no cash consideration unless
otherwise determined by the Committee.
(ii) Award Agreements. Each Award granted under the Plan
shall be evidenced by an Award Agreement in such form (consistent
with the terms of the Plan) as shall have been approved by the
Committee.
(iii) Awards May Be Granted Separately or Together.
Awards to Participating Key Employees under the Plan may be granted
either alone or in addition to, in tandem with, or in substitution
for, any other Award or any award granted under any other plan of the
Company or any Affiliate. Awards granted in addition to, or in
tandem with, other Awards, or in addition to, or in tandem with,
awards granted under any other plan of the Company or any Affiliate,
may be granted either at the same time as or at a different time from
the grant of such other Awards or awards.
(iv) Forms of Payment Under Awards. Subject to the terms
of the Plan and of any applicable Award Agreement, payments or
transfers to be made by the Company or an Affiliate upon the grant,
exercise or payment of an Award to a Participating Key Employee may
be made in such form or forms as the Committee shall determine, and
may be made in a single payment or transfer, in installments, or on a
deferred basis, in each case in accordance with rules and procedures
established by the Committee in its discretion. Such rules and
procedures may include, without limitation, provisions for the
payment or crediting of interest on installment or deferred payments.
(v) Transferability. Each Award granted under the Plan
shall not be transferable other than by will or the laws of descent
and distribution except that a Participating Key Employee may, to the
extent allowed by the Committee and in a manner specified by the
Committee or the Award Agreement, (a) designate in writing a
beneficiary to exercise the Award after the Participating Key
Employee's death, as the case may be, and (b) transfer any Award.
(vi) Term of Awards. Except as otherwise provided in the
Plan, the term of each Award shall be for such period as may be
determined by the Committee.
(vii) Rule 16b-3 Six-Month Limitations. To the extent
required in order to comply with Rule 16b-3 only, any equity security
offered pursuant to the Plan may not be sold for at least six months
after acquisition, except in the case of death or disability, and any
derivative security issued pursuant to the Plan shall not be
exercisable for at least six months, except in case of death or
disability of the holder thereof. Terms used in the preceding
sentence shall, for the purposes of such sentence only, have the
meanings, if any, assigned or attributed to them under Rule 16b-3.
(viii) Share Certificates; Representation. In addition
to the restrictions imposed pursuant to Section 6(c) and Section 6(d)
hereof, all certificates for Shares delivered under the Plan pursuant
to any Award or the exercise thereof shall be subject to such stop
transfer orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations and other
requirements of the Commission, New York Stock Exchange or any other
stock exchange or other market upon which such Shares are then listed
or traded, and any applicable federal or state securities laws, and
the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions. The
Committee may require each Participating Key Employee, or other
Person who acquires Shares under the Plan by means of an Award
originally made to a Participating Key Employee to represent to the
Company in writing that such Participating Key Employee, or other
Person is acquiring the Shares without a view to the distribution
thereof.
Section 7. Amendment and Termination of the Plan; Correction of
Defects and Omissions
(a) Amendments to and Termination of the Plan. The Board of
Directors of the Company may at any time amend, alter, suspend,
discontinue or terminate the Plan; provided, however, that shareholder
approval of any amendment of the Plan shall also be obtained if otherwise
required by: (i) the rules and/or regulations promulgated under Section 16
of the Exchange Act (in order for the Plan to remain qualified under Rule
16b-3); (ii) the Code or any rules promulgated thereunder (in order to
allow for Incentive Stock Options to be granted under the Plan); or (iii)
the listing requirements of the New York Stock Exchange or any other
principal securities exchange or market on which the Shares are then
traded (in order to maintain the listing of the Shares thereon).
Termination of the Plan shall not affect the rights of Participating Key
Employees with respect to Awards previously granted to them, and all
unexpired Awards shall continue in force and effect after termination of
the Plan except as they may lapse or be terminated by their own terms and
conditions.
(b) Correction of Defects, Omissions and Inconsistencies. The
Committee may in its discretion correct any defect, supply any omission or
reconcile any inconsistency in any Award or Award Agreement in the manner
and to the extent it shall deem desirable to carry the Plan into effect.
Section 8. General Provisions
(a) No Rights to Awards. No Key Employee, Participating Key
Employee or other Person shall have any claim to be granted any Award
under the Plan, and there is no obligation for uniformity of treatment of
Key Employees, Participating Key Employees or holders or beneficiaries of
Awards under the Plan. The terms and conditions of Awards need not be the
same with respect to each Participating Key Employee.
(b) Withholding. No later than the date as of which an amount
first becomes includable in the gross income of a Participating Key
Employee for federal income tax purposes with respect to any Award under
the Plan, the Participating Key Employee shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations arising with respect to Awards to
Participating Key Employees under the Plan may be settled with Shares
previously owned by the Participating Key Employee; provided, however,
that the Participating Key Employee may not settle such obligations with
Shares that are part of, or are received upon exercise of, the Award that
gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and
the Company and any Affiliate shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to the
Participating Key Employee. The Committee may establish such procedures
as it deems appropriate for the settling of withholding obligations with
Shares, including, without limitation, the establishment of such
procedures as may be necessary to satisfy the requirements of Rule 16b-3.
(c) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from
adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.
(d) Rights and Status of Recipients of Awards. The grant of an
Award shall not be construed as giving a Participating Key Employee the
right to be retained in the employ of the Company or any Affiliate.
Further, the Company or any Affiliate may at any time dismiss a
Participating Key Employee from employment, free from any liability, or
any claim under the Plan, unless otherwise expressly provided in the Plan
or in any Award Agreement. Except for rights accorded under the Plan and
under any applicable Award Agreement, Participating Key Employees shall
have no rights as holders of Shares as a result of the granting of Awards
hereunder.
(e) Unfunded Status of the Plan. Unless otherwise determined
by the Committee, the Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall
not establish any fiduciary relationship between the Company or the
Committee and any Participating Key Employee or other Person. To the
extent any Person holds any right by virtue of a grant under the Plan,
such right (unless otherwise determined by the Committee) shall be no
greater than the right of an unsecured general creditor of the Company.
(f) Governing Law. The validity, construction and effect of
the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the internal laws of the State of Wisconsin
and applicable federal law.
(g) Severability. If any provision of the Plan or any Award
Agreement or any Award is or becomes or is deemed to be invalid, illegal
or unenforceable in any jurisdiction, or as to any Person or Award, or
would disqualify the Plan, any Award Agreement or any Award under any law
deemed applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan, any Award Agreement
or the Award, such provision shall be stricken as to such jurisdiction,
Person or Award, and the remainder of the Plan, any such Award Agreement
and any such Award shall remain in full force and effect.
(h) No Fractional Shares. No fractional Shares or other
securities shall be issued or delivered pursuant to the Plan, any Award
Agreement or any Award, and the Committee shall determine (except as
otherwise provided in the Plan) whether cash, other securities or other
property shall be paid or transferred in lieu of any fractional Shares or
other securities, or whether such fractional Shares or other securities or
any rights thereto shall be canceled, terminated or otherwise eliminated.
(i) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference.
Such headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.
Section 9. Effective Date of the Plan
The Plan shall be effective as of the date the Plan is adopted
by the shareholders, provided such shareholder approval of the Plan is
within 12 months following the date of adoption of the Plan by the Board
of Directors, and all Awards granted under the Plan prior to the date of
shareholder approval shall be subject to such approval and the effective
date of such Award grants shall be deemed to be the date of such
shareholder approval.
Section 10. Term of the Plan
No Award shall be granted under the Plan following the tenth
anniversary of its effective date. However, unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award
theretofore granted may extend beyond such date and, to the extent set
forth in the Plan, the authority of the Committee to amend, alter, adjust,
suspend, discontinue or terminate any such Award, or to waive any
conditions or restrictions with respect to any such Award, and the
authority of the Board of Directors of the Company to amend the Plan,
shall extend beyond such date.
Management's discussion and analysis
Forward-Looking Statements
Certain matters discussed in this annual report to shareholders,
particularly in the Shareholders' Letter and Management's Discussion and
Analysis, 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 can
generally be identified as such because the context of the statement 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 which are described in close proximity to such statements
and which may cause actual results to differ materially from those
currently anticipated. 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 report 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 and its four divisions report their consolidated
and individual segment results of operations on either a 52-or 53-week
fiscal year. Fiscal 1998 was a 53-week fiscal year for the Company's
restaurant division, while the Company and each of its other divisions
reported on a 52-week fiscal year. Fiscal 1997 was a 53-week fiscal year
for the Company's limited-service lodging and hotel/resort divisions,
while the Company and each of its other divisions reported on a 52-week
fiscal year. Fiscal 1996 was a 53-week fiscal year for the Company and its
theatre division, while the Company's remaining divisions reported on a
52-week fiscal year. Fiscal 1999 will be a 52-week year for the Company
and each of its divisions.
Historically, the Company's fiscal year has been divided into three
12-week quarters and a final quarter consisting of 16 or 17 weeks.
Beginning in fiscal 1999, the Company will begin dividing its fiscal year
into three 13-week quarters and a final quarter consisting of 13 or 14
weeks. The Company is making this change in order to simplify its
reporting process and provide greater consistency between quarters. The
Company's fiscal year end will not change. To facilitate future
comparisons with fiscal 1999 quarterly results, the following table sets
forth approximate pro forma revenues, earnings and earnings per share
(diluted) for each of the Company's fiscal 1998 quarters as if the
quarters had been reported on the new basis:
Revenues (in thousands)
1st 2nd 3rd 4th Fiscal
Quarter Quarter Quarter Quarter 1998
Reported $90,053 $71,184 $71,220 $103,327 $335,784
Pro forma $96,111 $76,051 $79,625 $ 83,997 $335,784
Earnings (in thousands)
1st 2nd 3rd 4th Fiscal
Quarter Quarter Quarter Quarter* 1998*
Reported $13,065 $6,917 $3,035 $7,767 $30,784
Pro forma $13,669 $6,707 $4,284 $6,124 $30,784
Earnings Per Share (diluted)
1st 2nd 3rd 4th Fiscal
Quarter Quarter Quarter Quarter* 1998*
Reported $0.44 $0.23 $0.10 $0.25 $1.02
Pro forma $0.46 $0.22 $0.14 $0.20 $1.02
* Excludes $2.34 million or $.08 per share after-tax charge for Budgetel
name change
Total consolidated revenues for fiscal 1998 were $335.8 million, an
increase of $32.4 million, or 10.7%, compared to fiscal 1997 consolidated
revenues of $303.4 million. All four of the Company's divisions
contributed to the increase in revenues in fiscal 1998, with the greatest
increases resulting from the Company's theatre and hotel/resort divisions.
