The Marcus Corporation 2022 Q3 Form 10-Q Summary
Business context and reporting period
The Marcus Corporation operates movie theatres and hotels and resorts, with corporate activities reported separately. The filing covers the 13 weeks ended September 29, 2022, and the first 39 weeks of fiscal 2022. Fiscal 2022 is a 52-week year ending December 29, 2022. All amounts are in thousands unless otherwise stated.
Key financial metrics
| Metric | Third quarter 2022 | Third quarter 2021 | First 39 weeks 2022 | First 39 weeks 2021 |
|---|---|---|---|---|
| Total revenues | $183.7 million | $145.9 million | $514.4 million | $289.2 million |
| Operating income (loss) | $8.9 million | $6.3 million | $11.0 million | $(55.5) million |
| Operating margin | 4.9% | 4.3% | 2.1% | (19.2)% |
| Net earnings (loss) | $3.3 million | $1.8 million | $(2.7) million | $(49.7) million |
| Diluted EPS, Common Stock | $0.10 | $0.06 | $(0.09) | $(1.66) |
| Adjusted EBITDA | $27.9 million | $24.5 million | $68.5 million | $5.8 million |
- Theatre revenue was $101.3 million in the quarter and $310.2 million year to date, increases of 26.6% and 100.3%, respectively. Theatre operating income was $(0.7) million in the quarter and $7.7 million year to date.
- Hotels and resorts revenue was $82.3 million in the quarter and $204.0 million year to date, increases of 25.1% and 52.1%, respectively. Operating income was $14.1 million in the quarter and $18.0 million year to date.
- Company-owned hotel occupancy was 74.7% in the quarter and 63.0% year to date. Quarter ADR was $202.78 and RevPAR was $151.55; year-to-date ADR was $179.90 and RevPAR was $113.38.
- Net cash provided by operating activities was $60.4 million for the first 39 weeks, compared with $2.1 million in the prior-year period. Capital expenditures were $27.5 million, including approximately $8.2 million for theatres and $19.3 million for hotels and resorts.
- Cash, cash equivalents and restricted cash totaled $16.8 million at September 29, 2022, including $10.5 million of unrestricted cash. Revolving-credit availability was $202.8 million under the $225.0 million facility.
- Total debt and short-term borrowings, net of debt issuance costs, were $223.6 million, compared with $262.5 million at December 30, 2021. Debt-to-capitalization was 0.33, compared with 0.37 at year-end 2021.
Material changes versus the prior comparable period
- Results improved substantially as all theatres operated with normal days and hours, film releases increased, and hotel and resort demand recovered. The prior-year periods included temporary theatre closures, limited film availability, reduced travel, a $3.7 million impairment charge and COVID-related government grants.
- Theatre attendance increased 28.0% in the quarter and 97.8% year to date versus the prior year, but theatre revenue remained approximately 26.0% below the comparable 2019 quarter and 25.1% below the comparable 2019 year-to-date period.
- Hotel revenue before cost reimbursements exceeded 2019 levels by 8.9% in the quarter and 4.0% year to date. Year-to-date RevPAR remained 3.8% below 2019, reflecting lower occupancy despite higher room rates.
- On July 29, 2022, the company repaid $46.6 million of short-term term borrowings and retired the related term-loan facility. The credit agreement was amended to reduce the future fixed-charge coverage requirement from 3.0-to-1.0 to 2.5-to-1.0 beginning with the quarter ending March 30, 2023.
- The company reinstated quarterly dividends during the quarter, paying $0.05 per Common Stock share and $0.045 per Class B share. It paid $1.5 million of dividends during the first 39 weeks.
- The company received approximately $23.0 million of federal tax refunds, including interest, and $4.3 million of state theatre grants during the first 39 weeks. These benefits supported liquidity but are not necessarily recurring.
Guidance, outlook, risks and unusual items
- Management expects theatre operations to improve in fiscal 2023 but remain below comparable 2019 levels. Film release delays and production backlogs are expected to constrain results, particularly in early fiscal 2023, before film availability improves later in 2023 and 2024.
- Management expects continued improvement in hotels and resorts during the remainder of fiscal 2022 and fiscal 2023, but does not expect pre-pandemic occupancy levels in fiscal 2022 because business travel remains below historical levels.
- Group room bookings were approximately 5% below comparable 2019 levels for the remainder of fiscal 2022 and approximately 18% below 2019 levels for fiscal 2023 as of the filing date.
- Management estimated a fourth-quarter fiscal 2022 effective tax rate of approximately 24% to 28%, excluding changes in tax rates or one-time tax benefits. The filing does not provide full-year revenue or earnings guidance.
- Key risks include renewed COVID-19 restrictions or weaker consumer demand, film quantity and audience appeal, shortened theatrical windows, inflation and labor shortages, economic conditions, weather, business-travel recovery, competitive conditions and the company’s ability to satisfy debt covenants.
- The company stated that it expects sufficient liquidity to meet obligations and comply with debt covenants for at least 12 months from issuance of the financial statements. However, covenant compliance depends on operating recovery, movie release timing and consumer demand; management may need waivers or amendments if performance deteriorates.
- The credit agreement requires, among other matters, maximum debt-to-capitalization of 0.55-to-1.0, minimum liquidity requirements through December 29, 2022, EBITDA thresholds and capital-expenditure limitations. Borrowings under the revolver were subject to a 6.70% effective interest rate at September 29, 2022.
- No impairment indicators were identified in the first 39 weeks of 2022. The prior-year period included a $3.7 million impairment charge.
Important facts for investors to verify
- Whether theatre attendance and film availability recover sufficiently to close the remaining gap to 2019 revenue levels.
- Whether business travel, group bookings and hotel occupancy continue to improve without disproportionate labor, food and operating-cost inflation.
- Compliance with the credit agreement’s EBITDA, liquidity, leverage and future fixed-charge coverage covenants.
- The sustainability of liquidity after the nonrecurring federal tax refund, state grants and real-estate sale proceeds are excluded.
- The timing and amount of future capital expenditures, potential surplus-real-estate sales and the company’s ability to refinance or repay debt maturities, including the $100.1 million convertible senior notes due September 2025.
- Whether reinstated dividends remain permissible under the credit agreement and are supported by recurring cash flow.