Marcus Earnings 2020-09-24

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 September 24, 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.

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 October 30, 2020 – 23,139,038

CLASS B COMMON STOCK OUTSTANDING AT October 30, 2020 – 7,925,254

THE MARCUS CORPORATION

INDEX


		Page
PART I – FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements:

	Consolidated Balance Sheets (September 24, 2020 and December 26, 2019)	3

	Consolidated Statements of Earnings (Loss) (13 and 39 weeks ended September 24, 2020 and September 26, 2019)	5

	Consolidated Statements of Comprehensive Income (Loss) (13 and 39 weeks ended September 24, 2020 and September 26, 2019)	6

	Consolidated Statements of Cash Flows (39 weeks ended September 24, 2020 and September 26, 2019)	7

	Condensed Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48

Item 4.	Controls and Procedures	48

PART II – OTHER INFORMATION

Item 1A.	Risk Factors	49

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59

Item 4.	Mine Safety Disclosures	59

Item 6.	Exhibits	60

	Signatures	S-1

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

THE MARCUS CORPORATION

Consolidated Balance Sheets


	September 24,		December 26,
(in thousands, except share and per share data)	2020		2019

ASSETS
Current assets:
Cash and cash equivalents	$	8,244	$	20,862
Restricted cash		8,509		4,756
Accounts receivable, net of reserves of $1,034 and $762, respectively		6,907		29,465
Refundable income taxes		54,434		5,916
Assets held for sale		2,119		—
Other current assets		11,477		18,265
Total current assets		91,690		79,264

Property and equipment:
Land and improvements		149,299		152,434
Buildings and improvements		762,206		761,511
Leasehold improvements		166,628		164,083
Furniture, fixtures and equipment		381,749		377,404
Finance lease right-of-use assets		74,794		74,357
Construction in progress		6,826		4,043
Total property and equipment		1,541,502		1,533,832
Less accumulated depreciation and amortization		663,800		610,578
Net property and equipment		877,702		923,254

Operating lease right-of-use assets		236,632		243,855

Other assets:
Investments in joint ventures		2,084		3,595
Goodwill		75,211		75,282
Other		33,103		33,936
Total other assets		110,398		112,813
TOTAL ASSETS	$	1,316,422	$	1,359,186

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Balance Sheets


	September 24,		December 26,
(in thousands, except share and per share data)	2020		2019

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	15,824	$	49,370
Taxes other than income taxes		16,638		20,613
Accrued compensation		10,796		18,055
Other accrued liabilities		50,842		61,134
Short-term borrowings		89,932		—
Current portion of finance lease obligations		2,908		2,571
Current portion of operating lease obligations		20,646		13,335
Current maturities of long-term debt		12,927		9,910
Total current liabilities		220,513		174,988

Finance lease obligations		20,256		20,802

Operating lease obligations		231,552		232,111

Long-term debt		199,357		206,432

Deferred income taxes		46,838		48,262

Deferred compensation and other		58,938		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 September 24, 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 September 24, 2020 and 7,935,769 shares at December 26, 2019		7,926		7,936
Capital in excess of par		152,598		145,549
Retained earnings		370,919		461,884
Accumulated other comprehensive loss		(12,614)		(12,648)
		542,093		625,975
Less cost of Common Stock in treasury (125,652 shares at September 24, 2020 and 242,853 shares at December 26, 2019)		(3,125)		(4,540)
Total shareholders' equity attributable to The Marcus Corporation		538,968		621,435
Noncontrolling interest		—		23
Total equity		538,968		621,458

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,316,422	$	1,359,186

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Earnings (Loss)


	September 24, 2020				September 26, 2019
(in thousands, except per share data)	13 Weeks		39 Weeks		13 Weeks		39 Weeks

Revenues:
Theatre admissions	$	3,118	$	58,667	$	69,753	$	211,777
Rooms		9,772		27,618		34,185		81,317
Theatre concessions		3,243		50,277		57,051		172,126
Food and beverage		5,420		19,620		20,170		54,568
Other revenues		8,813		30,886		22,872		66,234
		30,366		187,068		204,031		586,022
Cost reimbursements		3,225		13,916		7,431		27,979
Total revenues		33,591		200,984		211,462		614,001