Fiscal 1997 consolidated revenues increased $41.1 million, or 15.7%, from
fiscal 1996 consolidated revenues. The additional week of results reported
for the restaurant division in fiscal 1998 did not materially impact the
Company's consolidated results of operations due to the relative size of
the restaurant division compared to the Company's other divisions. The
additional week of results reported for the limited-service lodging and
hotel/resort divisions in fiscal 1997 contributed an additional $3.5
million in revenues and $1.5 million in operating income to the Company's
fourth quarter and fiscal 1997 results. The additional week of results
reported for the theatre division in fiscal 1996 contributed an additional
$2.0 million in revenues and $550,000 in operating income to the Company's
fourth quarter and fiscal 1996 results.
Net earnings for fiscal 1998 were $28.4 million, or $0.94 per share.
As a result of the Company's announcement that it is changing the name of
its Budgetel Inns to Baymont Inns and Baymont Inns & Suites, the Company
recorded a $2.34 million after-tax charge ($3.9 million before-tax) to
earnings for the write-off of existing signage and other one-time expenses
associated with the name change during the fourth quarter of fiscal 1998.
Excluding the name change charge, earnings for fiscal 1998 were $30.7
million, or 1.02 per share, a decrease from comparable fiscal 1997
earnings of $30.9 million, or $1.04 per share. Fiscal 1997 earnings
increased $3.4 million, or 12.3%, over comparable fiscal 1996 earnings of
$27.5 million, or $0.93 per share, excluding the after-tax gain of $14.8
million, or $0.49 per share, resulting from the Company's fiscal 1996 sale
of restaurants. Including the gain from the sale of restaurants, net
earnings were $42.3 million, or $1.42 per share, for fiscal 1996. Weighted
average shares outstanding were 30.3 million for fiscal 1998 and 29.7
million for both fiscal 1997 and fiscal 1996. All per share and share data
in this discussion have been adjusted to reflect the Company's
three-for-two stock split effected in the form of a 50% stock dividend on
December 5, 1997. The Company adopted SFAS No. 128, "Earnings Per Share,"
in fiscal 1998. Prior period amounts have been restated under the new
standard. All per share data presented herein is on a diluted basis.
The Company's net interest expense, net of investment income, totaled
$11.8 million for fiscal 1998. This represented an increase of $1.8
million, or 17.7%, over fiscal 1997 net interest expense of $10.0 million.
Fiscal 1997 net interest expense increased $3.7 million, or 58.5%, over
fiscal 1996 net interest expense of $6.3 million. These increases were the
result of additional borrowings in fiscal 1998 and fiscal 1997
used to help finance the Company's capital program. The Company was able
to use proceeds from its sale of restaurants in fiscal 1996 to fund a
portion of its growth in that year, reducing its borrowing needs.
The Company's income tax expense for fiscal 1998 was $18.9 million, a
decrease of $1.4 million from fiscal 1997. The Company's effective tax
rate for fiscal 1998 was 40.0% compared to 39.7% in fiscal 1997 and 39.6%
in fiscal 1996.
Historically, the Company's first and fourth fiscal quarters have
produced the strongest operating results because these periods coincide
with the typical summer seasonality of the movie theatre industry and the
spring and summer strength of the Company's travel and food service
businesses. In addition, the Company's historical method of reporting a
16- or 17-week fourth quarter has always contributed to the larger results
in that quarter.
The Company is continuing its aggressive expansion plan that it began
in fiscal 1994, incurring over $300 million in aggregate capital
expenditures during the last three fiscal years. The Company's current
plans include the following goals:
- Converting Budgetel Inns to Baymont Inns and Baymont Inns & Suites in
fiscal 1999 and then increasing the total number of Baymont Inns and
Baymont Inns & Suites to over 400 within the next five years. Up to
four Company-owned and 27 franchised properties are currently under
development for fiscal 1999. The Company currently believes that much
of this anticipated future growth will ultimately come from its
emphasis on opening new franchised Baymont Inns and Baymont Inns &
Suites.
- Increasing its number of movie theatre screens to 500 by fiscal 2000,
with expected continued expansion outside of Wisconsin. Up to 66 new
screens are currently planned to be opened by the Company in fiscal
1999, including 16 new screens recently completed at the Company's
second location in Columbus, Ohio. Other current expansion plans
include 49 new screens to be added to existing locations in Wisconsin,
Illinois and Minnesota and completion of the Company's first large
screen IMAX/R/ 2D/3D theatre at its new Columbus location. The Company
also has plans to add stadium seating to a majority of its existing
screens by the end of fiscal 2000.
- Adding one or two hotel properties each year over the next few fiscal
years, either Company-owned or managed for others. In some cases, the
Company may own only a partial interest in the new properties. The
Company recently announced plans for the development of new hotels in
Madison, Wisconsin, and Chicago, Illinois. The Madison Hilton, which
is a public/private endeavor with the City of Madison, is anticipated
to be a 222-room Company-owned property scheduled to open in 2000. A
250-room downtown Chicago luxury hotel is planned to be developed and
managed by the Company. Plans are also underway to expand the
Milwaukee Hilton to 750 rooms.
- Increasing its number of Woodfield Suites. The Company currently has
two Company-owned Woodfield Suites scheduled to open late in fiscal
1999 and is evaluating additional sites.
- Expanding and enhancing the Company's KFC franchise. The Company's
first KFC/Taco Bell 2-in-1 unit, a conversion of an existing KFC,
opened early in fiscal 1998, and the Company plans to open at least
two additional 2-in-1 conversions in fiscal 1999.
The actual number, mix and timing of potential future new facilities
and expansions will depend in large part on continuing favorable industry
and economic conditions, the Company's financial performance and available
capital, the competitive environment, evolving customer needs and trends
and the continued availability of attractive opportunities. It is likely
that the Company's expansion goals will continue to evolve and change in
response to these and other factors and there can be no assurance that
these current goals will be achieved.
The Company is conducting a review of its computer systems to identify
those areas that may be affected by the Year 2000 issue and is developing
an implementation plan to resolve the issue. The Company expects the
project to be substantially complete by early 1999 and does not, at this
time, expect this project to have a significant effect on the business,
results of operations or financial condition of the Company. The Company
began converting critical accounting and data processing systems in fiscal
1998 in the normal course of business and expects that the new systems
will provide business benefits in addition to being ready for the Year
2000. The Company is also assessing the impact of this issue with its key
vendors and suppliers.
Limited-Service Lodging
The Company's largest division is its limited-service lodging division,
which contributed 43.4% of Company consolidated revenues and 53.2% of
Company consolidated operating income, excluding corporate items and the
Budgetel name change charge, during fiscal 1998. The division's primary
business consists of owning and franchising Budgetel Inns and Woodfield
Suites, which respectively operate in the limited-service economy and
limited-service all-suites segments of the lodging industry. The following
tables set forth revenues, operating income, operating margin, number of
units and rooms data for the limited-service lodging division for the last
three fiscal years:
1998 1997 1996
(in millions)
Revenues $145.7 $135.3 $118.7
Operating income* 35.4 39.8 36.3
Operating margin*
(% of revenues) 24.3% 29.4% 30.6%
* Excludes $3.9 million before-tax charge for Budgetel name change.
Number of units at year-end
1998 1997 1996
Budgetel Inns
Company-owned or operated 106 104 93
Franchised 50 39 31
---- ---- ----
Total Budgetel Inns 156 143 124
==== ==== ====
Woodfield Suites
Company-owned 5 4 3
---- ---- ----
Total number of units 161 147 127
==== ==== ====
Available rooms at year-end
1998 1997 1996
Budgetel Inns
Company-owned or operated 11,326 11,111 9,931
Franchised 4,766 3,757 3,087
------- ------- -------
Total Budgetel Inns 16,092 14,868 13,018
======= ======= =======
Woodfield Suites 610 490 339
------- ------- -------
Total available rooms 16,702 15,358 13,357
======= ======= =======
Total revenues in the limited-service lodging division increased 7.7%
and 14.0% during fiscal 1998 and fiscal 1997, respectively, principally as
a result of increasing available rooms. The additional week of operations
included in the limited-service lodging division's fiscal 1997 results
contributed an additional $2.5 million to fiscal 1997 revenues and
approximately $1.2 million to fiscal 1997 operating income. In addition to
the increased number of units each fiscal year, increases in the average
daily room rate at the Company's Budgetel Inns of 3.1% and 3.0% in fiscal
1998 and 1997, respectively, also contributed to the increased revenues.
Budgetel Inn's occupancy percentage decreased during both fiscal 1998 and
fiscal 1997, but still remained above limited-service lodging industry
averages. The primary factor contributing to the decline in occupancy in
both fiscal years was the significant increase in the supply of
limited-service economy lodging rooms. The increased room supply was
especially prevalent in the Midwestern and Southern portions of the
country, where the Company has a large number of properties. The result of
the average daily rate increases and occupancy declines was a 0.4%
decrease and 1.1% increase in the division's revenue per available room,
or RevPAR, for comparable Inns for fiscal 1998 and 1997, respectively. The
Company's newly opened Budgetel Inns and Woodfield Suites contributed
additional revenues of $11.5 million and nominal operating income during
fiscal 1998. Newly opened properties in fiscal 1997 contributed additional
revenue of $4.9 million and nominal operating income.
The limited-service lodging division's operating income, excluding the
$3.9 million before-tax charge for Budgetel name change costs, decreased
11.1% during fiscal 1998, compared to an increase of 9.7% during fiscal
1997. Operating margins, excluding the Budgetel name change costs,
declined to 24.3%, compared to 29.4% and 30.6% in fiscal 1997 and 1996,
respectively, due primarily to the reductions in occupancy percentages,
increased payroll costs from a tight labor market and recent minimum wage
increases, increased administrative costs associated with the Company's
expansion program, and increased marketing expenditures. In addition, the
operating margins of new properties opened during the past two fiscal
years were below the Company average due to the increased room supply.
