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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 28, 2023
| | | | | |
o | 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 incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | |
100 East Wisconsin Avenue, Suite 1900 Milwaukee ,Wisconsin | | 53202-4125 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (414) 905-1000
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common Stock, $1.00 par value | MCS | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check One).
| | | | | | | | | | | |
Large accelerated filer | o | Accelerated filer | x |
Non-accelerated filer | o | Smaller reporting company | o |
| | Emerging growth company | o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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 OCTOBER 30, 2023 – 24,617,344
CLASS B COMMON STOCK OUTSTANDING AT OCTOBER 30, 2023 –7,078,410
THE MARCUS CORPORATION
INDEX
PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
THE MARCUS CORPORATION
Consolidated Balance Sheets
(in thousands, except share and per share data)
| | | | | | | | | | | |
| September 28, 2023 | | December 29, 2022 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 36,036 | | | $ | 21,704 | |
Restricted cash | 4,046 | | | 2,802 | |
Accounts receivable, net of reserves of $161 and $172, respectively | 21,426 | | | 21,455 | |
| | | |
| | | |
Assets held for sale | 1,831 | | | 460 | |
Other current assets | 22,793 | | | 17,474 | |
Total current assets | 86,132 | | | 63,895 | |
| | | |
Property and equipment: | | | |
Land and improvements | 131,718 | | | 132,285 | |
Buildings and improvements | 724,289 | | | 729,177 | |
Leasehold improvements | 166,300 | | | 167,516 | |
Furniture, fixtures and equipment | 397,257 | | | 386,197 | |
Finance lease right-of-use assets | 30,066 | | | 29,885 | |
Construction in progress | 9,636 | | | 10,305 | |
Total property and equipment | 1,459,266 | | | 1,455,365 | |
Less accumulated depreciation and amortization | 771,882 | | | 739,600 | |
Net property and equipment | 687,384 | | | 715,765 | |
| | | |
Operating lease right-of-use assets | 183,674 | | | 194,965 | |
| | | |
Other assets: | | | |
Investments in joint ventures | 1,740 | | | 2,067 | |
Goodwill | 74,996 | | | 75,015 | |
| | | |
Other | 20,007 | | | 12,891 | |
Total other assets | 96,743 | | | 89,973 | |
TOTAL ASSETS | $ | 1,053,933 | | | $ | 1,064,598 | |
See accompanying condensed notes to consolidated financial statements.
THE MARCUS CORPORATION
Consolidated Balance Sheets
(in thousands, except share and per share data)
| | | | | | | | | | | |
| September 28, 2023 | | December 29, 2022 |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 29,360 | | | $ | 32,187 | |
| | | |
Taxes other than income taxes | 19,009 | | | 17,948 | |
Accrued compensation | 16,340 | | | 22,512 | |
Other accrued liabilities | 54,006 | | | 56,275 | |
Current portion of finance lease obligations | 2,561 | | | 2,488 | |
Current portion of operating lease obligations | 15,054 | | | 14,553 | |
Current maturities of long-term debt | 10,411 | | | 10,432 | |
Total current liabilities | 146,741 | | | 156,395 | |
| | | |
Finance lease obligations | 13,354 | | | 15,014 | |
| | | |
Operating lease obligations | 182,826 | | | 195,281 | |
| | | |
Long-term debt | 159,681 | | | 170,005 | |
| | | |
Deferred income taxes | 33,093 | | | 26,567 | |
| | | |
Other long-term obligations | 45,340 | | | 44,415 | |
| | | |
Equity: | | | |
Shareholders’ equity attributable to The Marcus Corporation | | | |
Preferred Stock, $1 par; authorized 1,000,000 shares; none issued | — | | | — | |
Common Stock, $1 par; authorized 50,000,000 shares; issued 24,691,548 shares at September 28, 2023 and 24,498,243 shares at December 29, 2022 | 24,692 | | | 24,498 | |
Class B Common Stock, $1 par; authorized 33,000,000 shares; issued and outstanding 7,078,410 shares at September 28, 2023 and 7,110,875 shares at December 29, 2022 | 7,078 | | | 7,111 | |
Capital in excess of par | 159,304 | | | 153,794 | |
Retained earnings | 285,215 | | | 274,254 | |
Accumulated other comprehensive loss | (1,809) | | | (1,694) | |
| 474,480 | | | 457,963 | |
Less cost of Common Stock in treasury (74,392 shares at September 28, 2023 and 78,882 shares at December 29, 2022) | (1,582) | | | (1,866) | |
Total shareholders’ equity attributable to The Marcus Corporation | 472,898 | | | 456,097 | |
Noncontrolling interest | — | | | 824 | |
Total equity | 472,898 | | | 456,921 | |
| | | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,053,933 | | | $ | 1,064,598 | |
See accompanying condensed notes to consolidated financial statements.
