THE MARCUS CORPORATION REPORTS FOURTH QUARTER AND FISCAL YEAR RESULTS

Company Press Release

July 26, 1999
MILWAUKEE --The Marcus Corporation (NYSE:MCS) has reported record revenues and reduced earnings for the fourth quarter and fiscal year ended May 27, 1999.

Total revenues for the fourth quarter of fiscal 1999 were $85,304,000, a 2.7% increase from pro forma revenues of $83,052,000 for the same period in the prior year. Net earnings were $2,551,000 or $0.09 per diluted share for the fourth quarter of fiscal 1999, compared to pro forma earnings of $3,784,000 or $0.12 per diluted share for the fourth quarter of the prior year.

Earnings for the fourth quarter of fiscal 1998 include an after-tax charge of $2,340,000 or $0.08 per diluted share for costs associated with changing the name of the company's Budgetel Inns to Baymont Inns & Suites. The pro forma comparisons for fiscal 1998 reflect a change in the company's reporting from three 12-week quarters and a final quarter consisting of 16 or 17 weeks to 13-week quarters beginning in fiscal 1999. For the 16-week reported fourth quarter in fiscal 1998, revenues were $102,382,000 and earnings were $5,427,000 or $0.18 per diluted share, including the charge for the Baymont name change.

For fiscal 1999, total revenues were $362,927,000, an 8.4% increase from revenues of $334,839,000 for fiscal 1998. Net earnings were $23,144,000 or $0.77 per diluted share for fiscal 1999, compared to earnings of $28,444,000 or $0.94 per diluted share for fiscal 1998, including the Baymont name change charge. Excluding the name change charge, net earnings for fiscal 1998 were $30,784,000 or $1.02 per diluted share.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the fourth quarter of fiscal 1999 were $16,806,000, compared to pro forma EBITDA of $16,927,000 for the same period in the prior year, including the Baymont name change charge. For fiscal 1999, EBITDA was $90,094,000, compared to $90,523,000 for fiscal 1998, including the charge for the Baymont name change.

"Fiscal 1999 was a challenging year for The Marcus Corporation. The record revenues and operating profit in our theatres, hotels and resorts and KFC restaurants were not enough to offset the performance in our limited-service lodging division as we transitioned to the new Baymont Inns & Suites brand,'' said Stephen H. Marcus, chairman and chief executive officer of The Marcus Corporation. ``While fiscal 1999 earnings were down, it was a year of significant progress in positioning the company for the long term. Substantial investments in major projects including new theatres, stadium seating and the Baymont re-positioning provide the groundwork for future growth in revenues and earnings.''

"As part of building the foundation for our future growth, we have made significant investments in our infrastructure--the technology that supports our business. We are dedicated to becoming a technology leader in each of our industries. Our new enterprise system includes financial and human resource reporting and management, a data warehouse and updated technology for each of our divisions, such as property and revenue management systems for Baymont and point-of-sale systems and teleticketing for our theatres. In the future, we plan to utilize the Internet for reservations for Baymont and ticket purchasing for theatres,'' Marcus said.

In reviewing results for each of the company's divisions, Marcus said the fourth quarter of fiscal 1999 was the first full quarter under the Baymont banner. ``We anticipated a decline in occupancy and revenue per available room (RevPAR) as we introduced the new name, and although results for the quarter are lower than at this time last year, we are beginning to build momentum. For example, the number of franchises sold in fiscal 1999 increased 29% over the prior year and interest from potential franchisees is up dramatically. In addition, performance has significantly improved at those properties where we've rolled-out the new lobby breakfast, which we plan to introduce at the vast majority of our properties during the next year,'' said Marcus.

He noted that the division added 10 new franchised properties and sold five company-owned properties to a franchisee during the year to bring its year-end total to 164 properties in 30 states, 99 company-owned and 65 franchised. An additional 28 franchised properties are currently under construction or in development.

