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Press Release: The Marcus Corporation
December 17, 2004
MILWAUKEE, WI -- The Marcus Corporation (NYSE:MCS) yesterday reported results for the second quarter ended November
25, 2004.
Total revenues for the second quarter of fiscal 2005 were $62,135,000, compared to revenues of $62,485,000 for
the second quarter of the prior year. Earnings from continuing operations rose 15.6% to $4,417,000 or $0.14 per
diluted share for the second quarter of fiscal 2005, from earnings from continuing operations of $3,821,000 or
$0.13 per diluted share for the comparable quarter of the prior year. Net earnings, which include a net gain of
$67.2 million or $2.20 per diluted share from discontinued operations, were $71,588,000 or $2.34 per diluted share
for the second quarter of fiscal 2005, compared to net earnings of $4,803,000 or $0.16 per diluted share for the
second quarter of fiscal 2004. Continuing operations include The Marcus Corporation's theatre and hotels and resorts
divisions. The company's former limited-service lodging division and the Miramonte Resort in Indian Wells, Calif.,
have been classified as discontinued operations in accordance with current accounting pronouncements and prior
year results have been restated to conform to the current presentation. The Miramonte Resort was sold subsequent
to the end of the second quarter on December 1, 2004.
For the first half of fiscal 2005, total revenues were $149,474,000, a 2.6% increase from revenues of $145,640,000
for the first half of fiscal 2004. Earnings from continuing operations were $15,603,000 or $0.52 per diluted share
for the first half of fiscal 2005, a 21.3% increase from earnings from continuing operations of $12,867,000 or
$0.43 per diluted share for the same period in the prior fiscal year. Net earnings were $89,733,000 or $2.96 per
diluted share for the first half of fiscal 2005, compared to net earnings of $17,748,000 or $0.60 per diluted share
for the first half of the prior fiscal year.
"The performance of Marcus Hotels and Resorts continued to improve in the second quarter, helping to offset
the impact of an overall weak slate of movies and a strong prior year comparison on the results of Marcus Theatres®,"
said Stephen H. Marcus, chairman and chief executive officer of The Marcus Corporation. "We are pleased with
the increase in earnings from continuing operations in the second quarter. In addition, we reported a significant
gain on the sale of our former limited-service lodging division."
Marcus Hotels and Resorts achieved increases in both revenues and operating income in the second quarter, with
improved occupancy contributing to a 2.1% increase in revenue per available room (RevPAR) for the quarter, including
the Miramonte. "Strong food and beverage sales and continued improvement in business travel drove the division's
solid second quarter performance. We continue to be encouraged by the steady improvement in the lodging industry
and the pace of advance bookings," said Marcus.
Marcus noted that the division currently has two major projects underway, with a third scheduled to begin in the
near future. The division is co-developing the Platinum Suite Hotel & Spa, a luxury condominium hotel located
just off the Las Vegas Strip, and construction is continuing on the division's new hotel in downtown Chicago. In
addition, the division will be participating in an extensive public/private renovation and restoration of the Skirvin
Hotel in Oklahoma City.
On December 1, 2004, Marcus Hotels and Resorts completed the previously announced sale of the Miramonte Resort
in Indian Wells, Calif., for $28.7 million in cash. Marcus said the company expects to report a pre-tax gain on
the sale in excess of $5 million in its fiscal third quarter.
Marcus Theatres reported lower revenues and operating income in the second quarter. "Overall, the slate of
movies in the second quarter was not as strong as in the prior year, particularly during September and October,"
said Marcus. "The good news is that the top grossing movies for the quarter were two animated films, The Incredibles
and Shark Tale. Strong family fare is always good for our concession business, which lessened the impact of the
reduced box office revenues."
"The second quarter ended on a high note, with a strong week leading into the Thanksgiving holiday weekend,"
said Marcus. "To date, our holiday season has benefited from films including National Treasure, The Polar
Express and last week's strong opening of Ocean's 12. Other potential hit movies that will be released in the next
two weeks include Lemony Snicket's A Series of Unfortunate Events, Meet the Fockers and The Aviator. However, we
don't expect any single movie to dominate like last year's blockbuster Lord of the Rings: The Return of the King,
making comparisons to last year's strong third quarter difficult."
The division opened three new screens at its existing theatre in La Crosse, Wis. in the second quarter, and three
additional screens will open December 22 at its theatre in Oshkosh, Wis. In the last four months, Marcus Theatres
has announced plans for three new theatres. The company will build a 16-screen theatre near Racine in Sturtevant,
Wis., a 14-screen facility in Green Bay and an eight-screen theatre in East Troy, Wis. Construction is continuing
on a new 12-screen theatre in Saukville, Wis. that is expected to open in early 2005. In addition, the division
opened its fifth 75-foot-wide UltraScreen® in Columbus, Ohio, during the second quarter, and a sixth UltraScreen
is under construction in the Twin Cities area.