THE MARCUS CORPORATION
Consolidated Statements of Earnings (Loss)
(in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| 13 Weeks Ended | | 39 Weeks Ended |
| September 28, 2023 | | September 29, 2022 | | September 28, 2023 | | September 29, 2022 |
Revenues: | | | | | | | |
Theatre admissions | $ | 63,652 | | | $ | 49,424 | | | $ | 180,274 | | | $ | 150,928 | |
Rooms | 36,456 | | | 36,924 | | | 82,959 | | | 83,219 | |
Theatre concessions | 54,551 | | | 44,715 | | | 156,633 | | | 138,326 | |
Food and beverage | 20,214 | | | 21,444 | | | 53,980 | | | 54,969 | |
Other revenues | 23,908 | | | 22,174 | | | 65,024 | | | 62,173 | |
| 198,781 | | | 174,681 | | | 538,870 | | | 489,615 | |
Cost reimbursements | 9,985 | | | 8,969 | | | 29,179 | | | 24,832 | |
Total revenues | 208,766 | | | 183,650 | | | 568,049 | | | 514,447 | |
| | | | | | | |
Costs and expenses: | | | | | | | |
Theatre operations | 62,742 | | | 54,756 | | | 180,716 | | | 160,921 | |
Rooms | 11,594 | | | 11,856 | | | 31,232 | | | 30,530 | |
Theatre concessions | 20,738 | | | 17,868 | | | 59,069 | | | 56,054 | |
Food and beverage | 15,266 | | | 16,150 | | | 43,285 | | | 43,325 | |
Advertising and marketing | 6,025 | | | 6,544 | | | 16,703 | | | 17,003 | |
Administrative | 19,854 | | | 19,995 | | | 59,171 | | | 56,703 | |
Depreciation and amortization | 19,158 | | | 16,452 | | | 51,028 | | | 50,435 | |
Rent | 6,592 | | | 6,672 | | | 19,679 | | | 19,500 | |
Property taxes | 4,663 | | | 4,911 | | | 13,952 | | | 14,636 | |
Other operating expenses | 10,532 | | | 10,528 | | | 30,596 | | | 29,463 | |
| | | | | | | |
Impairment charges | 684 | | | — | | | 684 | | | — | |
Reimbursed costs | 9,985 | | | 8,969 | | | 29,179 | | | 24,832 | |
Total costs and expenses | 187,833 | | | 174,701 | | | 535,294 | | | 503,402 | |
| | | | | | | |
Operating income | 20,933 | | | 8,949 | | | 32,755 | | | 11,045 | |
| | | | | | | |
Other income (expense): | | | | | | | |
Investment income (loss) | 445 | | | (35) | | | 1,064 | | | (762) | |
Interest expense | (2,869) | | | (3,688) | | | (8,970) | | | (11,843) | |
Other income (expense) | (477) | | | (472) | | | (1,355) | | | (1,278) | |
Equity earnings (losses) from unconsolidated joint ventures | 75 | | | 30 | | | (127) | | | (104) | |
| (2,826) | | | (4,165) | | | (9,388) | | | (13,987) | |
| | | | | | | |
Earnings (loss) before income taxes | 18,107 | | | 4,784 | | | 23,367 | | | (2,942) | |
Income tax expense (benefit) | 5,873 | | | 1,495 | | | 7,133 | | | (289) | |
Net earnings (loss) | $ | 12,234 | | | $ | 3,289 | | | $ | 16,234 | | | $ | (2,653) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net earnings (loss) per share - basic: | | | | | | | |
Common Stock | $ | 0.39 | | | $ | 0.11 | | | $ | 0.52 | | | $ | (0.09) | |
Class B Common Stock | $ | 0.36 | | | $ | 0.10 | | | $ | 0.48 | | | $ | (0.08) | |
| | | | | | | |
Net earnings (loss) per share - diluted: | | | | | | | |
Common Stock | $ | 0.32 | | | $ | 0.10 | | | $ | 0.46 | | | $ | (0.09) | |
Class B Common Stock | $ | 0.31 | | | $ | 0.10 | | | $ | 0.46 | | | $ | (0.08) | |
See accompanying condensed notes to consolidated financial statements.
THE MARCUS CORPORATION
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| 13 Weeks Ended | | 39 Weeks Ended |
| September 28, 2023 | | September 29, 2022 | | September 28, 2023 | | September 29, 2022 |
| | | | | | | |
Net earnings (loss) | $ | 12,234 | | | $ | 3,289 | | | $ | 16,234 | | | $ | (2,653) | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Amortization of the net actuarial loss and prior service credit related to the pension, net of tax effect (benefit) of $(4), $68, $(13) and $202, respectively | (12) | | | 190 | | | (35) | | | 570 | |
Fair market value adjustment of interest rate swap, net of tax effect (benefit) of $0, $17, $(8) and $133, respectively | — | | | 48 | | | (22) | | | 377 | |
Reclassification adjustment on interest rate swap included in interest expense, net of tax effect (benefit) of $0, $9, $(20) and $81, respectively | — | | | 22 | | | (58) | | | 228 | |
Other comprehensive income (loss) | (12) | | | 260 | | | (115) | | | 1,175 | |
Comprehensive income (loss) | $ | 12,222 | | | $ | 3,549 | | | $ | 16,119 | | | $ | (1,478) | |
| | | | | | | |
| | | | | | | |
See accompanying condensed notes to consolidated financial statements.
