INVESTOR PRESENTATION SEPTEMBER 2020 The Marcus Corporation Forward Looking Statement Certain matters discussed in this presentation are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements include words such as we "believe," "anticipate," "expect" or words of similar import. Similarly, statements that ...

The Marcus Corporation (NYSE:MCS) Q2 2020 Earnings Conference Call August 4, 2020 11:00 AM ET Company Participants Greg Marcus - President and CEO Doug Neis - EVP, CFO and Treasurer Conference Call Participants Mike Hickey - The Benchmark Company Eric Wold - B. Riley Jim Goss - Barrington Research Operator Good morning, everyone, and welcome to the Marcus Corporation Second Quarter Earnings Conference Call. My name is Crystal, and I will be your operator for today. At this time, all participants are in list ...

THE MARCUS CORPORATION 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 (Exact name of registrant as specified in its charter) Wisconsin 39-1139844 (State ...

[PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements for the 13 weeks ended March 26, 2020, and March 28, 2019, including balance sheets, statements of earnings (loss), comprehensive income (loss), and cash flows, along with condensed notes detailing accounting policies, the impact of COVID-19, impairment charges, acquisitions, debt, leases, and segment information [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show a significant increase in cash and cash equivalents and long-term debt from December 26, 2019, to March 26, 2020, reflecting the company's efforts to bolster liquidity in response to the COVID-19 pandemic. Total assets and liabilities also increased, while shareholders' equity slightly decreased Consolidated Balance Sheet Highlights (in thousands) | Metric | March 26, 2020 | December 26, 2019 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $126,472 | $20,862 | | Total current assets | $173,327 | $79,264 | | Total assets | $1,441,386 | $1,359,186 | | Total current liabilities | $138,428 | $174,988 | | Long-term debt | $345,206 | $206,432 | | Total equity | $598,388 | $621,458 | [Consolidated Statements of Earnings (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Earnings%20(Loss)) For the 13 weeks ended March 26, 2020, the company reported a substantial net loss, a significant reversal from net earnings in the prior year. This decline was driven by decreased revenues across all segments and the recognition of impairment charges, largely attributable to the impact of the COVID-19 pandemic Consolidated Statements of Earnings (Loss) Highlights (13 Weeks Ended, in thousands except per share data) | Metric | March 26, 2020 | March 28, 2019 | Change ($k) | Change (%) | | :------------------------------------------ | :------------- | :------------- | :---------- | :--------- | | Total revenues | $159,460 | $170,039 | $(10,579) | (6.2)% | | Operating income (loss) | $(22,200) | $4,950 | $(27,150) | (548.5)% | | Impairment charges | $8,712 | — | $8,712 | N/A | | Net earnings (loss) attributable to The Marcus Corporation | $(19,352) | $1,860 | $(21,212) | (1140.4)% | | Net earnings (loss) per share - diluted (Common Stock) | $(0.64) | $0.06 | $(0.70) | (1166.7)% | [Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The company reported a comprehensive loss of $(20,047)k for the 13 weeks ended March 26, 2020, a significant deterioration from the comprehensive income of $1,497k in the prior year, primarily due to the net loss and an increased other comprehensive loss from fair market value adjustments of interest rate swaps Consolidated Statements of Comprehensive Income (Loss) Highlights (13 Weeks Ended, in thousands) | Metric | March 26, 2020 | March 28, 2019 | | :------------------------------------------------ | :------------- | :------------- | | Net earnings (loss) | $(19,500) | $1,794 | | Other comprehensive loss | $(547) | $(297) | | Comprehensive income (loss) | $(20,047) | $1,497 | | Comprehensive income (loss) attributable to The Marcus Corporation | $(19,899) | $1,563 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly increased to $(16,618)k in Q1 2020, compared to cash provided in Q1 2019, primarily due to the net loss and unfavorable changes in working capital. Investing activities saw a reduced cash outflow, while financing activities provided a substantial cash inflow due to increased borrowings on the revolving credit facility to enhance liquidity Consolidated Statements of Cash Flows Highlights (13 Weeks Ended, in thousands) | Metric | March 26, 2020 | March 28, 2019 | | :------------------------------------------ | :------------- | :------------- | | Net cash provided by (used in) operating activities | $(16,618) | $8,020 | | Net cash used in investing activities | $(10,181) | $(46,086) | | Net cash provided by financing activities | $132,448 | $29,393 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $105,649 | $(8,673) | | Cash, cash equivalents and restricted cash at end of period | $131,267 | $13,254 | [Condensed Notes to Consolidated Financial Statements](index=10&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) The condensed notes provide detailed explanations of the company's financial reporting, including accounting policies, the significant impact of the COVID-19 pandemic on operations and liquidity, the recognition of impairment charges, details of the Movie Tavern acquisition, changes in long-term debt and related covenants, lease accounting, income tax implications, and segment-specific financial performance [1. General](index=10&type=section&id=1.%20General) This note outlines the basis of presentation for the interim financial statements, key accounting policies, and details on asset impairment evaluations (long-lived assets, goodwill, trade name intangible assets). It also covers earnings per share computation, shareholders' equity changes, fair value measurements, defined benefit plan costs, revenue recognition, and recent accounting pronouncements - Depreciation expense increased to **$19,034k** for the 13 weeks ended March 26, 2020, from **$15,955k** in the prior year[26](index=26&type=chunk) - Indicators of impairment were present for long-lived assets and the trade name intangible asset in Q1 2020, leading to impairment charges discussed in Note 3[27](index=27&type=chunk)[30](index=30&type=chunk) - Goodwill was tested for impairment in Q1 2020, but no impairment was identified as the fair value of the reporting unit exceeded its carrying value[29](index=29&type=chunk) Accumulated Other Comprehensive Loss (in thousands) | Component | March 26, 2020 | December 26, 2019 | | :------------------------------------ | :------------- | :---------------- | | Unrecognized loss on interest rate swap agreements | $(1,612) | $(882) | | Net unrecognized actuarial loss for pension obligation | $(11,583) | $(11,766) | | **Total** | **$(13,195)** | **$(12,648)** | - Deferred revenue from contracts with customers decreased to **$37,108k** as of March 26, 2020, from **$43,200k** as of December 26, 2019, primarily due to gift card and advanced ticket redemptions[45](index=45&type=chunk) [2. Impact of COVID-19 Pandemic](index=15&type=section&id=2.%20Impact%20of%20COVID-19%20Pandemic) The COVID-19 pandemic caused significant disruptions, leading to the temporary closure of all theatres (March 17, 2020) and most hotels/resorts (March 24, 2020), halting revenue generation. The company implemented aggressive cash preservation measures, including temporary layoffs, salary reductions, dividend suspension, and securing additional financing, to ensure sufficient liquidity for at least 12 months, though reopening timing and future compliance with debt covenants remain uncertain - All theatres temporarily closed on **March 17, 2020**, and all hotel division restaurants/bars closed around the same time. Five of eight company-owned hotels/resorts closed on **March 24, 2020**, with the remaining three closing on **April 8, 2020**[56](index=56&type=chunk) - Liquidity preservation measures include discontinuing non-essential operating and capital expenditures, temporary layoffs and salary reductions for employees and executives, temporarily eliminating board cash compensation, and suspending quarterly dividend payments[60](index=60&type=chunk) - The company believes it has sufficient liquidity to meet obligations and comply with debt covenants for at least **12 months**, but future compliance could be impacted if operations do not resume as expected[60](index=60&type=chunk) - The timing for reopening theatres and hotels is uncertain; theatres are expected to reopen with capacity limitations (e.g., **50% reduced capacity**) under social distancing guidelines[58](index=58&type=chunk) [3. Impairment Charges](index=18&type=section&id=3.