Marcus Earnings 2020-06-25

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 25, 2020


☐	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.


Yes	☒		No	☐

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).


Yes	☒		No	☐

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	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes	☐		No	☒

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 JULY 31, 2020 – 23,135,198

CLASS B COMMON STOCK OUTSTANDING AT JULY 31, 2020 – 7,925,254

THE MARCUS CORPORATION

INDEX


		Page
PART I – FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements:

	Consolidated Balance Sheets (June 25, 2020 and December 26, 2019)	3

	Consolidated Statements of Earnings (Loss) (13 and 26 weeks ended June 25, 2020 and June 27, 2019)	5

	Consolidated Statements of Comprehensive Income (Loss) (13 and 26 weeks ended June 25, 2020 and June 27, 2019)	6

	Consolidated Statements of Cash Flows (26 weeks ended June 25, 2020 and June 27, 2019)	7

	Condensed Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4.	Controls and Procedures	41

PART II – OTHER INFORMATION

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 4.	Mine Safety Disclosures	44

Item 6.	Exhibits	44

	Signatures	S-1

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

THE MARCUS CORPORATION

Consolidated Balance Sheets


	June 25,		December 26,
(in thousands, except share and per share data)	2020		2019

ASSETS
Current assets:
Cash and cash equivalents	$	79,596	$	20,862
Restricted cash		8,385		4,756
Accounts receivable, net of reserves of $1,272 and $762, respectively		7,312		29,465
Refundable income taxes		51,580		5,916
Other current assets		11,117		18,265
Total current assets		157,990		79,264

Property and equipment:
Land and improvements		151,223		152,434
Buildings and improvements		762,340		761,511
Leasehold improvements		165,521		164,083
Furniture, fixtures and equipment		381,385		377,404
Finance lease right-of-use assets		74,504		74,357
Construction in progress		8,725		4,043
Total property and equipment		1,543,698		1,533,832
Less accumulated depreciation and amortization		648,229		610,578
Net property and equipment		895,469		923,254

Operating lease right-of-use assets		240,790		243,855

Other assets:
Investments in joint ventures		3,138		3,595
Goodwill		75,235		75,282
Other		32,775		33,936
Total other assets		111,148		112,813

TOTAL ASSETS	$	1,405,397	$	1,359,186

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Balance Sheets


	June 25,		December 26,
(in thousands, except share and per share data)	2020		2019

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	11,585	$	49,370
Taxes other than income taxes		16,864		20,613
Accrued compensation		8,837		18,055
Other accrued liabilities		53,414		61,134
Short-term borrowings		90,218		—
Current portion of finance lease obligations		2,809		2,571
Current portion of operating lease obligations		18,971		13,335
Current maturities of long-term debt		2,312		9,910
Total current liabilities		205,010		174,988

Finance lease obligations		19,877		20,802

Operating lease obligations		235,291		232,111

Long-term debt		257,409		206,432

Deferred income taxes		57,109		48,262

Deferred compensation and other		57,721		55,133

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 23,264,259 shares at June 25, 2020 and 23,253,744 shares at December 26, 2019		23,264		23,254
Class B Common Stock, $1 par; authorized 33,000,000 shares; issued and outstanding 7,925,254 shares at June 25, 2020 and 7,935,769 shares at December 26, 2019		7,926		7,936
Capital in excess of par		147,690		145,549
Retained earnings		410,359		461,884
Accumulated other comprehensive loss		(12,995)		(12,648)
		576,244		625,975
Less cost of Common Stock in treasury (124,568 shares at June 25, 2020 and 242,853 shares at December 26, 2019)		(3,264)		(4,540)
Total shareholders' equity attributable to The Marcus Corporation		572,980		621,435
Noncontrolling interest		—		23
Total equity		572,980		621,458

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,405,397	$	1,359,186

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Earnings (Loss)


	June 25, 2020				June 27, 2019
(in thousands, except per share data)	13 Weeks		26 Weeks		13 Weeks		26 Weeks

Revenues:
Theatre admissions	$	154	$	55,549	$	83,055	$	142,024
Rooms		857		17,846		28,194		47,132
Theatre concessions		1,104		47,034		67,920		115,075
Food and beverage		586		14,200		18,615		34,398
Other revenues		3,297		22,073		22,533		43,362
		5,998		156,702		220,317		381,991
Cost reimbursements		1,935		10,691		12,183		20,548
Total revenues		7,933		167,393		232,500		402,539

