The Marcus Corporation Reports Record Revenues and Operating Income for Fiscal 2018

Marcus Theatres® achieves record results for
the fourth quarter and full year; Marcus
®
Hotels & Resorts reports record revenues for both periods

MILWAUKEE–(BUSINESS WIRE)–The
Marcus Corporation
(NYSE: MCS) today reported record revenues and
operating income for the fiscal year ended December 27, 2018 and record
revenues for the fourth quarter of fiscal 2018.

Fourth Quarter Fiscal 2018 Highlights

  • Total revenues for the fourth quarter of fiscal 2018 were a record
    $175,032,000, a 5.7% increase from total revenues of $165,581,000 for
    the fourth quarter of fiscal 2017.
  • Operating income was $14,653,000 for the fourth quarter of fiscal
    2018, a 17.8% decrease from operating income of $17,822,000 for the
    prior year quarter.
  • Net earnings attributable to The Marcus Corporation were $8,720,000
    for the fourth quarter of fiscal 2018, compared to net earnings
    attributable to The Marcus Corporation of $34,441,000 for the same
    period in fiscal 2017.
  • Net earnings per diluted common share attributable to The Marcus
    Corporation were $0.30 for the fourth quarter of fiscal 2018, compared
    to net earnings per diluted common share attributable to The Marcus
    Corporation of $1.21 for the fourth quarter of fiscal 2017.
  • Adjusted net earnings attributable to The Marcus Corporation were
    $11,848,000 for the fourth quarter of fiscal 2018, a 15.4% increase
    from Adjusted net earnings attributable to The Marcus Corporation of
    $10,271,000 for the fourth quarter of fiscal 2017.
  • Adjusted net earnings per diluted common share attributable to The
    Marcus Corporation were $0.41 for the fourth quarter of fiscal 2018, a
    13.9% increase from Adjusted net earnings per diluted common share
    attributable to The Marcus Corporation of $0.36 for the prior year
    quarter.
  • Adjusted EBITDA was $36,035,000, a 10.7% increase from Adjusted EBITDA
    of $32,541,000 for the comparable prior period.
  • Adjusted net earnings attributable to The Marcus Corporation, Adjusted
    net earnings per diluted common share attributable to The Marcus
    Corporation and Adjusted EBITDA reflect adjustments made by the
    company to eliminate the favorable impact of certain nonrecurring
    reductions in deferred income taxes in the fourth quarter of fiscal
    2018 and 2017, to eliminate the negative impact of certain
    nonrecurring acquisition and preopening expenses related to the Movie
    Tavern acquisition, as well as certain nonrecurring preopening
    expenses and accelerated depreciation expense related to the project
    currently underway to convert the former InterContinental Milwaukee
    hotel into Saint Kate – The Arts Hotel, in the fourth quarter of
    fiscal 2018, and to eliminate the favorable impact of a significant
    one-time gain related to the sale of an unconsolidated joint venture
    interest in the fourth quarter of fiscal 2017.

Full Year Fiscal 2018 Highlights:

  • Total revenues were a record $707,120,000 for fiscal 2018, an 8.2%
    increase from total revenues of $653,552,000 for fiscal 2017.
  • Operating income was a record $83,189,000 for fiscal 2018, a 7.6%
    increase from operating income of $77,307,000 for fiscal 2017.
  • Net earnings attributable to The Marcus Corporation were $53,391,000
    for fiscal 2018, a 17.9% decrease from net earnings attributable to
    The Marcus Corporation of $64,996,000 for fiscal 2017.
  • Net earnings per diluted common share attributable to The Marcus
    Corporation were $1.86 for fiscal 2018, an 18.8% decrease from net
    earnings per diluted common share attributable to The Marcus
    Corporation of $2.29 for fiscal 2017.
  • Adjusted net earnings attributable to The Marcus Corporation were
    $55,781,000 for fiscal 2018, a 34.1% increase from Adjusted net
    earnings attributable to The Marcus Corporation of $41,585,000 for
    fiscal 2017.
  • Adjusted net earnings per diluted common share attributable to The
    Marcus Corporation were $1.94 for fiscal 2018, a 32.9% increase from
    Adjusted net earnings per diluted common share attributable to The
    Marcus Corporation of $1.46 for fiscal 2017.
  • Adjusted EBITDA was $149,420,000 for fiscal 2018, a 12.6% increase
    from Adjusted EBITDA of $132,700,000 for fiscal 2017.
  • Adjusted net earnings attributable to The Marcus Corporation, Adjusted
    net earnings per diluted common share attributable to The Marcus
    Corporation and Adjusted EBITDA reflect adjustments made by the
    company to eliminate the favorable impact of certain nonrecurring
    reductions in deferred income taxes in fiscal 2018 and 2017, to
    eliminate the negative impact of certain nonrecurring acquisition and
    preopening expenses related to the Movie Tavern acquisition, as well
    as certain nonrecurring preopening expenses and accelerated
    depreciation expense related to the project currently underway to
    convert the former InterContinental Milwaukee hotel into Saint Kate –
    The Arts Hotel, in fiscal 2018, and to eliminate the favorable impact
    of a significant one-time gain related to the sale of an
    unconsolidated joint venture interest and the negative impact of
    certain preopening expenses in fiscal 2017.