Costs and expenses:
Theatre operations		14,150		76,806		66,971		199,542
Rooms		4,611		16,132		10,829		30,173
Theatre concessions		2,592		25,634		21,471		63,789
Food and beverage		5,109		20,725		15,842		44,353
Advertising and marketing		1,981		8,446		6,653		17,664
Administrative		11,645		40,555		18,053		54,862
Depreciation and amortization		18,690		56,568		19,226		53,484
Rent		6,594		19,876		6,806		19,087
Property taxes		5,950		18,004		5,666		16,527
Other operating expenses		6,266		18,094		10,127		31,729
Impairment charges		765		9,477		—		—
Reimbursed costs		3,225		13,916		7,431		27,979
Total costs and expenses		81,578		324,233		189,075		559,189

Operating income (loss)		(47,987)		(123,249)		22,387		54,812

Other income (expense):
Investment income		66		207		187		835
Interest expense		(4,132)		(10,177)		(2,807)		(8,959)
Other expense		(590)		(1,771)		(481)		(1,441)
Loss on disposition of property, equipment and other assets		(251)		(299)		(129)		(269)
Equity losses from unconsolidated joint ventures, net		(1,054)		(1,539)		(84)		(252)
		(5,961)		(13,579)		(3,314)		(10,086)

Earnings (loss) before income taxes		(53,948)		(136,828)		19,073		44,726
Income taxes (benefit)		(14,508)		(50,984)		4,843		10,465
Net earnings (loss)		(39,440)		(85,844)		14,230		34,261
Net earnings (loss) attributable to noncontrolling interests		—		(23)		(59)		46
Net earnings (loss) attributable to The Marcus Corporation	$	(39,440)	$	(85,821)	$	14,289	$	34,215

Net earnings (loss) per share - basic:
Common Stock	$	(1.30)	$	(2.84)	$	0.47	$	1.18
Class B Common Stock	$	(1.18)	$	(2.57)	$	0.43	$	1.02

Net earnings (loss) per share - diluted:
Common Stock	$	(1.30)	$	(2.84)	$	0.46	$	1.10
Class B Common Stock	$	(1.18)	$	(2.57)	$	0.43	$	1.01

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Comprehensive Income (Loss)


	September 24, 2020				September 26, 2019
(in thousands)	13 Weeks		39 Weeks		13 Weeks		39 Weeks

Net earnings (loss)	$	(39,440)	$	(85,844)	$	14,230	$	34,261

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 $64, $194, $30 and $89, respectively		184		549		79		238

Fair market value adjustment of interest rate swaps, net of tax benefit of $10, $358, $35 and $340, respectively		(30)		(1,015)		(138)		(968)

Reclassification adjustment on interest rate swaps included in interest expense, net of tax effect of $81, $177, $11 and $19, respectively		227		500		32		53

Other comprehensive income (loss)		381		34		(27)		(677)

Comprehensive income (loss)		(39,059)		(85,810)		14,203		33,584

Comprehensive income (loss) attributable to noncontrolling interests		—		(23)		(59)		46

Comprehensive income (loss) attributable to The Marcus Corporation	$	(39,059)	$	(85,787)	$	14,262	$	33,538

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Cash Flows


	39 Weeks Ended
(in thousands)	September 24, 2020		September 26, 2019

OPERATING ACTIVITIES:
Net earnings (loss)	$	(85,844)	$	34,261
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
Losses on investments in joint ventures		1,539		252
Distributions from joint ventures		—		200
Loss on disposition of property, equipment and other assets		299		269
Impairment charges		9,477		—
Depreciation and amortization		56,568		53,484
Amortization of debt issuance costs and discount on convertible notes		697		232
Share-based compensation		3,286		2,594
Deferred income taxes		(2,787)		(572)
Deferred compensation and other		3,938		592
Contribution of the Company’s stock to savings and profit-sharing plan		1,315		1,181
Changes in operating assets and liabilities:
Accounts receivable		22,558		2,118
Other assets		1,604		566
Operating leases		8,519		(280)
Accounts payable		(31,852)		(7,524)
Income taxes		(48,518)		8,506
Taxes other than income taxes		(3,975)		626
Accrued compensation		(7,259)		1,671
Other accrued liabilities		(10,214)		(12,218)
Total adjustments		5,195		51,697
Net cash provided by (used in) operating activities		(80,649)		85,958