Costs and expenses:
Theatre operations		8,640		62,656		76,193		132,571
Rooms		1,866		11,521		10,309		19,344
Theatre concessions		831		23,042		25,049		42,318
Food and beverage		1,151		15,616		14,902		28,511
Advertising and marketing		1,075		6,465		6,101		11,011
Administrative		11,178		28,910		18,950		36,809
Depreciation and amortization		18,845		37,878		18,273		34,258
Rent		6,328		13,282		6,878		12,281
Property taxes		6,025		12,054		5,468		10,861
Other operating expenses		3,121		11,828		10,719		21,602
Impairment charges		—		8,712		—		—
Reimbursed costs		1,935		10,691		12,183		20,548
Total costs and expenses		60,995		242,655		205,025		370,114

Operating income (loss)		(53,062)		(75,262)		27,475		32,425

Other income (expense):
Investment income		836		141		175		648
Interest expense		(3,529)		(6,045)		(3,093)		(6,152)
Other expense		(591)		(1,181)		(480)		(960)
Loss on disposition of property, equipment and other assets		(36)		(48)		(147)		(140)
Equity losses from unconsolidated joint ventures, net		(428)		(485)		(84)		(168)
		(3,748)		(7,618)		(3,629)		(6,772)

Earnings (loss) before income taxes		(56,810)		(82,880)		23,846		25,653
Income taxes (benefit)		(29,906)		(36,476)		5,609		5,622
Net earnings (loss)		(26,904)		(46,404)		18,237		20,031
Net earnings (loss) attributable to noncontrolling interests		125		(23)		171		105
Net earnings (loss) attributable to The Marcus Corporation	$	(27,029)	$	(46,381)	$	18,066	$	19,926

Net earnings (loss) per share - basic:
Common Stock	$	(0.89)	$	(1.53)	$	0.60	$	0.68
Class B Common Stock	$	(0.81)	$	(1.39)	$	0.54	$	0.59

Net earnings (loss) per share - diluted:
Common Stock	$	(0.89)	$	(1.53)	$	0.58	$	0.64
Class B Common Stock	$	(0.81)	$	(1.39)	$	0.54	$	0.59

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Comprehensive Income (Loss)


	June 25, 2020				June 27, 2019
(in thousands)	13 Weeks		26 Weeks		13 Weeks		26 Weeks

Net earnings (loss)	$	(26,904)	$	(46,404)	$	18,237	$	20,031

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 of $65, $130, $29 and $59, respectively		182		365		80		159

Fair market value adjustment of interest rate swap, net of tax benefit of $60, $348, $163 and $305, respectively		(171)		(985)		(444)		(830)

Reclassification adjustment on interest rate swap included in interest expense, net of tax effect of $65, $96, $4 and $8, respectively		189		273		11		21

Other comprehensive income (loss)		200		(347)		(353)		(650)

Comprehensive income (loss)		(26,704)		(46,751)		17,884		19,381

Comprehensive income (loss) attributable to noncontrolling interests		125		(23)		171		105

Comprehensive income (loss) attributable to The Marcus Corporation	$	(26,829)	$	(46,728)	$	17,713	$	19,276

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Cash Flows


	26 Weeks Ended
(in thousands)	June 25, 2020		June 27, 2019

OPERATING ACTIVITIES:
Net earnings (loss)	$	(46,404)	$	20,031
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
Losses on investments in joint ventures		485		168
Distributions from joint ventures		—		200
Loss on disposition of property, equipment and other assets		48		140
Impairment charges		8,712		—
Depreciation and amortization		37,878		34,258
Amortization of debt issuance costs		156		179
Share-based compensation		2,178		1,726
Deferred income taxes		9,016		(2)
Deferred compensation and other		2,327		250
Contribution of the Company’s stock to savings and profit-sharing plan		1,315		1,181
Changes in operating assets and liabilities:
Accounts receivable		22,153		(2,388)
Other assets		1,964		158
Operating leases		6,886		(308)
Accounts payable		(35,281)		5,018
Income taxes		(45,664)		5,579
Taxes other than income taxes		(3,749)		1,356
Accrued compensation		(9,218)		(2,252)
Other accrued liabilities		(7,818)		(5,564)
Total adjustments		(8,612)		39,699
Net cash provided by (used in) operating activities		(55,016)		59,730

INVESTING ACTIVITIES:
Capital expenditures		(15,885)		(30,460)
Acquisition of theatres, net of cash acquired and working capital assumed		—		(29,626)
Proceeds from disposals of property, equipment and other assets		1,477		16
Capital contribution in joint venture		(28)		—
Proceeds from sale of trading securities		5,184		—
Other investing activities		113		(5,716)
Net cash used in investing activities		(9,139)		(65,786)