THE MARCUS CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
| | | | | | | | | | | |
| 39 Weeks Ended |
| September 28, 2023 | | September 29, 2022 |
| | | |
OPERATING ACTIVITIES: | | | |
Net income (loss) | $ | 16,234 | | | $ | (2,653) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | |
Losses on investments in joint ventures | 127 | | | 104 | |
Distribution from joint venture | 200 | | | — | |
(Gain) loss on disposition of property, equipment and other assets | 1,019 | | | (267) | |
Impairment charges | 684 | | | — | |
Depreciation and amortization | 51,028 | | | 50,435 | |
Amortization of debt issuance costs | 1,109 | | | 1,242 | |
Share-based compensation | 5,000 | | | 7,036 | |
Deferred income taxes | 6,586 | | | (2) | |
Other long-term obligations | 904 | | | 791 | |
Contribution of the Company’s stock to savings and profit-sharing plan | 1,259 | | | 956 | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | 59 | | | 2,775 | |
Government grants receivable | — | | | 4,335 | |
Other assets | (3,043) | | | (3,341) | |
Operating leases | (663) | | | (1,596) | |
Accounts payable | (4,389) | | | (11,641) | |
Income taxes | (241) | | | 22,653 | |
Taxes other than income taxes | 1,061 | | | (1,222) | |
Accrued compensation | (6,195) | | | (4,719) | |
Other accrued liabilities | (2,097) | | | (4,524) | |
Total adjustments | 52,408 | | | 63,015 | |
Net cash provided by operating activities | 68,642 | | | 60,362 | |
| | | |
INVESTING ACTIVITIES: | | | |
Capital expenditures | (25,836) | | | (27,483) | |
Proceeds from disposals of property, equipment and other assets | 67 | | | 4,850 | |
| | | |
Proceeds from sale of trading securities | 17 | | | — | |
Purchase of trading securities | (839) | | | — | |
Other investing activities | (291) | | | (230) | |
Net cash used in investing activities | (26,882) | | | (22,863) | |
| | | |
FINANCING ACTIVITIES: | | | |
Debt transactions: | | | |
Proceeds from borrowings on revolving credit facility | 38,000 | | | 62,000 | |
Repayment of borrowings on revolving credit facility | (38,000) | | | (43,000) | |
| | | |
Repayments on short-term borrowings | — | | | (47,499) | |
Principal payments on long-term debt | (11,097) | | | (11,275) | |
Repayment of borrowing on insurance policy | (6,700) | | | — | |
Debt issuance costs | (82) | | | (37) | |
Principal payments on finance lease obligations | (1,904) | | | (2,047) | |
Equity transactions: | | | |
Treasury stock transactions, except for stock options | (526) | | | (1,486) | |
Exercise of stock options | 222 | | | 126 | |
Dividends paid | (5,273) | | | (1,540) | |
Distributions to noncontrolling interest | (824) | | | — | |
Net cash used in financing activities | (26,184) | | | (44,758) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 15,576 | | | (7,259) | |
Cash, cash equivalents and restricted cash at beginning of period | 24,506 | | | 24,054 | |
Cash, cash equivalents and restricted cash at end of period | $ | 40,082 | | | $ | 16,795 | |
| | | |
Supplemental Information: | | | |
Interest paid, net of amounts capitalized | $ | 9,542 | | | $ | 12,391 | |
Income taxes refunded (paid), including interest earned | (788) | | | 22,940 | |
Change in accounts payable for additions to property, equipment and other assets | 1,550 | | | 469 | |
See accompanying condensed notes to consolidated financial statements.
THE MARCUS CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 13 AND 39 WEEKS ENDED SEPTEMBER 28, 2023
(in thousands, except share and per share data)
1. General
Basis of Presentation - The unaudited consolidated financial statements for the 13 and 39 weeks ended September 28, 2023 and September 29, 2022 have been prepared by the Company. In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary to present fairly the unaudited interim financial information at September 28, 2023, and for all periods presented, have been made. The results of operations during the interim periods are not necessarily indicative of the results of operations for the entire year or other interim periods. However, the unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2022.
Accounting Policies - Refer to the Company’s audited consolidated financial statements (including footnotes) for the fiscal year ended December 29, 2022, contained in the Company’s Annual Report on Form 10-K for such year, for a description of the Company’s accounting policies.
Noncontrolling Interest - The Company has an ownership interest greater than 50% in one joint venture that is considered a Variable Interest Entity (VIE) that is included in the accounts of the Company. The Company is the primary beneficiary of the VIE and the Company’s interest is considered a majority voting interest. The primary asset of this VIE, The Skirvin Hilton, was sold on December 16, 2022. The equity interest of outside owners in consolidated entities is recorded as noncontrolling interest in the consolidated balance sheets.
Depreciation and Amortization - Depreciation and amortization of property and equipment are provided using the straight-line method over the shorter of the estimated useful lives of the assets or any related lease terms. Depreciation expense totaled $19,150 and $51,004 for the 13 and 39 weeks ended September 28, 2023, respectively, and $16,444 and $50,411 for the 13 and 39 weeks ended September 29, 2022, respectively.
Assets Held for Sale – Long-lived assets that are expected to be sold within the next 12 months and meet the other relevant held-for-sale criteria are classified as assets held for sale and included within current assets on the consolidated balance sheet. Assets held for sale are measured at the lower of their carrying value or their fair value less costs to sell the asset. As of September 28, 2023, assets held for sale consists of excess land and one closed theatre.
Long-Lived Assets – The Company periodically considers whether indicators of impairment of long-lived assets held for use are present. This includes quantitative and qualitative factors, including evaluating the historical actual operating performance of the long-lived assets and assessing the potential impact of recent events and transactions impacting the long-lived assets. If such indicators are present, the Company determines if the long-lived assets are recoverable by assessing whether the sum of the estimated undiscounted future cash flows attributable to such assets is less than their carrying amounts. If the long-lived assets are not recoverable, the Company recognizes any impairment losses based on the excess of the carrying amount of the assets over their fair value.
During the 13 weeks ended September 28, 2023, the Company determined that indicators of impairment were present at one theatre asset group. As such, the Company evaluated the fair value of these assets, consisting primarily of land, building and furniture, fixtures and equipment, and determined that the fair value, measured using Level 3 pricing inputs (using estimated discounted cash flows over the life of the primary asset, including estimated sales proceeds) was less than their carrying values and recorded a $684 impairment loss, reducing certain property and equipment assets. The remaining net book value of the impaired assets as of the date of the asset write-down (September 28, 2023) was $3,040. There were no indicators of impairment identified during the 39 weeks ended September 29, 2022.
Goodwill – The Company reviews goodwill for impairment annually or more frequently if certain indicators arise. The Company performs its annual impairment test on the first day of the fiscal fourth quarter. There were no indicators of impairment identified during the 39 weeks ended September 28, 2023 or September 29, 2022.