INVESTING ACTIVITIES:
Capital expenditures		(18,687)		(50,097)
Acquisition of theatres, net of cash acquired and working capital assumed		—		(30,287)
Proceeds from disposals of property, equipment and other assets		1,602		22
Capital contribution in joint venture		(28)		—
Proceeds from sale of trading securities		5,184		—
Other investing activities		220		(5,809)
Net cash used in investing activities		(11,709)		(86,171)

FINANCING ACTIVITIES:
Debt transactions:
Proceeds from borrowings on revolving credit facility		209,000		246,000
Repayment of borrowings on revolving credit facility		(280,000)		(215,000)
Proceeds from short-term borrowings		90,800		—
Proceeds from convertible senior notes		100,050		—
Principal payments on long-term debt		(9,356)		(24,203)
Proceeds received from PPP loans expected to be repaid		3,147		—
Debt issuance costs		(6,543)		—
Principal payments on finance lease obligations		(1,389)		(1,908)
Equity transactions:
Treasury stock transactions, except for stock options		(542)		(747)
Exercise of stock options		379		1,344
Capped call transactions		(16,908)		—
Dividends paid		(5,145)		(14,478)
Distributions to noncontrolling interest		—		(185)
Net cash provided by (used in) financing activities		83,493		(9,177)

Net decrease in cash, cash equivalents and restricted cash		(8,865)		(9,390)
Cash, cash equivalents and restricted cash at beginning of period		25,618		21,927
Cash, cash equivalents and restricted cash at end of period	$	16,753		12,537

Supplemental Information:
Interest paid, net of amounts capitalized	$	9,313		9,540
Income taxes paid		322		2,530
Change in accounts payable for additions to property, equipment and other assets		(2,640)		7,406

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 24, 2020

1. General

Basis of Presentation - The unaudited consolidated financial statements for the 13 and 39 weeks ended September 24, 2020 and September 26, 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 September 24, 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 $18,698,000 and $56,584,000 for the 13 and 39 weeks ended September 24, 2020, respectively, and $19,194,000 and $53,433,000 for the 13 and 39 weeks ended September 26, 2019, 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 24, 2020, assets held for sale consists primarily of excess land.

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 and the third 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 impairment charges as discussed in Note 3.

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 and the third quarter of fiscal 2020, the Company determined that indicators of impairment were present and performed quantitative tests as of the quarter-end dates. In order to determine fair value, the Company used assumptions based on information available to it as of March 26, 2020 (the last day of the Company’s first quarter) and September 24, 2020 (the last day of the Company’s third quarter), 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 March 26, 2020 or September 24, 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 and the third quarter of fiscal 2020, the Company determined that indicators of impairment were present. As such, the Company evaluated the value of its trade name intangible asset and recorded an impairment charge during the first quarter of fiscal 2020 as discussed in Note 3.

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 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		39 Weeks		39 Weeks
	Ended		Ended		Ended		Ended
	September 24, 2020		September 26, 2019		September 24, 2020		September 26, 2019

	(in thousands, except per share data)
Numerator:
Net earnings (loss) attributable to The Marcus Corporation	$	(39,440)	$	14,289	$	(85,821)	$	34,215
Denominator:
Denominator for basic EPS		31,064		30,918		31,033		30,566
Effect of dilutive employee stock options		—

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	2020-09-24	Filed 2020-11-03
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	2020-11-03
8-K	2020-09-17
8-K	2020-09-17
8-K	2020-09-11
8-K	2020-08-04
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-3.1	mcs-20200924xex3d1.htm
EX-10.2	mcs-20200924xex10d2.htm
EX-31.1	mcs-20200924xex31d1.htm
EX-31.2	mcs-20200924xex31d2.htm
EX-32	mcs-20200924xex32.htm

MCS 10Q Quarterly Report

Marcus Earnings 2020-09-24