FINANCING ACTIVITIES:
Debt transactions:
Proceeds from borrowings on revolving credit facility		188,000		162,000
Repayment of borrowings on revolving credit facility		(138,600)		(127,000)
Proceeds from short-term borrowings		90,800		—
Principal payments on long-term debt		(9,266)		(24,032)
Proceeds received from PPP loans expected to be repaid		3,213		—
Debt issuance costs		(1,604)		—
Principal payments on finance lease obligations		(805)		(1,207)
Equity transactions:
Treasury stock transactions, except for stock options		(131)		(316)
Exercise of stock options		56		904
Dividends paid		(5,145)		(9,646)
Distributions to noncontrolling interest		—		(95)
Net cash provided by financing activities		126,518		608

Net increase (decrease) in cash, cash equivalents and restricted cash		62,363		(5,448)
Cash, cash equivalents and restricted cash at beginning of period		25,618		21,927
Cash, cash equivalents and restricted cash at end of period	$	87,981	$	16,479

Supplemental Information:
Interest paid, net of amounts capitalized	$	4,719	$	6,032
Income taxes paid		172		44
Change in accounts payable for additions to property, equipment and other assets		(2,764)		4,761

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE 13 AND 26 WEEKS ENDED JUNE 25, 2020

1. General

Basis of Presentation - The unaudited consolidated financial statements for the 13 and 26 weeks ended June 25, 2020 and June 27, 2019 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 June 25, 2020, 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 26, 2019.

Accounting Policies - Refer to the Company’s audited consolidated financial statements (including footnotes) for the fiscal year ended December 26, 2019, contained in the Company’s Annual Report on Form 10-K for such year, for a description of the Company’s accounting policies.

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 $18,852,000 and $37,886,000 for the 13 and 26 weeks ended June 25, 2020, respectively, and $18,284,000 and $34,239,000 for the 13 and 26 weeks ended June 27, 2019, respectively.

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 first quarter of fiscal 2020, the Company determined that indicators of impairment were present. As such, the Company evaluated the value of its property and equipment and the value of its operating lease right-of-use assets and recorded an impairment charge as discussed in Note 3. During the 13 weeks ended June 25, 2020, no indicators of impairment were present.

Goodwill – The Company reviews goodwill for impairment annually or more frequently if certain indicators arise. The Company performs its annual impairment test on the last day of its fiscal year. Goodwill is tested for impairment at a reporting unit level, determined to be at an operating segment level. When reviewing goodwill for impairment, the Company considers the amount of excess fair value over the carrying value of the reporting unit, the period of time since its last quantitative test, and other factors to determine whether or not to first perform a qualitative test. When performing a qualitative test, the Company assesses numerous factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying value. Examples of qualitative factors that the Company assesses include its share price, its financial performance, market and competitive factors in its industry, and other events specific to the reporting unit. If the Company concludes that it is more likely than not that the fair value of its reporting unit is less than it carrying value, the Company performs a quantitative impairment test by comparing the carrying value of the reporting unit to the estimated fair value.

During the first quarter of fiscal 2020, the Company determined that indicators of impairment were present and performed a quantitative test. In order to determine fair value, the Company used assumptions based on information available to it as of March 26, 2020, including both market data and forecasted future cash flows. The Company then used this information to determine fair value. The Company determined that the fair value of the Company's goodwill was greater than its carrying value and thus was not impaired as of that date. There were no indicators of impairment identified during the 13 weeks ended June 25, 2020.

Trade Name Intangible Asset – The Company recorded a trade name intangible asset in conjunction with the Movie Tavern acquisition (See Note 4) that was determined to have an indefinite life. The Company reviews its trade name intangible asset for impairment at least annually or whenever events or changes in circumstances indicate the carrying value may not be fully recoverable. During the first quarter of fiscal 2020, indicators of impairment were present and the Company recorded an impairment charge of $2,200,000 (see Note 3 for further detail). There were no indicators of impairment identified during the 13 weeks ended June 25, 2020.

