General
We report our consolidated and individual segment results of operations on a 52- or 53-week fiscal year ending on the last Thursday in December. 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 two business segments: theatres, and hotels and resorts. Fiscal 2019 was a 52-week year, beginning onDecember 28, 2018 and ending onDecember 26, 2019 . Fiscal 2020 was a 53-week year, beginning onDecember 27, 2019 and ending onDecember 31, 2020 . Fiscal 2021 was a 52-week year, beginning onJanuary 1, 2021 and ending onDecember 30, 2021 . Fiscal 2020 and fiscal 2021 results by quarter were significantly impacted by the COVID-19 pandemic, which began late in our fiscal 2020 first quarter and impacted our results for the remainder of fiscal 2020 and throughout fiscal 2021. Under normal conditions, our first fiscal quarter typically produces the weakest operating results in our hotels and resorts division due primarily to the effects of reduced travel during the winter months. The quality of film product in any given quarter typically impacts the operating results in our theatre division. Our second and third fiscal quarters generally produce our strongest operating results because these periods coincide with the typical summer seasonality of the movie theatre industry and the summer strength of the lodging business. Due to the fact that the week between Christmas andNew Year's Eve is historically one of the strongest weeks of the year for our theatre division, the specific timing of the last Thursday in December impacts the results of our fiscal first and fourth quarters in that division, particularly when we have a 53-week year. This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") generally discusses fiscal 2021 and fiscal 2020 items and year-to-year comparisons between fiscal 2021 and fiscal 2020. Discussions of fiscal 2019 items and year-to-year comparisons between fiscal 2020 and fiscal 2019 that are not included in this MD&A can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 . Within this MD&A amounts for totals, subtotals, and variances may not recalculate exactly within tables due to rounding as they are calculated using the unrounded numbers.
Impact of the COVID-19 pandemic
The COVID-19 pandemic has had an unprecedented impact on the world and both of our business segments. The situation continues to be volatile and the social and economic effects are widespread. As an operator of movie theatres, hotels and resorts, restaurants and bars, each of which consists of spaces where customers and guests gather in close proximity, our businesses are significantly impacted by protective actions that federal, state and local governments have taken to control the spread of the pandemic, and our customers' reactions or responses to such actions. These actions have included, among other things, declaring national and state emergencies, encouraging social distancing, restricting freedom of movement and congregation, mandating non-essential business closures, issuing curfews, limiting business capacity, mandating mask-wearing and/or proof of vaccination, and issuing shelter-in-place, quarantine and stay-at-home orders. We began fiscal 2021 with approximately 52% of our theatres open. As state and local governments eased restrictions in several of our markets and movie studios released several new films, we gradually reopened theatres during the first half of fiscal 2021. We ended fiscal 2021 with all of our theatres open (excluding three theatres which were permanently closed during fiscal 2021). The majority of our reopened theatres operated with reduced operating days (Fridays, Saturdays, Sundays and Tuesdays) and reduced operating hours during the fiscal 2021 first quarter. By the end ofMay 2021 , we had returned the vast majority of our theatres to normal operating days (seven days per week) and operating hours. During fiscal 2021, all of our reopened theatres operated at significantly reduced attendance levels compared to prior pre-COVID-19 pandemic years due to customer concerns related to the COVID-19 pandemic and a reduction in the number of new films released. While still below pre-COVID-19 levels, attendance has gradually improved beginning inJune 2021 as the number of vaccinated individuals increased, more films were released, and customer willingness to return to movie theatres increased.