%20Impairment%20Charges) During the 13 weeks ended March 26, 2020, the company recorded total impairment charges of $8,712k. This included a $6,512k impairment loss for certain theatre asset groups (leasehold improvements, furniture, fixtures, equipment, and operating lease right-of-use assets) and a $2,200k impairment loss for its trade name intangible asset, both triggered by the COVID-19 pandemic - Recorded a **$6,512k** impairment loss for certain theatre asset groups, with the fair value of these impaired assets estimated at **$13,686k** as of March 26, 2020[61](index=61&type=chunk) - Recorded a **$2,200k** impairment loss for the trade name intangible asset, with its fair value estimated at **$7,300k** as of March 26, 2020[62](index=62&type=chunk) [4. Acquisition](index=18&type=section&id=4.%20Acquisition) On February 1, 2019, the company acquired Movie Tavern, a circuit of 22 dine-in theatres with 208 screens, for a total purchase price of $139,310k, comprising $30,000k in cash and 2,450,000 shares of common stock. Acquisition costs of approximately $1,153k were expensed in Q1 2019 - Acquired **22 dine-in theatres** with **208 screens** from Movie Tavern on February 1, 2019[63](index=63&type=chunk) - Total purchase price was **$139,310k**, consisting of **$30,000k** cash and **2,450,000 shares** of common stock (valued at **$109,197k**)[63](index=63&type=chunk) - Incurred approximately **$1,153k** in acquisition costs during the 13 weeks ended March 28, 2019[63](index=63&type=chunk) [5. Long-Term Debt](index=18&type=section&id=5.%20Long-Term%20Debt) Long-term debt significantly increased to $345,206k by March 26, 2020, primarily due to increased revolving credit facility borrowings. Post-quarter, the company entered into a First Amendment to Credit Agreement, securing a new $90.8 million term loan, modifying financial covenants (including suspending the fixed charge coverage ratio), and pledging assets as collateral. Similar amendments were made to Note Purchase Agreements, including an additional fee to note holders Long-Term Debt Summary (in thousands) | Debt Type | March 26, 2020 | December 26, 2019 | | :-------------------------- | :------------- | :---------------- | | Mortgage notes | $24,482 | $24,571 | | Senior notes | $109,000 | $109,000 | | Unsecured term note | $2,006 | $2,093 | | Revolving credit agreement | $220,000 | $81,000 | | Debt issuance costs | $(305) | $(322) | | **Total Long-Term Debt** | **$355,183** | **$216,342** | | Less current maturities | $(9,977) | $(9,910) | | **Net Long-Term Debt** | **$345,206** | **$206,432** | - On April 29, 2020, the company entered into a First Amendment to Credit Agreement, providing a new **$90,800k** 364-day Senior Term Loan A[65](index=65&type=chunk) - The Amendment suspends testing of the minimum consolidated fixed charge coverage ratio until **September 2021** and adds new covenants for consolidated EBITDA and liquidity, along with capital expenditure restrictions[67](index=67&type=chunk) - In connection with the amendments, the company pledged substantially all personal and real property assets as security for the Credit Agreement and Note Purchase Agreements[69](index=69&type=chunk)[74](index=74&type=chunk) - The fair value of interest rate swaps, designated as cash flow hedges, was a liability of **$2,181k** as of March 26, 2020[78](index=78&type=chunk) [6. Leases](index=21&type=section&id=6.%20Leases) The company classifies leases as either finance or operating, with total lease costs for Q1 2020 amounting to $7,934k, predominantly from operating leases. Post-quarter, the company is actively negotiating lease concessions with landlords due to the COVID-19 pandemic and plans to account for these changes as if they were part of the original agreements Total Lease Cost (13 Weeks Ended March 26, 2020, in thousands) | Lease Cost Type | Classification | Amount | | :---------------------- | :----------------------- | :----- | | Amortization of finance lease assets | Depreciation and amortization | $711 | | Interest on lease liabilities | Interest expense | $269 | | Operating lease costs | Rent expense | $6,667 | | Variable lease cost | Rent expense | $227 | | Short-term lease cost | Rent expense | $60 | | **Total Lease Cost** | | **$7,934** | Lease Terms and Discount Rates (March 26, 2020) | Metric | Finance Leases | Operating Leases | | :------------------------------ | :------------- | :--------------- | | Weighted-average remaining lease terms | 10 years | 15 years | | Weighted-average discount rates | 4.67% | 4.54% | - The company is negotiating lease concessions with landlords due to the COVID-19 pandemic and anticipates electing a policy to account for these concessions as if they were made under enforceable rights in the original agreement, avoiding a lease-by-lease modification analysis[83](index=83&type=chunk) [7. Income Taxes](index=23&type=section&id=7.%20Income%20Taxes) The company's effective income tax rate for Q1 2020 was 25.3%, a significant increase from 0.7% in Q1 2019, primarily due to a substantial pre-tax loss. The company expects to be eligible for a $15-25 million income tax refund in fiscal 2020, and potentially a significant refund in fiscal 2021, related to provisions of the CARES Act concerning qualified improvement property and net operating loss carrybacks - Effective income tax rate for the 13 weeks ended March 26, 2020, was **25.3%**, compared to **0.7%** for the same period in 2019[85](index=85&type=chunk) - The company anticipates an income tax refund in the **$15-25 million** range in fiscal 2020 due to CARES Act provisions for qualified improvement property expenditures and net operating loss carrybacks[86](index=86&type=chunk) - A significant refund in fiscal 2021 is also possible by applying any fiscal 2020 tax loss to prior year income[86](index=86&type=chunk) [8. Business Segment Information](index=23&type=section&id=8.%20Business%20Segment%20Information) Both the Theatres and Hotels/Resorts segments experienced revenue declines and operating losses in Q1 2020 compared to Q1 2019, primarily due to the widespread closures caused by the COVID-19 pandemic. Corporate items also contributed to the overall operating loss Business Segment Performance (13 Weeks Ended, in thousands) | Segment | Revenues (Mar 26, 2020) | Operating income (loss) (Mar 26, 2020) | Revenues (Mar 28, 2019) | Operating income (loss) (Mar 28, 2019) | | :-------------- | :---------------------- | :------------------------------------- | :---------------------- | :------------------------------------- | | Theatres | $109,211 | $(7,083) | $114,885 | $12,594 | | Hotels/Resorts | $50,160 | $(10,853) | $55,061 | $(3,153) | | Corporate Items | $89 | $(4,264) | $93 | $(4,491) | | **Total** | **$159,460** | **$(22,200)** | **$170,039** | **$4,950** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, with a significant focus on the unprecedented impact of the COVID-19 pandemic. It details the operational closures, liquidity preservation measures, financial performance declines, and the outlook for both theatre and hotels/resorts segments, as well as changes in debt covenants and capital resources [Special Note Regarding Forward-Looking Statements](index=24&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements, particularly concerning the COVID-19 pandemic's impact, and cautions readers about inherent risks and uncertainties that could cause actual results to differ materially from expectations. These risks include the pandemic's duration, economic conditions, film availability, and the company's ability to service debt - Forward-looking statements are identified by words such as "believe," "anticipate," "expect," and describe future plans, objectives, or goals[91](index=91&type=chunk) - Key risks include the adverse effects of the COVID-19 pandemic on theatre and hotels/resorts businesses, results of operations, liquidity, cash flows, financial condition, access to credit markets, and ability to service indebtedness[91](index=91&type=chunk) - Statements are based on assumptions about managing COVID-19 difficulties, temporary closures, workforce availability, and the temporary and long-term effects of the pandemic on the business[91](index=91&type=chunk) [RESULTS OF OPERATIONS](index=25&type=section&id=RESULTS%20OF%20OPERATIONS) The company's Q1 2020 results were severely impacted by the COVID-19 pandemic, leading to significant revenue declines and operating losses across both theatre and hotels/resorts segments. This section details the overall financial performance, segment-specific impacts, and the nonrecurring expenses and impairment charges incurred due to the crisis [General](index=25&type=section&id=General) The company reports its consolidated and segment results on a 52- or 53-week fiscal year, ending on the last Thursday in December. Fiscal 