"We are also making good progress on our Project 2010 remodeling program. This is a major effort that will
further improve 28 of our facilities with enhanced art deco facades, luxurious design packages and remodeled lobbies,
vestibules and concession areas, including the addition of self-serve soft drinks. The Project 2010 makeover has
been completed at six theatres and remodeling is currently underway or nearly finished at theatres in New Berlin,
La Crosse and Green Bay, Wis., and in Addison, Ill.," said Marcus.
The Marcus Corporation's second quarter results include an after-tax gain of $71.0 million on the sale of its limited-service
lodging division, which was sold on September 3, 2004, offset slightly by an operating loss on the discontinued
operations. "We operated the limited-service lodging division for the first week of the second quarter. The
operating loss from discontinued operations includes costs associated with exiting this business, as well as operating
losses from our now-sold Miramonte Resort," said Marcus. He added that approximately $40 million in proceeds
from the sale of the limited-service lodging division remain in escrow pending the completion of additional customary
transfer requirements. Additional gains will be recorded in future quarters as these escrow proceeds are released.
Marcus said the company's management team is continuing to evaluate the potential uses of the proceeds from the
sale of the limited-service lodging division. "We are committed to growing our Marcus Theatres and Marcus
Hotels and Resorts divisions. We will also consider other opportunities and potential uses of the proceeds,"
said Marcus.
Marcus Corporation management hosted a conference call yesterday, December 16, 2004, at 3:00 p.m. Central/4:00
p.m. Eastern time to discuss the second quarter results. Interested parties can listen to the call live on the
Internet through the investor relations section of the company's Web site: www.marcuscorp.com, or by dialing 1-913-981-4900.
Listeners should dial in to the call at least 5 - 10 minutes prior to the start of the call or should go to the
Web site at least 15 minutes prior to the call to download and install any necessary audio software. The call will
be available for telephone replay through Thursday, December 23, 2004 by dialing 1-888-203-1112 and entering the
passcode 117529. The Webcast of the conference call will be archived on the company's Web site until the next earnings
release.
Headquartered in Milwaukee, Wis., The Marcus Corporation is a leader in the lodging and entertainment industries.
The Marcus Corporation's movie theatre division, Marcus Theatres, owns or manages 488 screens at 44 locations in
Wisconsin, Illinois, Minnesota and Ohio, and one family entertainment center in Wisconsin. The company's lodging
division, Marcus Hotels and Resorts, owns or manages 10 hotels and resorts in Wisconsin, California, Minnesota,
Missouri and Texas, and one vacation club in Wisconsin. For more information, visit the company's Web site at www.marcuscorp.com.
Certain matters discussed in this Press Release are "forward-looking statements" intended to qualify
for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These
forward-looking statements may generally be identified as such because the context of such statements will include
words such as we "believe," "anticipate," "expect" or words of similar import. Similarly,
statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking
statements are subject to certain risks and uncertainties which could cause results to differ materially from those
expected, including, but not limited to, the following: (i) the availability, in terms of both quantity and audience
appeal, of motion pictures for our theatre division; (ii) the effects of increasing depreciation expenses and preopening
and start-up costs due to the capital intensive nature of our businesses; (iii) the effects of adverse economic
conditions in our markets, particularly with respect to our hotels and resorts division; (iv) the effects of adverse
weather conditions, particularly during the winter in the Midwest and in our other markets; (v) the effects on
our occupancy and room rates from the relative industry supply of available rooms at comparable lodging facilities
in our markets; (vi) the effects of competitive conditions in the markets served by us; (vii) our ability to identify
properties to acquire, develop and/or manage and continuing availability of funds for such development; and (viii)
the adverse impact on business and consumer spending on travel, leisure and entertainment resulting from terrorist
attacks in the United States, the United States' responses thereto and subsequent hostilities. Shareholders, potential
investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements
made herein are made only as of the date of this Press Release and we undertake no obligation to publicly update
such forward-looking statements to reflect subsequent events or circumstances.
