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 August 17, 1995 [] 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, SUITE 1700 - 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 SEPTEMBER 21, 1995 - 7,010,549 CLASS B COMMON STOCK OUTSTANDING AT SEPTEMBER 21, 1995 - 6,068,252
THE MARCUS CORPORATION INDEX Page No. PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements: Balance Sheets (August 17, 1995 and May 25, 1995) . . . . 3 Statements of Earnings (Twelve weeks ended August 17, 1995 and August 18, 1994) . . . . . . . . . . . 5 Statements of Cash Flows (Twelve weeks ended August 17, 1995 and August 18, 1994) . . . . . . . . . . . . . 6 Condensed Notes to Financial Statements . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 8 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . 11 Signatures . . . . . . . . . . . . . . . . . . 12
PART I - FINANCIAL INFORMATION Item 1. Financial Statements THE MARCUS CORPORATION Consolidated Balance Sheets August 17, May 25, 1995 1995 ASSETS (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 27,470,000 $ 8,798,000 Accounts and notes receivable 10,884,000 6,166,000 Receivables from joint ventures 1,554,000 1,861,000 Other current assets 4,301,000 4,817,000 ---------- ---------- Total current assets 44,209,000 21,642,000 ---------- ---------- PROPERTY AND EQUIPMENT: Land and improvements 53,415,000 54,740,000 Buildings and improvements 298,864,000 290,219,000 Leasehold improvements 6,188,000 7,562,000 Furniture, fixtures and equipment 134,505,000 128,035,000 Construction in progress 6,879,000 27,434,000 ----------- ----------- Total property and equipment 499,851,000 507,990,000 Less accumulated depreciation and amortization 136,609,000 133,706,000 ----------- ----------- Net property and equipment 363,242,000 374,284,000 ----------- ----------- OTHER ASSETS: Investment in and advances to joint ventures 676,000 629,000 Other 7,044,000 10,527,000 ----------- ----------- Total other assets 7,720,000 11,156,000 ----------- ----------- TOTAL ASSETS $415,171,000 $407,082,000 =========== =========== See accompanying notes to consolidated financial statements.
THE MARCUS CORPORATION Consolidated Balance Sheets August 17, May 25, 1995 1995 LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) CURRENT LIABILITIES: Notes payable $ 3,931,000 $ 4,452,000 Accounts payable 8,407,000 17,886,000 Income taxes 16,150,000 2,069,000 Taxes other than income taxes 9,899,000 9,091,000 Accrued compensation 2,388,000 1,458,000 Other accrued liabilities 9,647,000 8,052,000 Current maturities on long-term debt 6,913,000 9,245,000 ----------- ----------- Total current liabilities 57,335,000 52,253,000 ----------- ----------- LONG-TERM DEBT 98,157,000 116,364,000 ----------- ----------- DEFERRED INCOME TAXES 20,603,000 19,957,000 ----------- ----------- DEFERRED COMPENSATION AND OTHER 4,238,000 4,044,000 ----------- ----------- SHAREHOLDERS' EQUITY Preferred Stock, $1 par; authorized 1,000,000 shares; none issued Common Stock, $1 par; authorized 30,000,000 shares; issued 7,522,368 shares at August 17, 1995, 7,522,368 shares at May 25, 1995 7,522,000 7,522,000 Class B Common Stock, $1 par; authorized 20,000,000 shares; issued 6,068,952 shares at August 17, 1995, 6,068,952 shares at May 25, 1995 6,069,000 6,069,000 Capital in excess of par 45,147,000 45,154,000 Retained earnings 179,975,000 159,675,000 ----------- ----------- 238,713,000 218,420,000 Less cost of treasury stock Common stock - 513,979 shares at August 17 and 525,847 shares at May 25 3,875,000 3,956,000 ----------- ----------- Total shareholders' equity 234,838,000 214,464,000 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $415,171,000 $407,082,000 =========== =========== See accompanying notes to consolidated financial statements.