2020 is a 53-week year. The first quarter of fiscal 2020 covered December 27, 2019, to March 26, 2020, while Q1 2019 covered December 28, 2018, to March 28, 2019. Operations are primarily divided into movie theatres and hotels and resorts - The company's fiscal year ends on the last Thursday in December; fiscal 2020 is a **53-week year**[92](index=92&type=chunk) - The first quarter of fiscal 2020 ran from **December 27, 2019, to March 26, 2020**, and the first quarter of fiscal 2019 ran from **December 28, 2018, to March 28, 2019**[93](index=93&type=chunk) - Primary business segments are movie theatres and hotels and resorts[93](index=93&type=chunk) [Impact of the COVID-19 Pandemic](index=25&type=section&id=Impact%20of%20the%20COVID-19%20Pandemic) The COVID-19 pandemic led to the temporary closure of all theatres and most hotels/resorts by March 2020, halting revenue generation. The company implemented aggressive cash preservation measures, including securing a new $90.8 million term loan, suspending dividends, and reducing expenses. It also incurred impairment charges and nonrecurring expenses due to the crisis, but believes it has sufficient liquidity to sustain operations well into fiscal 2021, despite uncertainties regarding reopening and recovery - All theatres temporarily closed on **March 17, 2020**, and most hotel operations ceased by **March 24, 2020**, due to the COVID-19 pandemic[95](index=95&type=chunk) - Secured a new **$90.8 million** 364-day Senior Term Loan A on **April 29, 2020**, to further enhance liquidity, positioning the company to sustain operations well into fiscal 2021[97](index=97&type=chunk) - Implemented cash preservation measures including discontinuing non-essential expenditures, temporary layoffs, salary reductions, eliminating board cash compensation, and temporarily suspending quarterly dividend payments[100](index=100&type=chunk) - Anticipates an income tax refund of **$15-25 million** in fiscal 2020 due to CARES Act provisions and incurred **$8.7 million** in pre-tax impairment charges and **$5.5 million** in nonrecurring expenses in Q1 2020[101](index=101&type=chunk)[103](index=103&type=chunk) - Theatres are expected to reopen with capacity limitations (e.g., **50% reduced capacity**), and hotels will reopen based on increased demand, with the pace of recovery uncertain[104](index=104&type=chunk)[108](index=108&type=chunk) [Overall Results](index=29&type=section&id=Overall%20Results) The company's overall financial performance in Q1 2020 significantly deteriorated, with revenues decreasing by 6.2% and operating income shifting to a substantial loss of $(22.2) million, primarily due to COVID-19 related closures, $8.7 million in impairment charges, and $5.5 million in nonrecurring expenses. Net earnings attributable to The Marcus Corporation fell to a loss of $(19.4) million, resulting in a diluted EPS of $(0.64) Overall Financial Results (First Quarter, in millions except per share data) | Metric | F2020 | F2019 | Variance Amt. | Variance Pct. | | :------------------------------------------ | :---- | :---- | :------------ | :------------ | | Revenues | $159.5 | $170.0 | $(10.5) | (6.2)% | | Operating income (loss) | $(22.2) | $5.0 | $(27.2) | (548.5)% | | Net earnings (loss) attributable to The Marcus Corp. | $(19.4) | $1.9 | $(21.3) | (1,140.4)% | | Net earnings (loss) per common share - diluted | $(0.64) | $0.06 | $(0.70) | (1,166.7)% | - Operating loss was negatively impacted by **$5.5 million** in nonrecurring expenses (primarily payroll continuation) and **$8.7 million** in impairment charges during Q1 2020[112](index=112&type=chunk) - Investment income shifted to a loss of **$695k** in Q1 2020 from income of **$473k** in Q1 2019 due to significant market declines[116](index=116&type=chunk) - Interest expense decreased by **$600k (17.8%)** in Q1 2020 due to reduced borrowing levels and lower average interest rates[117](index=117&type=chunk) - Reported an income tax benefit of **$6.6 million** in Q1 2020, compared to a **$13k** expense in Q1 2019, driven by the significant pre-tax loss[119](index=119&type=chunk) [Theatres](index=30&type=section&id=Theatres) The theatre division's revenues decreased by 4.9% in Q1 2020, leading to an operating loss, primarily due to the mid-March COVID-19 closures, impairment charges, and nonrecurring expenses. Despite this, comparable theatres outperformed the national box office decline. The decrease was partially offset by an extra month of Movie Tavern revenues and increases in average ticket price and average concession revenues per person Theatre Division Performance (First Quarter, in millions except operating margin) | Metric | F2020 | F2019 | Variance Amt. | Variance Pct. | | :------------------------ | :---- | :---- | :------------ | :------------ | | Revenues | $109.2 | $114.9 | $(5.7) | (4.9)% | | Operating income (loss) | $(7.1) | $12.6 | $(19.7) | (156.2)% | | Operating margin (% of revenues) | (6.5)% | 11.0% | | | - Operating loss was negatively impacted by **$2.8 million** in nonrecurring expenses and **$8.7 million** in impairment charges in Q1 2020[123](index=123&type=chunk) - Comparable theatre admission revenues and concession revenues decreased **14.8%** and **13.7%**, respectively, excluding Movie Tavern theatres[125](index=125&type=chunk) - Comparable theatres outperformed the U.S. box office decline of **17.0%** by **2.2 percentage points** in Q1 2020[126](index=126&type=chunk) - Average ticket price increased **7.0% (6.0%** for comparable theatres) and average concession revenues per person increased **10.9% (7.4%** for comparable theatres) in Q1 2020[128](index=128&type=chunk)[130](index=130&type=chunk) - Total theatre attendance decreased **12.2% (19.5%** for comparable theatres) in Q1 2020, primarily due to COVID-19 closures and a weaker film slate in early March[133](index=133&type=chunk) - The film product release schedule for the second half of fiscal 2020 and 2021 is expected to be very strong, including many films delayed from early 2020[135](index=135&type=chunk) [Hotels and Resorts](index=35&type=section&id=Hotels%20and%20Resorts) The Hotels and Resorts division experienced an 8.9% revenue decrease and an increased operating loss in Q1 2020, primarily due to COVID-19 related cancellations and the closure of five company-owned hotels in March. RevPAR declined significantly by 14.5%, though the company believes it outperformed the national 'upper upscale' hotel segment and its competitive sets. Group bookings for future periods are running behind prior year levels Hotels and Resorts Division Performance (First Quarter, in millions except operating margin) | Metric | F2020 | F2019 | Variance Amt. | Variance Pct. | | :------------------------ | :---- | :---- | :------------ | :------------ | | Revenues | $50.2 | $55.1 | $(4.9) | (8.9)% | | Operating loss | $(10.9) | $(3.2) | $(7.7) | (244.2)% | | Operating margin (% of revenues) | (21.6)% | (5.7)% | | | - Revenues decreased due to COVID-19 related cancellations in March 2020 and the closure of five company-owned hotels. Excluding the Saint Kate (under renovation in 2019), total revenues decreased by **12.2%**[138](index=138&type=chunk) - Operating loss was negatively impacted by approximately **$2.7 million** in nonrecurring expenses (primarily payroll continuation) due to hotel closures[140](index=140&type=chunk) Operating Statistics (Comparable Company-Owned Properties, First Quarter) | Metric | F2020 | F2019 | Variance | Variance Pct. | | :-------------------- | :------ | :------ | :------- | :------------ | | Occupancy percentage | 55.6% | 64.6% | (9.0)pts | (13.9)% | | ADR | $129.20 | $130.05 | $(0.85) | (0.7)% | | RevPAR | $71.84 | $84.05 | $(12.21) | (14.5)% | - The company believes it outperformed comparable 'upper upscale' hotels nationally (RevPAR decrease of **20.9%**) and its competitive sets (RevPAR decrease of **25.1%**) in Q1 2020[142](index=142&type=chunk) - Group room revenue bookings for the second half of fiscal 2020 and fiscal 2021 are currently running slightly behind prior year levels[144](index=144&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=37&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company's liquidity was significantly impacted by COVID-19, leading to increased borrowings. Post-quarter, it secured a new $90.8 million term loan and amended its credit and note purchase agreements, modifying covenants, adding new financial requirements (EBITDA, liquidity, capital expenditure limits), and collateralizing debt to ensure sufficient liquidity for at least 12 months. Operating cash flow turned negative, while financing cash flow surged due to increased debt [Liquidity](index=37&type=section&id=Liquidity) The company secured a new $90.8 million term loan facility and amended its Credit