THE MARCUS CORPORATION
Consolidated Statements of Earnings (Unaudited)
(in thousands, except per share data)
13 Weeks Ended 26 Weeks Ended
-------------- --------------
Nov. 25, Nov. 27, Nov. 25, Nov. 27,
2004 2003 2004 2003
---- ---- ---- ----
Revenues:
Rooms and telephone $ 14,769 $ 14,787 $ 33,386 $ 32,921
Theatre admissions 19,457 21,250 51,573 51,211
Theatre concessions 9,381 9,596 24,352 23,449
Food and beverage 9,759 9,000 19,650 18,505
Other revenues 8,769 7,852 20,513 19,554
--------- --------- --------- ---------
Total revenues 62,135 62,485 149,474 145,640
Costs and expenses:
Rooms and telephone 5,755 5,543 11,776 11,573
Theatre operations 15,696 16,422 39,950 39,484
Theatre concessions 2,075 2,111 5,299 5,193
Food and beverage 7,170 6,812 14,489 13,667
Advertising and marketing 3,992 3,675 8,219 7,974
Administrative 6,250 6,211 12,917 12,608
Depreciation and
amortization 6,041 6,154 12,189 12,334
Rent 493 525 964 981
Property taxes 2,021 1,621 4,052 3,794
Pre-opening expenses 126 4 175 97
Other operating expenses 4,761 4,968 10,632 10,505
--------- --------- --------- ---------
Total costs and expenses 54,380 54,046 120,662 118,210
--------- --------- --------- ---------
Operating income 7,755 8,439 28,812 27,430
Other income (expense):
Investment income 1,473 511 1,819 1,051
Interest expense (3,780) (3,945) (7,659) (8,419)
Gain on disposition of
property, equipment and
investments in joint
ventures 1,266 1,373 2,232 1,387
--------- --------- --------- ---------
(1,041) (2,061) (3,608) (5,981)
--------- --------- --------- ---------
Earnings from continuing
operations before income
taxes 6,714 6,378 25,204 21,449
Income taxes 2,297 2,557 9,601 8,582
--------- --------- --------- ---------
Earnings from continuing
operations 4,417 3,821 15,603 12,867
Discontinued operations:
Income (loss) from
discontinued operations,
net of income taxes (3,786) 982 3,173 4,881
Gain on sale of
discontinued operations,
net of income taxes 70,957 -- 70,957 --
--------- --------- --------- ---------
67,171 982 74,130 4,881
--------- --------- --------- ---------
Net earnings $ 71,588 $ 4,803 $ 89,733 $ 17,748
========= ========= ========= =========
Earnings per share - basic:
Continuing operations $ 0.15 $ 0.13 $ 0.52 $ 0.43
Discontinued operations 2.23 0.03 2.47 0.17
--------- --------- --------- ---------
Net earnings per share $ 2.38 $ 0.16 $ 2.99 $ 0.60
========= ========= ========= =========
Earnings per share - diluted:
Continuing operations $ 0.14 $ 0.13 $ 0.52 $ 0.43
Discontinued operations 2.20 0.03 2.44 0.17
--------- --------- --------- ---------
Net earnings per share $ 2.34 $ 0.16 $ 2.96 $ 0.60
========= ========= ========= =========
Weighted average shares
outstanding:
Basic 30,093 29,585 29,972 29,535
Diluted 30,559 29,784 30,358 29,709
THE MARCUS CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited) (Audited)
November 25, 2004 May 27, 2004
----------------- ------------
Assets:
Cash and cash equivalents $ 195,633 $ 9,366
Accounts and notes receivable 12,623 10,408
Real estate and development costs 5,482 6,438
Other current assets 130,718 5,677
Assets of discontinued operations 54,665 290,096
Property and equipment - net 380,120 373,617
Other assets 48,929 49,267
---------- ----------
Total Assets $ 828,170 $ 744,869
========== ==========
Liabilities and Shareholders' Equity:
Accounts and notes payable $ 13,164 $ 16,885
Income taxes 26,457 1,311
Taxes other than income taxes 8,915 8,113
Other current liabilities 16,109 18,056
Current maturities of long-term debt 24,549 25,738
Liabilities of discontinued operations 38,064 39,668
Long-term debt 182,415 207,282
Deferred income taxes 17,142 18,714
Deferred compensation and other 16,127 15,379
Shareholders' equity 485,228 393,723
---------- ----------
Total Liabilities and Shareholders'
Equity $ 828,170 $ 744,869
========== ==========
THE MARCUS CORPORATION
Business Segment Information (Unaudited)
(in thousands)
Continuing Dis-
Hotels/ Corporate Operations continued
Theatres Resorts Items Total Operations Total
-------- ------- ----- ----- ---------- -------
13 Weeks Ended
Nov. 25, 2004
Revenues $ 30,292 $ 31,405 $ 438 $ 62,135 $ 4,522 $ 66,657
Operating
income (loss) 5,826 3,950 (2,021) 7,755 (6,209) 1,546
Depreciation and
amortization 2,937 2,706 398 6,041 474 6,515
13 Weeks Ended
Nov. 27, 2003
Revenues $ 32,372 $ 29,838 $ 275 $ 62,485 $ 32,163 $ 94,648
Operating
income (loss) 7,160 3,583 (2,304) 8,439 2,298 10,737
Depreciation and
amortization 2,857 2,920 377 6,154 5,181 11,335
26 Weeks Ended
Nov. 25, 2004
Revenues $ 79,339 $ 69,378 $ 757 $149,474 $ 46,144 $195,618
Operating
income (loss) 19,905 12,551 (3,644) 28,812 5,378 34,190
Depreciation and
amortization 5,856 5,538 795 12,189 3,731 15,920
26 Weeks Ended
Nov. 27, 2003
Revenues $ 78,490 $ 66,592 $ 558 $145,640 $ 69,803 $215,443
Operating
income (loss) 19,859 11,691 (4,120) 27,430 8,948 36,378
Depreciation and
amortization 5,766 5,824 744 12,334 10,310 22,644
Corporate items include amounts not allocable to the business segments. Corporate revenues consist principally
of rent and the corporate operating loss includes general corporate expenses. Corporate information technology
costs and accounting shared services are allocated to the business segments based upon several factors, including
actual usage and segment revenues.
---------------------------------------------
Contact:
The Marcus Corporation
Douglas A. Neis, 414-905-1100
Source: The Marcus Corporation