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Press Release: The Marcus Corporation
July 29, 2005
MILWAUKEE, WI -- The Marcus Corporation (NYSE:MCS) yesterday reported results for the fourth quarter and fiscal
year ended May 26, 2005.
Total revenues for the fourth quarter of fiscal 2005 were $60,761,000, compared to revenues of $63,527,000 for
the fourth quarter of the prior year. Earnings from continuing operations were $1,849,000 or $0.06 per diluted
share for the fourth quarter of fiscal 2005, compared to earnings from continuing operations of $2,954,000 or $0.10
per diluted share for the comparable prior period. Last year's earnings from continuing operations for the fourth
quarter included a gain on disposition of property and equipment of $1.4 million, or $0.03 per diluted share after-tax.
Net earnings, which include net after-tax income of $1,044,000 or $0.03 per diluted share from discontinued operations,
were $2,893,000 or $0.09 per diluted share for the fourth quarter of fiscal 2005, compared to net earnings of $4,579,000
or $0.15 per diluted share for the fourth quarter of the prior year. The company's former limited-service lodging
division and Miramonte Resort 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.
For fiscal 2005, total revenues were $272,707,000, compared to revenues of $274,931,000 for fiscal 2004. Earnings
from continuing operations were $19,238,000 or $0.63 per diluted share for fiscal 2005, compared to earnings from
continuing operations of $18,466,000 or $0.62 per diluted share for the prior year. Net earnings for fiscal 2005
were $99,221,000 or $3.25 per diluted share, compared to net earnings of $24,611,000 or $0.82 per diluted share
for fiscal 2004. The net earnings for fiscal 2005 include $78.3 million or $2.57 per diluted share in after-tax
gains on sale of discontinued operations.
"Fiscal 2005 was a year of major change for The Marcus Corporation. We sold our limited-service lodging division
last September for approximately $415 million in cash, reducing the size of the company by about a third. We focused
our sights on growing our two remaining divisions, Marcus Theatres® and Marcus Hotels and Resorts, and we have
taken several steps in recent months towards that end. We also implemented a process for evaluating other investments
and potential uses of the funds," said Stephen H. Marcus, chairman and chief executive officer of The Marcus
Corporation.
"We are pleased to report a slight increase in earnings from continuing operations during fiscal 2005 and
a significant increase in net earnings due to the gains on sale of our limited-service lodging division and Miramonte
Resort. Our increase in earnings from continuing operations can be attributed to increased investment income and
reduced interest expense, primarily resulting from the significant cash balance we currently have as a result of
the sale of the limited-service lodging division," said Marcus.
"However, fiscal 2005 was also a challenging year in many ways. In particular, our overall results from continuing
operations were impacted by decreased revenues and operating income for Marcus Theatres. The year got off to a
strong start, with record Memorial Day and July 4 holiday weeks. But we experienced decreased attendance in each
of the last three quarters of the year, compared to fiscal 2004. With no significant change in the number of competitive
screens in our markets, we believe that a significant factor contributing to the attendance decrease during fiscal
2005 was the quality of film product released during the last three quarters. Additional factors that are difficult
to measure but may have had some impact on attendance this year include an industry concern over piracy and the
ongoing impact of DVDs and other home entertainment options on consumer spending choices, particularly during a
period of relatively weak film product," said Marcus.
As evidence of this, Marcus noted that there were no films in fiscal 2005 that produced box office receipts in
excess of $4 million for Marcus Theatres. This compares to three films with revenues surpassing this level in fiscal
2004 - Lord of the Rings: Return of the King, Finding Nemo and The Passion of the Christ. "Primarily as a
result of the very strong performance of The Passion of the Christ last year, our attendance for the fourth quarter
of fiscal 2005 was down nearly 20%. This was in spite of nine strong opening days for Star Wars: Episode III -
Revenge of the Sith, just prior to the end of the quarter," Marcus said. "It is interesting to note that
The Passion of the Christ, a film that achieved blockbuster status during a time period - late February and March
- not noted for such films, produced box office receipts in excess of $4.3 million for Marcus Theatres during fiscal
2004 and our overall decline in box office receipts for the full fiscal year 2005 totaled approximately $5 million.
"Although the beginning of this summer has been disappointing, with our box office receipts below last year's
for the first seven weeks of the new fiscal year, we are encouraged by our improved performance during the last
two weeks due to hit films including Charlie and the Chocolate Factory and The Wedding Crashers. With promising
films for fall including Chicken Little, The Legend of Zorro and Harry Potter and the Goblet of Fire and potential
hits for the holiday season such as The Chronicles of Narnia: The Lion, the Witch and the Wardrobe, King Kong,
Fun with Dick and Jane and The Producers, we are hopeful that the second half of calendar 2005 will finish on a
much stronger note than the first half," Marcus said.