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 using the treasury method. Convertible Class B Common Stock is 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 and Class B Common Stock basic and diluted net earnings (loss) per share for net earnings (loss) and provides a reconciliation of the number of weighted-average basic and diluted shares outstanding:


	13 Weeks		13 Weeks		26 Weeks		26 Weeks
		Ended		Ended	Ended		Ended
	June 25, 2020		June 27, 2019		June 25, 2020		June 27, 2019

	(in thousands, except per share data)
Numerator:
Net earnings (loss) attributable to The Marcus Corporation	$	(27,029)	$	18,066	$	(46,381)	$	19,926
Denominator:
Denominator for basic EPS		31,061		30,897		31,018		30,390
Effect of dilutive employee stock options		—		504		—		558
Denominator for diluted EPS		31,061		31,401		31,018		30,948
Net earnings (loss) per share - basic:
Common Stock	$	(0.89)	$	0.60	$	(1.53)	$	0.68
Class B Common Stock	$	(0.81)	$	0.54	$	(1.39)	$	0.59
Net earnings (loss) per share - diluted:
Common Stock	$	(0.89)	$	0.58	$	(1.53)	$	0.64
Class B Common Stock	$	(0.81)	$	0.54	$	(1.39)	$	0.59

For the periods when the Company reports a net loss, the computation of diluted loss per share equals the computation of basic loss per share since common stock equivalents are dilutive due to the net loss.

Shareholders’ Equity - Activity impacting total shareholders’ equity attributable to The Marcus Corporation and noncontrolling interests for the 13 and 26 weeks ended June 25, 2020 and June 27, 2019 was as follows (in thousands, except per share data):

Price	36.95	EPS	1
Shares	31	P/E	27
MCap	1,159	P/FCF	13
Net Debt	233	EBIT	63
TEV	1,392	TEV/EBIT	22
TTM 2019-09-26, in MM, except price, ratios

10-Q	2020-06-25	Filed 2020-08-04
10-Q	2020-03-26	Filed 2020-05-12
10-K	2019-12-26	Filed 2020-02-24
10-Q	2019-09-26	Filed 2019-11-05
10-Q	2019-06-27	Filed 2019-08-06
10-Q	2019-03-28	Filed 2019-05-07
10-K	2018-12-27	Filed 2019-03-12
10-Q	2018-09-27	Filed 2018-11-06
10-Q	2018-06-28	Filed 2018-08-07
10-Q	2018-03-29	Filed 2018-05-08
10-K	2017-12-28	Filed 2018-03-13
10-Q	2017-09-28	Filed 2017-11-07
10-Q	2017-06-29	Filed 2017-08-08
10-Q	2017-03-30	Filed 2017-05-09
10-K	2016-12-29	Filed 2017-03-14
10-Q	2016-09-29	Filed 2016-11-08
10-Q	2016-06-30	Filed 2016-08-09
10-Q	2016-03-31	Filed 2016-05-10
10-Q	2015-11-26	Filed 2016-01-05
10-Q	2015-08-27	Filed 2015-10-06
10-K	2015-05-28	Filed 2015-08-11
10-Q	2015-02-26	Filed 2015-04-07
10-Q	2014-11-27	Filed 2015-01-06
10-Q	2014-08-28	Filed 2014-10-07
10-K	2014-05-29	Filed 2014-08-12
10-Q	2014-02-27	Filed 2014-04-08
10-Q	2013-11-28	Filed 2014-01-07
10-Q	2013-08-29	Filed 2013-10-08
10-K	2013-05-30	Filed 2013-08-13
10-Q	2013-02-28	Filed 2013-04-09
10-Q	2012-11-29	Filed 2013-01-08
10-Q	2012-08-30	Filed 2012-10-09
10-K	2012-05-31	Filed 2012-08-14
10-Q	2012-02-23	Filed 2012-04-03
10-Q	2011-11-24	Filed 2012-01-03
10-Q	2011-08-25	Filed 2011-10-04
10-K	2011-05-26	Filed 2011-08-09
10-Q	2011-02-24	Filed 2011-04-05
10-Q	2010-11-25	Filed 2011-01-04
10-Q	2010-08-26	Filed 2010-10-05
10-K	2010-05-27	Filed 2010-08-10
10-Q	2010-02-25	Filed 2010-04-06
10-Q	2009-11-26	Filed 2010-01-05

8-K	2020-08-04	Earnings, Exhibits
8-K	2020-05-06
8-K	2020-05-05
8-K	2020-04-29
8-K	2020-04-09
8-K	2020-02-20
8-K	2020-01-09
8-K	2019-10-24
8-K	2019-07-25
8-K	2019-05-07
8-K	2019-04-25
8-K	2019-02-21
8-K	2019-02-04
8-K	2019-02-01
8-K	2018-11-01
8-K	2018-10-25
8-K	2018-07-26
8-K	2018-05-08
8-K	2018-04-26
8-K	2018-02-22

EX-31.1	mcs-20200625xex31d1.htm
EX-31.2	mcs-20200625xex31d2.htm
EX-32	mcs-20200625xex32.htm

MCS 10Q Quarterly Report

Marcus Earnings 2020-06-25