“As highlighted by our record revenues and operating income, fiscal 2018
was another great year for The Marcus Corporation. Both divisions
contributed to the improved performance, with Marcus Theatres achieving
record revenues and operating income for both the fourth quarter and
full year and Marcus Hotels & Resorts delivering record revenues during
both periods as well,” said Gregory S. Marcus, president and chief
executive officer of The Marcus Corporation.

The company’s fiscal 2018 results were impacted by nonrecurring
acquisition and preopening expenses in the theatre division and
nonrecurring preopening expenses and accelerated depreciation expense in
the hotel division in the fourth quarter. “If not for these one-time
expenses, we would have achieved both record revenues and operating
income for the fourth quarter and our hotel division would have reported
a sizeable increase in fourth-quarter operating income,” said Marcus.

Marcus
Theatres
®

Revenues for Marcus Theatres increased 6.2% in the fourth quarter and
10.8% for fiscal 2018 and operating income increased 2.8% for the fourth
quarter and 10.4% for fiscal 2018, compared to the prior year periods. A
particularly strong October enabled the division to achieve record
results for the fiscal 2018 fourth quarter, in spite of a weaker
December holiday movie slate than in the prior year. The overall revenue
increase was also driven by higher concession revenues per person, which
reflects the continued success of the company’s distinctive food and
beverage concepts. The division’s record operating income during the
fiscal 2018 fourth quarter and full year would have been even greater if
not for the previously described acquisition and preopening expenses
related to the Movie Tavern acquisition.

On a comparable theatre basis, the division’s box office was in line
with the industry for the fourth quarter of fiscal 2018 (after adjusting
for new theatres) and outperformed the national box office by nearly two
percentage points for the full year, according to data received from
Rentrak.

On February 1, 2019, Marcus Theatres completed the acquisition of the
Movie Tavern circuit, adding 208 screens at 22 locations in nine states
and increasing its footprint by 23%. “Movie Tavern is an attractive
addition to our circuit and we are especially excited to enter nine new
states and expand our portfolio of in-theatre dining locations. We
believe the Movie Tavern business will be accretive to earnings,
earnings per share and cash flow in the first 12 months after closing,”
said Marcus.

The division continued to invest in its theatres, expanding its
signature features and amenities to more locations. During fiscal 2018,
Marcus Theatres added DreamLoungerSM recliner seating to
seven theatres, including three Marcus Wehrenberg locations. As a
result, the company ended fiscal 2018 with DreamLounger recliner seating
in approximately 75% of its company-owned, first-run screens, a
percentage believed to be the highest among the largest theatre chains
in the nation. In addition, one existing screen was converted to an UltraScreen
DLX® auditorium and eight existing screens were converted to SuperScreen
DLX® auditoriums at seven theatres, including four Marcus
Wehrenberg locations, during fiscal 2018. The division also opened one
new Take FiveSM Lounge and two Zaffiro’s® Express
outlets during the year.

“The ongoing investments in our theatres were a major contributor to our
record fiscal 2018 results. In addition, our innovative pricing
strategies, Magical Movie RewardsSM loyalty program and
creative marketing programs, along with excellent teamwork and strong
operational execution, continue to be a successful combination for us,”
said Rolando B. Rodriguez, chairman, president and chief executive
officer of Marcus Theatres.