During fiscal 1998, the Company announced that it was changing the
name of its Budgetel Inns to Baymont Inns and Baymont Inns & Suites. The
Company believes that the Budgetel name no longer reflects the current
product's features and amenities. The name change is intended to help
expand the Company's customer base, increase RevPAR and increase
development opportunities. Additional features and amenities are being
added to the product and it is the Company's intention to change the
majority of its company-owned and operated properties to Baymont Inns &
Suites. The Company currently plans to convert all properties, including
franchised inns, to the Baymont name by approximately October 31, 1998. As
a result of the name change and the anticipated expanded market potential,
the Company's goal is to have over 400 locations under the Baymont banner
within the next five years, a change from the Company's prior goal of 300
Budgetel Inns by fiscal 2000. The Company's ability to reach this goal
will be significantly impacted by customer acceptance of the new name and
product and the Company's ability to increase the number of franchised
locations at a pace faster than that achieved under the Budgetel name, as
well as industry and economic conditions, the competitive environment and
other factors.
Theatres
The Company's oldest and second largest division is its theatre division.
The theatre division contributed 27.3% of the Company's consolidated
revenues and 29.6% of its consolidated operating income, excluding
corporate items and the Budgetel name change charge, during fiscal 1998.
The theatre division operates motion picture theatres in Wisconsin,
Illinois, Ohio and Minnesota, and a family entertainment center in
Wisconsin. The following tables set forth revenues, operating income,
operating margin, screens and theatres for the last three fiscal years:
1998 1997 1996
(in millions)
Revenues $91.8 $80.6 $63.7
Operating income 19.7 16.9 15.0
Operating margin (% of revenues) 21.4% 20.9% 23.6%
Number of screens
and locations at year-end
1998 1997 1996
Theatre screens 361 297 219
Theatre locations 46 40 36
Average screens per location 7.8 7.4 6.1
Total revenues in the theatre division increased 13.9% and 26.5%
during fiscal years 1998 and 1997, respectively, principally as a result
of adding additional screens. The additional week of operations included
in the theatre division's fiscal 1996 results (which included the Memorial
Day holiday weekend) contributed an additional $2.0 million to the
division's fiscal 1996 revenues.
Consistent with the Company's long-term strategic plan to focus on
operating large multi-screen theatres, the Company added 66 new screens
during fiscal 1998, all during the fourth quarter, including a new 12-plex
in Menomonee Falls, Wisconsin, and a 16-screen theatre in Pickerington
(Columbus), Ohio. During the final weeks of fiscal 1998, the Company also
completed the purchase of five suburban Minneapolis/St. Paul, Minnesota,
theatres with a total of 38 screens (32 first-run and 6 budget screens).
Upon opening the new location in Menomonee Falls, the Company converted an
existing five-screen complex in that city into a budget-oriented theatre.
As of May 28, 1998, the Company operated 329 first-run screens and 32
budget screens. Compared to first-run theatres, budget theatres generally
have lower box office revenues and associated film costs, but higher
concession sales as a percentage of box office revenue.
The Company opened 80 new screens during fiscal 1997, including a new
20-screen ultraplex in Addison, Illinois, a 12-plex in New Berlin,
Wisconsin, and an eight-plex in Appleton, Wisconsin. Also added during
fiscal 1997 were 27 screens acquired at the beginning of the year,
consisting of an 11-screen theatre in Chicago Heights, Illinois, two
budget-film, eight-plex theatres in the metropolitan Milwaukee area, and
13 screens added to existing locations (including a six-screen addition to
the Gurnee, Illinois, theatre, also making that location a 20-screen
ultraplex). Additionally, the Company's first family entertainment center
opened early in fiscal 1997 in Appleton, Wisconsin. The 40,000 square foot
Hollywood-themed indoor amusement facility includes a restaurant, party
rooms, a laser tag center, virtual reality games, a miniature golf course
and an arcade and adjoins the Company's new theatre in Appleton. The
addition of the new screens and the family entertainment center during
fiscal 1998 and 1997 generated additional revenues of $8.5 million and
$17.6 million, respectively, compared to the previous years.
One theatre with two screens was closed during fiscal 1998 and two
theatres with a total of two screens were closed during fiscal 1997. These
closed theatres had minimal impact on operations in each year.
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,
factors over which the Company has no control. Fiscal 1998 results were
greatly enhanced by the record-setting box office performance of the film
Titanic. Additional box office hits during fiscal 1998 included Men in
Black, Air Force One, Good Will Hunting, As Good as It Gets, Tomorrow
Never Dies, Lost World, My Best Friend's Wedding and Batman & Robin, while
fiscal 1997 included the hits Independence Day, the Star Wars trilogy,
Jerry Maguire, Liar Liar, 101 Dalmations, Ransom and Scream. Each of these
films produced box office receipts in excess of $1 million for the theatre
division in their respective fiscal years. Approximately the same number
of first-run films were released in fiscal years 1996, 1997 and 1998.
Total box office receipts during fiscal 1998 were $60.0 million, an
increase of $5.5 million, or 10.1%, from $54.5 million during fiscal 1997.
Fiscal 1997 box office receipts increased $10.1 million, or 22.7%,
compared to fiscal 1996. These increases were attributable to 7.4% and
22.7% increases in attendance during fiscal years 1998 and 1997,
respectively. The increases in attendance were due to the increase in new
screens each year. Attendance at the Company's comparable locations
decreased 1.4% during fiscal 1998 and 4.5% during fiscal 1997, compared to
the previous year. Early in the third quarter of fiscal 1998, the Company
experienced a fire at its North Shore Cinema in Mequon, Wisconsin,
resulting in the loss of 11 screens for approximately five months in
fiscal 1998. Fiscal 1997 attendance at the Company's theatres, and the
industry in general, was adversely affected by the 1996 Summer Olympics.
The decrease in fiscal 1997 attendance compared to the prior year was also
due to the additional week of operations during fiscal 1996. This
additional week during fiscal 1996 included the Memorial Day weekend,
which is traditionally one of the year's busiest motion picture viewing
weekends.
The theatre division's average ticket price increased 2.4% during
fiscal 1998 after remaining unchanged during fiscal 1997, compared to the
prior year. The fiscal 1997 average ticket price did not increase due to
the additional budget-oriented screens added during the fiscal year.
First-run theatre average ticket prices increased 1.4% during fiscal 1998
and 4.9% during fiscal 1997, compared to the prior year.
Vending revenues in fiscal 1998 were $27.3 million, an increase of
$4.4 million, or 19.1%, from $22.9 million in fiscal 1997. Fiscal 1997
vending revenues increased $5.2 million, or 29.7%, from fiscal 1996
vending revenues of $17.7 million. Vending revenues increased due to
increased theatre attendance from the Company's added screens and the
11.4% and 5.8% increase in average concession sales per person during
fiscal years 1998 and 1997, respectively.
The theatre division's operating income increased 16.7% during fiscal
1998 and 12.3% during fiscal 1997, compared to the prior year results. The
division's operating margin increased to 21.4%, compared to 20.9% and
23.6% in fiscal 1997 and 1996, respectively. Fiscal 1998 and fiscal 1997
operating income was reduced by pre-opening expenses of over $550,000 and
$800,000, respectively, related to new screens and the Company's new
family entertainment center in fiscal 1997. Fiscal 1996 operating income
included $550,000 from the additional week of results reported during the
year.
Hotels and Resorts
The Company's hotel and resort division contributed 20.9% of the Company's
consolidated revenues and 11.8% of the Company's consolidated operating
income, excluding corporate items and the Budgetel name change charge,
during fiscal 1998. The hotel and resort division owns and operates two
full-service hotels in downtown Milwaukee, Wisconsin, a full-facility
destination resort in Lake Geneva, Wisconsin, and a boutique luxury resort
in Indian Wells, California. In addition, the Company managed three hotels
and a resort during fiscal 1998, compared to three hotels during fiscal
1997 and two hotels during fiscal 1996. The following table sets forth
revenues, operating income and operating margin for the hotel and resort
division for the last three fiscal years:
1998 1997 1996
(in millions)
Revenues $70.3 $60.2 $53.5
Operating income 7.9 5.5 3.4
Operating margin (% of revenues) 11.2% 9.1% 6.3%
Total revenues in the hotel and resort division increased 16.8% and
12.5% during fiscal 1998 and fiscal 1997, respectively, compared to the
prior year. The additional week of operations included in the division's
fiscal 1997 results contributed an additional $1.0 million to fiscal 1997
revenues and $230,000 to the fiscal 1997 operating income. The division's
operating income increased 44.1% during fiscal 1998 and 61.9% during
fiscal 1997, compared to the previous year. Operating margins have
increased each year.
Occupancy and average daily rate increases at all three of the
division's comparable owned properties contributed to the increase in
revenues and operating income in both fiscal 1998 and fiscal 1997. As a
result of the occupancy and average daily rate increases, the division's
total RevPAR for comparable properties increased 12.5% and 12.4% during
fiscal 1998 and 1997, respectively, compared to the prior year. Unlike the
limited-service segment of the lodging industry, strong consumer demand in
conjunction with relatively little increase in room supply has resulted in
strong operating results for owners and operators of upper-end hotels and
resorts during the past two years.
The division acquired a resort in Indian Wells, California, in fiscal
1997 and closed the facility for an extensive renovation. The Company
reopened the property in January 1998 under the name Miramonte Resort.
Fiscal 1998 results were negatively impacted by approximately $1.2 million
of pre-opening costs and anticipated start-up operating losses at the
Miramonte. The Miramonte did not have a material effect on fiscal 1997
results. During fiscal 1998, the Company entered into a management
contract to operate its first property in Michigan, the Mission Point
Resort on Mackinac Island. The Mission Point Resort is a seasonal property
and did not materially impact the Company's fiscal 1998 operating results.
Fiscal 1997 operating results were favorably impacted by reduced charges
for pre-opening costs for the Milwaukee Hilton (formerly the Marc Plaza)
and increased management fees.