Agreement and Note Purchase Agreements on April 29, 2020. These amendments modified various covenants, including suspending the fixed charge coverage ratio until Q3 2021, adding new minimum EBITDA and consolidated liquidity covenants, and restricting capital expenditures. All debt is now secured by substantially all personal and real property assets. The company believes these actions provide sufficient liquidity for at least 12 months - A new **$90.8 million** 364-day term loan facility was established on April 29, 2020, with potential to increase up to **$100 million**[150](index=150&type=chunk) - The Credit Agreement was amended to suspend testing of the minimum consolidated fixed charge coverage ratio until **Q3 2021** and to add new covenants for consolidated EBITDA and liquidity, along with capital expenditure limitations[154](index=154&type=chunk) - All borrowings under the Credit Agreement and Senior Notes are now secured by substantially all of the company's personal and real property assets[156](index=156&type=chunk)[161](index=161&type=chunk) - The Note Amendments include an additional quarterly fee of **0.18125% (0.725% per annum)** on outstanding borrowings to each note holder[160](index=160&type=chunk) - The company believes it has sufficient liquidity to meet obligations and comply with debt covenants for at least **12 months**, contingent on resuming operations as expected[163](index=163&type=chunk) [Financial Condition](index=39&type=section&id=Financial%20Condition) Net cash used in operating activities totaled $(16.6) million in Q1 2020, a significant decrease from cash provided in Q1 2019, due to reduced net earnings and unfavorable working capital timing. Net cash used in investing activities decreased by $35.9 million, primarily due to the absence of a large acquisition like Movie Tavern in 2019 and reduced capital expenditures. Net cash provided by financing activities surged to $132.4 million, driven by increased borrowings on the revolving credit facility. The debt-to-capitalization ratio increased to 0.37 - Net cash used in operating activities totaled **$(16.6) million** in Q1 2020, compared to **$8.0 million** provided in Q1 2019[164](index=164&type=chunk) - Net cash used in investing activities decreased by **$35.9 million** to **$(10.2) million** in Q1 2020, primarily due to the Movie Tavern Acquisition in Q1 2019 and reduced capital expenditures[165](index=165&type=chunk) - Net cash provided by financing activities increased to **$132.4 million** in Q1 2020, driven by a net increase of **$139.0 million** in revolving credit facility borrowings[167](index=167&type=chunk) - The debt-to-capitalization ratio (excluding lease obligations) increased to **0.37** at March 26, 2020, from **0.26** at December 26, 2019[168](index=168&type=chunk) - Quarterly dividend payments are temporarily suspended for the remainder of 2020 and limited in the first two quarters of fiscal 2021[171](index=171&type=chunk) - Fiscal 2020 capital expenditures are now projected to be in the **$20-30 million** range, significantly reduced from the initial **$65-85 million** estimate due to COVID-19 and debt restrictions[172](index=172&type=chunk) [Critical Accounting Policy Update](index=41&type=section&id=Critical%20Accounting%20Policy%20Update) Due to the COVID-19 pandemic, the company performed a quantitative goodwill impairment test for its theatre segment in Q1 2020. The analysis determined that the fair value of the theatre reporting unit exceeded its carrying value by approximately 20%, indicating no impairment as of March 26, 2020. However, future impairment could occur if forecasted cash flows are not met or market conditions worsen - A quantitative goodwill impairment test was performed for the theatre segment in Q1 2020 due to a triggering event from the COVID-19 pandemic[173](index=173&type=chunk) - The fair value of the theatre reporting unit was determined to exceed its carrying value by approximately **20%**, resulting in no goodwill impairment as of March 26, 2020[173](index=173&type=chunk) - Future goodwill impairment could occur if forecasted cash flows are not achieved or if market conditions deteriorate[173](index=173&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reported no material changes in its market risk exposures since December 26, 2019 - No material changes in market risk exposures have occurred since December 26, 2019[174](index=174&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's principal executive officer and principal financial officer concluded that its disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q. No significant changes in internal control over financial reporting were identified during the period - Disclosure controls and procedures were deemed effective as of the end of the reporting period[175](index=175&type=chunk) - No significant changes in internal control over financial reporting were identified during the period[175](index=175&type=chunk) [PART II – OTHER INFORMATION](index=43&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) The COVID-19 pandemic has introduced new and heightened risks, significantly impacting the company's theatre and hotels/resorts businesses, liquidity, and financial condition. These risks include prolonged closures, uncertain recovery rates, potential changes in consumer behavior, disruptions in film distribution, and increased challenges in complying with financial covenants. The company cannot guarantee rapid recovery or timely access to governmental relief - The COVID-19 pandemic has had an unprecedented impact, leading to the temporary closure of all theatres and hotels/resorts, halting revenue generation[176](index=176&type=chunk)[177](index=177&type=chunk) - The company has suspended dividends, halted non-essential expenditures, reduced staff/salaries, and obtained waivers for debt covenants, but cannot predict when businesses will return to normal levels[178](index=178&type=chunk)[179](index=179&type=chunk) - Long-lasting effects of the pandemic could include lack of film availability, decreased attendance, reduced travel, cancellation of major events, inability to negotiate favorable rent terms, increased employee risks, potential impairment charges, and challenges in meeting financial obligations or accessing credit markets[181](index=181&type=chunk) - Uncertainty exists regarding the speed of recovery, as customers may avoid public spaces, and the company cannot assure timely access to benefits under the CARES Act or other governmental relief bills[180](index=180&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2020, the company repurchased 8,551 shares of its common stock for approximately $274,000 at an average price of $32.06 per share, primarily in conjunction with income tax payments on vested restricted stock. As of March 26, 2020, approximately 2.7 million shares remained available for repurchase under prior Board authorizations Common Stock Repurchases (Q1 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------- | :----------------------------- | :--------------------------- | | January 31 - February 27 | 8,551 | $32.06 | | **Total** | **8,551** | **$32.06** | - Repurchases were made in conjunction with the payment of income taxes on vested restricted stock[185](index=185&type=chunk) - As of March 26, 2020, **2,748,010 shares** remained available for repurchase under Board authorizations, which do not have an expiration date[186](index=186&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to The Marcus Corporation - This item is not applicable[187](index=187&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the 10-Q report, including amendments to the Credit Agreement and Note Purchase Agreements, certifications by the Chief Executive Officer and Chief Financial Officer, and various Inline XBRL taxonomy documents - Key exhibits include the First Amendment to Credit Agreement and First Amendments to Note Purchase Agreements, both dated **April 29, 2020**[189](index=189&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 1350 of the Sarbanes-Oxley Act of 2002 are included[189](index=189&type=chunk) - Various Inline XBRL Taxonomy Extension documents (Schema, Calculation, Definition, Label, Presentation Linkbase) are also listed[189](index=189&type=chunk)

The Marcus Corporation (NYSE:MCS) Q1 2020 Earnings Conference Call May 5, 2020 11:00 AM ET Company Participants Greg Marcus – President and Chief Executive Officer Doug Neis – Executive Vice President and Chief Financial Officer and Treasurer Conference Call Participants Jim Goss – Barrington Research Mike Hickey – The Benchmark Company Eric Wold – B. Riley Ryan Hamilton – Morgan Dempsey Operator Good morning, and welcome to the Marcus Corporation First Quarter Earnings Conference Call. My name is Stephanie ...