Marcus said the division continued to invest in improving its facilities and the guest experience. During fiscal
2005, Marcus Theatres opened a new 12-screen theatre in Saukville, Wis., and added eight new screens to existing
theatres. The division further expanded its successful 75-foot-wide UltraScreen® concept to two existing locations,
increasing the total number of UltraScreens at year end to six. The division also continued its Project 2010 remodeling
program, with 11 of the planned 28 locations now featuring Marcus Theatres' distinctive art-deco interior design.
"We have also set the stage for our future growth by acquiring land for new theatres in Green Bay, Sturtevant,
East Troy and Brookfield, Wis.," said Marcus.
"Although Marcus Hotels and Resorts' fiscal 2005 operating income was lower than in the comparable prior periods,
there was much to be encouraged by during the fourth quarter and fiscal year. Revenues increased at all five of
our company-owned hotels and resorts in fiscal 2005, with the largest improvements at our two newest hotels, the
Hotel Phillips in Kansas City, Mo. and the Hilton Madison at Monona Terrace in Madison, Wis., and at the business-oriented
Pfister Hotel in Milwaukee," said Marcus. In particular, Marcus noted that revenue per available room (RevPAR)
for continuing company-owned properties increased a substantial 14.2% in the fourth quarter of fiscal 2005 and
was up 4.2% for the fiscal year.
Marcus said the decrease in operating income was entirely due to reduced earnings from the company's timeshare
operations and start-up and pre-opening costs for the Platinum Suite Hotel & Spa condominium hotel project
currently under construction in Las Vegas and the Four Points by Sheraton Chicago Downtown/ Magnificent Mile, which
opened in early June 2005. "Excluding the combined $1.9 million negative year-over-year impact of these items
on our overall results, the division's fiscal 2005 operating income from our remaining operations was up nearly
12% over the prior year. Although the start-up and pre-opening expenses reduced our results for the year, we believe
these new properties will be positive contributors to the division's future operating income," said Marcus.
"The summer is off to an excellent start. Group bookings have been strong, the leisure business segment continues
to perform well and the individual business segment is showing steady improvement. We are especially pleased with
the strong opening of the Four Points by Sheraton in Chicago. This property has been very well received and is
already building a solid customer base in this dynamic, growing market," said Marcus.
Shortly after the end of the fiscal year, the division purchased the Wyndham Milwaukee Center Hotel in downtown
Milwaukee. Marcus Hotels and Resorts plans a major remodeling of this property to maximize its location in the
heart of Milwaukee's cultural and business district. In addition, renovation of the historic Skirvin Hotel in Oklahoma
City, a public-private hotel project in which the division expects to be integrally involved, is expected to begin
later in fiscal 2006.
"With a number of new properties under construction or in development and continuing improvement in the performance
of our existing properties, we believe the future for Marcus Hotels and Resorts is very bright," he added.
"We are continuing to evaluate potential uses of the proceeds from the sale of the limited-service lodging
division to ensure that all uses are in the best long-term interest of our shareholders. We are committed to growing
Marcus Theatres and Marcus Hotels and Resorts and will consider other potential investments and uses of the funds,
including returns of capital to shareholders. While we have not established an arbitrary deadline for determining
the use of these funds, we currently anticipate that we will provide additional direction on potential applications
of at least a portion of these proceeds during the first half of fiscal 2006," said Marcus.
Marcus Corporation management will host a conference call today, July 28, 2005, at 3:00 p.m. Central/4:00 p.m.
Eastern time to discuss the fourth 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 1-913-981-5520.
