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MARCUS CORP — Interim / Quarterly Report 2004
Apr 9, 2004
32859_10-q_2004-04-09_651b248e-dc08-4d62-98b3-e644c52b8522.zip
Interim / Quarterly Report
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10-Q 1 sdc706.htm 10-Q QUARTERLY REPORT MARKER FORMAT-SHEET="Head Major Center Bold-TNR" FSL="Project"
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
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FORM 10-Q
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(Mark One)
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| [X] |
|---|
| For the quarterly |
| period ended February 26, 2004 |
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| [ ] |
|---|
| For the transition |
| period from ___ to ___ |
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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) |
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Registrant's telephone number, including area code: (414) 905-1000
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 12, 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.
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Yes X No
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Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
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Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
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Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
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COMMON STOCK OUTSTANDING AT APRIL 7, 2004 - 20,474,636 CLASS B COMMON STOCK OUTSTANDING AT APRIL 7, 2004 - 9,324,560
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THE MARCUS CORPORATION
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INDEX
| Page | ||
|---|---|---|
| PART I - FINANCIAL INFORMATION | ||
| Item 1. | Consolidated Financial Statements: | |
| Balance Sheets | ||
| (February 26, 2004 and May 29, 2003) | 3 | |
| Statements of Earnings | ||
| (Thirteen and thirty-nine weeks ended February 26, 2004 | ||
| and February 27, 2003) | 5 | |
| Statements of Cash Flows | ||
| (Thirty-nine weeks ended February 26, 2004 | ||
| and February 27, 2003) | 6 | |
| Condensed Notes to Financial Statements | 7 | |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 10 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 19 |
| Item 4. | Controls and Procedures | 19 |
| PART II - OTHER INFORMATION | ||
| Item 6. | Exhibits and Reports on Form 8-K | 20 |
| Signatures | S-1 |
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PART I FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
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THE MARCUS CORPORATION Consolidated Balance Sheets
| (Unaudited) February 26, 2004 | (Audited) May 29, 2003 | |
|---|---|---|
| (in thousands) | ||
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 3,490 | $ 6,039 |
| Accounts and notes receivable | 14,380 | 26,059 |
| Receivables from joint ventures, net of reserves | 5,175 | 3,626 |
| Refundable income taxes | -- | 4,032 |
| Real estate and development costs | 6,788 | 5,338 |
| Other current assets | 9,930 | 5,771 |
| Total current assets | 39,763 | 50,865 |
| Property and equipment: | ||
| Land and improvements | 86,503 | 88,997 |
| Buildings and improvements | 628,850 | 623,156 |
| Leasehold improvements | 9,257 | 9,010 |
| Furniture, fixtures and equipment | 289,432 | 272,961 |
| Construction in progress | 14,835 | 6,850 |
| Total property and equipment | 1,028,877 | 1,000,974 |
| Less accumulated depreciation and amortization | 378,824 | 345,171 |
| Net property and equipment | 650,053 | 655,803 |
| Other assets: | ||
| Investments in joint ventures | 4,647 | 1,880 |
| Goodwill | 11,773 | 11,773 |
| Other | 35,379 | 35,136 |
| Total other assets | 51,799 | 48,789 |
| TOTAL ASSETS | $ 741,615 | $ 755,457 |
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See accompanying notes to consolidated financial statements.
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THE MARCUS CORPORATION Consolidated Balance Sheets
| (Unaudited) February 26, 2004 | ||||
|---|---|---|---|---|
| (in thousands) | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Notes payable | $ 1,122 | $ | 1,465 | |
| Accounts payable | 13,733 | 20,723 | ||
| Income taxes | 1,595 | -- | ||
| Taxes other than income taxes | 11,969 | 13,682 | ||
| Accrued compensation | 5,742 | 7,097 | ||
| Other accrued liabilities | 18,700 | 11,013 | ||
| Current maturities of long-term debt | 46,617 | 72,906 | ||
| Total current liabilities | 99,478 | 126,886 | ||
| Long-term debt | 196,139 | 203,307 | ||
| Deferred income taxes | 40,326 | 38,768 | ||
| Deferred compensation and other | 17,717 | 16,596 | ||
| Shareholders' equity: | ||||
| Preferred Stock, $1 par; authorized 1,000,000 shares; none issued | ||||
| Common Stock, $1 par; authorized 50,000,000 shares; | ||||
| issued 21,864,953 shares at February 26, 2004 and 21,684,328 shares at May 29, 2003 | 21,865 | 21,684 | ||
| Class B Common Stock, $1 par; authorized 33,000,000 | ||||
| shares; issued and outstanding 9,324,560 at February 26, 2004 and 9,505,185 at May 29, 2003 | 9,325 | 9,506 | ||
| Capital in excess of par | 42,483 | 41,751 | ||
| Retained earnings | 330,186 | 314,903 | ||
| Accumulated other comprehensive loss | (1,773 | ) | (2,181 | ) |
| 402,086 | 385,663 | |||
| Less unearned compensation on restricted stock | (664 | ) | -- | |
| Less cost of Common Stock in treasury (1,441,815 shares at | ||||
| February 26, 2004 and 1,687,595 shares at May 29, 2003) | (13,467 | ) | (15,763 | ) |
| Total shareholders' equity | 387,955 | 369,900 | ||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 741,615 | $ | 755,457 |
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See accompanying notes to consolidated financial statements.