THE MARCUS CORPORATION Consolidated Statements of Earnings (unaudited) 12 Weeks Ended August 17, August 18, 1995 1994 Revenues: Rooms and telephone $37,012,000 $31,706,000 Theatre operations 18,857,000 17,438,000 Food and beverage 11,866,000 23,337,000 Other income 5,833,000 3,869,000 ---------- ---------- 73,568,000 76,350,000 ---------- ---------- Costs and Expenses: Rooms and telephone 12,014,000 10,603,000 Theatre operations 11,247,000 10,221,000 Food and beverage 8,306,000 17,471,000 Advertising and marketing 3,324,000 3,951,000 Administrative 7,359,000 6,403,000 Depreciation and amortization 5,875,000 5,198,000 Rent 1,019,000 1,361,000 Property taxes 2,203,000 2,263,000 Other costs and expenses 2,794,000 1,707,000 ---------- ---------- 54,141,000 59,178,000 ---------- ---------- Operating income 19,427,000 17,172,000 Other income (loss): Investment income 787,000 508,000 Interest expense (2,534,000) (2,210,000) Gain (loss) on disposition of property and equipment (Note C) 24,607,000 (8,000) ---------- ---------- 22,860,000 (1,710,000) ---------- ---------- Earnings from operations before income taxes 42,287,000 15,462,000 Income taxes 16,977,000 6,372,000 ---------- ----------- Net earnings $25,310,000 $ 9,090,000 ========== =========== Net earnings per weighted average share of Common Stock and Class B Common Stock $1.92* $0.69 ===== ===== Weighted average shares outstanding 13,162,000 13,150,000 Dividends per share Common Stock $0.40 $0.34 Class B Common Stock $0.36 $0.31 * Includes a one time net of tax gain equal to $1.12 on the disposition of certain restaurant locations. (See note C.) See accompanying notes to consolidated financial statements.
THE MARCUS CORPORATION Consolidated Statements of Cash Flows For the Twelve Weeks Ended August 17, August 18, (unaudited) 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $25,310,000 $9,090,000 Adjustments to reconcile net earnings to cash provided by operating activities: Earnings on investments in joint ventures (80,000) (118,000) (Gain) loss on disposition of property and equipment (24,607,000) 8,000 Depreciation and amortization 5,875,000 5,198,000 Deferred tax provision 646,000 157,000 Deferred compensation and other 194,000 182,000 Changes in assets and liabilities: Accounts and notes receivable (4,411,000) 1,269,000 Other current assets 516,000 471,000 Accounts and notes payable (10,000,000) (755,000) Income taxes 14,081,000 5,182,000 Taxes other than income taxes 808,000 699,000 Accrued compensation 930,000 162,000 Other accrued liabilities 1,595,000 (951,000) ---------- ---------- Cash provided by operating activities 10,857,000 20,594,000 CASH FLOW FROM INVESTING ACTIVITIES: Additions to property and equipment (19,306,000) (19,580,000) Proceeds from disposals of property and equip 49,080,000 392,000 Investments in joint ventures (222,000) (143,000) Decrease in other assets 3,483,000 537,000 Cash received from joint ventures 255,000 296,000 ---------- ----------- Cash provided by (used in) investing activities 33,290,000 (18,498,000) ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Debt transactions: Proceeds from issuance of long-term debt - 2,545,000 Principal payments on long-term debt (20,539,000) (2,902,000) Equity transactions: Treasury stock transactions (except for stock options) (109,000) (1,000) Exercise of stock options 183,000 17,000 Dividends paid (5,010,000) (4,239,000) ----------- ---------- Cash used in financing activities (25,475,000) (4,580,000) ----------- ---------- CASH AND CASH EQUIVALENTS; Net increase (decrease) during period 18,672,000 (2,484,000) Beginning balance 8,798,000 9,974,000 ---------- --------- Ending balance $27,470,000 $7,490,000 ========== ========= See accompanying notes to consolidated financial statements.
