FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 5, 1998
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________to_______________
Commission file number 1-12604
THE MARCUS CORPORATION
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1139844
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 EAST WISCONSIN AVENUE - MILWAUKEE, WISCONSIN 53202
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (414) 272-6020
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934, during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
COMMON STOCK OUTSTANDING AT MARCH 19, 1998 - 17,594,371
CLASS B COMMON STOCK OUTSTANDING AT MARCH 19, 1998 - 12,729,402
<PAGE>
THE MARCUS CORPORATION
INDEX
Page
No.
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Balance Sheets
(February 5, 1998 and May 29, 1997) . . . . . . . . 3
Statements of Earnings
(Twelve and thirty-six weeks ended February 5, 1998
and February 6, 1997) . . . . . . . . . . . . . . . 5
Statements of Cash Flows
(Thirty-six weeks ended February 5, 1998 and
February 6, 1997) . . . . . . . . . . . . . . . . . 6
Condensed Notes to Financial Statements . . . . . . 7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition . . . 8
PART II - OTHER INFORMATION
Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THE MARCUS CORPORATION
Consolidated Balance Sheets
(in thousands)
(Unaudited) (Audited)
Feb. 5, May 29,
1998 1997
ASSETS
Current Assets:
Cash and cash equivalents $7,045 $ 7,991
Accounts and notes receivable 9,308 5,531
Receivables from joint ventures 1,254 1,066
Other current assets 4,237 3,591
-------- --------
Total current assets 21,844 18,179
Property and equipment:
Land and improvements 81,143 70,313
Buildings and improvements 414,719 399,416
Leasehold improvements 8,291 8,059
Furniture, fixtures and equipment 171,734 159,715
Construction in progress 28,639 12,019
-------- --------
Total property and equipment 704,526 649,522
Less accumulated depreciation and
amortization 180,836 162,470
-------- --------
Net property and equipment 523,690 487,052
Other assets:
Investments in joint ventures 1,303 1,439
Other 16,280 15,287
-------- --------
Total other assets 17,583 16,726
-------- --------
TOTAL ASSETS $563,117 $521,957
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
THE MARCUS CORPORATION
Consolidated Balance Sheets
(in thousands)
(Unaudited) (Audited)
Feb. 5, May 29,
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 4,159 $ 5,625
Accounts payable 14,776 10,291
Income taxes 4,368 52
Taxes other than income taxes 8,861 9,297
Accrued compensation 3,198 1,270
Other accrued liabilities 11,437 10,886
Current maturities on long-term debt 9,319 9,327
-------- -------
Total current liabilities 56,118 46,748
Long-term debt 174,229 168,065
Deferred income taxes 23,175 22,425
Deferred compensation and other 8,431 7,426
Shareholders' equity:
Preferred Stock, $1 par; authorized 1,000,000
shares; none issued
Common Stock, $1 par; authorized 50,000,000
shares; issued 18,455,994 shares at February 5,
1998, 11,678,935 shares at May 29, 1997 18,456 11,679
Class B Common Stock, $1 par; authorized
33,000,000 shares; issued and outstanding
12,733,528 shares at February 5, 1998,
8,707,632 shares at May 29, 1997 12,734 8,708
Capital in excess of par 39,595 39,470
Retained earnings 233,482 220,860
-------- --------
304,267 280,717
Less cost of Common Stock in treasury
(908,792 shares at February 5, 1998 and
668,272 shares at May 29, 1997) 3,103 3,424
-------- --------
Total shareholders' equity 301,164 277,293
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $563,117 $521,957
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
THE MARCUS CORPORATION
Consolidated Statements of Earnings (Unaudited)
<CAPTION>
(in thousands, except per share data)
February 5, 1998 February 6, 1997
12 Weeks 36 Weeks 12 Weeks 36 Weeks
<S> <C> <C> <C> <C>
Revenues:
Rooms and telephone $30,803 $117,698 $28,577 $105,727