The Company expects to begin construction in fiscal 1999 on a 250-room
expansion of the Milwaukee Hilton, which will create the largest hotel in
Wisconsin. Scheduled to open in 2000, the addition will also include
meeting rooms, a family water park fun center and a skywalk to the city's
new Midwest Express Convention Center. Shortly after the end of the fiscal
year, the Company announced plans for new hotels in Madison, Wisconsin,
and Chicago, Illinois. The Madison Hilton is anticipated to be a 222-room
Company-owned headquarters hotel adjacent to the new Monona Terrace
Convention Center. Additionally, a 250-room downtown Chicago luxury hotel
is planned to be developed and managed by the Company, but will not be
company-owned.
Restaurants
The Company's restaurant division contributed 8.2% of the Company's
consolidated revenues and 5.4% of its consolidated operating income,
excluding corporate items and the Budgetel name change charge, during
fiscal 1998. The restaurant division has non-exclusive franchise rights to
operate KFC restaurants in the Milwaukee metropolitan area and in
northeast Wisconsin. The division has operated 31 KFC restaurants since
the end of fiscal 1996. The division also leases several Company-owned
restaurants to other restaurant operators. The following tables set forth
revenues, operating income and operating margin for the restaurant
division for the last three fiscal years:
1998 1997 1996
(in millions)
Revenues $27.6 $26.8 $25.9
Operating income 3.6 2.7 2.0
Operating margin (% of revenues) 12.9% 10.0% 7.7%
Total revenues in the restaurant division increased 2.9% and 3.5% in
fiscal years 1998 and 1997, respectively, compared to the previous year.
Excluding $1.1 million of revenues from subsequently sold or closed
restaurants from fiscal 1996 revenues, restaurant division fiscal 1997
revenues increased 7.9% over the prior year. Restaurant division revenues
include annual rental income from leased restaurants of approximately $1.5
million in fiscal 1998, $1.7 million in fiscal 1997 and $1.9 million in
fiscal 1996. The restaurant division's operating income increased 32.7% in
fiscal 1998 and 34.6% in fiscal 1997, compared to the previous year.
The Company's KFC restaurants experienced a 3.5% and 6.8% increase in
aggregate revenues during fiscal years 1998 and 1997, respectively,
compared to the previous year. Excluding $400,000 of decreased revenues in
fiscal 1997 and $1.0 million of decreased revenues in fiscal 1996
resulting from the closure of four under-performing KFC restaurants, same
store KFC restaurant sales increased 8.6% in fiscal 1997. Same store KFC
guest counts increased 2.1% and 4.2% during fiscal 1998 and 1997,
respectively, due to increased lunch-time traffic, the introduction and
expansion of home delivery service and the introduction of several new
franchisor products. Average guest checks increased in both fiscal 1998
and 1997 over previous year levels.
The Company's comparable KFC restaurants experienced a 41.9% increase
in aggregate operating income during fiscal 1998, compared to a 74.8%
increase during fiscal 1997. The improved operating results in fiscal 1998
were primarily the result of the increased customer counts and average
guest checks, significantly reduced food costs as the result of favorable
chicken pricing and the successful conversion of an existing KFC
restaurant into the Company's first KFC/Taco Bell 2-in-1 unit in June
1997. Start-up costs associated with the introduction of home delivery
services in fiscal 1996 contributed to the comparative increase in
operating income in fiscal 1997. The Company opened a new KFC during the
fiscal 1996 fourth quarter and did not open any new restaurants in fiscal
1997 or fiscal 1998. The Company is pursuing additional KFC/Taco Bell
2-in-1 conversions as well as exploring various other KFC expansion and
acquisition opportunities.
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 $36 million of unused
credit lines at fiscal 1998 year end, should be adequate to support the
ongoing operational liquidity needs of the Company's businesses.
Net cash provided by operating activities increased by $10.6 million,
or 17.3%, to $71.7 million in fiscal 1998, compared to $61.1 million in
fiscal 1997. The increase was primarily the result of increased
depreciation and amortization in fiscal 1998 compared to fiscal 1997 and
timing differences in payments of accounts payable, net of receipts of
accounts and notes receivable.
Net cash used in investing activities in fiscal 1998 increased by $1.6
million, or 1.6%, to $106.1 million. Capital expenditures and business
acquisitions during fiscal 1998 included $25.2 million incurred on
limited-service lodging division projects, $59.4 million on theatre
division projects and $24.9 million on hotel and resort division projects.
During fiscal 1997, $55.9 million was incurred on limited-service lodging
division projects, $37.4 million on theatre division projects and $13.4
million on hotel and resort division projects. During fiscal 1998, the
Company acquired $2.6 million in cash pursuant to the acquisition of
operating assets of a related company, Guest House Inn, Inc. The Company
issued 610,173 shares of its Common Stock in conjunction with the
acquisition.
Principally as a result of funding a portion of the Company's fiscal
1998 facility expansions and renovations, the Company's total debt
increased to $215.9 million at the close of fiscal 1998, compared to
$177.4 million at the end of fiscal 1997. Net cash provided by financing
activities in fiscal 1998 totaled $31.1 million, compared to $35.9 million
in fiscal 1997. During fiscal 1998, the Company received $54.7 million of
net proceeds from the issuance of notes payable and long-term debt,
compared to $99.9 million during fiscal 1997. Included in the fiscal 1998
proceeds was $30 million in principal amount of senior unsecured long-term
notes privately placed with two institutional lenders. Fiscal 1997
proceeds included $85 million in principal amount of senior unsecured
long-term notes privately placed with six institutional lenders. The
Company has the ability to issue up to $85 million of additional senior
notes under the private placement program through February 1999. The
Company used a portion of the proceeds from its issued senior notes to pay
off existing short-term debt, resulting in total principal payments on
notes payable and long-term debt of $16.5 million in fiscal 1998 and $58.6
million in fiscal 1997. The Company expects to use the remaining proceeds
to help fund the Company's ongoing expansion plans. The Company's
debt-capitalization ratio was 0.42 at May 28, 1998, compared to 0.39 at
the prior fiscal year end.
In addition to the changes in debt transactions noted above, net cash
provided by financing activities also decreased due to dividend payments
of $6.3 million in fiscal 1998 compared to $5.7 million in fiscal 1997.
Total capital expenditures (including normal continuing capital
maintenance projects and business acquisitions) of $115.9 million and
$107.5 million were incurred in fiscal 1998 and 1997, respectively. Total
capital expenditures in fiscal 1999 are expected to exceed fiscal 1998
expenditures and are expected to be funded by cash generated from
operations and additional debt, including additional institutional debt
from the Company's private placement program. The mix of fiscal 1999
capital expenditures between segments is currently not anticipated to be
significantly different than fiscal 1998 capital expenditures.
<PAGE>
Consolidated Statements of Earnings
Years ended
May 28, May 29, May 30,
1998 1997 1996
(in thousands, except per share data)
Revenues:
Rooms and telephone $171,668 $156,689 $137,961
Theatre operations 90,806 79,733 63,099
Food and beverage 48,346 45,401 43,193
Other income 24,964 21,534 18,034
------- ------- -------
Total revenues 335,784 303,357 262,287
Costs and expenses:
Rooms and telephone 68,130 60,198 51,346
Theatre operations 54,107 49,149 38,055
Food and beverage 34,686 33,218 32,014
Advertising and marketing 23,820 20,635 15,273
Administrative 32,387 27,108 25,532
Depreciation and amortization 32,904 28,903 25,117
Rent (Note 9) 2,739 2,435 2,461
Property taxes 12,300 10,175 9,416
Other operating expenses 13,192 10,805 11,258
Budgetel name change (Note 3) 3,900 - -
------- ------- -------
Total costs and expenses 278,165 242,626 210,472
------- ------- -------
Operating income 57,619 60,731 51,815
Other income (expense):
Investment income 834 1,584 2,378
Interest expense (12,616) (11,597) (8,696)
Gain on disposition of
property and
equipment (Note 2) 1,547 488 24,595
------- ------- -------
(10,235) (9,525) 18,277
------- ------- -------
Earnings before income taxes 47,384 51,206 70,092
Income taxes (Note 8) 18,940 20,325 27,785
------- ------- -------
Net earnings $ 28,444 $ 30,881 $ 42,307
======= ======= =======
Net earnings per common
share
Basic $ .95 $ 1.05 $ 1.44
Diluted .94 1.04 1.42
======= ======= =======
Weighted average shares
outstanding
Basic 30,046 29,525 29,452
Diluted 30,293 29,745 29,712
======= ======= =======
See accompanying notes.
<PAGE>
Consolidated Balance Sheets
May 28, May 29,
1998 1997
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 4,678 $ 7,991
Accounts and notes receivable (Note 4) 14,294 5,531
Receivables from joint ventures (Note 10) 1,288 1,066
Refundable income taxes 4,385 -
Other current assets 3,773 3,591
------- -------
Total current assets 28,418 18,179
Property and equipment, net (Note 4) 559,996 487,052
Other assets:
Investments in joint ventures (Notes
9 and 10) 1,496 1,439
Other (Note 11) 18,594 15,287
------- -------
Total other assets 20,090 16,726
------- -------
Total assets $608,504 $521,957
======= =======
Liabilities and shareholders' equity
Current liabilities:
Notes payable (Note 10) $ 5,255 $ 5,625
Accounts payable 26,385 10,291
Income taxes - 52
Taxes other than income taxes 11,404 9,297
Accrued compensation 2,643 1,270
Other accrued liabilities 10,072 10,886
Current maturities of long-term
debt (Note 5) 10,277 9,327
------- -------
Total current liabilities 66,036 46,748
Long-term debt (Note 5) 205,632 168,065
Deferred income taxes (Note 8) 26,479 22,425
Deferred compensation and
other (Note 7) 7,826 7,426
Commitments, license rights and
contingencies (Note 9)
Shareholders' equity (Note 6):
Preferred Stock, $1 par; authorized
1,000,000 shares; none issued
Common Stock:
Common Stock, $1 par; authorized
50,000,000 shares; issued
18,511,866 shares in 1998 and
11,678,935 shares in 1997 18,512 11,679
Class B Common Stock, $1 par;
authorized 33,000,000 shares;
issued and outstanding
12,677,656 shares in 1998
and 8,707,632 shares in 1997 12,678 8,708
Capital in excess of par 40,265 39,470
Retained earnings 235,708 220,860
------- -------
307,163 280,717
Less cost of Common Stock in
treasury (944,544 shares in 1998
and 668,272 shares in 1997) 4,632 3,424
------- -------
Total shareholders' equity 302,531 277,293
------- -------
Total liabilities and shareholders'
equity $608,504 $521,957
======= =======
See accompanying notes.