Earnings (Loss) Per Share - Net earnings (loss) per share (EPS) of Common Stock and Class B Common Stock is computed using the two class method. Basic net earnings (loss) per share is computed by dividing net earnings (loss) by the
weighted-average number of common shares outstanding. Diluted net earnings (loss) per share is computed by dividing net earnings (loss) by the weighted-average number of common shares outstanding, adjusted for the effect of dilutive stock options and convertible debt instruments using the if-converted method. Convertible Class B Common Stock and convertible debt instruments are reflected on an if-converted basis when dilutive to Common Stock. The computation of the diluted net earnings (loss) per share of Common Stock assumes the conversion of Class B Common Stock in periods that have net earnings since it would be dilutive to Common Stock earnings per share, while the diluted net earnings (loss) per share of Class B Common Stock does not assume the conversion of those shares.
Holders of Common Stock are entitled to cash dividends per share equal to 110% of all dividends declared and paid on each share of Class B Common Stock. As such, the undistributed earnings (losses) for each period are allocated based on the proportionate share of entitled cash dividends.
The following table illustrates the computation of Common Stock basic and diluted net earnings (loss) per share and provides a reconciliation of the number of weighted-average basic and diluted shares outstanding:
| | | | | | | | | | | | | | | | | | | | | | | |
| 13 Weeks Ended | | 39 Weeks Ended |
| September 28, 2023 | | September 29, 2022 | | September 28, 2023 | | September 29, 2022 |
| |
Numerator: | | | | | | | |
Net earnings (loss) | $ | 12,234 | | | $ | 3,289 | | | $ | 16,234 | | | $ | (2,653) | |
Denominator (in thousands): | | | | | | | |
Denominator for basic EPS | 31,691 | | | 31,506 | | | 31,645 | | | 31,481 | |
Effect of dilutive employee stock options | 41 | | | 84 | | | 48 | | | — | |
Effect of convertible notes | 9,242 | | | 9,112 | | | 9,242 | | | — | |
Denominator for diluted EPS | 40,974 | | | 40,702 | | | 40,935 | | | 31,481 | |
Net earnings (loss) per share - basic: | | | | | | | |
Common Stock | $ | 0.39 | | | $ | 0.11 | | | $ | 0.52 | | | $ | (0.09) | |
Class B Common Stock | $ | 0.36 | | | $ | 0.10 | | | $ | 0.48 | | | $ | (0.08) | |
Net earnings (loss) per share - diluted: | | | | | | | |
Common Stock | $ | 0.32 | | | $ | 0.10 | | | $ | 0.46 | | | $ | (0.09) | |
Class B Common Stock | $ | 0.31 | | | $ | 0.10 | | | $ | 0.46 | | | $ | (0.08) | |
For the periods when the Company reports a net loss, common stock equivalents are excluded from the computation of diluted loss per share as their inclusion would have an antidilutive effect. During the 39 weeks ended September 29, 2022, approximately 76,714 common stock equivalents were excluded from the computation of diluted loss per share due to the Company’s net loss. During the 39 weeks ended September 29, 2022, 9,111,846 shares related to the convertible notes were excluded from the computation of diluted loss per share as the effect would have been anti-dilutive.
Shareholders’ Equity - Activity impacting total shareholders’ equity attributable to The Marcus Corporation and noncontrolling interest for the 13 and 39 weeks ended September 28, 2023 and September 29, 2022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Class B Common Stock | | Capital in Excess of Par | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Treasury Stock | | Shareholders’ Equity Attributable to The Marcus Corporation | | Non- controlling Interest | | Total Equity |
BALANCES AT DECEMBER 29, 2022 | $ | 24,498 | | | $ | 7,111 | | | $ | 153,794 | | | $ | 274,254 | | | $ | (1,694) | | | $ | (1,866) | | | $ | 456,097 | | | $ | 824 | | | $ | 456,921 | |
Cash dividends: | | | | | | | | | | | | | | | | | |
$0.045 per share Class B Common Stock | — | | | — | | | — | | | (319) | | | — | | | — | | | (319) | | | — | | | (319) | |
$0.05 per share Common Stock | — | | | — | | | — | | | (1,229) | | | — | | | — | | | (1,229) | | | — | | | (1,229) | |
Exercise of stock options | — | | | — | | | (1) | | | — | | | — | | | 3 | | | 2 | | | — | | | 2 | |
Purchase of treasury stock | — | | | — | | | — | | | — | | | — | | | (313) | | | (313) | | | — | | | (313) | |
Savings and profit-sharing contribution | 79 | | | — | | | 1,180 | | | — | | | — | | | — | | | 1,259 | | | — | | | 1,259 | |
Reissuance of treasury stock | — | | | — | | | (3) | | | — | | | — | | | 24 | | | 21 | | | — | | | 21 | |
Issuance of non-vested stock | 82 | | | — | | | (143) | | | — | | | — | | | 61 | | | — | | | — | | | — | |
Shared-based compensation | — | | | — | | | 2,172 | | | — | | | — | | | — | | | 2,172 | | | — | | | 2,172 | |
Other | — | | | — | | | 1 | | | (1) | | | — | | | — | | | — | | | — | | | — | |
Conversions of Class B Common Stock | 33 | | | (33) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Distribution to noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (550) | | | (550) | |
Comprehensive loss | — | | | — | | | — | | | (9,466) | | | (91) | | | — | | | (9,557) | | | — | | | (9,557) | |