The five top-performing films for Marcus Theatres in the fourth quarter
were Dr. Seuss’ The Grinch, A Star is Born, Bohemian Rhapsody,
Halloween
and Ralph Breaks the Internet. For the full year,
the top performing movies were Black Panther, Avengers: Infinity War,
Incredibles 2, Jurassic World: Fallen Kingdom
and Deadpool 2.

“As anticipated, the first quarter of fiscal 2019 is off to a slower
start than last year due to a difficult comparison against several
strong holdover films in the prior year and last year’s top film, Black
Panther
. We are looking forward to the opening of highly anticipated
films including Captain Marvel and Us later in the
quarter. Overall, the film slate for 2019 is expected to be quite
strong, particularly during the second half of the year, with potential
hits including Dumbo, Avengers: Endgame, Aladdin, The Secret Life of
Pets 2, Toy Story 4, Spider-Man: Far From Home, The Lion King, It:
Chapter Two, Frozen 2, Jumanji 3
and Star Wars: Episode IX,”
said Rodriguez.

Marcus®
Hotels & Resorts

Marcus Hotels & Resorts’ revenue per available room (RevPAR) for
comparable company-owned properties increased 1.9% in the fourth quarter
of fiscal 2018 and 1.4% for the full year. Revenues increased 4.9% in
the fourth quarter of fiscal 2018 and 4.1% for the full year, primarily
driven by increased group business as well as higher food and beverage
revenues and management fees.

“Operating income was down for the fiscal 2018 fourth quarter and full
year due entirely to preopening expenses and accelerated depreciation
expense related to the transformation of the InterContinental Milwaukee
hotel into Saint Kate – The Arts Hotel. Excluding these expenses from
fiscal 2018 and operating results of the newly opened SafeHouse®
Chicago from fiscal 2017, operating income for the division for fiscal
2018 would have been up approximately 23% from the prior year,
reflecting our focus on strong cost controls, while maintaining our high
standards for quality and service,” said Marcus. “With the increases in
revenues and comparable operating income, fiscal 2018 was a very good
year for Marcus Hotels & Resorts.”

“The InterContinental Milwaukee has been closed since early January for
the renovation into Saint Kate – The Arts Hotel. Saint Kate will be an
independent hotel focused on the arts in its many forms. We are very
excited about this concept and the impact we believe it will have on the
arts scene in Milwaukee when it opens in late spring,” added Marcus. He
noted that the hotel division will incur additional preopening expenses
during the first half of fiscal 2019 as a result of the hotel closing
and renovation.

Marcus Hotels & Resorts added three new management contracts in fiscal
2018: the Murieta Inn and Spa in Rancho Murieta, Calif. and the
Doubletree by Hilton Hotel El Paso Downtown and the Courtyard by
Marriott El Paso Downtown/Convention Center, both in El Paso, Texas. The
additions increased the company’s footprint to 21 owned and/or managed
properties.

In 2018, numerous Marcus Hotels & Resorts hotels and restaurants were
recognized by prestigious organizations for their commitment to
excellence. Three properties received the coveted Condé Nast Traveler
31st annual Readers’ Choice Award, four hotels earned the AAA
Four Diamond Award and 20 hotels and restaurants received the TripAdvisor®
2018 Certificate of Excellence.

Return of Capital to Shareholders

“Yesterday, we announced a 6.7% increase in the cash dividend rate,
which, combined with an increased number of shares outstanding, will
result in an increase in total dividends paid of over 17% compared to
the prior year. The new dividend rate is nearly 90% higher than it was
just five years ago. Our strong balance sheet gives us the ability to
return capital to shareholders, while at the same time continuing to
invest in our two businesses and pursue additional growth opportunities,
such as our recently completed Movie Tavern acquisition,” said Douglas
A. Neis, executive vice president, chief financial officer and treasurer
of The Marcus Corporation.

Conference Call and Webcast

Marcus Corporation management will hold a conference call today,
Thursday, February 21, 2019, at 10:00 a.m. Central/11:00 a.m. Eastern
time. Interested parties may listen to the call live on the internet
through the investor relations section of the company’s website: www.marcuscorp.com,
or by dialing 1-574-990-3059 and entering the passcode 5256459.

A telephone replay of the conference call will be available through
Thursday, February 28, 2019, by dialing 1-855-859-2056 and entering
passcode 5256459. The webcast will be archived on the company’s website
until its next earnings release.