Food and beverage 10,049 33,788 9,440 31,987
Theatre operations 25,612 63,491 21,207 53,571
Other income 4,756 17,480 3,982 14,573
-------- -------- ------- --------
Total revenues 71,220 232,457 63,206 205,858
Costs and expenses:
Rooms and telephone 15,134 46,163 12,687 39,068
Food and beverage 7,661 23,749 7,398 23,222
Theatre operations 14,690 37,365 13,188 33,340
Advertising and marketing 4,928 15,671 4,298 13,404
Administrative 6,829 21,706 5,585 17,713
Depreciation and amortization 7,591 22,164 6,740 19,608
Rent 575 2,123 536 1,842
Property taxes 2,664 8,103 1,771 6,861
Other operating expenses 3,056 9,442 2,258 7,150
-------- -------- ------- --------
Total costs and expenses 63,128 186,486 54,461 162,208
-------- -------- ------- --------
Operating income 8,092 45,971 8,745 43,650
Other income (expense):
Investment income (loss) (43) 783 487 924
Interest expense (3,191) (8,828) (3,025) (7,693)
Gain (loss) on disposition of
property and equipment 215 457 (8) 11
------- ------- ------- -------
(3,019) (7,588) (2,546) (6,758)
------- ------- ------- -------
Earnings before income taxes 5,073 38,383 6,199 36,892
Income taxes 2,038 15,366 2,484 14,767
------- ------- ------- -------
Net earnings $3,035 $23,017 $ 3,715 $ 22,125
======= ======= ======= =======
Net earnings per share:*
Basic $0.10 $0.77 $0.13 $0.75
Diluted $0.10 $0.76 $0.12 $0.74
Weighted Average Shares Outstanding:*
Basic 30,276 29,942 29,516 29,510
Diluted 30,537 30,193 29,789 29,783
* All per share and shares outstanding data have been adjusted to reflect
the 50% stock dividend distributed on December 5, 1997.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
THE MARCUS CORPORATION
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
36 Weeks Ended
Feb. 5, Feb. 6,
1998 1997
OPERATING ACTIVITIES:
Net earnings $23,017 $22,125
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Earnings on investments in joint ventures,
net of distributions 136 137
Gain on disposition of property and equipment (457) (11)
Depreciation and amortization 22,164 19,608
Deferred income taxes 750 184
Deferred compensation and other 1,005 (729)
Changes in assets and liabilities:
Accounts and notes receivable (3,777) 1,846
Other current assets (646) (1,078)
Accounts payable 4,485 (7,026)
Income taxes 4,316 4,189
Taxes other than income taxes (436) (518)
Accrued compensation 1,928 1,244
Other accrued liabilities 551 2,312
------- ------
Total adjustments 30,019 20,158
------- ------
Net cash provided by operating activities 53,036 42,283
INVESTING ACTIVITIES:
Capital expenditures (56,337) (80,386)
Net proceeds from disposals of property,
equipment and other assets 1,323 1,770
Increase in other assets (1,113) (2,459)
Cash received from (advanced to) joint ventures (188) 4,464
------- -------
Net cash used in investing activities (56,315) (76,611)
FINANCING ACTIVITIES:
Debt transactions:
Net proceeds from issuance of notes payable
and long-term debt 16,489 98,053
Principal payments on notes payable and
long-term debt (11,799) (55,495)
Equity transactions:
Treasury stock transactions, except for stock
options (383) (55)
Exercise of stock options 1,104 155
Dividends paid (3,078) (2,830)
------- -------
Net cash provided by financing activities 2,333 39,828
------- -------
Net increase (decrease) in cash and cash
equivalents (946) 5,500
Cash and cash equivalents at beginning of year 7,991 15,466
------- -------
Cash and cash equivalents at end of period $ 7,045 $ 20,966
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
THE MARCUS CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS FOR THE
TWELVE AND THIRTY-SIX WEEKS ENDED
FEBRUARY 5, 1998
(Unaudited)
A. Refer to the Company's audited financial statements (including
footnotes) for the fiscal year ended May 29, 1997, contained in the
Company's Form 10-K Annual Report for such fiscal year, for a
description of the Company's accounting policies.