BALANCES AT MARCH 30, 2023 | $ | 24,692 | | | $ | 7,078 | | | $ | 157,000 | | | $ | 263,239 | | | $ | (1,785) | | | $ | (2,091) | | | $ | 448,133 | | | $ | 274 | | | $ | 448,407 | |
Cash dividends: | | | | | | | | | | | | | | | | | |
$0.045 per share Class B Common Stock | — | | | — | | | — | | | (319) | | | — | | | — | | | (319) | | | — | | | (319) | |
$0.05 per share Common Stock | — | | | — | | | — | | | (1,230) | | | — | | | — | | | (1,230) | | | — | | | (1,230) | |
Exercise of stock options | — | | | — | | | (25) | | | — | | | — | | | 121 | | | 96 | | | — | | | 96 | |
Purchase of treasury stock | — | | | — | | | — | | | — | | | — | | | (226) | | | (226) | | | — | | | (226) | |
Reissuance of treasury stock | — | | | — | | | (204) | | | — | | | — | | | 223 | | | 19 | | | — | | | 19 | |
Issuance of non-vested stock | — | | | — | | | (55) | | | — | | | — | | | 55 | | | — | | | — | | | — | |
Shared-based compensation | — | | | — | | | 1,515 | | | — | | | — | | | — | | | 1,515 | | | — | | | 1,515 | |
Other | — | | | — | | | — | | | 1 | | | — | | | (1) | | | — | | | — | | | — | |
Distribution to noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (274) | | | (274) | |
Comprehensive income (loss) | — | | | — | | | — | | | 13,466 | | | (12) | | | — | | | 13,454 | | | — | | | 13,454 | |
BALANCES AT JUNE 29, 2023 | $ | 24,692 | | | $ | 7,078 | | | $ | 158,231 | | | $ | 275,157 | | | $ | (1,797) | | | $ | (1,919) | | | $ | 461,442 | | | $ | — | | | $ | 461,442 | |
Cash dividends: | | | | | | | | | | | | | | | | | |
$0.064 per share Class B Common Stock | — | | | — | | | — | | | (453) | | | — | | | — | | | (453) | | | — | | | (453) | |
$0.07 per share Common Stock | — | | | — | | | — | | | (1,723) | | | — | | | — | | | (1,723) | | | — | | | (1,723) | |
Exercise of stock options | — | | | — | | | (184) | | | — | | | — | | | 1,171 | | | 987 | | | — | | | 987 | |
Purchase of treasury stock | — | | | — | | | — | | | — | | | — | | | (914) | | | (914) | | | — | | | (914) | |
Reissuance of treasury stock | — | | | — | | | (3) | | | — | | | — | | | 27 | | | 24 | | | — | | | 24 | |
Issuance of non-vested stock | — | | | — | | | (53) | | | — | | | — | | | 53 | | | — | | | — | | | — | |
Shared-based compensation | — | | | — | | | 1,313 | | | — | | | — | | | — | | | 1,313 | | | — | | | 1,313 | |
Comprehensive income | — | | | — | | | — | | | 12,234 | | | (12) | | | — | | | 12,222 | | | — | | | 12,222 | |
BALANCES AT SEPTEMBER 28, 2023 | $ | 24,692 | | | $ | 7,078 | | | $ | 159,304 | | | $ | 285,215 | | | $ | (1,809) | | | $ | (1,582) | | | $ | 472,898 | | | $ | — | | | $ | 472,898 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Class B Common Stock | | Capital in Excess of Par | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Treasury Stock | | Shareholders’ Equity Attributable to The Marcus Corporation | | Non- controlling Interest | | Total Equity |
BALANCES AT DECEMBER 30, 2021 | $ | 24,345 | | | $ | 7,130 | | | $ | 145,656 | | | $ | 289,306 | | | $ | (11,444) | | | $ | (1,379) | | | $ | 453,614 | | | $ | — | | | $ | 453,614 | |
Exercise of stock options | — | | | — | | | (5) | | | — | | | — | | | 31 | | | 26 | | | — | | | 26 | |
Purchase of treasury stock | — | | | — | | | — | | | — | | | — | | | (1,373) | | | (1,373) | | | — | | | (1,373) | |
Savings and profit-sharing contribution | 56 | | | — | | | 900 | | | — | | | — | | | — | | | 956 | | | — | | | 956 | |
Reissuance of treasury stock | — | | | — | | | 1 | | | — | | | — | | | 8 | | | 9 | | | — | | | 9 | |
Issuance of non-vested stock | 78 | | | — | | | (236) | | | — | | | — | | | 158 | | | — | | | — | | | — | |
Shared-based compensation | — | | | — | | | 2,917 | | | — | | | — | | | — | | | 2,917 | | | — | | | 2,917 | |
Other | — | | | — | | | 1 | | | (1) | | | — | | | — | | | — | | | — | | | — | |
Conversions of Class B Common Stock | 19 | | | (19) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Comprehensive income (loss) | — | | | — | | | — | | | (14,902) | | | 531 | | | — | | | (14,371) | | | — | | | (14,371) | |
BALANCES AT MARCH 31, 2022 | $ | 24,498 | | | $ | 7,111 | | | $ | 149,234 | | | $ | 274,403 | | | $ | (10,913) | | | $ | (2,555) | | | $ | 441,778 | | | $ | — | | | $ | 441,778 | |
Exercise of stock options | — | | | — | | | (16) | | | — | | | — | | | 69 | | | 53 | | | — | | | 53 | |
Purchase of treasury stock | — | | | — | | | — | | | — | | | — | | | (104) | | | (104) | | | — | | | (104) | |
Reissuance of treasury stock | — | | | — | | | (2) | | | — | | | — | | | 9 | | | 7 | | | — | | | 7 | |
Issuance of non-vested stock | — | | | — | | | (305) | | | — | | | — | | | 305 | | | — | | | — | | | — | |
Shared-based compensation | — | | | — | | | 1,655 | | | — | | | — | | | — | | | 1,655 | | | — | | | 1,655 | |
Other | — | | | — | | | (1) | | | 1 | | | — | | | — | | | — | | | — | | | — | |
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Comprehensive income | — | | | — | | | — | | | 8,960 | | | 384 | | | — | | | 9,344 | | | — | | | 9,344 | |
BALANCES AT JUNE 30, 2022 | $ | 24,498 | | | $ | 7,111 | | | $ | 150,565 | | | $ | 283,364 | | | $ | (10,529) | | | $ | (2,276) | | | $ | 452,733 | | | $ | — | | | $ | 452,733 | |
Cash dividends: | | | | | | | | | | | | | | | | | |