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THE MARCUS CORPORATION Consolidated Statements of Earnings (Unaudited)
| (in thousands, except per share data) | February 26, 2004 — 13 Weeks | 39 Weeks | 13 Weeks | 39 Weeks | ||||
|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||
| Rooms and telephone | $ 35,111 | $ | 130,668 | $ | 34,714 | $ | 129,106 | |
| Theatre admissions | 26,441 | 77,652 | 26,854 | 76,737 | ||||
| Theatre concessions | 12,427 | 35,876 | 12,388 | 35,420 | ||||
| Food and beverage | 9,066 | 28,209 | 8,204 | 25,814 | ||||
| Other revenues | 11,386 | 37,469 | 9,826 | 33,273 | ||||
| Total revenues | 94,431 | 309,874 | 91,986 | 300,350 | ||||
| Costs and expenses: | ||||||||
| Rooms and telephone | 18,812 | 60,341 | 18,204 | 58,884 | ||||
| Theatre operations | 20,494 | 59,978 | 20,199 | 58,699 | ||||
| Theatre concessions | 2,721 | 7,914 | 2,651 | 7,925 | ||||
| Food and beverage | 7,483 | 21,961 | 6,725 | 19,923 | ||||
| Advertising and marketing | 6,332 | 20,987 | 6,744 | 21,439 | ||||
| Administrative | 9,899 | 31,000 | 10,257 | 30,367 | ||||
| Depreciation and amortization | 11,553 | 34,197 | 11,246 | 34,112 | ||||
| Rent | 594 | 1,813 | 628 | 1,845 | ||||
| Property taxes | 4,064 | 11,490 | 3,095 | 11,364 | ||||
| Preopening expenses | 118 | 273 | 18 | 21 | ||||
| Other operating expenses | 4,914 | 16,095 | 4,469 | 15,114 | ||||
| Total costs and expenses | 86,984 | 266,049 | 84,236 | 259,693 | ||||
| Operating income | 7,447 | 43,825 | 7,750 | 40,657 | ||||
| Other income (expense): | ||||||||
| Investment income (loss) | 420 | 1,411 | (1,577 | ) | (342 | ) | ||
| Interest expense | (4,013 | ) | (12,603 | ) | (4,809 | ) | (15,106 | ) |
| Gain (loss) on disposition of property, equipment and | ||||||||
| investments in joint ventures | (46 | ) | 759 | 1,539 | 2,859 | |||
| (3,639 | ) | (10,433 | ) | (4,847 | ) | (12,589 | ) | |
| Earnings from continuing operations before income taxes | 3,808 | 33,392 | 2,903 | 28,068 | ||||
| Income taxes | 1,524 | 13,360 | 1,168 | 11,410 | ||||
| Earnings from continuing operations | 2,284 | 20,032 | 1,735 | 16,658 | ||||
| Discontinued operations: | ||||||||
| Gain on sale of discontinued operations, net of applicable | ||||||||
| income taxes | -- | -- | -- | 1,216 | ||||
| Net earnings | $ 2,284 | $ | 20,032 | $ | 1,735 | $ | 17,874 | |
| Earnings per share - basic: | ||||||||
| Continuing operations | $ 0.08 | $ | 0.68 | $ | 0.06 | $ | 0.57 | |
| Discontinued operations | $ -- | $ | -- | $ | -- | $ | 0.04 | |
| Net earnings per share | $ 0.08 | $ | 0.68 | 0.06 | 0.61 | |||
| Earnings per share - diluted: | ||||||||
| Continuing operations | $ 0.08 | $ | 0.67 | $ | 0.06 | $ | 0.57 | |
| Discontinued operations | $ -- | $ | -- | $ | -- | $ | 0.04 | |
| Net earnings per share | $ 0.08 | $ | 0.67 | $ | 0.06 | $ | 0.61 |
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See accompanying notes to consolidated financial statements.
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THE MARCUS CORPORATION Consolidated Statements of Cash Flows (Unaudited)
| 39 Weeks Ended — February 26, 2004 | February 27, 2003 | |||
|---|---|---|---|---|
| (in thousands) | ||||
| OPERATING ACTIVITIES: | ||||
| Net earnings | $ 20,032 | $ | 17,874 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||
| Losses on loans to and investments in joint ventures, net of distributions | 733 | 3,030 | ||
| Gain on disposition of property, equipment and investments in joint ventures | (759 | ) | (4,909 | ) |
| Amortization of loss on swap agreement | 536 | 937 | ||
| Depreciation and amortization | 34,197 | 34,112 | ||
| Deferred income taxes | 1,500 | 1,109 | ||
| Deferred compensation and other | 1,121 | 3,317 | ||
| Changes in assets and liabilities: | ||||
| Accounts and notes receivable | 11,679 | 2,505 | ||
| Real estate and development costs | (1,450 | ) | (210 | ) |
| Other current assets | (4,159 | ) | (797 | ) |
| Accounts payable | (6,990 | ) | 290 | |
| Income taxes | 5,413 | 3,845 | ||
| Taxes other than income taxes | (1,713 | ) | (1,674 | ) |
| Accrued compensation | (1,355 | ) | (1,552 | ) |
| Other accrued liabilities | 7,687 | 4,507 | ||
| Total adjustments | 46,440 | 44,510 | ||
| Net cash provided by operating activities | 66,472 | 62,384 | ||
| INVESTING ACTIVITIES: | ||||
| Capital expenditures | (33,925 | ) | (15,529 | ) |
| Net proceeds from disposals of property, equipment and other assets | 6,923 | 10,927 | ||
| Purchase of interest in joint ventures | (3,500 | ) | (477 | ) |
| Increase in other assets | (199 | ) | (4,119 | ) |
| Cash advanced to joint ventures | (2,134 | ) | (1,862 | ) |
| Net cash used in investing activities | (32,835 | ) | (11,060 | ) |
| FINANCING ACTIVITIES: | ||||
| Debt transactions: | ||||
| Net proceeds from issuance of notes payable and long-term debt | 5,383 | 551 | ||
| Principal payments on notes payable and long-term debt | (39,183 | ) | (46,852 | ) |
| Equity transactions: | ||||
| Treasury stock transactions, except for stock options | (248 | ) | (185 | ) |
| Exercise of stock options | 2,612 | 765 | ||
| Dividends paid | (4,750 | ) | (4,702 | ) |
| Net cash used in financing activities | (36,186 | ) | (50,423 | ) |
| Net increase (decrease) in cash and cash equivalents | (2,549 | ) | 901 | |
| Cash and cash equivalents at beginning of year | 6,039 | 5,614 | ||
| Cash and cash equivalents at end of period | $ 3,490 | $ | 6,515 |
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See accompanying notes to consolidated financial statements.