Theatre Operations - As of December 26, 2019, the company operated 91 movie theatres with a total of 1,106 screens across 17 states, making it the 4th largest theatre circuit in the United States[15]. - The acquisition of Movie Tavern on February 1, 2019, added 208 screens at 22 locations, increasing the total number of screens by approximately 23% for a total purchase price of approximately $139.3 million[21]. - As of December 26, 2019, the company offered DreamLounger recliner seating in 63 theatres, representing approximately 72% of its company-owned, first-run theatres[23]. - The company operates 51 theatres with bar service, representing approximately 59% of its company-owned, first-run theatres as of December 26, 2019[25]. - As of December 26, 2019, the company operated 32 theatres with full-service, in-theatre dining, representing approximately 37% of its company-owned, first-run theatres[28]. - The company has digital cinema projection on 100% of its first-run screens, allowing for non-motion picture programming, including live performances and special events[29]. - The theatre division operated 1,106 screens across 91 locations as of fiscal 2019, compared to 889 screens at 68 locations in fiscal 2018[187]. - The acquisition of Movie Tavern added approximately $125.8 million to theatre division revenues during the 47 weeks of ownership in fiscal 2019, increasing total screens by 23%[189]. - Total theatre attendance increased by 8.8% in fiscal 2019, although attendance at comparable theatres decreased by approximately 8.6%[190]. - The "$5 Tuesday" promotion has significantly increased attendance, with a similar response observed at Movie Tavern theatres[178]. - The top 15 performing films accounted for 48% of total admission revenues in fiscal 2019, up from 42% in fiscal 2018[197]. - Average ticket price increased by 8.0% in fiscal 2019, contributing approximately $7.6 million to admission revenues[200]. - Total concession revenues increased by 38.8% in fiscal 2019, with average concession sales per person rising by 27.6%[201]. - The theatre division contributed 67.9% of consolidated revenues and 88.4% of consolidated operating income in fiscal 2019, up from 63.2% and 87.7% in fiscal 2018[187]. - Total revenues for the theatre division increased by 24.7% to $557.1 million in fiscal 2019, driven by the acquisition of Movie Tavern theatres and increased admission and concession revenues[188]. Financial Performance - Revenues for fiscal 2019 were $820,863,000, an increase of 16.0% from $707,120,000 in fiscal 2018[139]. - Net earnings attributable to The Marcus Corporation for fiscal 2019 were $42,017,000, a decrease of 21.3% from $53,391,000 in fiscal 2018[139]. - Net earnings per common share for fiscal 2019 were $1.35, down from $1.86 in fiscal 2018, representing a decline of 27.4%[139]. - Total assets increased to $1,359,186,000 in fiscal 2019 from $989,331,000 in fiscal 2018, reflecting a growth of 37.4%[139]. - Long-term debt decreased to $206,432,000 in fiscal 2019 from $228,863,000 in fiscal 2018, a reduction of 9.8%[139]. - Shareholders' equity attributable to The Marcus Corporation rose to $621,435,000 in fiscal 2019, up 26.9% from $490,009,000 in fiscal 2018[139]. - Capital expenditures and acquisitions for fiscal 2019 totaled $94,167,000, an increase from $58,660,000 in fiscal 2018[139]. - The current ratio for fiscal 2019 was 0.45, slightly down from 0.46 in fiscal 2018[139]. - The debt/capitalization ratio improved to 0.26 in fiscal 2019 from 0.33 in fiscal 2018[139]. - Return on average shareholders' equity for fiscal 2019 was 7.6%, down from 11.4% in fiscal 2018[139]. - Operating income decreased by 18.0% to $68.2 million in fiscal 2019, down from $83.2 million in fiscal 2018[154]. - Investment income rose to $1.4 million in fiscal 2019, compared to $208,000 in fiscal 2018, due to increases in the value of marketable securities[159]. - Interest expense decreased by 9.8% to $11.8 million in fiscal 2019, down from $13.1 million in fiscal 2018[160]. - Other expense decreased by 3.2% to $1.9 million in fiscal 2019, compared to $2.0 million in fiscal 2018[161]. - Fiscal 2019 income tax expense was $12.3 million, a decrease of approximately $800,000, or 6.1%, compared to $13.1 million in fiscal 2018[165]. - The effective income tax rate for fiscal 2019 was 22.7%, up from 19.7% in fiscal 2018, with an anticipated increase to the 24-26% range for fiscal 2020[165]. Hotel and Resort Operations - The hotels and resorts division contributed 32.1% of consolidated revenues and 11.6% of consolidated operating income in fiscal 2019, down from 36.8% and 12.3% in fiscal 2018, respectively[210]. - Total revenues for the hotels and resorts division in fiscal 2019 were $263.4 million, representing a 1.3% increase from $259.9 million in fiscal 2018[212]. - Operating income decreased to $10.1 million in fiscal 2019, a decline of 19.5% compared to $12.5 million in fiscal 2018[210]. - Room revenues fell to $105.9 million in fiscal 2019, a decrease of 2.7% from $108.8 million in fiscal 2018[212]. - Food and beverage revenues increased to $74.7 million in fiscal 2019, up 2.6% from $72.8 million in fiscal 2018[212]. - Other revenues rose to $46.5 million in fiscal 2019, reflecting a 2.7% increase from $45.3 million in fiscal 2018[212]. - The total number of available rooms increased to 5,385 in fiscal 2019, up from 5,275 in fiscal 2018[210]. - Management contracts with other owners increased to 1,945 rooms in fiscal 2019, compared to 1,833 rooms in fiscal 2018[210]. - Cost reimbursements grew by 10.0% to $36.3 million in fiscal 2019, up from $33.0 million in fiscal 2018[212]. - The operating margin for the hotels and resorts division was 3.8% in fiscal 2019, down from 4.8% in fiscal 2018[210]. Strategic Initiatives and Challenges - The company continues to pursue additional strategies to increase ancillary revenue sources, including advertising and sponsorships[36]. - The company faces intense competition from larger national and regional chains, impacting its market positioning[71]. - Economic downturns may adversely affect the hotels and resorts division, particularly impacting group travel customers[89]. - The company expects to derive most of its business from traditional distribution channels, but increasing sales through third-party internet travel intermediaries could decrease consumer loyalty[90]. - Strategic initiatives may require significant capital expenditures, with uncertain returns on investment from these initiatives[92]. - The company has a history of successfully integrating acquisitions, including the Movie Tavern business, but faces operational risks such as management distraction and market entry challenges[93]. - The movie theatre and hotels and resorts businesses are heavily capital intensive, requiring substantial upfront cash investments before generating sufficient revenues[94]. - The company periodically assesses indicators of impairment for long-lived assets, as demographic changes and economic conditions may render some properties unprofitable[95]. - Achieving growth objectives in both theatre and hotels and resorts divisions depends on the ability to identify suitable properties for acquisition and development[96]. - The company may act as an investment fund sponsor to acquire additional hotel properties, which requires identifying suitable joint venture partners or raising equity funds[98]. - Adverse economic conditions may hinder the company's ability to obtain financing on reasonable terms, impacting liquidity and growth objectives[99]. - Joint venture investments may involve risks such as shared control and potential bankruptcy of partners, affecting the management of joint venture assets[100]. - The company’s properties are subject to risks from acts of God, terrorism, and other crises, which may adversely affect financial results[101]. - Information technology systems are critical for operations, and any failure or cyber attack could disrupt business and lead to increased costs[102]. Future Outlook - Fiscal 2020 capital expenditures in the theatre division are anticipated to total approximately $45-$60 million[177]. - The company plans to invest approximately $20-$25 million in capital expenditures for hotels and resorts in fiscal 2020, excluding unidentified acquisitions[185]. - The company has assumed management of the Hyatt Regency Schaumburg hotel, which has 468 rooms and underwent a $15 million renovation[185]. - The company increased its quarterly common stock cash dividend rate by 6.3% in the first quarter of fiscal 2020, following increases of 20.0% and 6.7% in previous years[185]. - Fiscal 2020 is expected to benefit from an additional week of operations, potentially increasing revenues and operating income[209]. - The film slate for fiscal 2020 is anticipated to include a higher quantity of films, which may enhance box office performance[208]. - The company expects an increase in average concession sales per person in fiscal 2020 due to more non-traditional food and beverage outlets[201].