THE MARCUS CORPORATION CONDENSED NOTES TO FINANCIAL STATEMENTS FOR THE TWELVE WEEKS ENDED AUGUST 17, 1995 (Unaudited) A. Refer to the Company's audited financial statements (including footnotes) for the year ended May 25, 1995, contained in the Company's Form 10-K Annual Report for such year, for a description of the Company's accounting policies. B. The consolidated financial statements for the twelve weeks ended August 17, 1995 and August 18, 1994, 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 August 17, 1995, and for all periods presented have been made. C. Pursuant to an asset purchase agreement dated April 12, 1995, the Company completed the sale of 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 commenced to immediately manage, operate and assume all of the Company's existing operating and development responsibilities related to the Company's Applebee's restaurant operations. The Purchaser received all profits of the restaurants between June 5, 1995 and June 30, 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 MARCUS CORPORATION Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 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 1996 will consist of 17 weeks for the Company and its theatre division, while the Company's remaining divisions will report a 16-week fourth quarter. The Company and all of its divisions reported a 52-week year in fiscal 1995. Revenues for the first quarter of fiscal 1996, ended August 17, 1995, totaled $73.6 million dollars, a decrease of $2.8 million, or 3.6%, from revenues reported for the first quarter of fiscal 1995. The decline in first quarter comparative revenues, which was anticipated by the Company, was due to a reduction of $11.8 million in restaurant division revenue resulting primarily from the June 1995 sale of the Company's Applebee's restaurants and the disposition through lease of the Company's 11 Marc's Cafe & Coffee Mill restaurants in February 1995. Earnings from ongoing operations for the first quarter of fiscal 1996 were $10.5 million, or $0.80 per share, excluding the after-tax gain of $14.8 million, or $1.12 per share, resulting from the Company's sale of its Applebee's restaurants and related rights. These results represented an increase of 15.4% and 15.9%, respectively, compared to net earnings of $9.1 million, or $0.69 per share, for the same period in the prior year. Including the gain from the Applebee's sale, net earnings were $25.3 million, or $1.92 per share, for the first quarter of fiscal 1996. Motels Total revenues for the first quarter of fiscal 1996 for the motel division were $30.5 million, an increase of $4.4 million, or 17.0%, compared to the same period in fiscal 1995. The motel division's operating profits for the fiscal 1996 first quarter totaled $8.2 million, an increase of $1.6 million, or 24.6%, over the division's same period fiscal 1995 operating profits. Compared to the first quarter of fiscal 1995, there were eight new Company-owned and five new franchised Budgetel Inns in operation during the fiscal 1996 first quarter. These new facilities contributed additional revenues of $2.6 million to the division's fiscal 1996 first quarter revenues. Increased occupancy and average daily room rates at the Company's continuing motels during the first quarter of fiscal 1996 compared to the prior year's first quarter contributed $1.4 million to the division's increased revenues, as the Company benefitted from a strong summer business and leisure travel season. At the end of the first quarter, the Company operated 113 Budgetel Inns, of which 85 were Company- owned and 28 were franchised. The Company is continuing to pursue an aggressive expansion program for its Budgetel Inns and currently plans to open up to an additional 20 new Company-owned or franchised Budgetel Inns during the remainder of fiscal 1996. The Company also owns and operates three Woodfield Suites all-suite motels. Theatres The theatre division's fiscal 1996 first quarter revenues were $18.9 million, an increase of $1.5 million, or 8.3%, over the same period in fiscal 1995. Operating profits for the first quarter in fiscal 1996 were $4.4 million, an increase of $197,000, or 4.7%, over the same prior year period. Total box office receipts for the fiscal 1996 first quarter were $13.3 million, an increase of $725,000, or 5.8%, from the same period in the prior year. Box office receipts increased due to the operation during the first quarter of fiscal 1996 of two new eight-plex theatres and a four-screen addition to the Gurnee Mills theatre complex, together with a 5.8% increase in average ticket prices and a 12.4% increase in vending revenues per person for the first quarter in fiscal 1996 compared to the prior year's first quarter. Four screens were closed from last year's first quarter. The Company operated 202 total screens during the first quarter of fiscal 1996 compared to 189 during last year's first quarter. The additional screens in operation during the quarter allowed over-all theatre attendance to remain flat compared to the fiscal 1995 first quarter. Theatre attendance is largely dependent upon the audience appeal of available films. During last year's first quarter, The Lion King, Forrest Gump and True Lies each generated more box office revenue than the Company's highest grossing film, Apollo 13, in the first quarter of fiscal 1996. Hotels and Resorts Total revenues from the hotels and resorts division during the first quarter of fiscal 1996 