$0.045 per share Class B Common Stock | — | | | — | | | — | | | (320) | | | — | | | — | | | (320) | | | — | | | (320) | |
$0.05 per share Common Stock | — | | | — | | | — | | | (1,220) | | | — | | | — | | | (1,220) | | | — | | | (1,220) | |
Exercise of stock options | — | | | — | | | (175) | | | — | | | — | | | 988 | | | 813 | | | — | | | 813 | |
Purchase of treasury stock | — | | | — | | | — | | | — | | | — | | | (809) | | | (809) | | | — | | | (809) | |
Reissuance of treasury stock | — | | | — | | | (2) | | | — | | | — | | | 20 | | | 18 | | | — | | | 18 | |
Issuance of non-vested stock | — | | | — | | | (131) | | | — | | | — | | | 131 | | | — | | | — | | | — | |
Shared-based compensation | — | | | — | | | 2,464 | | | — | | | — | | | — | | | 2,464 | | | — | | | 2,464 | |
Comprehensive income | — | | | — | | | — | | | 3,289 | | | 260 | | | — | | | 3,549 | | | — | | | 3,549 | |
BALANCES AT SEPTEMBER 29, 2022 | $ | 24,498 | | | $ | 7,111 | | | $ | 152,721 | | | $ | 285,113 | | | $ | (10,269) | | | $ | (1,946) | | | $ | 457,228 | | | $ | — | | | $ | 457,228 | |
Accumulated Other Comprehensive Loss – Accumulated other comprehensive loss presented in the accompanying consolidated balance sheets consists of the following, all presented net of tax:
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| September 28, 2023 | | December 29, 2022 |
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Unrecognized gain on interest rate swap agreements | $ | — | | | $ | 80 | |
Net unrecognized actuarial loss for pension obligation | (1,809) | | | $ | (1,774) | |
| $ | (1,809) | | | $ | (1,694) | |
Fair Value Measurements - Certain financial assets and liabilities are recorded at fair value in the consolidated financial statements. Some are measured on a recurring basis while others are measured on a non-recurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. A fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in
the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.
The Company’s assets and liabilities measured at fair value are classified in one of the following categories:
Level 1 - Assets or liabilities for which fair value is based on quoted prices in active markets for identical instruments as of the reporting date. At September 28, 2023 and December 29, 2022, respectively, the Company’s $4,964 and $3,932 of debt and equity securities classified as trading were valued using Level 1 pricing inputs and were included in other current assets. At September 28, 2023 and December 29, 2022, respectively, the Company’s $27,003 and $6,000 of investments in money market funds were valued using Level 1 pricing inputs and were included in cash and cash equivalents.
Level 2 - Assets or liabilities for which fair value is based on pricing inputs that were either directly or indirectly observable as of the reporting date. At December 29, 2022, the Company’s $108 asset related to the Company’s interest rate swap contract was valued using Level 2 pricing inputs. This contract terminated on March 1, 2023.
Level 3 - Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which result in the use of management estimates. At September 28, 2023 and December 29, 2022, none of the Company’s recorded assets or liabilities that are measured on a recurring basis at fair market value were valued using Level 3 pricing inputs. Assets that are measured on a non-recurring basis are discussed above under Long-Lived Assets.
The carrying value of the Company’s financial instruments (including cash and cash equivalents, restricted cash, accounts receivable and accounts payable) approximates fair value. The fair value of the Company’s $70,000 of senior notes, valued using Level 2 pricing inputs, is approximately $62,406 at September 28, 2023, determined based upon discounted cash flows using current market interest rates for financial instruments with a similar average remaining life. The fair value of the Company's $100,050 of convertible senior notes, valued using Level 2 pricing inputs, is approximately $154,936 at September 28, 2023, determined based on market rates and the closing trading price of the convertible senior notes as of September 28, 2023. The carrying amounts of the Company’s remaining long-term debt approximate their fair values, determined using current rates for similar instruments, or Level 2 pricing inputs.
Defined Benefit Plan - The components of the net periodic pension cost of the Company’s unfunded nonqualified, defined-benefit plan are as follows:
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| 13 Weeks Ended | | 39 Weeks Ended |
| September 28, 2023 | | September 29, 2022 | | September 28, 2023 | | September 29, 2022 |
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Service cost | $ | 122 | | | $ | 263 | | | $ | 366 | | | $ | 791 | |
Interest cost | 453 | | | 335 | | | 1,358 | | | 1,005 | |
Net amortization of prior service cost and actuarial loss | (16) | | | 258 | | | (48) | | | 772 | |
Net periodic pension cost | $ | 559 | | | $ | 856 | | | $ | 1,676 | | | $ | 2,568 | |
Service cost is included in Administrative expense while all other components are recorded within Other expense outside of operating income in the consolidated statements of earnings.