The Marcus Corporation (NYSE:MCS) Q4 2019 Earnings Conference Call February 20, 2020 11:00 AM ET Company Participants Greg Marcus - President & Chief Executive Officer Doug Neis - Executive Vice President, Chief Financial Officer & Treasurer Conference Call Participants Mike Hickey - Benchmark Company Jim Goss - Barrington Research Eric Wold - B. Riley Operator Good morning, everyone, and welcome to the Marcus Corporation Fourth Quarter Earnings Conference Call. My name is Josh, and I will be your operator ...

PART I – FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The consolidated financial statements present The Marcus Corporation's financial position as of September 26, 2019, and December 27, 2018, and its results of operations and cash flows for the 13 and 39 weeks then ended, highlighting a significant increase in total assets to $1.34 billion primarily due to the Movie Tavern acquisition and ASC 842 adoption, while net earnings for the 39-week period decreased to $34.2 million from $44.7 million year-over-year [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased significantly from $989.3 million at year-end 2018 to $1.34 billion as of September 26, 2019, driven by $229.1 million in operating lease right-of-use assets from ASC 842 adoption, an increase in net property and equipment to $932.8 million, and a rise in goodwill to $75.8 million following the Movie Tavern acquisition, with total liabilities also growing primarily from $233.9 million in operating lease obligations, and shareholders' equity increasing to $622.5 million from $490.1 million Key Balance Sheet Items (in millions) | Account | Sep 26, 2019 | Dec 27, 2018 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$1,340.1** | **$989.3** | **+35.5%** | | Cash and cash equivalents | $7.5 | $17.1 | -56.5% | | Net property and equipment | $932.8 | $840.0 | +11.0% | | Operating lease right-of-use assets | $229.1 | $0 | N/A | | Goodwill | $75.8 | $43.2 | +75.6% | | **Total Liabilities** | **$717.6** | **$499.2** | **+43.8%** | | Operating lease obligations | $233.9 | $0 | N/A | | Long-term debt | $235.8 | $228.9 | +3.0% | | **Total Shareholders' Equity** | **$622.5** | **$490.1** | **+27.0%** | - The adoption of the new lease accounting standard (ASC 842) on December 28, 2018, resulted in the recognition of significant operating lease right-of-use assets and corresponding liabilities on the balance sheet for the first time[22](index=22&type=chunk)[56](index=56&type=chunk) [Consolidated Statements of Earnings](index=6&type=section&id=Consolidated%20Statements%20of%20Earnings) For the 39 weeks ended September 26, 2019, total revenues increased 15.4% YoY to $614.0 million, driven by the Movie Tavern acquisition, but operating income declined 20.0% to $54.8 million, and net earnings attributable to The Marcus Corporation fell 23.4% to $34.2 million, with diluted EPS for Common Stock at $1.10, down from $1.56 in the prior year period, while the third quarter showed similar trends, with revenues up 24.0% but net earnings down 12.0% Consolidated Earnings Summary (in millions, except per share data) | Metric | 39 Weeks 2019 | 39 Weeks 2018 | YoY Change | 13 Weeks 2019 | 13 Weeks 2018 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $614.0 | $532.1 | +15.4% | $211.5 | $170.6 | +24.0% | | Operating Income | $54.8 | $68.5 | -20.0% | $22.4 | $22.4 | -0.1% | | Net Earnings | $34.2 | $44.7 | -23.4% | $14.3 | $16.2 | -12.0% | | Diluted EPS (Common) | $1.10 | $1.56 | -29.5% | $0.46 | $0.56 | -17.9% | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the 39 weeks ended September 26, 2019, net cash from operating activities increased to $86.0 million from $77.1 million in the prior year, net cash used in investing activities rose sharply to $86.2 million from $46.1 million primarily due to $30.3 million for the Movie Tavern acquisition and higher capital expenditures, and net cash used in financing activities decreased to $9.2 million from $39.1 million, reflecting a net increase in borrowings on the revolving credit facility compared to a net decrease in the prior year Cash Flow Summary (39 Weeks Ended, in millions) | Activity | Sep 26, 2019 | Sep 27, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $86.0 | $77.1 | | Net cash used in investing activities | ($86.2) | ($46.1) | | Net cash used in financing activities | ($9.2) | ($39.1) | | **Net decrease in cash** | **($9.4)** | **($8.1)** | - Investing activities were significantly impacted by the **$30.3 million** cash portion of the Movie Tavern acquisition and a **$5.0 million** increase in capital expenditures year-over-year[17](index=17&type=chunk) [Condensed Notes to Consolidated Financial Statements](index=10&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, the Movie Tavern acquisition, the adoption of the new lease standard (ASC 842), debt instruments, and segment performance, showing that the Movie Tavern acquisition on February 1, 2019, had a total purchase price of $139.5 million, the adoption of ASC 842 resulted in the recognition of $76.2 million in operating lease right-of-use assets and $81.5 million in operating lease liabilities, and segment data indicates that while Theatres segment revenue grew significantly due to the acquisition, its operating income for the 39-week period declined, as did the Hotels/Resorts segment's operating income primarily due to a key property's renovation and rebranding - On February 1, 2019, the company acquired 22 dine-in theatres from Movie Tavern for a total purchase price of **$139.5 million**, comprising **$30 million** in cash and **2.45 million** shares of common stock valued at **$109.2 million**[49](index=49&type=chunk) - The company adopted the new lease accounting standard, ASC 842, on December 28, 2018, using a modified retrospective approach, resulting in recognizing operating lease right-of-use assets of **$76.2 million** and lease obligations of **$81.5 million** on the balance sheet at the date of adoption[45](index=45&type=chunk)[56](index=56&type=chunk) Business Segment Operating Income (39 Weeks Ended, in millions) | Segment | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Theatres | $57.7 | $66.3 | -13.1% | | Hotels/Resorts | $11.4 | $15.7 | -27.3% | | Corporate (Loss) | ($14.3) | ($13.5) | -5.7% | | **Total Operating Income** | **$54.8** | **$68.5** | **-20.0%** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 15.4% year-to-date revenue growth primarily to the Movie Tavern acquisition, but consolidated operating income decreased by 20.0% due to nonrecurring acquisition and preopening expenses of $2.0 million for Movie Tavern and $5.5 million in preopening expenses and start-up losses from the Saint Kate hotel conversion, with the Theatres division seeing increased revenue but lower operating income due to a weaker film slate and higher fixed costs, and the Hotels and Resorts division's operating income significantly impacted by the InterContinental Milwaukee's renovation into the Saint Kate hotel, while the company maintains adequate liquidity with $110 million in unused credit lines [Overall Results](index=28&type=section&id=Overall%20Results) Consolidated revenues for the first three quarters of fiscal 2019 rose 15.4% to $614.0 million, while operating income fell 