We started fiscal 2021 with all eight company-owned hotels and all but one of our managed hotels open. The majority of our restaurants and bars at our hotels and resorts were open in fiscal year 2021, operating under applicable terms
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national and local restrictions and guidelines and, in some cases, reduced hours of operation. The majority of our hotels and restaurants are generating reduced revenue compared to years prior to the COVID-19 pandemic, although hotel occupancy increased throughout fiscal 2021. We reopened one of our two SafeHouse® restaurants and bars in
Maintaining and protecting a strong balance sheet has always been a core philosophy ofThe Marcus Corporation during our 86-year history, and, despite the COVID-19 pandemic, our financial position remains strong. As ofDecember 30, 2021 , we had a cash balance of$17.7 million ,$221.4 million of availability under our$225.0 million revolving credit facility, and our debt-to-capitalization ratio (including short-term borrowings) was 0.37. With our strong liquidity position, combined with the expected receipt of additional state grants, income tax refunds and proceeds from the sale of surplus real estate (discussed below), we believe we are positioned to meet our obligations as they come due and continue to sustain our operations throughout fiscal 2022 and beyond, even if our properties continue to generate reduced revenues during these periods. We will continue to work to preserve cash and maintain strong liquidity to endure the impacts of the global pandemic, even if it continues for a prolonged period of time. Early in the third quarter of fiscal 2021, in conjunction with an amendment to our revolving credit agreement (described in detail in the Liquidity section below), we paid down a portion of our term loan facility using borrowings from our revolving credit facility, reducing the balance of our short-term borrowings from approximately$83.5 million to$50.0 million . In conjunction with the amendment, we extended the maturity date of the term loan facility toSeptember 22, 2022 . Early in our first quarter of fiscal 2021, we received the remaining$5.9 million of requested tax refunds from our fiscal 2019 tax return. During the first quarter of fiscal 2021, we filed income tax refund claims of$24.2 million related to our fiscal 2020 tax return, with the primary benefit derived from net operating loss carrybacks to prior years. We received approximately$1.8 million of this refund inJuly 2021 . Due to significant delays in processing refunds by the Internal Revenue Service, the remaining$22.3 million refund, plus interest, was not received untilFebruary 2022 . We also generated additional income tax loss carryforwards during fiscal 2021 that will benefit future years. During the fourth quarter of fiscal 2020 and continuing into fiscal 2021, a number of states elected to provide grants to certain businesses most impacted by the COVID-19 pandemic, utilizing funds received by the applicable state under provisions of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act") or subsequent federal relief programs. We received$4.9 million of these prior year grants inJanuary 2021 . We were awarded and received an additional$1.3 million in theatre grants during the first quarter of fiscal 2021 and an additional$1.9 million in hotel grants during the third quarter of fiscal 2021. We were also awarded an additional$4.5 million in theatre grants during the fourth quarter of fiscal 2021, the majority of which was not received untilJanuary 2022 . All of these grants further contributed to our current strong liquidity position. We also continue to pursue sales of surplus real estate and other non-core real estate to further enhance our liquidity. During the first quarter of fiscal 2021, we sold an equity interest in a joint venture, generating net proceeds of approximately$4.2 million . During the third quarter of fiscal 2021, we sold several land parcels, generating additional net proceeds of approximately$4.8 million . During the fourth quarter of fiscal 2021, we sold a retail center inSt. Louis, Missouri and a former budget theatre, generating additional net proceeds of approximately$12.6 million . As ofDecember 30, 2021 , we had letters of intent or contracts to sell several pieces of real estate with a total carrying value of$4.9 million . We believe we may receive total sales proceeds from real estate sales during the next 12 months totaling approximately$10 -$20 million , depending upon demand for the real estate in question. We remain optimistic that the theatre industry is in the process of rebounding and will continue to benefit from pent-up social demand now that a greater percentage of the population is vaccinated, the majority of state and local restrictions have been lifted, and people seek togetherness with a return to normalcy. We believe the approval of vaccines for children ages 5-11 has contributed to parents feeling more comfortable to visit a movie theatre, which should bolster the market for films aimed at children and families, a genre in which we have historically performed very well. We were very encouraged by the performance of multiple films released during the second half of fiscal 2021. Following up on the success of Shang-Chi and the Legend of the Ten Rings, which was released exclusively in theatres,Disney announced that all of its remaining films for 2021 would receive an exclusive theatrical window. Sony's Spider-Man: No Way Home, which was released in mid-December, became the best performing film since the onset of the pandemic and has generated the 3rd highestU.S. admission revenues of all time. Total theatre division revenues, expressed as a percentage of fiscal 2019 revenues, increased every quarter of fiscal 2021, increasing from 20% in the first quarter to 32% in the second quarter, 59% in the third quarter and 82% in the fourth quarter. 26