increased by $3.4 million, or 25.3%, to $16.7 million, over the previous year's comparable period. Operating profits increased by $1.3 million, or 73.7%, to $3.1 million, compared to the prior fiscal year's first quarter. Substantially improved occupancy and room rates at the Grand Geneva Resort & Spa were the primary reasons for the increases. Occupancy rates and average room rates at the Company's owned and managed hotels also remained strong during the first quarter. Pre-opening costs for the Company's newly franchised Milwaukee Hilton (formerly the Marc Plaza), which are being amortized over a one-year period beginning in the first quarter of fiscal 1996, reduced otherwise stronger operating profits. Non-renewal of the Company's operating agreement for the Sheraton-Mayfair Inn had a nominal effect on reported revenues and operating profits for the quarter. Restaurants Restaurant division revenues totaled $7.3 million for the fiscal 1996 first quarter, a decrease of $11.8 million, or 61.8%, from the same period in fiscal 1995. The decreased revenue was due to the disposition or closure of 38 restaurants since last year's first quarter. The division's operating loss for the fiscal 1996 period was $368,000, compared to an operating profit of $827,000 in the first quarter of the prior year due primarily to the sale of the Company's profitable Applebee's restaurants. The Company's KFC restaurants experienced a 3.5% decrease in revenues and a 42.3% decrease in operating profits during the quarter compared to the prior year's first quarter as a result of increased operating expenses, including significantly higher chicken costs. The decrease in revenues between comparative quarters was the result of the closure of two underperforming KFC restaurants since last year's first quarter. Guest counts at same store KFCs were down 2.0% during the first quarter of fiscal 1996 compared to the first quarter of fiscal 1995; however, this decrease was offset by increased average guest check amounts. 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 $45 million in unused credit lines at the end of the first quarter, should be adequate to support the ongoing operational liquidity needs of the Company's businesses. Net cash provided by operating activities decreased by $9.7 million during the first quarter of fiscal 1996 to $10.9 million, compared to the prior year's first quarter. The decrease between the fiscal first quarters resulted principally from a $9.2 million decrease in accounts and notes payable caused by timing differences in payments to vendors and an increase of $5.7 million in accounts receivable due to a higher volume of business in the lodging segments of the Company. As a result of receiving $48.3 million in net cash proceeds in June 1995 from the sale of its Applebee's restaurants and related rights, the Company's investing activities generated a positive cash flow of $33.2 million compared to a net use of $18.5 million in the fiscal 1995 first quarter. Capital expenditures to support the Company's continuing expansion program totalled $19.3 million in the first quarter of fiscal 1996 compared to $19.6 million in the prior year's first quarter. The most significant amount of capital spent by the Company during the quarter was on the Company's new Budgetel Inns. Cash used in financing activities increased to $25.5 million in the first quarter of fiscal 1996, compared to $4.6 million in the first quarter of fiscal 1995. During the fiscal 1996 first quarter, the Company paid $20.5 million of principal payments on long-term debt (as a result of its receipt of cash from its Applebee's sale), compared to $2.9 million in the prior year's first quarter, and made dividend payments of $5.0 million compared to $4.2 million during the prior year's first quarter. The Company did not issue any new debt during the quarter compared to $2.5 million of new debt issued in the first quarter of fiscal 1995. The Company's current fiscal 1996 capital expenditure budget is $133 million, a 72.5% increase over the amount spent in fiscal 1995. This budget currently represents approximately $95 million for new Budgetel Inns and Woodfield Suites; $26 million for movie theatre expansion; $10 million for hotel and resort expansion and renovation; and $2 million for KFC franchises. These anticipated capital expenditures are expected to be funded from cash generated from operations, the funds received by the Company from the prior sale of its Applebee's restaurants and other facilities, and additional bank debt. The actual timing and extent of the implementation of the Company's current fiscal 1996 expansion plans will depend in large part on continuing favorable industry and general economic conditions, 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. Item 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit 27. Financial Data Schedule b. Reports on Form 8-K A Form 8-K was filed by the Company on July 17, 1995 which reported the sale of its Applebee's Neighborhood Grill & Bar restaurants under Items 2 and 7 of such form.
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: September 29, 1995 By: \s\ Stephen H. Marcus Stephen H. Marcus, Chairman of the Board, President and Chief Executive Officer DATE: September 29, 1995 By: \s\ Kenneth A. MacKenzie Kenneth A. MacKenzie Chief Financial Officer and Treasurer
THE MARCUS CORPORATION FORM 10-Q FOR 12 - WEEKS ENDED AUGUST 17, 1995 EXHIBIT INDEX Exhibit Description 27 Financial Data Schedule