20.0% to $54.8 million, and net earnings decreased 23.4% to $34.2 million, with the decline in profitability driven by nonrecurring expenses, including approximately $2.0 million in acquisition/preopening costs for Movie Tavern and $5.5 million in preopening/start-up losses for the Saint Kate hotel conversion, negatively impacting EPS by approximately $0.05 and $0.13 per share, respectively Overall Results Summary (First Three Quarters, in millions) | Metric | F2019 | F2018 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $614.0 | $532.1 | +15.4% | | Operating income | $54.8 | $68.5 | -20.0% | | Net earnings | $34.2 | $44.7 | -23.4% | | Diluted EPS | $1.10 | $1.56 | -29.5% | - Operating income was negatively impacted by non-recurring expenses in the first three quarters of 2019: approximately **$2.0 million** for the Movie Tavern acquisition and approximately **$5.5 million** for the Saint Kate hotel conversion[86](index=86&type=chunk)[87](index=87&type=chunk) [Theatres Segment](index=31&type=section&id=Theatres%20Segment) The Theatres division reported a 24.2% revenue increase to $414.1 million for the first three quarters, driven by the Movie Tavern acquisition, but operating income fell 13.1% to $57.7 million, attributed to a weaker film slate in early 2019 which reduced attendance at comparable theatres, and higher fixed costs, though comparable theatre admission revenues decreased 5.7% year-to-date, outperforming the U.S. box office decline of 6.2%, and average ticket prices and concession revenues per person at comparable theatres increased by 2.8% and 7.3%, respectively Theatres Segment Performance (First Three Quarters, in millions) | Metric | F2019 | F2018 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $414.1 | $333.4 | +24.2% | | Operating Income | $57.7 | $66.3 | -13.1% | | Operating Margin | 13.9% | 19.9% | -6.0 p.p. | - Comparable theatre admission revenues decreased **5.7%** YTD, outperforming the U.S. box office decline of **6.2%** by **0.5 percentage points**[101](index=101&type=chunk)[103](index=103&type=chunk) - Excluding Movie Tavern, comparable theatres saw a **2.8%** increase in average ticket price and a **7.3%** increase in average concession revenues per person for the first three quarters of 2019[104](index=104&type=chunk)[107](index=107&type=chunk) [Hotels and Resorts Segment](index=36&type=section&id=Hotels%20and%20Resorts%20Segment) The Hotels and Resorts division's revenues for the first three quarters were flat at $199.6 million, while operating income decreased 27.3% to $11.4 million, with this decline entirely due to $5.5 million in preopening expenses and start-up losses from the conversion of the InterContinental Milwaukee to the Saint Kate hotel, as excluding this property, the division's operating income would have increased by 11%, and for the seven comparable company-owned hotels, Revenue Per Available Room (RevPAR) increased by 0.9% year-to-date, driven by a 1.6% increase in Average Daily Rate (ADR) Hotels and Resorts Segment Performance (First Three Quarters, in millions) | Metric | F2019 | F2018 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $199.6 | $198.4 | +0.6% | | Operating Income | $11.4 | $15.7 | -27.3% | | Operating Margin | 5.7% | 7.9% | -2.2 p.p. | - The decline in operating income was entirely due to **$5.5 million** in costs related to the Saint Kate hotel conversion, and excluding this hotel, operating income would have improved by approximately **$1.8 million**, or **11%**[121](index=121&type=chunk) Comparable Company-Owned Hotel Statistics (First Three Quarters) | Metric | F2019 | F2018 | % Change | | :--- | :--- | :--- | :--- | | Occupancy | 75.2% | 75.7% | -0.6% | | ADR | $155.91 | $153.47 | +1.6% | | RevPAR | $117.19 | $116.09 | +0.9% | [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity, with $86.0 million in cash from operations for the first three quarters of 2019 and approximately $110 million available under its credit lines, while capital expenditures totaled $50.1 million, with $21.8 million for the Theatres division and $28.3 million for Hotels and Resorts, primarily for the Saint Kate and Hilton Madison renovations, and the company anticipates total fiscal 2019 capital expenditures to be between $60-$70 million, with the debt-to-capitalization ratio improving to 0.28 from 0.33 at year-end 2018 - The company generated **$86.0 million** in net cash from operating activities during the first three quarters of 2019[135](index=135&type=chunk) - Total capital expenditures were **$50.1 million** for the first three quarters of 2019 and are projected to be **$60-$70 million** for the full fiscal year[137](index=137&type=chunk)[145](index=145&type=chunk) - The debt-to-capitalization ratio (excluding lease obligations) was **0.28** at the end of the quarter[140](index=140&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no material changes in its market risk exposures since the end of the previous fiscal year, December 27, 2018 - No material changes in market risk exposures were reported since December 27, 2018[146](index=146&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period, and there were no significant changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls - The principal executive officer and principal financial officer concluded that disclosure controls and procedures are effective[147](index=147&type=chunk) - No significant changes to internal control over financial reporting were identified during the quarter[149](index=149&type=chunk) PART II – OTHER INFORMATION [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 27, 2018 - No material change to risk factors has occurred during the 39 weeks ended September 26, 2019[150](index=150&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the third quarter of fiscal 2019, the company repurchased 14,272 shares of its Common Stock at an average price of $33.46 per share, with these repurchases made in conjunction with the exercise of stock options, and as of September 26, 2019, approximately 2.8 million shares remained available for repurchase under existing Board authorizations Share Repurchases (Q3 2019) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | June 28 – Sep 26 | 14,272 | $33.46 | - As of September 26, 2019, **2,756,561 shares** remained available for repurchase under the company's authorized programs[152](index=152&type=chunk) [Item 4. Mine Safety Disclosures](index=43&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to The Marcus Corporation - Not applicable[153](index=153&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002 and financial statements formatted in XBRL - Exhibits filed include CEO/CFO certifications (**31.1, 31.2, 32**) and XBRL data files (**101**)[156](index=156&type=chunk)

The Marcus Corporation (NYSE:MCS) Q3 2019 Earnings Conference Call October 24, 2019 11:00 AM ET Company Participants Greg Marcus - President & Chief Executive Officer Doug Neis - Executive Vice President, Chief Financial Officer & Treasurer Conference Call Participants Mike Hickey - Benchmark Company Jim Goss - Barrington Research Ryan Hamilton - Morgan Dempsey Operator Good morning, everyone, and welcome to the Marcus Corporation Third Quarter Earnings Conference Call. My name is Josh, and I will be your ...