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We still expect a return to "normalcy" to span multiple months driven by a continued increase in vaccinations and a gradual ramp-up of consumer comfort with public gatherings. The increase of first the Delta variant and subsequently the Omicron variant of the disease has resulted in changing government guidance on indoor activities in some communities, which impacted consumer comfort early in fiscal 2022. With the number of COVID-19 cases now beginning to decline, industry customer surveys indicate that consumer comfort is once again increasing. As described further below in the Theatres section, a significant number of films originally scheduled to be released during fiscal 2020 and 2021 were delayed until fiscal 2022, further increasing the quality and quantity of films that we expect to be available during future time periods. As we expected, the primary customer for hotels during fiscal 2021 continued to come from the "drive-to leisure" market. Demand from this customer segment has exceeded our expectations. Most organizations implemented travel bans at the onset of the pandemic, only allowing essential travel. It is likely that business travel will continue to be limited in the near term, although we are beginning to experience some increases in travel from this customer segment. Total hotel division revenues, expressed as a percentage of fiscal 2019 revenues, have also increased throughout fiscal 2021, including an increase from 51% in the first quarter to 57% in second quarter, 88% in the third quarter and 82% in the fourth quarter, with the largest improvement in the third quarter coinciding with busy summer leisure travel and several demand-generating events in certain key markets. As of the date of this report, our group room revenue bookings for fiscal 2022 - commonly referred to in the hotels and resorts industry as "group pace" - is running behind where we would typically be at this same time in prior years (pre-pandemic), but group pace has improved from earlier in the fiscal year and we have experienced increased booking activity in recent months for fiscal 2022 and beyond. Banquet and catering revenue pace for fiscal 2022 is also running behind where we would typically be at this same time in prior pre-pandemic years. Increased wedding bookings have contributed to banquet and catering revenue in fiscal 2021. The future economic environment will also have a significant impact on the pace of our return to "normal" hotel operations. Both of our operating divisions are experiencing challenges related to a labor shortage that has arisen as the country emerges from the pandemic. Difficulties in hiring new associates after significantly reducing staffing during the height of the COVID-19 pandemic has impacted our ability to service our increasing customer counts in both theatres and hotels and may also increase labor costs in future periods. We cannot assure that the impact of the COVID-19 pandemic will cease to have a material adverse effect on both our theatre and hotels and resorts businesses, results of operations, cash flows, financial condition, access to credit markets and ability to service our existing and future indebtedness.
Current packages
Due to the impact of the COVID-19 pandemic, our aggregate cash capital expenditures, acquisitions and purchases of interests in, and contributions to, joint ventures were$19.5 million during fiscal 2021, compared to$21.4 million during fiscal 2020 and$94.2 million during fiscal 2019 (including approximately$30 million in cash consideration paid in conjunction with theMovie Tavern acquisition described below). Although we anticipate that we will continue to carefully monitor our capital expenditures during fiscal 2022, we currently estimate that cash capital expenditures will increase during fiscal 2022 to the$35 -$45 million range. We will, however, continue to monitor our operating results and economic and industry conditions so that we may adjust our plans accordingly.
Our current strategic plans include the following goals and strategies:
Theaters
•Maximize and leverage our current assets in a post-pandemic world. We have invested approximately$379 million to further enhance the movie-going experience and amenities in new and existing theatres over the last eight-plus years. These investments have included: •DreamLoungerSM recliner seating additions. As ofDecember 30, 2021 , we offered all DreamLounger recliner seating in 66 theatres, representing approximately 78% of our theatres. Including our premium, large format (PLF) auditoriums with recliner seating, as ofDecember 30, 2021 , we offered our 27
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The DreamLounger Recliner occupies approximately 81% of our screens, a percentage we believe to be the highest among the nation’s largest theater chains.