<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Equity
<CAPTION>
Three Years ended May 28, 1998
Class B Capital
Common Common in Excess Retained Treasury
Stock Stock of Par Earnings Stock
(in thousands)
<S> <C> <C> <C> <C> <C>
Balances at May 25, 1995 $ 7,522 $ 6,069 $45,154 $159,675 $(3,956)
Cash dividends:
$.21 per share Class B
Common Stock - - - (2,770) -
$.23 per share Common
Stock - - - (3,559) -
Three-for-two stock split 3,764 3,032 (6,796) (10) -
Exercise of stock options - - 118 - 403
Purchase of treasury stock - - - - (145)
Savings and profit-sharing
contribution - - 350 - 83
Reissuance of treasury stock - - 6 - 1
Conversions of Class B
Common Stock 244 (244) - - -
Net earnings - - - 42,307 -
------ ------ ------ ------- -------
Balances at May 30, 1996 11,530 8,857 38,832 195,643 (3,614)
Cash dividends:
$.18 per share Class B
Common Stock - - - (2,409) -
$.20 per share Common
Stock - - - (3,255) -
Exercise of stock options - - 127 - 251
Purchase of treasury stock - - - - (214)
Savings and profit-sharing
contribution - - 383 - 115
Reissuance of treasury stock - - 128 - 38
Conversions of Class B
Common Stock 149 (149) - - -
Net earnings - - - 30,881 -
------- -------- ------- ------- -------
Balances at May 29, 1997 11,679 8,708 39,470 220,860 (3,424)
Cash dividends:
$.20 per share Class B
Common Stock - - - (2,522) -
$.22 per share Common
Stock - - - (3,756) -
Three-for-two stock split 6,144 4,252 (10,396) - -
Exercise of stock options - - 339 - 1,107
Purchase of treasury stock - - - - (2,504)
Savings and profit-sharing
contribution - - 464 - 118
Reissuance of treasury stock - - 266 - 71
Conversions of Class B
Common Stock 282 (282) - - -
Guest House Inn, Inc.
acquisition (Note 2) 407 - 10,122 (7,318) -
Net earnings - - - 28,444 -
------- ------- ------- ------- -------
Balances at May 28, 1998 $18,512 $12,678 $40,265 $235,708 $ (4,632)
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
<PAGE>
Consolidated statements of cash flows
Years ended
May 28, May 29, May 30,
1998 1997 1996
(in thousands)
Operating activities
Net earnings $ 28,444 $ 30,881 $ 42,307
Adjustments to reconcile net
earnings to net cash
provided by operating
activities:
Earnings on investments in
joint ventures, net of
distributions (57) (144) (406)
Gain on disposition of
property and equipment (1,547) (488) (24,595)
Impairment of fixed assets 1,521 - -
Depreciation and
amortization 32,904 28,903 25,117
Deferred income taxes 4,054 2,398 70
Deferred compensation
and other 400 1,239 2,143
Contribution of Company
stock to savings
and profit-sharing plan 582 498 433
Changes in operating assets
and liabilities:
Accounts and notes
receivable (8,763) 3,249 (2,614)
Other current assets (182) (1,128) 1,767
Accounts payable 16,094 (5,355) (2,240)
Income taxes (4,437) (1,341) (676)
Taxes other than income
taxes 2,107 974 (768)
Accrued compensation 1,373 (110) (78)
Other accrued liabilities (814) 1,534 1,300
------- ------- -------
Total adjustments 43,235 30,229 (547)
------- ------- -------
Net cash provided by operating
activities 71,679 61,110 41,760
------- ------- -------
Investing activities
Capital expenditures, including
business acquistions (115,880) (107,514) (83,689)
Net proceeds from disposals
of property, equipment and
other assets 6,093 3,783 48,914
Purchase of interest in joint
ventures, net of cash acquired - - (260)
(Increase) decrease in other assets 1,280 (4,602) (2,770)
Cash acquired pursuant to Guest
House Inn, Inc. acquisition 2,589 - -
Cash received from (advanced to)
joint ventures (222) 3,824 (3,029)
------- ------- -------
Net cash used in investing
activities (106,140) (104,509) (40,834)
Financing activities
Debt transactions:
Net proceeds from issuance of
notes payable and long-
term debt 54,665 99,857 19,603
Principal payments on notes
payable and long-term debt (16,518) (58,599) (7,905)
Equity transactions:
Treasury stock transactions,
except for stock options (2,167) (48) (138)
Exercise of stock options 1,446 378 521
Dividends paid (6,278) (5,664) (6,339)
------- ------- -------
Net cash provided by financing
activities 31,148 35,924 5,742
------- ------- -------
Net increase (decrease) in cash
and cash equivalents (3,313) (7,475) 6,668
Cash and cash equivalents at
beginning of year 7,991 15,466 8,798
------- ------- -------
Cash and cash equivalents at
end of year $ 4,678 $ 7,991 $ 15,466
======= ======= =======
See accompanying notes.
<PAGE>
Notes to Consolidated Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
Description of Business - The Marcus Corporation and its subsidiaries
(the Company) operate principally in four business segments:
Limited-Service Lodging: Operates and franchises lodging
facilities under the names Budgetel Inns (see Note 3) and
Woodfield Suites, primarily located in the eastern half of the
United States.
Theatres: Operates multi-screen motion picture theatres and a
family entertainment center in Wisconsin, Illinois, Ohio and
Minnesota.
Hotels/Resorts: Owns and operates full service hotels and
resorts in Wisconsin and California and manages full service
hotels and resorts in Wisconsin, Minnesota, Michigan and
California.
Restaurants: Operates KFC restaurants under a license agreement
for certain areas in Wisconsin.
Principles of Consolidation - The consolidated financial statements
include the accounts of The Marcus Corporation and all of its
subsidiaries. Investments in 50%-owned affiliates are accounted for on the
equity method. All intercompany accounts and transactions have been
eliminated in consolidation.
Fiscal Year - The Company reports on a 52/53-week year ending the last
Thursday of May. The Restaurants segment had a 53-week year in fiscal
1998. The Limited-Service Lodging and Hotels/Resorts segments had a
53-week year in fiscal 1997. The Theatres and Corporate segments had a
53-week year in fiscal 1996. All other segments had 52-week years in each
period.
Cash Equivalents - The Company considers all highly liquid investments
with maturities of three months or less when purchased to be cash
equivalents. Cash equivalents are carried at cost, which approximates
market.
Pre-opening Costs - Certain costs incurred prior to opening new or
remodeled motels and remodeled hotels are deferred and charged to
operations over the 12 months subsequent to the opening. Similar expenses
incurred in connection with the opening and remodeling of theatres and
restaurants are deferred and charged to operations at the time of opening.
In April 1998, the AICPA issued Statement of Position (SOP) 98-5,
"Reporting on the Costs of Start-Up Activities." The SOP is effective for
fiscal years beginning after December 15, 1998 and requires that start-up
costs capitalized prior to adoption of the SOP be written off and any
future costs be expensed as incurred. As of May 28, 1998, the Company had
$917,000 of unamortized start-up costs. It is not practical to estimate at
this time what the effect of this change will be on the Company's future
earnings or financial position.
Depreciation and Amortization - Depreciation and amortization of property
and equipment are provided using the straight-line method over the
following estimated useful lives:
Years
Land improvements 10 - 39
Buildings and improvements 10 - 39
Leasehold improvements 3 - 39
Furniture, fixtures and equipment 3 - 20
Advertising and Marketing Costs - The Company expenses all advertising
and marketing costs as incurred.
Net Earnings Per Share - In February 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share," which specifies the computation,
presentation and disclosure requirements of earnings per share. All
earnings per share amounts for all periods have been presented to conform
to SFAS No. 128 disclosure requirements. The numerator for the calculation
of basic and diluted earnings per share is net income and the denominator
is the respective weighted average shares outstanding. The difference
between basic and diluted weighted average shares outstanding is the
dilutive effect of employee stock options.
New Accounting Pronouncements - In June 1997, the FASB issued SFAS No.
130, "Reporting Comprehensive Income," which establishes the standards for
reporting and displaying comprehensive income and its components (revenue,
expenses, gains and losses) as part of a full set of financial statements.
This statement requires that all elements of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. The statement is effective for
fiscal years beginning after December 15, 1997. Since this standard
applies only to the presentation of comprehensive income, it will not have
any impact on the Company's results of operations, financial position or
cash flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which is effective for fiscal
years beginning after December 15, 1997. SFAS No. 131 establishes
standards for the way public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major
customers. The Company will adopt Statement No. 131 in fiscal 1999.
Management has not completed its review of SFAS No. 131, but does not
anticipate that the adoption of this statement will have a significant
effect on the Company's reported segments.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed for or Obtained for Internal Use." The SOP is
effective for fiscal years beginning after December 15, 1998. The SOP
will require the capitalization of certain costs incurred after the date
of adoption in connection with developing or obtaining software for
internal use. The Company currently capitalizes such costs as incurred
and, accordingly, the adoption of this SOP should not have any material
impact on the Company's results of operations or financial position.
Capitalization of Interest - The Company capitalizes interest during
construction periods by adding such interest to the cost of property and
equipment. Interest of approximately $1,601,000, $1,320,000 and $1,119,000
was capitalized in fiscal 1998, 1997 and 1996, respectively.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
2. Acquisitions and Dispositions
On October 1, 1997, the Company issued 610,173 shares of Common Stock to
Guest House Inn, Inc. (GHI) in exchange for all of the net operating
assets of GHI and issued 449,320 new shares of Class B Common Stock to GHI
in exchange for the cancellation of the existing 449,320 shares of Class B
Common Stock owned by GHI. Share data has been adjusted to reflect the
three-for-two stock split (see Note 6). GHI was owned and controlled by
certain officers, directors and/or principal controlling shareholders of
the Company. Based on this common ownership and control, for financial
reporting purposes the assets acquired from GHI were recorded at the
historical book value of GHI rather than fair value. The common shares
issued to complete this transaction were recorded at their fair value and
the excess of this fair value over the historical book value of the assets
acquired was recorded as a distribution.