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) Presents unaudited financial statements reflecting the Movie Tavern acquisition and new lease standard adoption [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $1.35 billion, driven by the Movie Tavern acquisition and new lease accounting standards Consolidated Balance Sheet Highlights (in thousands) | Account | June 27, 2019 | December 27, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$1,351,679** | **$989,331** | | Cash and cash equivalents | $11,693 | $17,114 | | Net property and equipment | $935,188 | $840,043 | | Operating lease right-of-use assets | $234,064 | $0 | | Goodwill | $74,821 | $43,170 | | **Total Liabilities** | **$739,337** | **$499,212** | | Long-term debt | $239,950 | $228,863 | | Operating lease obligations | $238,729 | $0 | | **Total Equity** | **$612,342** | **$490,119** | [Consolidated Statements of Earnings](index=6&type=section&id=Consolidated%20Statements%20of%20Earnings) Revenues rose to $402.5 million while net earnings fell to $19.9 million due to higher operating costs Consolidated Earnings Summary (in thousands, except per share data) | Metric | 26 Weeks Ended June 27, 2019 | 26 Weeks Ended June 28, 2018 | | :--- | :--- | :--- | | Total Revenues | $402,539 | $361,489 | | Operating Income | $32,425 | $46,123 | | Net Earnings Attributable to The Marcus Corp. | $19,926 | $28,440 | | Diluted EPS (Common Stock) | $0.64 | $1.00 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased slightly while investing cash use grew significantly due to a major acquisition Cash Flow Summary (in thousands) | Activity | 26 Weeks Ended June 27, 2019 | 26 Weeks Ended June 28, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $59,730 | $55,443 | | Net cash used in investing activities | ($65,786) | ($33,494) | | Net cash provided by (used in) financing activities | $608 | ($24,154) | | **Net decrease in cash** | **($5,448)** | **($2,205)** | [Condensed Notes to Consolidated Financial Statements](index=10&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) Details the adoption of the new lease standard and the $138.9 million acquisition of Movie Tavern - The company adopted the new lease accounting standard, ASU No 2016-02 (Topic 842), on December 28, 2018, resulting in the recognition of **operating lease right-of-use assets and liabilities**[18](index=18&type=chunk)[40](index=40&type=chunk)[72](index=72&type=chunk) - On February 1, 2019, the company acquired Movie Tavern for a total purchase price of **$138.9 million**, comprising $30 million in cash and 2.45 million shares of common stock[44](index=44&type=chunk) Revenue by Segment - 26 Weeks Ended June 27, 2019 (in thousands) | Segment | Revenue | % of Total | | :--- | :--- | :--- | | Theatres | $277,272 | 68.9% | | Hotels/Resorts | $125,032 | 31.1% | | Corporate | $235 | 0.0% | | **Total** | **$402,539** | **100.0%** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew 11.4% due to an acquisition, but operating income fell 29.7% from non-recurring expenses Overall Results Summary - First Half (in millions) | Metric | F2019 | F2018 | Variance Amt. | Variance Pct. | | :--- | :--- | :--- | :--- | :--- | | Revenues | $402.5 | $361.5 | $41.0 | 11.4% | | Operating income | $32.4 | $46.1 | ($13.7) | -29.7% | | Net earnings | $19.9 | $28.4 | ($8.5) | -29.9% | | Diluted EPS | $0.64 | $1.00 | ($0.36) | -36.0% | - The acquisition of Movie Tavern added 208 screens at 22 locations, increasing the company's **total screen count by 23%**[79](index=79&type=chunk)[80](index=80&type=chunk) - The InterContinental Milwaukee hotel was closed for renovation and reopened in June 2019 as Saint Kate – The Arts Hotel, incurring **$3.9 million in preopening expenses** and start-up losses in H1 2019[81](index=81&type=chunk) [Theatres Segment Analysis](index=30&type=section&id=Theatres%20Segment%20Analysis) Acquisition-driven revenue growth was offset by a 21.3% drop in operating income and lower comparable attendance Theatres Segment Performance - First Half (in millions) | Metric | F2019 | F2018 | Variance Amt. | Variance Pct. | | :--- | :--- | :--- | :--- | :--- | | Revenues | $277.3 | $238.4 | $38.9 | 16.3% | | Operating income | $40.8 | $51.9 | ($11.1) | -21.3% | | Operating margin | 14.7% | 21.8% | - | - | - Excluding Movie Tavern, **comparable theatre attendance decreased 11.8%** in H1 2019, attributed to a weaker film slate compared to the prior year[104](index=104&type=chunk) - At comparable theatres, the average ticket price increased 1.5% and **average concession revenues per person increased 6.4%** in H1 2019[98](index=98&type=chunk)[100](index=100&type=chunk) [Hotels and Resorts Segment Analysis](index=35&type=section&id=Hotels%20and%20Resorts%20Segment%20Analysis) Operating income fell 76.8% due to hotel renovation expenses, despite a slight increase in revenue Hotels and Resorts Segment Performance - First Half (in millions) | Metric | F2019 | F2018 | Variance Amt. | Variance Pct. | | :--- | :--- | :--- | :--- | :--- | | Revenues | $125.0 | $122.9 | $2.1 | 1.8% | | Operating income | $0.9 | $3.7 | ($2.8) | -76.8% | | Operating margin | 0.7% | 3.0% | - | - | - The division's operating income decline was entirely due to **$3.9 million in preopening expenses** and losses related to the Saint Kate hotel conversion[113](index=113&type=chunk) Comparable Company-Owned Hotel Statistics - First Half | Metric | F2019 | F2018 | Variance | | :--- | :--- | :--- | :--- | | Occupancy pct. | 71.2% | 71.7% | -0.5 pts | | ADR | $146.47 | $143.80 | +1.9% | | RevPAR | $104.36 | $103.13 | +1.2% | [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity remains strong with $106 million in credit, while capex guidance is revised to the lower end - Net cash used in investing activities increased by $32.3 million year-over-year, primarily due to the **$29.6 million cash consideration** for the Movie Tavern acquisition[128](index=128&type=chunk) - Total cash capital expenditures were **$30.5 million in H1 2019**, with $17.2 million for hotels and $12.9 million for theatres[129](index=129&type=chunk) - Full-year fiscal 2019 capital expenditure guidance is now expected to be at the **lower end of the $75-$95 million range**, or possibly below[135](index=135&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes in market risk exposures since the prior fiscal year-end - **No material changes** in market risk exposures were experienced since December 27, 2018[136](index=136&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no significant changes - The CEO and CFO concluded that **disclosure controls and procedures are effective**[137](index=137&type=chunk) - **No significant changes** occurred in internal control over financial reporting during the quarter[137](index=137&type=chunk) [PART II – OTHER INFORMATION](index=39&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the previous annual disclosure - **No material change** to risk factors has occurred during the 26 weeks ended June 27, 2019[138](index=138&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 5,350 shares in Q2 2019, with 2.8 million shares remaining under authorization Share Repurchases (Q2 2019) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | March 29 – April 25 | 4,731 | $40.14 | | April 26 – May 30 | 619 | $38.24 | | May 31 – June 27 | — | — | | **Total** | **5,350** | **$39.92** | - As of June 27, 2019, **2,770,833 shares remained available for repurchase** under existing Board of Directors authorizations[141](index=141&type=chunk) [Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This disclosure requirement is not applicable to the company's operations - **Not applicable**[142](index=142&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) Lists filed exhibits, including Sarbanes-Oxley certifications and XBRL-formatted financial statements - Exhibits filed include CEO and CFO certifications (Section 302), a written statement (18 U.S.C §1350), and **XBRL formatted financial data**[143](index=143&type=chunk)