•UltraScreen DLX® and SuperScreen DLX® (DreamLounger eXperience) conversions. As ofDecember 30, 2021 , we had a total of 120 premium large format ("PLF") screens at 66 of our theatre locations (31 UltraScreen DLX auditoriums, one traditional UltraScreen auditorium, 85 SuperScreen DLX auditoriums - a slightly smaller screen than an UltraScreen but with the same DreamLounger seating and Dolby Atmos sound - and three IMAX® PLF screens). As ofDecember 30, 2021 , we offered at least one PLF screen in approximately 78% of our theatres - once again a percentage we believe to be the highest percentage among the largest theatre chains in the nation. Our PLF screens generally have higher per-screen revenues and draw customers from a larger geographic region compared to our standard screens, and we charge a premium price to our guests for this experience. •Signature cocktail and dining concepts. We have continued to further enhance our food and beverage offerings within our existing theatres. We believe our 50-plus years of food and beverage experience in the hotel and restaurant businesses provides us with a unique advantage and expertise that we can leverage to further grow revenues in our theatres. As ofDecember 30, 2021 , we offered bars/full liquor service under the conceptsTake FiveSM Lounge , Take Five Express and The Tavern at 49 theatres, representing approximately 58% of our theatres. As ofDecember 30, 2021 , we also offered one or more in-lobby dining concepts, including the pizza concept Zaffiro's® Express and hamburger and other Americana fare concept Reel Sizzle®, in 39 theatres, representing approximately 60% of our theatres (excluding our in-theatre dining theatres). In select locations without aTake Five Lounge outlet, we offer beer and wine at the Zaffiro's Express outlet. We also operate three Zaffiro's® Pizzeria and Bar full-service restaurants. •In-theatre dining concepts. As ofDecember 30, 2021 , we offered in-theatre dining with a complete menu of drinks and chef-prepared salads, sandwiches, entrées and desserts at 29 theatres and a total of 229 auditoriums, operating under the names Big Screen BistroSM, Big Screen Bistro ExpressSM, BistroPlexSM andMovie Tavern by Marcus, representing approximately 34% of our theatres.
In fiscal 2022 and beyond, we plan to implement a number of strategies to maximize and further leverage our existing assets in a post-pandemic world. These strategies should include:
•Opportunistically expanding the number of our PLF formats described above to meet consumer demand. Our guests have shown a strong preference for viewing blockbuster films on the largest screen available. Our goal is to have multiple PLF auditoriums in as many theatres as physically and financially viable in order to provide PLF formats to our guests for more than one blockbuster film at a time. •Expanding and evolving our food and beverage operations described above. We will continue to test new concepts and enhance our existing concepts in order to provide further options to our guests and increase our average concession/food and beverage revenues per person. Strategies may also include expanded sports programming and other entertainment options in our signature bars. •Evolving and reenergizing what we believe to be our best-in-class customer loyalty program called Magical Movie RewardsSM ("MMR"). We currently have approximately 4.4 million members enrolled in the program. Approximately 41% of all box office transactions and 40% of total transactions in our theatres during fiscal 2021 were completed by registered members of the loyalty program. We believe that this program contributes to increased movie-going frequency, more frequent visits to the concession stand, increased loyalty toMarcus Theatres and, ultimately, improved operating results. •Modernizing pricing strategies based upon consumer demand. We currently offer a number of very successful pricing promotions, including "$5 Tuesday," "$6 Student Thursday" and a$6 "Young-at-Heart" program for seniors on Friday afternoons. We believe these promotions have increased movie going frequency and reached a customer who may have stopped going to the movies because of price, without adversely impacting the movie-going habits of our regular weekend customers. During fiscal 2021, we introduced Marcus Private Cinema ("MPC"), a program that allows guests the opportunity to purchase an entire auditorium for up to 20 of his or her friends and family for a fixed charge. Conversely, we charge a higher ticket price for PLF screens and have recently tested higher pricing on Friday and 28
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Saturday nights at select locations. We plan to continue testing and implementing additional pricing strategies based on consumer demand.
•Expanding the use of technology in all facets of our business. We have recently enhanced our mobile ticketing capabilities, our downloadableMarcus Theatres mobile application and our marcustheatres.com website. We added food and beverage ordering capabilities to our mobile application at select theatres in fiscal 2019 and expanded this feature to all of our theatres in fiscal 2020. We have continued to install additional theatre-level technology, such as new ticketing kiosks, digital menu boards and concession advertising monitors. Each of these enhancements is designed to improve customer interactions, both at the theatre and through mobile platforms and other electronic devices. We also believe that maximizing the use of these technology enhancements will reduce the impact of labor shortages that we and others are currently facing. •Exploring new lobby monetization initiatives. Lobby innovations may include, but not be limited to, unique experiential displays, video and redemption games and other interactive options for our guests. •Executing multiple strategies designed to further increase revenues and improve the profitability of our existing theatres. These strategies include various cost control efforts, as well as plans to expand ancillary theatre revenues, such as pre-show advertising, lobby advertising, post transaction click-through advertising, additional corporate and group sales, sponsorships and special film series.