The company's theatre division achieved record revenues for the fourth quarter and fiscal year. Operating income decreased in the fourth quarter but reached a record high for the fiscal year. "Operating income for the theatre division was up 36% at the end of the first half of fiscal 1999. This increase was virtually eliminated by a lack of quality and quantity of film product until the release late in the fourth quarter of The Mummy, Star Wars and The Matrix,'' said Marcus. "The improvement in film quality is continuing in the first quarter. In addition to the ongoing consumer appeal of Star Wars, other hits include Austin Powers, Tarzan and Notting Hill,'' he added.

"Although the lack of quality pictures was disappointing, we continued to build this division for the future. We invested over $60 million in our theatres in fiscal 1999 to enhance our position as a leader in our markets. These investments included adding 73 screens, retrofitting existing theatres for stadium seating and digital sound, installing a 75-foot-wide UltraScreen(TM), introducing our new Luxury Cinema(TM) concept, and opening two IMAX® theatres as part of our complexes in Columbus, Ohio, and Addison, Illinois.

Marcus said the division ended the year with 428 screens, a 19% increase from the end of fiscal 1998 and well on the way toward its goal of 500 screens in the year 2000. The company's average of 8.9 screens per location is substantially above the industry average. Currently, more than 60% of the division's first-run theatres feature stadium seating, which is believed to be the highest percentage in the industry. "We plan to have stadium seating in over 90% of our first-run theatres by the end of fiscal 2000,'' Marcus said.

Revenues and operating profit increased in both the fourth quarter and fiscal year in the hotels and resorts division. The division achieved record performance at three of its four company-owned properties and all four of its managed properties. "Pre-opening expenses and start-up operating losses for the Miramonte Resort in Indian Wells, California, reduced operating profit for the division during the first seven months of the fiscal year, compared to the prior year. Now that these expenses are behind us, we expect improved performance for the Miramonte going forward,'' said Marcus.

He noted that construction is under way on the division's new convention hotel in Madison, Wisconsin, and the major addition to the Hilton Milwaukee City Center. In July 1999, ground was broken for the division's new vacation ownership condominium complex at the Grand Geneva Resort & Spa in Lake Geneva, Wisconsin.

The company's KFC restaurants also achieved increases in revenues and operating profit for the fourth quarter and fiscal year. Two KFC/Taco Bell 2-in-1 restaurant conversions opened in Milwaukee during the year.

"We have a solid foundation based on established franchises, leadership in our markets and a strong balance sheet. The investments we are making in our major divisions are designed to build on these strengths and position us for improved performance over the long term,'' said Marcus.

Headquartered in Milwaukee, Wisconsin, The Marcus Corporation is comprised of four divisions: limited-service lodging, movie theatres, hotels/resorts and restaurants. The company currently operates or franchises 165 Baymont Inns and Baymont Inns & Suites (97 company-owned and 68 franchised) in 30 states and six Woodfield Suites in Wisconsin, Colorado, Ohio and Illinois; 442 movie screens in Wisconsin, Illinois, Ohio and Minnesota and one family entertainment center in Wisconsin; three hotels and a resort in Wisconsin, one hotel in Minnesota, one hotel and a resort in California and one resort in Michigan; and 27 KFC and 3 KFC/Taco Bell 2-in-1 restaurants in Wisconsin.

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 can generally be identified as such because the context of such statements 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, including, but not limited to, the following: (i) continuing availability, in terms of both quality and quantity, of films for the theatre division; (ii) absence of increases in costs of obtaining food for the restaurant division; (iii) continuing consumer demand as a result of general economic conditions with respect to the hotel and resort division; (iv) the limited-service lodging division's ability to attract and retain quality franchise operators and to capitalize on the Baymont name change; (v) competitive conditions in the markets served by the company; and (vi) the company's ability to identify properties to acquire, develop and/or manage and continuing availability of funds for such development. 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 only made as of the date of this press release and the company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

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