The Company sold its 18 existing Applebee's Neighborhood Grill & Bar
restaurants (Applebee's), two Applebee's under construction, five
Applebee's under development and its development rights for Applebee's to
Apple South, Inc. (the Purchaser). On June 5, 1995, the Company entered
into a management agreement with the Purchaser, whereby the Purchaser
would immediately commence managing, operating and assuming all of the
Company's existing operating and development responsibilities related to
the Company's Applebee's restaurant operations. The Purchaser was entitled
to all profits of the restaurants subsequent to June 5, 1995, as
reimbursement for its management service. On June 30, 1995, proceeds from
the sale of approximately $48.3 million were received in cash. The Company
realized a net pre-tax gain of $25.4 million in fiscal 1996. Revenues and
operating income from the Company's Applebee's operations were not
significant in fiscal 1996.
3. Budgetel Name Change
On February 10, 1998, the Company announced that it is planning to change
the name of its Budgetel Inns to Baymont Inns and Baymont Inns & Suites by
approximately October 31, 1998. As a result of the name change, the
Company recorded a $3.9 million pre-tax charge in fiscal 1998 for the
write-off of existing signage ($1.5 million), assistance to franchisees
($1.4 million) and other one-time expenses associated with the name
change.
4. Additional Balance Sheet Information
The composition of accounts and notes receivable is as follows:
May 28, May 29,
1998 1997
(in thousands)
Trade receivables $7,549 $3,871
Notes receivable 646 -
Employee advances 2,257 343
Other receivables 3,842 1,317
------ ------
$14,294 $5,531
====== ======
The composition of property and equipment, which is stated at cost, is
as follows:
May 28, May 29,
1998 1997
(in thousands)
Land and improvements $ 85,282 $ 70,313
Buildings and improvements 440,737 399,416
Leasehold improvements 9,355 8,059
Furniture, fixtures and
equipment 187,341 159,715
Construction in progress 27,510 12,019
------- -------
750,225 649,522
Less accumulated depreciation
and amortization 190,229 162,470
------- -------
$559,996 $487,052
======= =======
5. Long-Term Debt
Long-term debt is summarized as follows:
May 28, May 29,
1998 1997
(in thousands)
Senior notes due May 31, 2005,
with monthly principal and
interest payments of $362,346,
bearing interest at 10.22% $ 21,854 $ 23,856
Senior notes due October 15, 2008,
with annual principal payments
of $6,666,666 due beginning
October 15, 2000, bearing
interest at 7.41% paid semiannually 60,000 60,000
Senior notes due October 15, 2011,
with annual principal payments
of $2,272,727 due beginning
October 15, 2001, bearing
interest at 7.51% paid semiannually 25,000 25,000
Senior notes due May 15, 2013,
with annual principal payments
of $3,571,429 due beginning
May 15, 2007, bearing interest
at 6.70% paid semiannually 25,000 -
Senior notes due May 15, 2013,
with annual principal payments
of $454,545 due beginning
May 15, 2003, bearing interest
at 6.66% paid semiannually 5,000 -
Mortgage notes due to 2008 11,564 9,061
Industrial Development Revenue
Bonds due to 2006 6,686 7,100
Unsecured term notes 46,625 52,375
Commercial paper 12,180 -
Revolving credit agreements 2,000 -
------- -------
215,909 177,392
Less current maturities 10,277 9,327
------- -------
$205,632 $168,065
======= =======
Substantially all of the mortgage notes, both fixed rate and adjustable,
bear interest from 7.2% to 9.0% at May 28, 1998. Adjustable rate
Industrial Development Revenue Bonds ($3,781,000 at May 28, 1998) bear
interest at 76.5% of prime plus 1% (effectively 7.5% at May 28, 1998), or
are adjustable based on high quality tax-exempt obligation rates
(approximately 4.0% at May 28, 1998). The Company's remaining Industrial
Development Revenue Bonds bear interest at 6.5% or 8.8%. The mortgage
notes and the Industrial Development Revenue Bonds are secured by the
related land, buildings and equipment.
The Company has four unsecured term notes outstanding, as follows:
May 28, May 29,
1998 1997
(in thousands)
Note due May 31, 2004, with quarterly
principal payments of $781,250.
The variable interest rate is based
on the LIBOR rate with an effective
rate of 6.44% at May 28, 1998 and is
payable quarterly. $17,969 $21,875
Note due February 1, 2003, with quarterly
principal payments of $714,286 due
beginning May 1, 1999. The variable
interest rate is based on the LIBOR
rate with an effective rate of 6.71%
at May 28, 1998 and is payable quarterly. 20,000 20,000
Note due October 1, 2000, with quarterly
principal payments of $750,000. The
variable interest rate is based on the
LIBOR rate with an effective rate
of 6.44% at May 28, 1998 and is
payable quarterly. 7,500 10,500
Note due April 28, 2003, with monthly
payments of $20,267, including
interest at 2% 1,156 -
------- -------
$46,625 $52,375
======= =======
The Company issues commercial paper through an agreement with a bank
which bears interest at 5.7% at May 28, 1998. The agreement requires the
Company to maintain unused bank lines of credit at least equal to the
principal amount of its outstanding commercial paper. At May 28, 1998, the
Company had $35,820,000 of unused credit lines available under various
bank revolving credit agreements which mature throughout 1999. The
interest rates under the revolving credit agreements were at prime (8.5%)
at May 28, 1998. There is an annual commitment fee of .25% of the unused
portion of these commitments. The Company has the ability and intent to
replace commercial paper borrowings, revolving credit borrowings and
certain other long-term debt with long-term borrowings under its private
placement financing agreement. Accordingly, the Company has classified
these borrowings at May 28, 1998, as long-term.
Scheduled annual principal payments on long-term debt for the five years
subsequent to May 28, 1998, are:
Fiscal Year (in thousands)
1999 $10,277
2000 13,398
2001 19,005
2002 20,812
2003 27,478
Interest paid, net of amounts capitalized, in 1998, 1997 and 1996
totaled $13,179,000, $10,985,000, and $8,272,000, respectively.
The Company has a swap agreement covering $7,500,000, which is reduced
by $750,000 quarterly, expires October 1, 2000, and requires the Company
to pay interest at a defined fixed rate of 5.08% while receiving interest
at a defined variable rate of three-month LIBOR (5.69% at May 28, 1998).
The Company also has a swap agreement covering $7,500,000 which expires
August 6, 2001, and requires the Company to pay interest at a defined
fixed rate of 6.56% while receiving interest at a defined variable rate of
three-month LIBOR (5.69% at May 28, 1998). Together, these swap agreements
effectively convert $15,000,000 of the Company's variable rate unsecured
term notes to a fixed rate. The Company recorded the net interest expense
(income) related to these swap agreements as incurred, totaling $3,000,
$4,000 and $(96,000) in 1998, 1997 and 1996, respectively. The
accompanying consolidated balance sheet at May 28, 1998, does not reflect
the negative fair market value of the remaining swap agreements as
determined by the lender, which totals approximately $101,000.
The carrying amounts of the Company's long-term debt, based on the
respective rates and prepayment provisions of the senior notes,
approximate their fair value.
6. Shareholders' Equity
The Company's Board of Directors declared three-for-two stock splits,
effected in the form of 50% stock dividends, which were distributed on
December 5, 1997 and November 14, 1995 to all holders of Common and Class
B Common Stock. All per share, weighted average shares outstanding and
stock option data prior to the respective distribution dates have been
adjusted to reflect these dividends.
Shareholders may convert their shares of Class B Common Stock into
shares of Common Stock at any time. Class B Common Stock shareholders are
substantially restricted in their ability to transfer their Class B Common
Stock. Holders of Common Stock are entitled to cash dividends per share
equal to 110% of all dividends declared and paid on each share of the
Class B Common Stock. Holders of Class B Common Stock are entitled to ten
votes per share while holders of Common Stock are entitled to one vote per
share on any matters brought before the shareholders of the Company.
Liquidation rights are the same for both classes of stock.
Shareholders have approved the issuance of up to 1,237,500 shares of
Common Stock under various stock option plans. The options generally
become exercisable 40% after two years, 60% after three years and 80%
after four years. The remaining options are exercisable five years after
the date of the grant. At May 28, 1998 and May 29, 1997, there were
918,980 and 1,083,225 shares, respectively, available for grants under the
plans.
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB No. 25), in
accounting for its employee stock options. Under APB No. 25, because the
exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net earnings and earnings per share
required by SFAS No. 123, "Accounting for Stock Based Compensation," has
been determined as if the Company had accounted for its employee stock
options under the fair value method of that statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following assumptions for 1998, 1997 and
1996, respectively: risk-free interest rates of 5.2%, 5.3% and 5.5%;
dividend yield of 1.3% in all years; volatility factors of the expected
market price of the Company's common stock of 48% for 1998 and 55% for
1997 and 1996, and an expected life of the option of approximately 6
years. Based on this analysis, the impact on net earnings and earnings per
share is immaterial.
A summary of the Company's stock option activity and related information
follows:
<TABLE>
<CAPTION>
May 28, May 29, May 30,
1998 1997 1996
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price Options
(options in thousands)
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of year 828 $11.72 759 $10.75 711
Granted 180 16.52 126 16.67 186
Exercised (145) 9.48 (44) 9.15 (89)
Forfeited (23) 15.34 (13) 13.15 (49)
----- ------ ----- ------ -----
Outstanding at end of year 840 $13.04 828 $11.72 759
----- ------ ----- ------ -----
Exercisable at end of year 389 $10.66 371 $10.61 216
----- ------ ----- ------ -----
Weighted-average fair value of
options granted during year $7.77 $8.64 $6.81
===== ===== =====
</TABLE>
Exercise prices for options outstanding as of May 28, 1998 ranged from
$3.11 to $18.13. The weighted-average remaining contractual life of those
options is 6.8 years.