B. The consolidated financial statements for the twelve and thirty-six
weeks ended February 5, 1998 and February 6, 1997 have been prepared
by the Company without audit. In the opinion of management, all
adjustments consisting only of normal recurring accruals necessary to
present fairly the unaudited interim financial information at
February 5, 1998, and for all periods presented, have been made.
C. The Company's Board of Directors declared a three-for-two stock split,
effected in the form of a 50% stock dividend, distributed on December
5, 1997, to all holders of Common Stock and Class B Common Stock. All
per share and weighted average shares outstanding data prior to
December 5, 1997, have been adjusted to reflect this dividend.
D. Pursuant to an Agreement and Plan of Reorganization dated June 30,
1997 between The Marcus Corporation and Guest House Inn, Inc. ("GHI"),
the Company issued on October 1, 1997 610,173 Common Shares in
exchange for the net operating assets of GHI and issued 449,320 new
Class B Shares in exchange for and cancellation of 449,320 existing
Class B Shares owned by GHI. All share data has been adjusted to
reflect the three-for-two stock split. GHI is owned and controlled by
certain officers, directors and/or principal shareholders of the
Company. For financial reporting purposes, the assets acquired from
GHI were recorded at the historical book value of GHI rather than fair
value because GHI and the Company were controlled by the same
shareholders. The Common Shares issued to complete the GHI
Transaction were recorded at their fair value and the excess of this
fair value over the historical book value of the assets was recorded
as a distribution.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Management's Discussion and Analysis
of Results of Operations and Financial Condition are "forward-looking
statements" intended to qualify for the safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements may generally be identified as such
because the context of 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, assumptions 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 risks, assumptions and uncertainties 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 only made as of the date of this Form 10-Q and
the Company undertakes no obligation to publicly update such forward-
looking statements to reflect subsequent events or circumstances.
RESULTS OF OPERATIONS
General
The Company reports its results of operations on a 52-or 53-week fiscal
year which ends on the last Thursday in May. Each fiscal year is divided
into three 12-week quarters and a final quarter consisting of 16 or 17
weeks. The final quarter of fiscal 1998 will consist of 17 weeks for the
Company's restaurant division, while the Company and its other remaining
divisions will report a 16-week fourth quarter. Due to the relative size
of the Company's restaurant division compared to the Company's other
divisions, the division's additional week of results in fiscal 1998 is not
anticipated to materially impact the Company's consolidated results of
operations for the fiscal year. Fiscal 1997 was a 53-week fiscal year for
the Company's motel and hotels/resorts divisions, while the Company and
its remaining divisions reported a 52-week year in fiscal 1997. 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 plans to
provide comparative quarterly revenue and income data to allow for
meaningful quarterly comparisons. The Company's fiscal year end will not
change.
Revenues for the third quarter of fiscal 1998 ended February 5, 1998
totaled $71.2 million, an increase of $8.0 million, or 12.7%, from
revenues of $63.2 million for the third quarter of fiscal 1997. For the
first three quarters of fiscal 1998, revenues were $232.5 million, an
increase of $26.6 million, or 12.9%, from revenues of $205.9 million in
the first three quarters of fiscal 1997. All four operating segments
contributed to the increase in revenues for the fiscal 1998 third quarter.
Net earnings for the third quarter of fiscal 1998 were $3.0 million, or
$.10 per share, down 18.3% and 16.7%, respectively, from net earnings of
$3.7 million, or $.12 per share, for the same quarter in the prior year.
For the first three quarters of fiscal 1998, net earnings were $23.0
million, or $.76 per share. This represented a respective 4.0% and 2.7%
increase over net earnings of $22.1 million, or $.74 per share, for the
first three quarters of fiscal 1997. All earnings per share data have been
adjusted to reflect the three-for-two stock split effected in the form of
a 50% stock dividend on December 5, 1997. In the third quarter of fiscal
1998, the Company adopted SFAS No. 128, "Earnings per Share". Prior
period amounts have been restated under the new standard. All per share
data presented is on a diluted basis.
