The Marcus(MCS) - 2019 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Consolidated Financial Statements Presents unaudited financial statements reflecting the Movie Tavern acquisition and new lease standard adoption Consolidated Balance Sheets 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 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 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 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][40][72] - 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] 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 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][80] - 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] Theatres Segment Analysis 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] - At comparable theatres, the average ticket price increased 1.5% and average concession revenues per person increased 6.4% in H1 2019[98][100] Hotels and Resorts Segment Analysis 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] 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 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] - Total cash capital expenditures were $30.5 million in H1 2019, with $17.2 million for hotels and $12.9 million for theatres[129] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - No significant changes occurred in internal control over financial reporting during the quarter[137] PART II – OTHER INFORMATION Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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] Mine Safety Disclosures This disclosure requirement is not applicable to the company's operations - Not applicable[142] Exhibits 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]