Revenue Recognition – The disaggregation of revenues by business segment for the 13 and 39 weeks ended September 28, 2023 is as follows:
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| 13 Weeks Ended September 28, 2023 |
| Theatres | | Hotels/Resorts | | Corporate | | Total |
Theatre admissions | $ | 63,652 | | | $ | — | | | $ | — | | | $ | 63,652 | |
Rooms | — | | | 36,456 | | | — | | | 36,456 | |
Theatre concessions | 54,551 | | | — | | | — | | | 54,551 | |
Food and beverage | — | | | 20,214 | | | — | | | 20,214 | |
Other revenues(1) | 8,382 | | | 15,443 | | | 83 | | | 23,908 | |
Cost reimbursements | — | | | 9,985 | | | — | | | 9,985 | |
Total revenues | $ | 126,585 | | | $ | 82,098 | | | $ | 83 | | | $ | 208,766 | |
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| 39 Weeks Ended September 28, 2023 |
| Theatres | | Hotels/Resorts | | Corporate | | Total |
Theatre admissions | $ | 180,274 | | | $ | — | | | $ | — | | | $ | 180,274 | |
Rooms | — | | | 82,959 | | | — | | | $ | 82,959 | |
Theatre concessions | 156,633 | | | — | | | — | | | $ | 156,633 | |
Food and beverage | — | | | 53,980 | | | — | | | $ | 53,980 | |
Other revenues(1) | 22,904 | | | 41,857 | | | 263 | | | $ | 65,024 | |
Cost reimbursements | — | | | 29,179 | | | — | | | $ | 29,179 | |
Total revenues | $ | 359,811 | | | $ | 207,975 | | | $ | 263 | | | $ | 568,049 | |
(1)Included in other revenues is an immaterial amount related to rental income that is not considered revenue from contracts with customers.
The disaggregation of revenues by business segment for the 13 and 39 weeks ended September 29, 2022 is as follows:
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| 13 Weeks Ended September 29, 2022 |
| Theatres | | Hotels/Resorts | | Corporate | | Total |
Theatre admissions | $ | 49,424 | | | $ | — | | | $ | — | | | $ | 49,424 | |
Rooms | — | | | 36,924 | | | — | | | 36,924 | |
Theatre concessions | 44,715 | | | — | | | — | | | 44,715 | |
Food and beverage | — | | | 21,444 | | | — | | | 21,444 | |
Other revenues(1) | 7,119 | | | 14,963 | | | 92 | | | 22,174 | |
Cost reimbursements | — | | | 8,969 | | | — | | | 8,969 | |
Total revenues | $ | 101,258 | | | $ | 82,300 | | | $ | 92 | | | $ | 183,650 | |
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| 39 Weeks Ended September 29, 2022 |
| Theatres | | Hotels/Resorts | | Corporate | | Total |
Theatre admissions | $ | 150,928 | | | $ | — | | | $ | — | | | $ | 150,928 | |
Rooms | — | | | 83,219 | | | — | | | 83,219 | |
Theatre concessions | 138,326 | | | — | | | — | | | 138,326 | |
Food and beverage | — | | | 54,969 | | | — | | | 54,969 | |
Other revenues(1) | 20,932 | | | 40,938 | | | 303 | | | 62,173 | |
Cost reimbursements | — | | | 24,832 | | | — | | | 24,832 | |
Total revenues | $ | 310,186 | | | $ | 203,958 | | | $ | 303 | | | $ | 514,447 | |
(1)Included in other revenues is an immaterial amount related to rental income that is not considered revenue from contracts with customers.
The Company had deferred revenue from contracts with customers of $36,934 and $37,046 as of September 28, 2023 and December 29, 2022, respectively. The Company had no contract assets as of September 28, 2023 and December 29, 2022. During the 39 weeks ended September 28, 2023, the Company recognized revenue of $14,545 that was included in deferred revenues as of December 29, 2022. During the 39 weeks ended September 29, 2022, the Company recognized revenue of $9,448 that was included in deferred revenues as of December 30, 2021. The majority of the Company’s deferred revenue relates to non-redeemed gift cards, advanced ticket sales and the Company’s loyalty program.
As of September 28, 2023, the amount of transaction price allocated to the remaining performance obligations under the Company’s advanced ticket sales was $1,882 and is reflected in the Company’s consolidated balance sheet as part of deferred revenues, which is included in other accrued liabilities. As of September 28, 2023, the amount of transaction price allocated to the remaining performance obligations related to the amount of Theatres non-redeemed gift cards was $15,317 and is reflected in the Company’s consolidated balance sheet as part of deferred revenues. The Company recognizes revenue as the tickets and gift cards are redeemed, which is expected to occur within the next two years.
As of September 28, 2023, the amount of transaction price allocated to the remaining performance obligations related to the amount of Hotels and Resorts non-redeemed gift cards was $3,707 and is reflected in the Company’s consolidated balance sheet as part of deferred revenues. The Company recognizes revenue as the gift cards are redeemed, which is expected to occur within the next two years.
The majority of the Company’s revenue is recognized in less than one year from the original contract.
THE MARCUS CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 13 AND 39 WEEKS ENDED SEPTEMBER 28, 2023
(in thousands, except share and per share data)
2. Long-Term Debt
Long-term debt is summarized as follows:
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| September 28, 2023 | | December 29, 2022 |
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Senior notes | $ | 70,000 | | | $ | 80,000 | |
Unsecured term note due February 2025, with monthly principal and interest payments of $39, bearing interest at 5.75% | 637 | | | 954 | |
Convertible senior notes | 100,050 | | | 100,050 | |
Payroll Protection Program loans | 1,460 | | | 2,240 | |
Revolving credit agreement | — | | | — | |
Debt issuance costs | (2,055) | | | (2,807) | |
Total debt, net of debt issuance costs | 170,092 | | | 180,437 | |
Less current maturities, net of issuance costs | 10,411 | | | 10,432 | |
Long-term debt | $ | 159,681 | | | $ | 170,005 | |
Credit Agreement
On January 9, 2020, the Company replaced its then-existing credit agreement with several banks. On April 29, 2020, the Company entered into the First Amendment, on September 15, 2020, the Company entered into the Second Amendment, on July 13, 2021, the Company entered into the Third Amendment, on July 29, 2022, the Company entered into the Fourth Amendment and on February 10, 2023, the Company entered into the Fifth Amendment (the Credit Agreement, as amended by the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment and the Fifth Amendment, hereinafter referred to as the “Credit Agreement”).