The Company's Board of Directors has approved the repurchase of up to
1,687,500 shares of Common Stock to be held in treasury. The Company
intends to reissue these shares upon the exercise of stock options and for
savings and profit-sharing contributions. The Company purchased 145,297,
13,751 and 10,691 shares pursuant to this plan during 1998, 1997 and 1996,
respectively. At May 28, 1998, there were 362,473 shares available for
repurchase under this authorization.
The Board has authorized the issuance of up to 750,000 shares of Common
Stock for The Marcus Corporation Dividend Reinvestment and Associate Stock
Purchase Plan. At May 28, 1998, there were 719,985 shares available under
this authorization.
The Company's loan agreements include, among other covenants,
restrictions on retained earnings and maintenance of certain financial
ratios. At May 28, 1998, retained earnings of approximately $80,874,000
were unrestricted.
7. Employee Benefit Plans
The Company has a qualified profit-sharing savings plan (401(k) plan)
covering eligible employees. The 401(k) plan provides for a contribution
of a minimum of 1% of defined compensation for all plan participants and
matching of 25% of employee contributions up to 6% of defined
compensation. In addition, the Company may make additional discretionary
contributions. The Company also sponsors unfunded nonqualified defined
benefit and deferred compensation plans. Pension and profit-sharing
expense for all plans was $1,814,000, $1,485,000 and $1,355,000 for fiscal
1998, 1997 and 1996, respectively.
8. Income Taxes
Income tax expense consists of the following:
Year ended
May 28, May 29, May 30,
1998 1997 1996
(in thousands)
Currently payable:
Federal $12,173 $14,415 $22,347
State 2,713 3,512 5,368
Deferred 4,054 2,398 70
------- ------- -------
$18,940 $20,325 $27,785
======= ======= =======
The Company recognizes deferred tax assets and liabilities based upon
the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under the liability method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities
using enacted tax rates for the year in which the differences are expected
to reverse.
The components of the net deferred tax liability were as follows:
May 28, May 29,
1998 1997
(in thousands)
Deferred tax assets:
Accrued employee benefits $ 2,140 $ 1,765
Other 1,419 493
------- -------
Total deferred assets 3,559 2,258
Deferred tax liability -
Depreciation and amortization 30,038 24,683
------- -------
Net deferred tax liability
included in balance sheet $ 26,479 $22,425
======= ======
A reconciliation of the statutory federal tax rate to the effective tax
rate follows:
Year ended
May 28, May 29, May 30,
1998 1997 1996
Statutory federal tax rate 35.0 % 35.0 % 35.0 %
State income taxes,
net of federal income
tax benefit 5.1 5.1 5.1
Other (.1) (.4) (.5)
---- ---- ----
40.0 % 39.7 % 39.6 %
==== ==== ====
Income taxes paid in 1998, 1997 and 1996 totaled $19,323,000,
$19,268,000 and $28,391,000, respectively.
9. Commitments, License Rights and Contingencies
Lease Commitments - The Company leases real estate under various
noncancellable operating leases with an initial term greater than one
year. Percentage rentals are based on the revenues at the specific rented
property. Certain sublease agreements include buyout incentives. Rent
expense charged to operations under these leases was as follows:
Year ended
May 28, May 29, May 30,
1998 1997 1996
(thousands)
Fixed minimum rentals $2,733 $2,282 $2,287
Percentage rentals 188 335 356
Sublease rental income (182) (182) (182)
----- ----- -----
$2,739 $2,435 $2,461
===== ===== =====
Payments to affiliated parties for lease obligations were approximately
$144,000, $492,000 and $268,000 in 1998, 1997 and 1996, respectively.
Aggregate minimum rental commitments at May 28, 1998, are as follows:
Fiscal Year
(in thousands)
1999 $ 1,433
2000 1,418
2001 1,470
2002 1,457
2003 1,221
After 2003 9,519
-------
$16,518
=======
Included in the above commitments is $528,000 in minimum rental
commitments to affiliated parties.
Commitments - The Company has commitments for the completion of
construction at various properties and the purchase of various properties
totaling approximately $53,600,000 at May 28, 1998.
License Rights - The Company owns the license rights in certain areas to
operate its restaurants and to sell products using the KFC trademark. In
addition, the Company has license rights to operate a hotel using the
Hilton trademark. Under the terms of the licenses, the Company is
obligated to pay fees based on defined gross sales. The KFC license also
requires the Company to pay an additional fee for each new location
established.
Contingencies - The Company guarantees the debt of joint ventures and
other entities totaling approximately $16,599,000 at May 28, 1998. The
debt of the joint ventures is collateralized by the real estate, buildings
and improvements, and all equipment of each joint venture.
10. Joint Venture Transactions
At May 28, 1998 and May 29, 1997, the Company held investments of
$1,496,000 and $1,439,000, respectively, in various approximately
50%-owned affiliates (joint ventures) which are accounted for under the
equity method.
The Company has receivables from the joint ventures of $1,288,000 and
$1,066,000 at May 28, 1998 and May 29, 1997, respectively. The Company
earns interest on $405,000 and $189,000 of the receivables at
approximately prime to prime plus 1.5% at May 28, 1998 and May 29, 1997,
respectively.
Included in notes payable at May 28, 1998 and May 29, 1997, is
$2,044,000 and $2,294,000, respectively, due to joint ventures in
connection with cash advanced to the Company. The Company pays interest on
the cash advances based on the 90-day certificate of deposit rates.
11. Business Segment Information
Following is a summary of business segment information for 1996 through
1998:
<TABLE>
<CAPTION>
Limited-Service Hotels/ Corporate
Lodging Theatres Resorts Restaurants Items Total
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
1998
Revenues $145,658 $ 91,825 $ 70,305 $27,596 $ 400 $335,784
Operating income
(loss) 31,479 19,676 7,874 3,558 (4,968) 57,619
Depreciation and
amortization 17,910 6,069 6,649 1,969 307 32,904
Assets 292,571 149,491 102,923 23,279 40,240 608,504
Capital expenditures,
including business
acquisitions 25,241 59,440 24,903 569 5,727 115,880
------- ------- ------- ------- -------- -------
1997
Revenues $135,251 $ 80,586 $ 60,210 $26,828 $ 482 $303,357
Operating income (loss) 39,787 16,865 5,464 2,681 (4,066) 60,731
Depreciation and amortization 15,389 5,071 6,174 2,001 268 28,903
Assets 287,027 98,554 79,829 24,979 31,568 521,957
Capital expenditures,
including business
acquisitions 55,916 37,364 13,445 384 405 107,514
------- ------- ------- ------- -------- -------
1996
Revenues $118,679 $ 63,696 $ 53,498 $25,927 $ 487 $262,287
Operating income (loss) 36,266 15,017 3,374 1,992 (4,834) 51,815
Depreciation and amortization 13,815 3,265 5,467 2,191 379 25,117
Assets 247,328 63,365 73,045 29,041 42,536 455,315
Capital expenditures,
including business
acquisitions 51,542 20,316 8,010 619 3,202 83,689
======= ======= ======= ======= ========
(1) Includes a $3.9 million charge related to the Budgetel name change.
</TABLE>
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 assets primarily
include cash and cash equivalents, notes receivable, receivables from
joint ventures and land held for development.
The Company has a loan outstanding of approximately $2,749,000 at May
28, 1998, to one of the hotels it manages, which bears interest at the
prime rate plus 1% and matures December 31, 2008.
<PAGE>
Auditors' Report and Management Statement
Report of Independent Auditors
The Board of Directors and Shareholders of The Marcus Corporation
We have audited the accompanying consolidated balance sheets of The
Marcus Corporation (the Company) as of May 28, 1998 and May 29, 1997, and
the related consolidated statements of earnings, shareholders' equity and
cash flows for each of the three years in the period ended May 28, 1998.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
the Company at May 28, 1998 and May 29, 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the
period ended May 28, 1998, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
July 22, 1998
Statement of Management Responsibility for Financial Statements
The management of The Marcus Corporation and its subsidiaries is
responsible for the preparation of the financial and operating information
contained in this annual report, including the consolidated financial
statements audited by Ernst & Young LLP, independent auditors. These
statements were prepared in conformity with generally accepted accounting
principles and include amounts that are based on the best estimates and
judgments of management.
A system of internal financial controls provides management with
reasonable assurance that transactions are recorded and executed as
authorized, that assets are properly safeguarded and accounted for, and
that records are maintained to permit preparation of financial statements
in accordance with generally accepted accounting principles. The Company
also has policies and guidelines that require employees to maintain a high
level of ethical standards.
The Audit Committee of the Board of Directors is composed entirely of
outside directors and has unrestricted access to representatives of Ernst
& Young LLP.
/s/ Stephen H. Marcus /s/ Douglas A. Neis
Stephen H. Marcus Douglas A. Neis
Chairman and Chief Executive Officer Chief Financial Officer
and Treasurer
<PAGE>
<TABLE>
Eleven-year Financial Summary
<CAPTION>
1998(2) 1997 1996(3) 1995 1994(4) 1993 1992 1991 1990 1989 1988
Operating Results
(dollars in
thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $335,784 303,357 262,287 277,990 242,614 212,910 204,297 188,008 176,592 166,710 162,393
Net earnings $ 28,444 30,881 42,307 24,136 22,829 16,482 13,289 11,618 10,781 10,042 10,073
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Common Stock
Data(1)
Net earnings
per share $ .94 1.04 1.42 .82 .77 .63 .52 .45 .42 .39 .39
Cash dividends
per share $ .22 .20 .23 .15 .13 .11 .10 .09 .08 .07 .07
Weighted average
shares
outstanding
(in thousands) 30,293 29,745 29,712 29,537 29,492 26,208 25,325 25,569 25,839 25,959 26,046
Book value per
share $ 10.00 9.37 8.51 7.29 6.61 5.95 4.97 4.54 4.17 3.83 3.53
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Financial Position
(dollars in
thousands)
Total assets $608,504 521,957 455,315 407,082 361,606 309,455 274,394 255,117 230,789 197,898 181,354
Long-term
debt $205,632 168,065 127,135 116,364 107,681 78,995 100,032 96,183 85,563 64,163 56,635
Shareholders'
equity $302,531 277,293 251,248 214,464 193,918 173,980 124,874 114,697 106,983 98,250 91,318
Capital
expenditures,
including
business
acquisitions $115,880 107,514 83,689 77,083 75,825 47,237 27,238 39,861 42,385 34,253 23,591
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Financial Ratios
Current ratio .43 .39 .62 .41 .67 .90 .73 .65 .91 .75 1.00
Debt/capitali-
zation ratio .42 .39 .35 .37 .37 .34 .46 .47 .45 .41 .40
Return on
revenues 8.5% 10.2% 16.1% 8.7% 9.4% 7.7% 6.5% 6.2% 6.1% 6.0% 6.2%
Return on average
shareholders'
equity 9.8% 11.7% 18.2% 11.8% 12.4% 11.0% 11.1% 10.5% 10.5% 10.6% 11.6%
====== ====== ====== ====== ====== ===== ====== ====== ====== ====== ======
(1) All per share and shares outstanding data is on a diluted basis and
has been adjusted to reflect stock splits in 1998, 1996 and 1993.