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THE MARCUS CORPORATION
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CONDENSED NOTES TO FINANCIAL STATEMENTS FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED FEBRUARY 26, 2004 (Unaudited)
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- General
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Accounting Policies Refer to the Companys audited financial statements (including footnotes) for the fiscal year ended May 29, 2003, contained in the Companys Form 10-K Annual Report for such year, for a description of the Companys accounting policies.
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Basis of Presentation The consolidated financial statements for the thirteen and thirty-nine weeks ended February 26, 2004 and February 27, 2003 have been prepared by the Company without audit. In the opinion of management, all adjustments, consisting only of normal recurring accruals necessary to present fairly the unaudited interim financial information at February 26, 2004, 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.
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Comprehensive Income Accumulated other comprehensive loss consists of the unrecognized loss on hedging transactions, the accumulated net unrealized losses on available for sale securities and the minimum pension liability, all net of tax. Accumulated other comprehensive loss was $1,773,000 and $2,181,000 as of February 26, 2004 and May 29, 2003, respectively. Total comprehensive income for the thirteen and thirty-nine weeks ended February 26, 2004 was $2,410,000 and $20,440,000, respectively. Total comprehensive income for the thirteen and thirty-nine weeks ended February 27, 2003 was $1,841,000 and $18,299,000, respectively.
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Earnings Per Share (EPS) Basic earnings per share is computed by dividing net earnings by the weighted-average number of common shares outstanding. Diluted earnings per share is computed by dividing net earnings by the weighted-average number of common shares outstanding, adjusted for the effect of dilutive stock options and non-vested restricted stock.
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The following table illustrates the computation of basic and dilutive earnings per share for earnings from continuing operations and provides a reconciliation of the number of weighted-average basic and diluted shares outstanding:
| 13 Weeks Ended February 26, 2004 | 13 Weeks Ended February 27, 2003 | 39 Weeks Ended February 26, 2004 | 39 Weeks Ended February 27, 2003 | |
|---|---|---|---|---|
| (in thousands, except per share data) | ||||
| Numerator: | ||||
| Earnings from continuing operations | $ 2,284 | $ 1,735 | $ 20,032 | $ 16,658 |
| Denominator: | ||||
| Denominator for basic EPS | 29,664 | 29,389 | 29,580 | 29,365 |
| Effect of dilutive employee | ||||
| stock options and non-vested | ||||
| restricted stock | 275 | 153 | 199 | 168 |
| Denominator for diluted EPS | 29,939 | 29,542 | 29,779 | 29,533 |
| Earnings per share from continuing | ||||
| operations: | ||||
| Basic | $ 0.08 | $ 0.06 | $ 0.68 | $ 0.57 |
| Diluted | $ 0.08 | $ 0.06 | $ 0.67 | $ 0.57 |
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Stock-Based Compensation The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25), in accounting for its employee stock options. Under APB No. 25, because the number of shares is fixed and the exercise price of the Companys employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.
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For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options vesting period. Had compensation cost been determined based upon the fair value at the grant date for awards under the plans based on the provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, the Companys pro forma earnings and earnings per share would have been as follows:
| 13 Weeks Ended February 26, 2004 | ||||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share data) | ||||||||
| Net earnings, as reported | $ 2,284 | $ | 1,735 | $ | 20,032 | $ | 17,874 | |
| Deduct: Stock-based employee compensation | ||||||||
| expense determined under the fair value | ||||||||
| method for all option awards, net of | ||||||||
| related tax effects | (269 | ) | (295 | ) | (782 | ) | (884 | ) |
| Pro forma net earnings | $ 2,015 | $ | 1,440 | $ | 19,250 | $ | 16,990 | |
| Earnings per share: | ||||||||
| Basic - as reported | $ 0.08 | $ | 0.06 | $ | 0.68 | $ | 0.61 | |
| Basic - pro forma | $ 0.07 | $ | 0.05 | $ | 0.65 | $ | 0.58 | |
| Diluted - as reported | $ 0.08 | $ | 0.06 | $ | 0.67 | $ | 0.61 | |
| Diluted - pro forma | $ 0.07 | $ | 0.05 | $ | 0.65 | $ | 0.58 |
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New Accounting Pronouncements In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). FIN 46 requires variable interest entities to be consolidated by their primary beneficiaries. A primary beneficiary is the party that absorbs a majority of the entitys expected losses or residual benefits. FIN 46 is currently effective for all variable interest entities created or modified after January 31, 2003 and is effective for all variable interest entities, regardless of when created, in quarterly periods ending after March 15, 2004. The Company is currently determining if a limited number of the Companys arrangements are with variable interest entities. If it is determined that FIN 46 is applicable, the Company will conclude whether consolidation or disclosure would be required upon full adoption of FIN 46 and would measure the impact, if any, that this accounting change would have on its results of operations or financial position.
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- Business Segment Information
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The Companys primary operations are reported in the following three business segments: Limited-Service Lodging, Theatres and Hotels/Resorts. Corporate items include amounts not allocable to the business segments. Corporate revenues consist principally of rent and the corporate operating loss includes general corporate expenses. Corporate information technology costs and accounting shared services costs are allocated to the business segments based upon several factors, including actual usage and segment revenues.
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Following is a summary of business segment information for the thirteen and thirty-nine weeks ended February 26, 2004 and February 27, 2003 (in thousands):
| 13 Weeks Ended February 26, 2004 — Revenues | Limited- Service Lodging — $ 26,855 | Theatres — $ 40,850 | Hotels/ Resorts — $ 26,382 | $ | 344 | $ | 94,431 |
|---|---|---|---|---|---|---|---|
| Operating income (loss) | 73 | 10,387 | (1,377 | ) | (1,636 | ) | 7,447 |
| 13 Weeks Ended February 27, 2003 — Revenues | Limited- Service Lodging — $ 26,745 | $ | 40,852 | Hotels/ Resorts — $ 24,105 | $ | 284 | $ | 91,986 |
|---|---|---|---|---|---|---|---|---|
| Operating income (loss) | (425 | ) | 10,684 | (636 | ) | (1,873 | ) | 7,750 |
| 39 Weeks Ended February 26, 2004 | Limited- Service Lodging | Theatres | Hotels/ Resorts | Corporate Items | ||
|---|---|---|---|---|---|---|
| Revenues | $ 94,373 | $ 119,340 | $ 95,259 | $ 902 | $ | 309,874 |
| Operating income (loss) | 10,739 | 30,246 | 8,596 | (5,756 | ) | 43,825 |
| 39 Weeks Ended February 27, 2003 | Limited- Service Lodging | Theatres | Hotels/ Resorts | Corporate Items | ||
|---|---|---|---|---|---|---|
| Revenues | $ 94,737 | $ 116,225 | $ 88,250 | $ 1,138 | $ | 300,350 |
| Operating income (loss) | 9,841 | 28,416 | 7,885 | (5,485 | ) | 40,657 |
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ITEM 2. Management's Discussion and Analysis of Results of Operations and Financial Condition
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Special Note Regarding Forward-Looking Statements
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Certain matters discussed in this Managements Discussion and Analysis of Results of Operations and Financial Condition 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 will include words such as we believe, anticipate, expect or words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which could cause results to differ materially from those expected, including, but not limited to, the following: (i) our ability to successfully define and build the Baymont brand within the limited-service, mid-price without food and beverage segment of the lodging industry; (ii) the availability, in terms of both quantity and audience appeal, of motion pictures for our theatre division; (iii) the effects of increasing depreciation expenses and preopening and start-up costs due to the capital intensive nature of our businesses; (iv) the effects of adverse economic conditions in our markets, particularly with respect to our limited-service lodging and hotels and resorts divisions; (v) the effects of adverse weather conditions, particularly during the winter in the Midwest and in our other markets; (vi) the effects on our occupancy and room rates from the relative industry supply of available rooms at comparable lodging facilities in our markets; (vii) the effects of competitive conditions in the markets served by us; (viii) our ability to identify properties to acquire, develop and/or manage and continuing availability of funds for such development; and (ix) the adverse impact on business and consumer spending on travel, leisure and entertainment resulting from terrorist attacks in the United States, the United States responses thereto and subsequent hostilities. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this Form 10-Q and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
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RESULTS OF OPERATIONS
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General
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We report our consolidated and individual segment results of operations on a 52-or-53-week fiscal year ending on the last Thursday in May. Fiscal 2004 and 2003 are both 52-week years. We divide our fiscal year into three 13-week quarters and a final quarter consisting of 13 or 14 weeks. Our primary operations are reported in the following three business segments: movie theatres, limited-service lodging and hotels and resorts. As a result of the sale of our KFC restaurants during fiscal 2001, a payment received by us in fiscal 2003 related to the sale of the restaurant business has been presented as a gain on sale of discontinued operations in the accompanying financial statements and in this discussion.
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The following table sets forth revenues, operating income (earnings before other income/expense and income taxes), earnings from continuing operations, discontinued operations, net earnings and earnings per share for the third quarter and first three quarters of fiscal 2004 and 2003 (in millions, except for per share and variance percentage data):
| Third Quarter | First Three Quarters | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Variance | Variance | ||||||||||
| F2004 | F2003 | Amt. | Pct. | F2004 | F2003 | Amt. | Pct. | ||||
| Revenues | $ 94.4 | $ 92.0 | $ 2.4 | 2.7% | $ 309.9 | $ 300.4 | $ 9.5 | 3.2% | |||
| Operating income | 7.4 | 7.7 | (0.3 | ) | -3.9% | 43.8 | 40.7 | 3.1 | 7.8% | ||
| Earnings from continuing | 2.3 | 1.7 | 0.6 | 31.6% | 20.0 | 16.7 | 3.3 | 20.3% | |||
| operations | |||||||||||
| Discontinued operations | -- | -- | -- | -- | 1.2 | (1.2 | ) | - | 100.0% | ||
| Net earnings | 2.3 | 1.7 | 0.6 | 31.6% | 20.0 | 17.9 | 2.1 | 12.1% | |||
| Earnings per share -Diluted: | |||||||||||
| Continuing operations | $ .08 | $ .06 | $ .02 | 33.3% | $ .67 | $ .57 | $ .10 | 17.5% | |||
| Net earnings per share | $ .08 | $ .06 | $ .02 | 33.3% | $ .67 | $ .61 | $ .06 | 9.8% |
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Revenues in our two lodging divisions and operating income in our limited service lodging division increased during the third quarter of fiscal 2004 compared to the same quarter last year. Total operating income decreased slightly during the fiscal 2004 third quarter compared to the prior years third quarter due to small operating income decreases in our theatre and hotels/resorts divisions. Increases in our theatre and hotels/resorts division revenues and increases in the operating income of all three of our operating divisions contributed to the improved performance for the first three quarters of fiscal 2004 compared to the same period last year. The overall increase in operating income for the first three quarters of fiscal 2004 has been achieved despite continued pressure on operating margins from increased insurance costs, particularly increased health insurance costs.
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Increased investment income and decreased interest expense, partially offset by reduced gains on the disposition of property, equipment and investments in joint ventures, favorably impacted earnings from continuing operations during our fiscal 2004 third quarter and first three quarters compared to the comparable periods of fiscal 2003. Investment income, which includes interest earned on cash equivalents and notes receivable, including notes related to the sale of timeshare units in our hotels and resorts division, totaled $420,000 and $1.4 million during the third quarter and first three quarters of fiscal 2004, respectively. During the fiscal 2003 comparable periods, we reported a net investment loss of approximately $1.6 million and $340,000, respectively, due to a $2.2 million investment loss recorded during the third quarter of fiscal 2003 related to loans to and investments in a Baymont Inns & Suites joint venture.
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Our interest expense totaled $4.0 million and $12.6 million for the third quarter and first three quarters of fiscal 2004, respectively, compared to $4.8 million and $15.1 million during the same periods last year. The decreases are primarily the result of a $31.7 million, or 11.5%, reduction in our long-term debt at the end of the third quarter of fiscal 2004 compared to the end of the third quarter of fiscal 2003.
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We recognized a net loss on disposition of property, equipment and investments in joint ventures totaling $46,000 during the third quarter of fiscal 2004 compared to a gain of $1.5 million during the prior year same period. Our fiscal 2004 third quarter loss was the result of the sale of a theatre, which was partially offset by a gain on the disposition of a parcel of excess land. Gains on disposition of property and equipment for the first three quarters of fiscal 2004 were $760,000 compared to gains of $2.9 million during the first three quarters of fiscal 2003. The timing of periodic sales of our property and equipment may vary from quarter to quarter, resulting in variations in our gains or losses on disposition of property and equipment. We anticipate periodic additional sales of non-revenue generating property and equipment with the potential for additional gains on disposition during the remainder of fiscal 2004.
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During the first quarter of fiscal 2003, the buyer of our former KFC restaurants elected to terminate a provision of the asset purchase agreement that provided for potential additional future purchase price payments by paying us an additional $2.1 million. As a result, an additional gain on sale of discontinued operations, net of tax, of $1.2 million or $.04 per share was included in our results for the first three quarters of fiscal 2003.
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Theatres
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The following table sets forth revenues, operating income and operating margin for our theatre division for the third quarter and first three quarters of fiscal 2004 and 2003 (in millions, except for variance percentage and operating margin):
| Third Quarter | First Three Quarters | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Variance | Variance | ||||||||
| F2004 | F2003 | Amt. | Pct. | F2004 | F2003 | Amt. | Pct. | ||
| Revenues | $ 40.9 | $ 40.9 | $ -- | 0.0% | $ 119.3 | $ 116.2 | $ 3.1 | 2.7% | |
| Operating income | 10.4 | 10.7 | (0.3 | ) | -2.8% | 30.2 | 28.4 | 1.8 | 6.4% |
| Operating margin | 25.4 % | 26.2 % | 25.3 % | 24.4 % | |||||
| (% of revenues) |
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Consistent with the seasonal nature of the motion picture exhibition industry, our third quarter is typically one of the strongest periods for our theatre division due to the traditionally strong holiday movie season. Our theatre division again reported strong operating results for our fiscal 2004 third quarter, with operating income only slightly less than last years record third quarter results. Fiscal 2004 third quarter revenues were even with last years same quarter. Operating income decreased slightly compared to the same period last year due to an increase in snow removal and other repair and maintenance costs and the fact that last years third quarter included a favorable adjustment to real estate taxes of approximately $200,000 related to one theatre. Contributing to the improved operating margins during the first three quarters of fiscal 2004 were increased box office and concession revenues and reduced concession cost of sales and film advertising and rental costs. Increases in other ancillary revenues, including management fees and pre-show advertising income, also favorably impacted operating performance during both periods. In addition, our fiscal 2004 first three quarters operating income and margin were favorably impacted by an insurance settlement of approximately $490,000 (the majority of which was reported during our fiscal 2004 first quarter) related to a fire that occurred several years ago at one of our theatres.
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The following table breaks out revenues for the theatre division for the third quarter and first three quarters of fiscal 2004 and 2003 (in millions, except for variance percentage):
| Third Quarter | First Three Quarters | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Variance | Variance | ||||||||
| F2004 | F2003 | Amt. | Pct. | F2004 | F2003 | Amt. | Pct. | ||
| Box office receipts | $ 26.5 | $ 26.9 | $ (0.4 | ) | -1.5% | $ 77.7 | $ 76.7 | $ 1.0 | 1.2% |
| Concession revenues | 12.4 | 12.4 | -- | 0.3% | 35.9 | 35.4 | 0.5 | 1.3% | |
| Other revenues | 2.0 | 1.6 | 0.4 | 23.1% | 5.7 | 4.1 | 1.6 | 42.9% | |
| Total revenues | $ 40.9 | $ 40.9 | $ -- | 0.0% | $ 119.3 | $ 116.2 | $ 3.1 | 2.7% |
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The increase in our box office receipts for the first three quarters of fiscal 2004 compared to the same period last year was due primarily to an increase in our average ticket price, as attendance decreased slightly during both our fiscal 2004 third quarter and first three quarters compared to the same periods last year. Our average ticket price increased 1.6% and 3.2%, respectively, during the third quarter and first three quarters of fiscal 2004 compared to the same periods last year. Modest price increases contributed to these average ticket price increases, with the majority of the year-to-date increase due to the fact that this years first quarter film product included an unusually high number of R-rated movies. Such strong adult admission motion pictures appeal to a smaller audience but result in a higher average ticket price due to fewer child admissions. Our average concession sales per person during our fiscal 2004 third quarter and first three quarters increased 3.4% and 3.1%, respectively, compared to the same periods last year, although our overall concession revenues have only increased 1.3% year-to-date, due to the slightly reduced attendance during our fiscal 2004 first three quarters.
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Total theatre attendance decreased 3.0% during our fiscal 2004 third quarter compared to total attendance during the same period last year. For the first three quarters of fiscal 2004, total attendance is down 1.9% compared to the first three quarters of fiscal 2003. Our fiscal 2004 third quarter started very strong, with holiday movies such as Somethings Gotta Give , Cheaper by the Dozen and Lord of the Rings: The Return of the King performing very well and contributing to an all-time record week at the box office during the last week in December. Unfortunately, films during January and February did not perform as well, resulting in six consecutive weeks of declines in box office revenues compared to the prior year and an overall decrease in attendance for the quarter. The third quarter of fiscal 2004 included four films that produced box office receipts in excess of $1.0 million for us, compared to six films that reached that amount during the third quarter of fiscal 2003.
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Our fiscal 2004 fourth quarter has started off extremely well for the division due primarily to the strong box office appeal of The Passion of the Christ . Additional films such as Starsky and Hutch , Hidalgo and Scooby Doo 2: Monsters Unleashed have also performed well. Comparisons to last years fourth quarter may also be favorably impacted by the fact that last years initial television coverage of the war in Iraq may have negatively impacted theatre attendance. Conversely, last years fourth quarter, which included the traditionally strong movie-going Memorial Day weekend, ended very strong, with films such as X-Men 2 , Matrix Reloaded and Bruce Almighty performing very well. This years May film product includes several films that are expected to perform very well, such as Van Helsing , Troy and Shrek 2 .
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However, Memorial Day weekend will fall in the first quarter of fiscal 2005 this year and will impact fourth quarter comparisons to last year. The extended outlook for film product in the summer appears very strong, with movies such as Day After Tomorrow , Harry Potter and the Prisoner of Azkaban and Spider-Man 2 expected to produce blockbuster results. Revenues for the theatre business and the motion picture industry in general are heavily dependent upon the general audience appeal of available films, together with studio marketing, advertising and support campaigns, all factors over which we have no control.
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We ended the third quarter of fiscal 2004 with a total of 454 company-owned screens in 42 theatres and 40 managed screens in 4 theatres compared to 454 company-owned screens in 43 theatres and 34 managed screens in 3 theatres at the end of the same period last year. Six new company-owned screens have opened during fiscal 2004, including four additional screens at a theatre in Menomonee Falls, Wisconsin and one screen at a Madison, Wisconsin theatre that opened late in our fiscal 2004 second quarter and a new Ultra Screen (our fourth) at a theatre in Elgin, Illinois that opened at the end of our third quarter. A new six-screen theatre in Tomah, Wisconsin, owned by the Ho-Chunk Indian Nation and managed by our theatre division under a long-term contract, opened early in our fiscal 2004 third quarter. We also closed and sold a six-screen theatre in Minnesota during the third quarter. We continue to review additional opportunities to add new screens to existing locations and to develop new locations in and around our existing markets. We recently announced plans to build a new 10 to 12-screen theatre in Saukville, Wisconsin. Construction on the new theatre, which will be expandable up to 20 screens, is expected to begin shortly.
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Limited-Service Lodging
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The following table sets forth revenues, operating income and operating margin for our limited-service lodging division for the third quarter and first three quarters of fiscal 2004 and 2003 (in millions, except for variance percentage and operating margin):
| Third Quarter | First Three Quarters | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Variance | Variance | ||||||||||
| F2004 | F2003 | Amt. | Pct. | F2004 | F2003 | Amt. | Pct. | ||||
| Revenues | $ 26.9 | $ 26.7 | $ | 0.2 | 0.4% | $ 94.4 | $ 94.7 | $ (0.3 | ) | - | 0.4% |
| Operating income (loss) | 0.1 | (0.4 | ) | 0.5 | 117.2% | 10.7 | 9.8 | 0.9 | 9.1% | ||
| Operating margin | 0.3 % | -1.6 | % | 11.4 % | 10.4 % | ||||||
| (% of revenues) |
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Comparable Baymont Inns & Suites experienced a 0.9% and 0.5% increase in revenue per available room, or RevPAR, during our fiscal 2004 third quarter and first three quarters, respectively, compared to the same periods last year. The increase in RevPAR during the third quarter was the result of a 1.7% increase in our average daily rate (ADR), partially offset by a 0.4 percentage point decrease in occupancy percentage (number of occupied rooms as a percentage of available rooms). Comparable Baymont Inns & Suites experienced a 0.1 percentage point increase in occupancy percentage and a 0.4% increase in ADR during the first three quarters of fiscal 2004, compared to the same period last year. Reduced business travel, as companies continue to respond cautiously to the current economic environment, continues to dampen room demand and create significant pricing pressure. The overall decline in division revenues during the first three quarters of fiscal 2004 is primarily the result of a decrease in
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Woodfield Suites revenues and the fact that we had one fewer company-owned Baymont Inn & Suites open during our fiscal 2004 first three quarters compared to the same period last year, partially offset by an increase in franchise revenues.
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We owned and operated seven Woodfield Suites all-suite hotels during the first three quarters of both fiscal 2004 and 2003. Revenues from Woodfield Suites decreased during the third quarter and first three quarters of fiscal 2004 compared to the same periods of fiscal 2003 due primarily to reduced occupancy and ADR, with resulting RevPAR decreases of 9.0% and 6.3%, respectively, compared to the same periods last year. Woodfield Suites dependence on business travelers is generally greater than that of Baymont Inns & Suites, contributing to the greater revenue decline.
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Data received from outside industry resources, such as Smith Travel Research, indicates that our company-owned or operated Baymont Inns & Suites have gained market share during our fiscal 2004 first three quarters relative to our specific competitive set in our markets. We believe that our continued sales and marketing efforts to increase brand awareness, including more effectively utilizing all channels of distribution, continuing to introduce our brand and facilities to many new customers and differentiating it from our competitors, has contributed to the improved revenue performance relative to our competitors. Revenues generated from our reservation center and the various internet reservation portals available to the hotel industry continue to increase and we expect continued growth from these revenue sources in the future. Year-to-date, we have experienced an approximately 30% increase in reservations booked through our Baymont web site. Membership in our frequent stay program, Guest Ovations , now exceeds 330,000 and has contributed nearly one-quarter of our revenues during the first three quarters of fiscal 2004.
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An improvement in the limited-service lodging divisions operating margin during the third quarter of fiscal 2004 compared to the same period last year resulted in a favorable increase in operating income during the quarter. Continued cost controls, particularly in our administrative group, and increased income from our franchising operations contributed to the improved performance during our fiscal 2004 third quarter and first three quarters. Contributing to the increase in franchising income was improved performance by our franchisees as well as an overall reduction in administrative costs of our franchising operation. Fiscal 2004 first three quarters franchising results have also benefited from the inclusion of a termination fee from a former franchisee.
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Our overall improvement in revenues in the division remains primarily driven by leisure customers, as evidenced by improvements in our occupancy percentage on weekends and holiday periods. Our fiscal 2004 third quarter performance benefited from the fact that Valentines Day fell on a Saturday this year and our Houston properties benefited from business related to the Super Bowl. We remain cautiously optimistic that an improved business climate as a response to the strengthening economy should increase business travel during calendar 2004. We were encouraged by the fact that Baymont Inns & Suites RevPAR increased nearly 3.5% during February, the last month of our third quarter. Our ability to continue to increase our operating margin will likely be dependent upon further improvement in the economy in general and business travel in particular, resulting in increased room demand and reduced pricing pressure. The fact that we have been able to increase our ADR during the last two quarters is encouraging. There is some uncertainty regarding the impact that rising gasoline prices may have on travel in the coming months, however.
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At the end of our fiscal 2004 third quarter, we owned or operated 94 Baymont Inns & Suites and franchised an additional 84 Inns, bringing the total number of Baymont Inns & Suites in operation to 178. Two franchised locations opened during the first three quarters of fiscal 2004 and five franchised locations left the system. In addition, there are currently six approved franchised locations and one company-owned property under construction or in development. During the second quarter of fiscal 2004, we opened our first Baymont Inn & Suites in the important California market, a joint venture property that continues to outperform our expectations. A company-owned property under construction, our first urban Baymont Inn & Suites, is being built in downtown Chicago, Illinois and is currently expected to open during the third quarter of fiscal 2005.
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As a result of the reduced demand for lodging and a constrained financing market for new hotel development, industry supply growth has slowed considerably. Accordingly, we currently have significantly fewer new franchised inns in development than previously planned. As industry conditions improve, we hope to increase the pace of our franchise growth. Conversely, we also continue to believe that the significantly reduced supply growth throughout the industry should favorably impact operating results of existing hotels as an economic recovery takes hold.
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Hotels and Resorts
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The following table sets forth revenues, operating income and operating margin for our hotels and resorts division for the third quarter and first three quarters of fiscal 2004 and 2003 (in millions, except for variance percentage and operating margin):
| Third Quarter | First Three Quarters | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Variance | Variance | |||||||||||
| F2004 | F2003 | Amt. | Pct. | F2004 | F2003 | Amt. | Pct. | |||||
| Revenues | $ 26.4 | $ | 24.1 | $ | 2.3 | 9.4% | $ 95.3 | $ 88.3 | $ 7.0 | 7.9% | ||
| Operating income (loss) | (1.4 | ) | (0.6 | ) | (0.8 | ) | - | 116.9% | 8.6 | 7.9 | 0.7 | 9.0% |
| Operating margin | -5.2 | % | -2.6 | % | 9.0 % | 8.9 % | ||||||
| (% of revenues) |
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Our third quarter is historically the weakest quarter of the year for our hotels and resorts division due to reduced travel during the winter months at our predominantly Midwestern properties. Total division revenues increased during the third quarter and first three quarters of fiscal 2004 compared to the same periods last year, with virtually all company-owned properties reporting increased RevPAR compared to the prior year. Continued improvement at our newest properties, as well as improved performance at our group-oriented hotels and resorts, have contributed to the improved operating results during our fiscal 2004 first three quarters. Also contributing to the improvement in fiscal 2004 revenues was increased food and beverage revenues, which are at least partially attributable to the successful introduction of our chop house restaurant concept at our Madison, Wisconsin and Kansas City, Missouri hotels. Comparisons to last years third quarter revenues were also favorably impacted by the fact that last year during the third quarter, we were required to account for current sales of timeshare units at our vacation ownership development at the Grand Geneva Resort & Spa under the percentage of completion method while our new building was under construction. That new building opened at the end of fiscal 2003 and all revenues are currently being recognized as incurred. Excluding timeshare revenues, total revenues for this division increased 7.7% during the fiscal 2004 third quarter compared to the prior years same period.
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The divisions total RevPAR for company-owned properties increased 7.5% and 7.3%, respectively, during our fiscal 2004 third quarter and first three quarters compared to the same periods last year. According to data received from outside industry resources, such as Smith Travel Research, our third quarter RevPAR improvement compares favorably to industry averages of 3-4% for the upper-upscale segment of the lodging industry for the same time period. Our occupancy percentage increased 3.1 and 3.4 percentage points, respectively, during our fiscal 2004 third quarter and first three quarters compared to the same periods last year. Our ADR has also increased during these same time periods, increasing 0.5% and 1.2%, respectively, compared to the third quarter and first three quarters of fiscal 2003.
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Our hotels and resorts division reported an increased operating loss during the fiscal 2004 third quarter compared to the same period last year primarily due to the fact that last years third quarter results were favorably impacted by nearly $700,000 of real estate tax adjustments, the result of reductions in our tax assessments in the wake of September 11 and the subsequent impact it had on our industry. Comparisons to last years first three quarters were also negatively impacted by the fact that the divisions fiscal 2004 first three quarters operating results included approximately $210,000 of preopening expenses related to the introduction of the new restaurant concepts noted earlier. Despite these unfavorable comparisons, the divisions operating income for the first three quarters of fiscal 2004 has increased 9.0% over the prior year as a result of the overall improvement in revenues at our hotels and resorts.
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Although it continues to be a challenging environment for hotels, we are encouraged by recent trends and the near-term outlook for our properties appears promising. The leisure customer segment has continued to perform well for us and business travel appears to be showing some signs of rebounding. Based upon current advanced bookings, our fourth quarter may be much better than last year at several of our properties and our summer business is already looking very good. Lead times on advanced bookings continue to be shorter than historical levels, but we are experiencing slightly lengthening booking windows. However, business and group travel has still not returned to pre-September 11 levels, indicating to us that companies are remaining cautious in their travel plans. Nonetheless, we expect our division operating results to improve during the fourth quarter of fiscal 2004 compared to the same period last year.
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During the fiscal 2004 third quarter, we announced that we had entered into a joint venture with the developer of the Timber Ridge Lodge to develop a luxury condominium hotel just off the Las Vegas Strip. The Platinum Suite Hotel & Spa will feature 255 condo units, a luxury spa, indoor and outdoor swimming pools, 8,440 square feet of meeting space, including a 4,500 square-foot rooftop terrace overlooking the Strip, restaurants, lounge and upscale bar. The hotel will be located just over one block east of the Strip near the Bellagio, Ballys and Caesars Palace casinos. The condo units will be priced between $300,000 and $1.0 million and the hotel will offer a unit rental program for owners who wish to generate income from their units.
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We have contributed an initial $3.5 million to this joint venture, representing our 50% share of the land acquisition costs and estimated initial pre-development costs. The initial sales phase of the project began in February with the opening of a sales center and model unit, along with an aggressive marketing program targeting both U.S. and international markets. During the initial sales phase, our hotels and resorts division operating income will be negatively impacted by our share of the sales and marketing expenses related to this project. During our fiscal 2004 third
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quarter, our division operating loss included approximately $200,000 of these costs, contributing to our overall increase in operating loss this quarter compared to the prior years same period. We currently expect our fiscal 2004 fourth quarter to be negatively impacted by approximately the same amount, although the actual timing of these expenditures is subject to change.
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The initial response to the units has been very positive and as a result, we believe that project construction may begin this summer, with a targeted opening date of December 2005 or shortly thereafter. We will likely slightly increase our equity contribution by a yet to be determined amount when construction begins. Upon completion of construction and closing of the condo unit sales, our hotels and resorts division would share in what may be a significant development profit on the project. The division would then manage the hotel for a fee and share in any joint venture earnings on the common areas, such as the restaurants, spa and bars.
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Construction continues on a new spa at our Miramonte Resort, with a grand opening of this new amenity scheduled for April. We continue to pursue several new growth opportunities, with a focus on expanding our management business and the possibility of making small equity investments in some projects as necessary. The number of projects that we are actively exploring appears to be increasing slightly, which we find encouraging.
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FINANCIAL CONDITION
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Our lodging and movie theatre businesses each generate significant and consistent daily amounts of cash because each segments revenues are derived predominantly from consumer cash purchases. We believe that these relatively consistent and predictable cash sources, together with the availability of $100 million of unused credit lines as of the end of the third quarter, should be adequate to support the near-term anticipated ongoing operational liquidity needs of our businesses.
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Our existing five-year, $125 million credit facility with several banks expires during the fourth quarter of fiscal 2004. We expect to execute a new five-year agreement at continued favorable terms in April 2004. As of February 26, 2004, we classified $30.4 million of outstanding borrowings under commercial paper agreements backed by unused credit lines as current, pending new credit agreements. We expect these borrowings to be reclassified to long-term debt upon execution of the new agreement.
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Net cash provided by operating activities increased by $4.1 million during the first three quarters of fiscal 2004 to $66.5 million, compared to $62.4 million during the prior years first three quarters. The increase was due primarily to improved operating results and a favorable timing difference in collections of accounts and notes receivable, partially offset by an unfavorable timing difference in the payment of accounts payable.
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Net cash used in investing activities during our fiscal 2004 first three quarters totaled $32.8 million, compared to $11.1 million during our fiscal 2003 first three quarters. The increase in net cash used in investing activities was primarily the result of increased capital expenditures, slightly reduced cash proceeds from disposals of property and equipment and a purchase of an interest in a joint venture. Capital expenditures totaled $33.9 million during the first three quarters of fiscal 2004 compared to $15.5 million during the prior years first three quarters. Fiscal 2004 first three quarters capital expenditures included $20.5 million incurred in our
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limited-service lodging division, $8.2 million incurred in our theatre division and $4.1 million incurred in our hotels and resorts division to fund ongoing capital projects. The decrease in cash proceeds was primarily due to the additional payment on the sale of our KFC restaurants received during last years first quarter. The purchase of the interest in a joint venture relates to the new Las Vegas project discussed earlier in the hotels and resorts section.
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Net cash used in financing activities during the first three quarters of fiscal 2004 totaled $36.2 million compared to $50.4 million during the first three quarters of fiscal 2003. Our principal payments on notes payable and long-term debt totaled $39.2 million during the first three quarters of fiscal 2004 compared to $46.9 million during the same period last year, with minimal new debt added in either year. Fiscal 2004 principal payments included full payment of a $15 million term note with one of our banks. In addition, excess cash available from operations, after investing activities, was used to reduce our outstanding commercial paper borrowings during the first three quarters. Our debt capitalization ratio was 0.38 at February 26, 2004, compared to 0.43 at the prior fiscal year end. Based upon our current expectation that fiscal 2004 capital expenditures will total approximately $50 million, we currently anticipate that our long-term debt total and debt-capitalization ratio will remain below fiscal 2003 levels during the remainder of fiscal 2004.
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The actual timing and extent of the implementation of our current expansion plans will depend in large part on industry and general economic conditions, our financial performance and available capital, the competitive environment, evolving customer needs and trends and the availability of attractive opportunities. It is likely that our plans will continue to evolve and change in response to these and other factors.
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
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We have not experienced any material changes in our market risk exposures since May 29, 2003.
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ITEM 4. Controls and Procedures
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a. Evaluation of disclosure controls and procedures
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Based on their evaluations, as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the Exchange Act)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
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b. Changes in internal controls
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There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
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PART II OTHER INFORMATION
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ITEM 6. Exhibits and Reports on Form 8-K
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a. Exhibits
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31.1 Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2 Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32 Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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b. Reports on Form 8-K
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We furnished a current report on Form 8-K dated March 19, 2004 pursuant to Item 9 with respect to our press release for our quarter ended February 26, 2004 and related disclosure requirements of Regulation FD.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: April 9, 2004 | THE MARCUS CORPORATION — By: | /s/ Stephen H. Marcus |
|---|---|---|
| Stephen H. Marcus Chairman of the Board, President and Chief Executive Officer | ||
| Date: April 9, 2004 | By: | /s/ Douglas A. Neis |
| Douglas A. Neis Chief Financial Officer and Treasurer |
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