Non-GAAP Financial Measures

Adjusted net earnings attributable to The Marcus Corporation, Adjusted
net earnings per diluted common share attributable to The Marcus
Corporation and Adjusted EBITDA have been presented in this press
release as supplemental measures of financial performance that are not
required by, or presented in accordance with, GAAP. The company defines
Adjusted net earnings attributable to The Marcus Corporation as net
earnings attributable to The Marcus Corporation adjusted to eliminate
the impact of certain items that the company does not consider
indicative of its core operating performance and the tax effect related
to those items. The company defines Adjusted net earnings per diluted
common share attributable to The Marcus Corporation as Adjusted net
earnings attributable to The Marcus Corporation divided by diluted
weighted average shares outstanding. The company defines Adjusted EBITDA
as net earnings attributable to The Marcus Corporation before investment
income, interest expense, other expense, gain or loss on disposition of
property, equipment and other assets, equity earnings or losses from
unconsolidated joint ventures, net earnings or losses attributable to
noncontrolling interests, income taxes and depreciation and
amortization, adjusted to eliminate the impact of certain items that the
company does not consider indicative of its core operating performance.
Reconciliations of these measures to the equivalent measures under GAAP
are set forth in the attached tables.

Adjusted net earnings attributable to The Marcus Corporation, Adjusted
net earnings per diluted common share attributable to The Marcus
Corporation and Adjusted EBITDA are key measures used by management and
the company’s board of directors to assess the company’s financial
performance and enterprise value. The company believes that Adjusted net
earnings attributable to The Marcus Corporation, Adjusted net earnings
per diluted common share attributable to The Marcus Corporation and
Adjusted EBITDA are useful measures, as they eliminate certain expenses
that are not indicative of the company’s core operating performance and
facilitate a comparison of the company’s core operating performance on a
consistent basis from period to period. The company also uses Adjusted
EBITDA as a basis to determine certain annual cash bonuses and long-term
incentive awards, to supplement GAAP measures of performance to evaluate
the effectiveness of its business strategies, to make budgeting
decisions, and to compare its performance against that of other peer
companies using similar measures. Adjusted net earnings, Adjusted
diluted earnings per share and Adjusted EBITDA are also used by
analysts, investors and other interested parties as performance measures
to evaluate companies in the company’s industries.

Adjusted net earnings attributable to The Marcus Corporation, Adjusted
net earnings per diluted common share attributable to The Marcus
Corporation and Adjusted EBITDA are non-GAAP measures of the company’s
financial performance and should not be considered as alternatives to
net earnings or diluted earnings per share as a measure of financial
performance, or any other performance measure derived in accordance with
GAAP and they should not be construed as an inference that the company’s
future results will be unaffected by unusual or non-recurring items.
Additionally, Adjusted net earnings attributable to The Marcus
Corporation and Adjusted EBITDA are not intended to be measures of
liquidity or free cash flow for management’s discretionary use. In
addition, these non-GAAP measures exclude certain non-recurring and
other charges. Each of these non-GAAP measures has its limitations as an
analytical tool, and you should not consider them in isolation or as a
substitute for analysis of the company’s results as reported under GAAP.
In evaluating Adjusted net earnings attributable to The Marcus
Corporation, Adjusted net earnings per diluted common share attributable
to The Marcus Corporation and Adjusted EBITDA, you should be aware that
in the future we will incur expenses that are the same as or similar to
some of the items eliminated in the adjustments made to determine
Adjusted net earnings attributable to The Marcus Corporation, Adjusted
net earnings per diluted common share attributable to The Marcus
Corporation and Adjusted EBITDA, such as acquisition expenses,
preopening expenses, accelerated depreciation and other adjustments. The
company’s presentation of Adjusted net earnings attributable to The
Marcus Corporation, Adjusted net earnings per diluted common share
attributable to The Marcus Corporation and Adjusted EBITDA should not be
construed to imply that the company’s future results will be unaffected
by any such adjustments. Definitions and calculations of Adjusted net
earnings, Adjusted diluted earnings per share and Adjusted EBITDA differ
among companies in our industries, and therefore Adjusted net earnings,
Adjusted diluted earnings per share and Adjusted EBITDA disclosed by the
company may not be comparable to the measures disclosed by other
companies.