(2) Includes charge of $2.34 million or $0.08 per share for costs
associated with the Budgetel name change.
(3) Includes gain of $14.8 million or $0.49 per share on sale of certain
restaurant locations.
(4) Includes gain of $1.8 million or $0.06 per share for cumulative effect
of change in accounting for income taxes.
</TABLE>
<PAGE>
Quarterly Information and Stock Prices
<TABLE>
Supplementary Quarterly Financial Data (Unaudited)
(in thousands except per share data)
<CAPTION>
12 Weeks Ended 12 Weeks Ended 12 Weeks Ended 16 Weeks Ended
Fiscal 1998 August 21, 1997 November 13, 1997 February 5, 1998 May 28, 1998
<S> <C> <C> <C> <C>
Revenues $90,053 $71,184 $71,220 $103,327
Operating income 24,205 13,674 8,092 11,648
Net earnings 13,065 6,917 3,035 5,427
Net earnings per share* .44 .23 .10 .18
<CAPTION>
12 Weeks Ended 12 Weeks Ended 12 Weeks Ended 16 Weeks Ended
Fiscal 1997 August 22, 1996 November 14, 1996 February 6, 1997 May 29, 1997
<S> <C> <C> <C> <C>
Revenues $77,824 $64,828 $63,206 $97,499
Operating income 21,418 13,487 8,745 17,081
Net earnings 11,628 6,782 3,715 8,756
Net earnings per share* .39 .23 .12 .29
<CAPTION>
Last Sale Price Range of Common Stock
First Second Third Fourth
Fiscal 1998* Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
High $17.29 $20.67 $20.38 $18.13
Low 16.00 16.54 16.38 16.06
Fiscal 1997*
High $18.50 $16.59 $15.50 $16.33
Low 14.17 14.59 13.50 14.00
*Adjusted for the 50% stock dividend distributed December 5, 1997.
</TABLE>
On August 7, 1998, there were 2,215 shareholders of record for the Common
Stock and 47 shareholders of record for the Class B Common Stock.
Exhibit 21
Subsidiaries of the Company
as of May 28, 1998
The Company owns all of the stock of the following corporations:
Name State of Incorporation
Marcus Theatres Corporation Wisconsin
Marcus Restaurants, Inc. Wisconsin
B & G Realty, Inc. Wisconsin
First American Finance Corporation Wisconsin
Marc Plaza Corporation Wisconsin
Pfister Corporation Wisconsin
Marcus Geneva, Inc. Wisconsin
Marcus Hotels, Inc. Wisconsin
Baymont Inns, Inc. f/k/a Budgetel
Inns, Inc. Wisconsin
Woodfield Suites, Inc. Wisconsin
Woodfield Suites, Inc. owns all of the stock of the following
corporations:
Name State of Incorporation
Woodfield Suites Hospitality Corporation Wisconsin
Woodfield Suites Franchises International, Inc. Wisconsin
Woodfield Suites Hospitality Corporation owns all of the stock of the
following corporation:
Name State of Incorporation
Woodfield Refreshments, Inc. Wisconsin
Marcus Theatres Corporation owns all of the stock of the following
corporations:
Name State of Incorporation
Appleton Theatres Corporation Wisconsin
Centre Theatres Corporation Wisconsin
Marcus Cinemas, Inc. Wisconsin
Marcus Productions, Inc. Wisconsin
Southtown Corporation Wisconsin
Stephen Amusement Corporation Wisconsin
Tower 41-Corporation Wisconsin
Vending Corporation Wisconsin
41-Bowl, Inc. Wisconsin
Marcus Amusement Co., Inc. Wisconsin
Marcus Cinemas of Minnesota, Inc. Wisconsin
Baymont Inns, Inc. f/k/a Budgetel Inns, Inc. owns all of the stock of
the following corporations:
Name State of Incorporation
Baymont Partners, Inc. f/k/a
Budgetel Partners, Inc. Wisconsin
Guest House Inn of Manitowoc, Inc. Wisconsin
Baymont Inns Hospitality Corporation
f/k/a Guest House Inn-Appleton, Inc. Wisconsin
Marc's Budgetel of Nebraska, Inc. Nebraska
Baymont Franchises International, Inc.
f/k/a Budgetel Franchises
International, Inc. Wisconsin
Woodfield Refreshments of Colorado, Inc. Colorado
Woodfield Refreshments of Ohio, Inc. Ohio
Marcus Restaurants, Inc. owns all of the stock of the following
corporations, except it owns 50% of 642, Inc.:
Name State of Incorporation
Marc's Carryout Corporation Wisconsin
Tops, Inc. Illinois
Captains-Juneau, Inc. Wisconsin
Captains-Wausau, Inc. Wisconsin
Captains-Kenosha, Inc. Wisconsin
Colony Inns Restaurant Corporation Wisconsin
642, Inc. Wisconsin
Cafe Refreshments, Inc. Wisconsin
Glendale Refreshments, Inc. Wisconsin
Grand Avenue Refreshments, Inc. Wisconsin
Marcus Restaurants, Inc. has an option to purchase the remaining 50%
of the stock of 642, Inc. for $5.
Colony Inns Restaurant Corporation owns 80% of the stock of Colony
Inns Refreshments, Inc., a Wisconsin corporation, and has an option to
purchase the remaining 20% for $5.
Hasty Host Distributing Corp. is a subsidiary of Tops, Inc.
Marcus Hotels, Inc. owns all of the stock of the following
corporations:
Name State of Incorporation
HPG Laundry Systems, Inc. Wisconsin
Marcus Northstar, Inc. Minnesota
Marcus Hotels of California, Inc. California
Marcus Indian Wells, Inc. California
Marcus Hotel Partners, Inc. Wisconsin
Marcus Hotels Associates, Inc. Wisconsin
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in Registration Statements
(Forms S-8 No. 33-18801 and No. 33-55695) of The Marcus Corporation of our
report dated July 22, 1998, with respect to the consolidated financial
statements of The Marcus Corporation incorporated by reference in the
Annual Report (Form 10-K) for the year ended May 28, 1998.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
August 24, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-28-1998
<PERIOD-START> MAY-30-1997
<PERIOD-END> MAY-28-1998
<CASH> 4,678
<SECURITIES> 0
<RECEIVABLES> 15,582
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,418
<PP&E> 750,225
<DEPRECIATION> 190,229
<TOTAL-ASSETS> 608,504
<CURRENT-LIABILITIES> 66,036
<BONDS> 205,632
0
0
<COMMON> 31,190
<OTHER-SE> 271,341
<TOTAL-LIABILITY-AND-EQUITY> 608,504
<SALES> 310,820
<TOTAL-REVENUES> 335,784
<CGS> 156,923
<TOTAL-COSTS> 278,165
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,616
<INCOME-PRETAX> 47,384
<INCOME-TAX> 18,940
<INCOME-CONTINUING> 28,444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,444
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.94
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-29-1997
<PERIOD-START> MAY-30-1996
<PERIOD-END> MAY-29-1997
<CASH> 7,991
<SECURITIES> 0
<RECEIVABLES> 6,597
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,179
<PP&E> 649,522
<DEPRECIATION> 162,470
<TOTAL-ASSETS> 521,957
<CURRENT-LIABILITIES> 46,748
<BONDS> 168,065
0
0
<COMMON> 20,387
<OTHER-SE> 256,906
<TOTAL-LIABILITY-AND-EQUITY> 521,957
<SALES> 281,823
<TOTAL-REVENUES> 303,357
<CGS> 142,565
<TOTAL-COSTS> 242,626
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,597
<INCOME-PRETAX> 51,206
<INCOME-TAX> 20,325
<INCOME-CONTINUING> 30,881
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,881
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.04
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-29-1997
<PERIOD-START> MAY-31-1996
<PERIOD-END> FEB-06-1997
<CASH> 20,966
<SECURITIES> 0
<RECEIVABLES> 6,934
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,867
<PP&E> 628,342
<DEPRECIATION> 157,760
<TOTAL-ASSETS> 516,924
<CURRENT-LIABILITIES> 52,932
<BONDS> 167,680
0
0
<COMMON> 20,386
<OTHER-SE> 250,257
<TOTAL-LIABILITY-AND-EQUITY> 516,924
<SALES> 191,285
<TOTAL-REVENUES> 205,858
<CGS> 95,630
<TOTAL-COSTS> 162,208
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,693
<INCOME-PRETAX> 36,892
<INCOME-TAX> 14,767
<INCOME-CONTINUING> 22,125
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,125
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.74
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-30-1996
<PERIOD-START> MAY-26-1995
<PERIOD-END> MAY-30-1996
<CASH> 15,466
<SECURITIES> 0
<RECEIVABLES> 13,670
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,599
<PP&E> 554,964
<DEPRECIATION> 143,401
<TOTAL-ASSETS> 455,315
<CURRENT-LIABILITIES> 50,718
<BONDS> 127,135
0
0
<COMMON> 20,387
<OTHER-SE> 230,861
<TOTAL-LIABILITY-AND-EQUITY> 455,315
<SALES> 244,253
<TOTAL-REVENUES> 262,287
<CGS> 121,415
<TOTAL-COSTS> 210,472
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,696
<INCOME-PRETAX> 70,092
<INCOME-TAX> 27,785
<INCOME-CONTINUING> 42,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,307
<EPS-PRIMARY> 1.44
<EPS-DILUTED> 1.42
</TABLE>