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, August 4, 2005 by dialing 1-888-203-1112 and entering the passcode
1097243. 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 504 screens at 45 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 12 hotels and resorts in Wisconsin, California, Minnesota,
Missouri, Texas and Illinois 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 52 Weeks Ended
-------------- --------------
May 26, May 27, May 26, May 27,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenues:
Rooms and telephone $14,166 $12,634 $56,778 $55,095
Theatre admissions 19,608 23,492 96,157 101,144
Theatre concessions 9,693 10,820 45,785 46,696
Food and beverage 8,713 7,826 36,576 34,940
Other revenues 8,581 8,755 37,411 37,056
---------- ---------- ---------- ----------
Total revenues 60,761 63,527 272,707 274,931
Costs and expenses:
Rooms and telephone 5,865 5,308 22,726 21,694
Theatre operations 15,988 17,965 75,560 77,944
Theatre concessions 2,115 2,295 9,896 10,209
Food and beverage 7,149 6,440 28,640 27,046
Advertising and
marketing 4,063 4,217 15,811 15,653
Administrative 7,092 6,074 26,644 24,662
Depreciation and
amortization 6,225 6,385 24,595 24,948
Rent 507 483 1,989 1,845
Property taxes 2,435 2,007 8,158 7,984
Pre-opening expenses 420 17 816 173
Other operating
expenses 4,950 5,405 20,393 20,449
---------- ---------- ---------- ----------
Total costs and expenses 56,809 56,596 235,228 232,607
---------- ---------- ---------- ----------
Operating income 3,952 6,931 37,479 42,324
Other income (expense):
Investment income 2,159 323 5,960 1,787
Interest expense (3,493) (4,186) (14,874) (16,529)
Gain (loss) on
disposition of
property and
equipment (56) 1,434 2,195 2,778
---------- ---------- ---------- ----------
(1,390) (2,429) (6,719) (11,964)
---------- ---------- ---------- ----------
Earnings from continuing
operations before income
taxes 2,562 4,502 30,760 30,360
Income taxes 713 1,548 11,522 11,894
---------- ---------- ---------- ----------
Earnings from continuing
operations 1,849 2,954 19,238 18,466
Discontinued operations:
Income (loss) from
discontinued
operations,
net of income taxes (676) 1,625 1,662 6,145
Gain on sale of
discontinued
operations,
net of income taxes 1,720 - 78,321 -
---------- ---------- ---------- ----------
1,044 1,625 79,983 6,145
---------- ---------- ---------- ----------
Net earnings $2,893 $4,579 $99,221 $24,611
========== ========== ========== ==========
Earnings per share -
basic:
Continuing operations $0.06 $0.10 $0.64 $0.62
Discontinued
operations 0.04 0.05 2.65 0.21
---------- ---------- ---------- ----------
Net earnings per share $0.10 $0.15 $3.29 $0.83
========== ========== ========== ==========
Earnings per share -
diluted:
Continuing operations $0.06 $0.10 $0.63 $0.62
Discontinued
operations 0.03 0.05 2.62 0.20
---------- ---------- ---------- ----------
Net earnings per share $0.09 $0.15 $3.25 $0.82
========== ========== ========== ==========
Weighted average shares
outstanding:
Basic 30,293 29,775 30,120 29,630
Diluted 30,654 30,072 30,526 29,850
THE MARCUS CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited) (Audited)
May 26, 2005 May 27, 2004
-------------- --------------
Assets:
Cash and cash equivalents $259,057 $9,439
Cash held by intermediaries 28,552 -
Accounts and notes receivable 11,615 10,408
Refundable income taxes 871 -
Deferred income taxes 5,464 4,593
Real estate and development costs 4,985 6,438
Other current assets 4,856 5,677
Assets of discontinued operations 13,373 290,233
Property and equipment - net 399,923 373,617
Other assets 55,476 49,267
-------------- --------------
Total Assets $784,172 $749,672
============== ==============
Liabilities and Shareholders' Equity:
Accounts and notes payable $17,785 $16,885
Income taxes - 1,311
Taxes other than income taxes 8,507 8,113
Other current liabilities 18,116 18,056
Current maturities of long-term
debt 25,765 25,738
Liabilities of discontinued
operations 6,187 40,519
Long-term debt 170,888 207,282
Deferred income taxes 26,614 22,666
Deferred compensation and other 16,649 15,379
Shareholders' equity 493,661 393,723
-------------- --------------
Total Liabilities and Shareholders'
Equity $784,172 $749,672
============== ==============
THE MARCUS CORPORATION
Business Segment Information (Unaudited)
(in thousands)
Continu- Dis-
ing continu-
Opera- ed
Hotels/ Corporate tions Opera-
Theatres Resorts Items Total tions Total
-------- -------- --------- -------- -------- ---------
13 Weeks Ended
May 26, 2005
Revenues $31,316 $29,107 $338 $60,761 $239 $61,000
Operating
income (loss) 5,773 784 (2,605) 3,952 (991) 2,961
Depreciation
and
amortization 3,242 2,780 203 6,225 36 6,261
13 Weeks Ended
May 27, 2004
Revenues $36,393 $26,813 $321 $63,527 $35,806 $99,333
Operating
income (loss) 8,687 822 (2,578) 6,931 2,668 9,599
Depreciation
and
amortization 3,057 2,917 411 6,385 5,454 11,839
52 Weeks Ended
May 26, 2005
Revenues $149,125 $122,181 $1,401 $272,707 $46,411 $319,118
Operating
income (loss) 34,791 11,235 (8,547) 37,479 3,048 40,527
Depreciation
and
amortization 12,148 11,047 1,400 24,595 3,806 28,401
52 Weeks Ended
May 27, 2004
Revenues $155,733 $117,975 $1,223 $274,931 $134,276 $409,207
Operating
income (loss) 38,933 11,724 (8,333) 42,324 11,100 53,424
Depreciation
and
amortization 11,782 11,634 1,532 24,948 21,088 46,036
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
costs 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