About The Marcus Corporation

Headquartered in Milwaukee, The
Marcus Corporation
is a leader in the lodging and entertainment
industries, with significant company-owned real estate assets. The
Marcus Corporation’s theatre division, Marcus
Theatres®
, is the fourth largest theatre circuit in the
U.S. and currently owns or manages 1,098 screens at 90 locations in 17
states. The company’s lodging division, Marcus®
Hotels & Resorts
, owns and/or manages 21 hotels, resorts and
other properties in nine states. For more information, please visit the
company’s website 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 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 may cause results to differ
materially from those expected, including, but not limited to, the
following: (1) the availability, in terms of both quantity and audience
appeal, of motion pictures for our theatre division, as well as other
industry dynamics such as the maintenance of a suitable window between
the date such motion pictures are released in theatres and the date they
are released to other distribution channels; (2) the effects of adverse
economic conditions in our markets, particularly with respect to our
hotels and resorts division; (3) the effects on our occupancy and room
rates of the relative industry supply of available rooms at comparable
lodging facilities in our markets; (4) the effects of competitive
conditions in our markets; (5) our ability to achieve expected benefits
and performance from our strategic initiatives and acquisitions; (6) the
effects of increasing depreciation expenses, reduced operating profits
during major property renovations, impairment losses, and preopening and
start-up costs due to the capital intensive nature of our businesses;
(7) the effects of weather conditions, particularly during the winter in
the Midwest and in our other markets; (8) our ability to identify
properties to acquire, develop and/or manage and the continuing
availability of funds for such development; (9) the adverse impact on
business and consumer spending on travel, leisure and entertainment
resulting from terrorist attacks in the United States or other incidents
of violence in public venues such as hotels and movie theatres; (10) a
disruption in our business and reputational and economic risks
associated with civil securities claims brought by shareholders; and
(11) our ability to timely and successfully integrate the Movie Tavern
operations into our own circuit.. 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
December 27, December 28, December 27, December 28,
2018 2017 2018 2017
Revenues:
Theatre admissions $ 61,350 $ 60,869 $ 246,385 $ 227,091
Rooms 24,530 24,032 108,786 106,876
Theatre concessions 42,877 39,624 166,564 148,989
Food and beverage 18,799 18,140 72,771 70,627
Other revenues   18,967     15,502     78,329     69,131  
166,523 158,167 672,835 622,714
Cost reimbursements   8,509     7,414     34,285     30,838  
Total revenues 175,032 165,581 707,120 653,552
 
Costs and expenses:
Theatre operations 53,399 51,426 217,851 197,270
Rooms 10,155 10,169 41,181 40,286
Theatre concessions 12,417 12,968 47,522 43,634
Food and beverage 14,732 15,282 58,662 59,375
Advertising and marketing 6,458 6,080 23,775 23,960
Administrative 19,463 16,584 72,116 66,954
Depreciation and amortization 18,443 14,175 61,342 51,719
Rent 2,916 2,151 11,267 11,869
Property taxes 4,385 4,240 19,396 18,815
Other operating expenses 9,502 7,270 36,534 31,525
Reimbursed costs   8,509     7,414     34,285     30,838  
Total costs and expenses   160,379     147,759     623,931     576,245  
 
Operating income 14,653 17,822 83,189 77,307
 
Other income (expense):
Investment income (loss) (225 ) 359 208 588
Interest expense (3,079 ) (2,646 ) (13,079 ) (12,100 )
Other expense (496 ) (428 ) (1,985 ) (1,712 )
Gain (loss) on disposition of property, equipment and other assets (575 ) 4,401 (1,342 ) 3,981
Equity earnings (losses) from unconsolidated joint ventures, net   (681 )   (29 )   (399 )   46  
  (5,056 )   1,657     (16,597 )   (9,197 )
 
Earnings before income taxes 9,597 19,479 66,592 68,110
Income taxes (benefit)   873     (14,946 )   13,127     3,625  
Net earnings 8,724 34,425 53,465 64,485
Net earnings (loss) attributable to noncontrolling interests   4     (16 )   74     (511 )
Net earnings attributable to The Marcus Corporation $ 8,720   $ 34,441   $ 53,391   $ 64,996  
 
Net earnings per common share attributable to
The Marcus Corporation – diluted $ 0.30 $ 1.21 $ 1.86 $ 2.29
 
Weighted ave. shares outstanding – diluted 28,949 28,385 28,713 28,403

Contacts

For additional information, contact:
Douglas A. Neis
(414)
905-1100

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