Operating income (earnings before other income/expense and income taxes)
totaled $8.1 million during the third quarter of fiscal 1998, a decrease
of $0.6 million, or 7.5%, compared to the prior year same period. For the
first three quarters of fiscal 1998, operating income was $46.0 million,
an increase of $2.3 million, or 5.3%, over operating income of $43.7
million for the first three quarters of fiscal 1997. The Company's
interest expense, net of investment income, totaled $3.2 million for the
third quarter and $8.0 million for the first three quarters of fiscal
1998. This represents increases of $0.7 million and $1.2 million,
respectively, over the same periods last year and was the result of
increased long-term debt levels necessary to help finance the Company's
capital expansion program, combined with reduced investment income.
The Company is conducting a review of its computer systems to identify
those areas that could be affected by the Year 2000 issue and is
developing an implementation plan to resolve the issue. The Company is
also assessing the impact of this issue with its key vendors and
suppliers.
Motels
Total revenues for the third quarter of fiscal 1998 for the motel
division were $27.0 million, an increase of $1.7 million, or 6.6%,
compared to $25.3 million during the same period in fiscal 1997. Total
revenues for the first three quarters of fiscal 1998 for the motel
division were $99.2 million, an increase of $9.5 million, or 10.6%,
compared to $89.7 million during the first three quarters of fiscal 1997.
The motel division's operating income for the fiscal 1998 third quarter
totaled $2.7 million, a decrease of $2.9 million, or 51.7%, from the $5.6
million earned by the division during the same period of fiscal 1997. The
motel division's operating income for the first three quarters of fiscal
1998 totaled $24.1 million, a decrease of $3.3 million, or 12.0%, from the
$27.4 million earned by the division during the same period of fiscal
1997.
Compared to the end of the third quarter of fiscal 1997, 7 new Company-
owned or operated Budgetel Inns, 11 new franchised Budgetel Inns and 1 new
Company-owned Woodfield Suites were in operation at the end of the fiscal
1998 third quarter. The Company's newly opened motels contributed
additional revenues of $1.9 million to the division's fiscal 1998 third
quarter revenues. The Company experienced lower occupancy rates and
slightly higher average daily room rates for comparable Budgetel Inns in
the third quarter of fiscal 1998, compared to the same quarter last year.
The result of the occupancy decline and average daily rate increases was a
2.5% decrease in the division's revenue per available room, or RevPAR, for
comparable Budgetel Inns for the fiscal 1998 third quarter. For the first
three quarters of fiscal 1998, RevPAR for comparable Budgetel Inns
remained constant with the same period last year. The motel division's
results continue to be impacted by the increasing limited service segment
room supply, resulting in no RevPAR growth and pressure on the division's
operating margins. The increased room supply is especially prevalent in
the Midwestern and Southern portions of the country, where the Company has
a large number of properties. The reduced occupancy, during what is
already traditionally a slow season for the travel industry, combined with
increased payroll costs from a tight labor market and recent minimum wage
increases, resulted in reduced operating margins during the fiscal 1998
third quarter compared to the prior year same period. The increased room
supply has also contributed to below average performance of new
properties, negatively impacting the division's fiscal 1998 operating
results to date.
Shortly after the end of the fiscal 1998 third quarter, the Company
announced that it is planning to change the name of its Budgetel Inns to
Baymont Inns by October 31, 1998. The Company believes that the Budgetel
name no longer reflects all of the current product's features and
amenities. The name change, which was endorsed by the Budgetel Franchise
Advisory Council, is intended to help expand the Company's customer base,
increase RevPAR and increase development opportunities. As a result of
the name change and the expanded market potential, the Company's goal is
to have between 400 and 500 locations under the Baymont banner within five
years, an increase from the Company's prior goal of 300 Budgetel Inns by
the year 2000. The Company's ability to reach this goal will be
significantly impacted by its ability to increase the number of franchised
locations at a pace faster than what has been achieved under the Budgetel
name as well as industry and economic conditions, the competitive
environment and other factors.