The Credit Agreement provides for a revolving credit facility that matures on January 9, 2025 with an initial maximum aggregate amount of availability of $225,000. At September 28, 2023, there were borrowings of $0 outstanding on the revolving credit facility, which when borrowed, bear interest at the secured overnight financing rate (“SOFR”) plus a margin, effectively 6.41% at September 28, 2023. Availability under the line at September 28, 2023, was $220,623, after taking into consideration outstanding letters of credit that reduce revolver availability.
Effective with the Fifth Amendment on February 10, 2023, the variable rate LIBOR benchmark in the Credit Agreement was replaced with SOFR. Borrowings under the Credit Agreement now generally bear interest at a variable rate equal to: (i) SOFR plus a credit spread adjustment of 0.10%, subject to a 0% floor, plus a specified margin based upon our consolidated debt to capitalization ratio as of the most recent determination date; or (ii) the base rate (which is the highest of (a) the prime rate, (b) the greater of the federal funds rate and the overnight bank funding rate plus 0.50% or (c) the sum of 1% plus one-month SOFR plus a credit spread adjustment of 0.10%), subject to a 1% floor, plus a specified margin based upon our consolidated debt to capitalization ratio as of the most recent determination date. In addition, the Credit Agreement generally requires the Company to pay a facility fee equal to 0.125% to 0.25% of the total revolving commitment, depending on our consolidated debt to capitalization ratio, as defined in the Credit Agreement.
The Credit Agreement contains various restrictions and covenants. Among other requirements, the Credit Agreement (a) limits the amount of priority debt (as defined in the Credit Agreement) held by the Company’s restricted subsidiaries to no more than 20% of the Company’s consolidated total capitalization (as defined in the Credit Agreement), (b) limits the Company’s permissible consolidated debt to capitalization ratio to a maximum of 0.55 to 1.0, (c) requires the Company to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0 as of the end of the fiscal quarter ending March 30, 2023 and each fiscal quarter thereafter, and (d) restricts the Company’s ability to incur additional indebtedness and make voluntary prepayments on or defeasance of the Company’s 4.02% Senior Notes due August 2025, 4.32% Senior Notes due February 2027, the notes or certain other convertible securities. Beginning with the first quarter of fiscal 2023, the Company returned to compliance with prior financial covenants under the Credit Agreement that were temporarily waived
THE MARCUS CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 13 AND 39 WEEKS ENDED SEPTEMBER 28, 2023
(in thousands, except share and per share data)
(specifically, the consolidated fixed charge coverage ratio), removing any limitations on the total amount of quarterly dividends or share repurchases. During fiscal 2022, the Credit Agreement limited the total amount of quarterly dividend payments or share repurchases to no more than $1,550 per quarter.
In connection with the Credit Agreement: (i) the Company has pledged, subject to certain exceptions, security interests and liens in and on (a) substantially all of its respective personal property assets and (b) certain of its respective real property assets, in each case, to secure the Credit Agreement and related obligations; and (ii) certain of the Company’s subsidiaries have guaranteed the Company’s obligations under the Credit Agreement.
The Credit Agreement contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then, among other things, the lenders may declare any outstanding obligations under the Credit Agreement to be immediately due and payable and exercise rights and remedies against the pledged collateral.
Subsequent to the end of the third quarter of fiscal 2023, on October 16, 2023 the Company amended the Credit Agreement. See Note 6 - Subsequent Event for further discussion.
Note Purchase Agreements
At September 28, 2023 and December 29, 2022, the Company’s $70,000 of senior notes consist of two Note Purchase Agreements maturing in 2025 through 2027, require annual principal payments in varying installments and bear interest payable semi-annually at fixed rates ranging from 4.02% to 4.32%.
Subsequent to the end of the third quarter of fiscal 2023, on October 16, 2023 the Company amended the Note Purchase Agreements. See Note 6 - Subsequent Event for further discussion.
Convertible Senior Notes
On September 17, 2020, the Company entered into a purchase agreement to issue and sell $100,050 aggregate principal amount of its 5.00% Convertible Senior Notes due 2025 (the “Convertible Notes.”) The Convertible Notes were issued pursuant to an indenture (the “Indenture”), dated September 22, 2020, between the Company and U.S. Bank National Association, as trustee.
The Convertible Notes bear interest from September 22, 2020 at a rate of 5.00% per year. Interest will be payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2021. The Convertible Notes may bear additional interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the Indenture or if the Convertible Notes are not freely tradeable as required by the Indenture. The Convertible Notes will mature on September 15, 2025, unless earlier repurchased or converted. Prior to March 15, 2025, the Convertible Notes will be convertible at the option of the holders only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ending on December 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period immediately after any five consecutive trading day period, or the measurement period, in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Common Stock and the conversion rate on each such trading day; or (iii) upon the occurrence of specified corporate events. On or after March 15, 2025, the Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.
Upon conversion, the Convertible Notes may be settled, at the Company’s election, in cash, shares of Common Stock or a combination thereof. The initial conversion rate was 90.8038 shares of Common Stock per $1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately $