The Marcus Corporation: Fiscal 2021 Form 10-K Summary
Business context and reporting period
The filing covers the 52-week fiscal year ended December 30, 2021, not a standalone fourth-quarter filing. The company operates two principal segments: movie theatres and hotels and resorts. At year-end, it operated 85 theatres with 1,064 screens and owned or managed approximately 5,400 hotel and resort rooms across 17 properties.
Fiscal 2021 remained materially affected by COVID-19, although theatres and hotels progressively reopened. All current theatres were open by year-end, while attendance, hotel occupancy, business travel and group demand remained below pre-pandemic levels.
Financial performance and key metrics
| Metric | Fiscal 2021 | Fiscal 2020 | Change |
|---|---|---|---|
| Total revenue | $458.2 million | $237.7 million | Up 92.8% |
| Operating income (loss) | $(41.5) million | $(178.4) million | Improved $137.0 million |
| Net loss attributable to Marcus | $(43.3) million | $(124.8) million | Improved $81.6 million |
| Diluted loss per share | $(1.42) | $(4.13) | Improved $2.71 |
| Adjusted EBITDA | $35.1 million | $(71.6) million | Improved $106.7 million |
| Cash flow from operations | $46.3 million | $(68.6) million | Improved $114.8 million |
Consolidated operating margin was approximately negative 9.0%, compared with negative 75.1% in fiscal 2020. Net margin was approximately negative 9.4%, compared with negative 52.5% in fiscal 2020. The company recorded a $15.7 million income tax benefit and $18.7 million of interest expense.
- Theatres: Revenue was $271.2 million, up 104.5%. Operating loss improved to $27.6 million from $121.4 million. Fiscal 2021 revenue was still 51.3% below fiscal 2019. Attendance increased 81.5% versus fiscal 2020, while average ticket price increased 11.1% and average concession revenue per patron increased 15.6%.
- Hotels and resorts: Revenue was $186.6 million, up 78.4%. The segment returned to operating income of $5.9 million from a $43.9 million operating loss. Company-owned hotel occupancy was 48.1%, ADR was $163.64 and RevPAR was $78.78. Compared with fiscal 2019, occupancy and RevPAR remained 24.0 percentage points and 30.0% lower, respectively.
- Cash and liquidity: Cash and cash equivalents were $17.7 million, with $221.4 million available under the $225.0 million revolving credit facility. Consolidated debt and short-term borrowings totaled $262.5 million, compared with $313.2 million at fiscal 2020 year-end. Debt-to-capitalization was 0.37.
- Capital expenditures: Cash capital expenditures were $17.1 million, compared with $21.4 million in fiscal 2020. The company received $22.1 million from property disposals and generated $10.9 million of net cash from investing activities.
Material changes versus prior comparable periods
- Revenue and operating results improved substantially because more theatres and hotels were open for more of the year, although both divisions remained below fiscal 2019 levels.
- The theatre division ended fiscal 2021 with 85 locations versus 89 at fiscal 2020 year-end; three theatres were permanently not reopened and one managed six-screen theatre was exited.
- The company recorded $5.8 million of impairment charges in fiscal 2021, compared with $24.7 million in fiscal 2020. Fiscal 2021 results benefited from approximately $10.7 million of government grants and federal tax credits.
- Fiscal 2021 included $3.2 million of gains on dispositions of property and other assets, including real estate and an equity investment.
- The company suspended dividends and did not repurchase shares in the open market during fiscal 2021. The credit agreement permits limited shareholder returns beginning in fiscal 2022, subject to specified conditions and a quarterly cap of $1.55 million.
- The company adopted ASU 2020-06 for convertible debt accounting, increasing reported long-term debt by approximately $21.4 million on January 1, 2021 and reducing capital in excess of par by approximately $16.5 million.
Outlook, commentary, risks and unusual items
Management expects continued recovery in fiscal 2022 but does not expect theatres or hotels to return fully to pre-pandemic performance. Theatre revenue is expected to improve but remain below fiscal 2019, while hotel recovery is expected to be constrained by slower business and group travel. Management expects fiscal 2022 cash capital expenditures of approximately $35 million to $45 million, including approximately $15 million to $20 million for theatres and $20 million to $25 million for hotels and resorts.
Management cited improving film availability, customer comfort, vaccination levels, leisure travel, premium large-format screens, higher concession spending and the company’s loyalty program as recovery drivers. It also expects to test subscription offerings, sports-viewing concepts, additional entertainment formats and further hotel management and joint-venture opportunities.
- COVID-19 variants, renewed government restrictions, consumer behavior and labor shortages could reduce demand, disrupt operations and impair liquidity.
- Theatre results depend heavily on the quantity, timing and appeal of film releases, theatrical release windows and competition from streaming and premium video-on-demand.
- Hotel recovery remains exposed to weak business and group travel, cancellation risk, economic conditions and seasonal demand.
- Debt agreements contain liquidity, EBITDA, leverage, capital expenditure and fixed-charge coverage requirements. The $47.3 million term loan balance was classified as short-term and matures in September 2022.
- Total contractual obligations were $696.4 million, including $215.1 million of long-term debt, $47.3 million of short-term borrowings, $310.2 million of operating lease obligations and $23.8 million of finance lease obligations.
- The company recorded no goodwill impairment, but impairment testing depends on forecasts of future cash flows and recovery from COVID-19.
Important facts for investors to verify
- Whether fiscal 2022 operating results satisfy the company’s EBITDA and minimum liquidity covenant thresholds.
- The repayment, refinancing or amendment of the $47.3 million term loan due in September 2022 and other scheduled debt maturities.
- The pace of recovery in theatre attendance, film supply, release windows, hotel occupancy, ADR, RevPAR and group bookings.
- Whether labor shortages, wage inflation and supply-chain disruption constrain operating capacity or margins.
- The timing and proceeds of planned real estate sales, estimated by management at approximately $10 million to $20 million over the following 12 months.
- The effect of potential conversion or cash settlement of the $100.1 million of 5.00% convertible senior notes due 2025.
- The continuation of dividend restrictions and the board’s future decisions regarding dividends and share repurchases.
- The assumptions supporting long-lived asset impairment tests and the risk of additional impairment charges if recovery is slower than expected.