The Company anticipates reporting an after-tax charge against earnings
in its fiscal 1998 fourth quarter of approximately $2.5 million, or $.08
per share, for the write-off of existing signage and other one-time
expenses associated with the name change.
At the end of the fiscal 1998 third quarter, the Company-owned or
operated 106 Budgetel Inns and franchised an additional 46 Inns, bringing
the total number of Budgetel Inns in operation to 152. In addition, there
are currently 17 franchised Budgetel/Baymont Inns under construction, 5 of
which are scheduled to open before the end of fiscal 1998. An additional
4 Company-owned and 9 franchised Budgetel/Baymont Inns are under
development and should begin construction in the near future. The Company
also owns and operates 5 Woodfield Suites all-suite motels. Three
company-owned Woodfield Suites are currently under development, with a new
franchise program set to be launched later this fiscal year.
Theatres
The theatre division's fiscal 1998 third quarter revenues were $25.7
million, an increase of $4.3 million, or 20.0%, over revenues of $21.4
million during the same period in fiscal 1997. Operating income for the
third quarter in fiscal 1998 totaled $7.0 million, an increase of $2.1
million, or 41.9%, over operating income of $4.9 million during the same
period last year. The theatre division's fiscal 1998 first three quarters
revenues were $63.8 million, an increase of $9.9 million, or 18.4%, over
revenues of $53.9 million during the first three quarters of fiscal 1997.
Operating income for the first three quarters of fiscal 1998 was $14.9
million, an increase of $4.2 million, or 39.5%, over $10.7 million of
operating income during the first three quarters of fiscal 1997.
Total box office receipts for the fiscal 1998 third quarter increased
$2.3 million, or 15.7%, over box office receipts during the same period
last year, despite having five less screens operating this year compared
to the prior year. Early in the third quarter of fiscal 1998, the Company
experienced a fire loss at its North Shore Cinema in Mequon, Wisconsin,
reducing the number of screens operating during the quarter. The theatre
is expected to be closed until late in the fiscal 1998 fourth quarter.
Total box office receipts for the first three quarters totaled $42.3
million, an increase of $5.6 million, or 15.3%, over $36.7 million during
the same period last year. The increase in box office receipts for the
first three quarters of fiscal 1998 compared to the same period in the
prior year was due to additional screens, a 3.3% increase in average
ticket prices and more popular films distributed during the year compared
to the same period last year. Vending revenues for the fiscal 1998 third
quarter increased $1.8 million, or 29.4%, over vending revenues during the
same period last year. Vending revenues for the first three quarters of
the year were $19.0 million, an increase of $3.7 million, or 24.0%, over
$15.3 million during the first three quarters of fiscal 1997. The
increase in vending revenues may be attributed to an overall increase in
attendance, including new screens, and an 11.6% increase in vending
revenues per person. For the first three quarters of fiscal 1998,
theatre attendance at comparable screens has increased 2.1%. Theatre
attendance is largely dependent upon the audience appeal of available
films, a factor over which the Company has limited control.
The Company did not add any new screens during the third quarter of
fiscal 1998, ending the third quarter with a total of 297 total screens in
40 theatres compared to 291 screens in 40 theatres at the end of the same
period last year. Due to the previously mentioned fire, only 286 screens
were in operation for the majority of the fiscal 1998 third quarter.
Early in the fiscal 1998 fourth quarter, the Company opened a new 12-
screen complex in Menomonee Falls, Wisconsin and converted an existing
five-screen complex into a budget-oriented theatre. The Company currently
has 49 additional screens under construction, including two 16-screen
ultraplexes in Columbus, Ohio, one IMAX/R/ 2D/3D large-screen theatre at
one of the new Columbus complexes and 16 screens being added to five
existing locations. The Company also began a recent capital program to
retrofit the majority of its existing screens to stadium seating and
expects to complete the purchase of six suburban Minneapolis/St. Paul
theatres with a total of 44 screens during the fiscal 1998 fourth quarter.
Hotels and Resorts
Total revenues for the hotels and resorts division during the third
quarter of fiscal 1998 increased by $1.7 million, or 15.7%, to $12.4
million, compared to $10.7 million during the previous year's comparable
period. Operating losses decreased by $30,000, or 2.8%, to $1.1 million
during the fiscal 1998 third quarter, compared to an operating loss of
$1.2 million during the third quarter of fiscal 1997. Consistent with the
seasonality of group and convention business in the Midwest, the third
quarter of the Company's fiscal year is typically the slowest period for
its hotels and resorts division. Total revenues from the hotels and
resorts division during the first three quarters of fiscal 1998 totaled
$49.2 million, an increase of $6.0 million, or 13.9%, over total first
three quarters revenues of $43.2 million in fiscal 1997. Operating income
increased by $1.6 million during the first three quarters of fiscal 1998,
or 26.8%, to $7.7 million, compared to $6.1 million during the prior
year's first three quarters.
For the first three quarters of the year, occupancy rates and average
daily rates have increased at all three of the Company's comparable owned
hotels and resorts, contributing to the increased revenues and operating
income in the fiscal 1998 first three quarters compared to the fiscal 1997
first three quarters. Late in the fiscal 1998 third quarter, the Company
opened its second resort, the Miramonte Resort in Indian Wells,
California, contributing to the increased revenues for the division during
the third quarter. Fiscal 1998 third quarter and year to date results
were negatively impacted by approximately $350,000 and $650,000,
respectively, of pre-opening costs and anticipated start-up operating
losses at the Miramonte Resort. Due to these anticipated start-up
expenses, this resort is expected to have a slightly negative impact on
the division's fiscal 1998 results. The division's total RevPAR for
comparable properties increased 5.5% in fiscal 1998's third quarter
compared to the same quarter last year and has increased over 11% for the
first three quarters of fiscal 1998 compared to the same period last year.
The Company announced during the fiscal 1998 third quarter that it had
executed a management contract to operate its first property in Michigan,
the Mission Point Resort on Mackinac Island. This is the Company's third
resort and fourth management contract, increasing the hotel and resort
division's properties to eight. The Mission Point Resort is a seasonal
property and is not expected to materially impact the division's fiscal
1998 operating income. In addition, the Company expects to begin
construction during the fourth quarter of fiscal 1998 on a 250-room
expansion of the Milwaukee Hilton, which will create the largest hotel in
Wisconsin. The addition is currently scheduled to open late in calendar
1999.
Restaurants
Restaurant division revenues totaled $6.0 million for the third quarter
of fiscal 1998, an increase of $400,000, or 6.9%, over fiscal 1997 third
quarter revenues of $5.6 million. The division's operating income for the
fiscal 1998 third quarter totaled $660,000, an increase of $220,000, or
50.5%, over operating income of $440,000 during the third quarter of
fiscal 1997. Restaurant division revenues totaled $19.9 million for the
first three quarters of fiscal 1998, an increase of $1.2 million, or 6.4%,
over first three quarters fiscal 1997 revenues of $18.7 million. The
division's operating income for the first three quarters of fiscal 1998
totaled $2.5 million, an increase of $750,000, or 42.3%, over fiscal 1997
first three quarters operating income of $1.8 million.
The increases in revenues and operating income for both the third
quarter and first three quarters of fiscal 1998, compared to the same
periods last year, were primarily the result of increased rental income
from closed restaurant locations, customer count and average guest check
increases related to recent successful KFC product introductions,
continued strong home delivery sales and results from the Company's first
2-in-1 KFC/Taco Bell conversion, combined with reduced food costs. The
Company operated 30 KFC restaurants and 1 KFC/Taco Bell 2-in-1 restaurant
at the end of the third quarter of fiscal 1998, compared to 31 KFC
restaurants at the end of the fiscal 1997 third quarter.
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 $40 million of unused
credit lines at the end of the third quarter, should be adequate to
support the ongoing operational liquidity needs of the Company's
businesses.
Net cash provided by operating activities increased by $10.7 million
during the first three quarters of fiscal 1998 to $53.0 million, compared
to $42.3 million during the prior year's first three quarters. The
increase over the same period last year was primarily the result of
increased net earnings and depreciation/amortization, combined with timing
differences in payments of accounts payable and receipts of accounts and
notes receivable.
Net cash used in investing activities during the fiscal 1998 first three
quarters totaled $56.3 million, compared to $76.6 million during the
fiscal 1997 first three quarters. Capital expenditures to support the
Company's continuing expansion program totaled $59.5 million in the first
three quarters of fiscal 1998 compared to $80.4 million in the prior
year's first three quarters. The fiscal 1998 capital expenditures total
of $59.5 million includes a $3.2 million non-cash acquisition of operating
assets of a related company, Guest House Inn, Inc. The Company issued
610,173 shares of its Common Stock (adjusted for the three-for-two stock
split) in conjunction with the acquisition. A reduction in the number of
company-owned Budgetel Inn projects and the timing of theatre screen
additions accounts for the majority of the decrease in capital
expenditures. A total of 72 new theatre screens, including 27 acquired
screens, were added in the fiscal 1997 first three quarters, compared to
none during the fiscal 1998 first three quarters. Due to the pending
theatre acquisition and screens under construction at the end of the
fiscal 1998 third quarter, the Company currently anticipates that its
total capital expenditures for fiscal 1998 will be approximately $100
million, with the theatre division spending a greater portion of the total
than in the past.
Cash provided by financing activities during the fiscal 1998 first three
quarters totaled $2.3 million, compared to $39.8 million during the first
three quarters of fiscal 1997. During the fiscal 1998 first three
quarters, the Company received $16.5 million of net proceeds from the
issuance of notes payable and long-term debt, compared to $98.1 million
during the first three quarters of fiscal 1997. Included in the fiscal
1997 proceeds was $85 million of senior unsecured long-term notes
privately placed with six institutional lenders. The Company used a
portion of the fiscal 1997 proceeds from the senior notes to pay off
existing debt, resulting in total principal payments on notes payable and
long-term debt of $55.5 million during the first three quarters of fiscal
1997, compared to only $11.8 million during the same period this year.
The Company has the ability to issue up to $115 million of additional
senior notes under the private placement program through February 1999 and
anticipates issuing additional long-term debt in fiscal 1998 to help fund
the Company's ongoing expansion plans.
The actual timing and extent of the implementation of the Company's
current expansion plans will depend in large part on continuing favorable
industry and general economic conditions, the 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 current expansion goals
will continue to evolve and change in response to these and other factors.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits
Exhibit 27 - Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
THE MARCUS CORPORATION
(Registrant)
DATE: March 20, 1998 By: \s\ Stephen H. Marcus
Stephen H. Marcus,
Chairman of the Board, President and
Chief Executive Officer
DATE: March 20, 1998 By: \s\ Douglas A. Neis
Douglas A. Neis
Chief Financial Officer and
Treasurer
<PAGE>
THE MARCUS CORPORATION
FORM 10-Q
FOR
36 - WEEKS ENDED FEBRUARY 5, 1998
EXHIBIT INDEX
Exhibit Description
27 Financial Data Schedule
<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> 9-MOS
<FISCAL-YEAR-END> MAY-28-1998
<PERIOD-START> MAY-30-1997
<PERIOD-END> FEB-05-1998
<CASH> 7,045
<SECURITIES> 0
<RECEIVABLES> 9,308
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,844
<PP&E> 704,526
<DEPRECIATION> 180,836
<TOTAL-ASSETS> 563,117
<CURRENT-LIABILITIES> 56,118
<BONDS> 174,229
0
0
<COMMON> 31,190
<OTHER-SE> 269,974
<TOTAL-LIABILITY-AND-EQUITY> 563,117
<SALES> 214,977
<TOTAL-REVENUES> 232,457
<CGS> 107,277
<TOTAL-COSTS> 186,486
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,828
<INCOME-PRETAX> 38,383
<INCOME-TAX> 15,366
<INCOME-CONTINUING> 23,017
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,017
<EPS-PRIMARY> .77
<EPS-DILUTED> .76
</TABLE>