•Continually assess the financial viability of our existing assets. In fiscal 2021, we made the decision not to reopen three theaters that had previously closed due to the COVID-19 pandemic, consisting of a former budget theater and two
•Regularly upgrading and remodeling our theatres to keep them fresh. To maintain our existing theatres and accomplish the strategies noted above and below, we currently anticipate that our fiscal 2022 capital expenditures in this division will total approximately$15 -$20 million . •Re-invent and modernize the out-of-home entertainment experience. Our goal continues to be to introduce and create entertainment destinations that further define and enhance the customer value proposition for movie-going and the overall out-of-home entertainment experience. Strategies to achieve this goal are expected to include: •Testing and subsequently launching a subscription program that would encourage more frequent movie-going, particularly for non-blockbuster films. InJanuary 2022 , we introduced two such programs, branded MovieFlexSM and MovieFlexSM+, in three separate markets as part of our initial test of this strategy. •Testing and subsequently implementing additional entertainment options within theatre auditoriums. Examples of initiatives may include sports bars for viewing live sports (possibly with online gambling where available), sports gaming, and interactive auditoriums. InMarch 2022 , we expect to introduce a sports viewing auditorium in one of our theatres as part of our initial test of this strategy. •Further socializing the overall experience for our guests. This strategy will include targeting future movie-goers with relevant and desired experiences through new and creative marketing approaches, including the use of technology to tailor communications to individual guest preferences. For example, we have partnered withMovio , a global leader in data analysis for the cinema industry, to allow more targeted communication with our loyalty members. The software provides us with insight into customer preferences, attendance habits and general demographics, which we believe will help us deliver customized communication to our members. In turn, members of this program can enjoy and plan for a more personalized movie-going experience.
• Explore new viewing experiences for our guests. For example, we currently offer a 4DX auditorium in one of our cinemas. 4DX delivers an immersive multi-sensory cinematic experience, including
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synchronized motion seats and environmental effects such as water, wind, fog, scent and more, to enhance the action on screen. We will consider additional experiential offerings in the future. •Exploring new content sources and deliveries to supplement existing mainstream movie content. The addition of digital technology throughout our circuit (we offer digital cinema projection on 100% of our screens) has provided us with additional opportunities to obtain non-motion picture programming from other new and existing content providers, including live and pre-recorded performances of theMetropolitan Opera , as well as sports, music and other events, at many of our locations. We offer weekday and weekend alternate programming at many of our theatres across our circuit. The special programming includes classic movies, faith-based content, live performances, comedy shows and children's performances. We believe this type of programming is more impactful when presented on the big screen and provides an opportunity to continue to expand our audience base beyond traditional moviegoers. Our MMR program also gives us the ability to cost effectively promote non-traditional programming and special events, particularly during non-peak time periods.
•Strategic growth. Our long-term growth plans in our theater division may include evaluating opportunities for new theaters and screens. Growth opportunities we may explore in the future include:
•New builds. InOctober 2019 , we opened our new eight-screen Movie Tavern® by Marcus theatre inBrookfield, Wisconsin . This new theatre became the firstMovie Tavern by Marcus inWisconsin . It includes eight auditoriums, each with laser projection and comfortable DreamLounger recliner seating, a full-service bar and food and drink center, and a new delivery-to-seat service model that also allows guests to order food and beverage via our mobile phone application or in-theatre kiosk. We will consider additional sites for potential new theatre locations in both new and existing markets in the future. •Management contracts and/or taking over existing theatre leases. The COVID-19 pandemic has been challenging for all theatre operators. In some cases, existing theatres have been returned to landlords. We will consider either managing theatres for existing owners/landlords or entering into new, financially viable lease arrangements if such opportunities arise. •Acquisitions. Acquisitions of existing theatres or theatre circuits has also been a viable growth strategy for us. OnFebruary 1, 2019 , we acquired the assets of Movie Tavern®, aNew Orleans -based industry leading circuit known for its in-theatre dining concept featuring chef-driven menus, premium quality food and drink and luxury seating. The acquired circuit consisted of 208 screens at 22 locations in nine states. The purchase price consisted primarily of shares of our common stock. The acquisition of theMovie Tavern circuit increased our total number of screens by an additional 23%. Now brandedMovie Tavern by Marcus, we subsequently introduced new amenities to selectMovie Tavern theatres, including our proprietary PLF screens and DreamLounger recliner seating, signature programming, such as$5 movies on Tuesdays with a free complimentary-size popcorn for loyalty members, and proven marketing, loyalty and pricing programs that will continue to benefitMovie Tavern guests in the future. As noted above, the COVID-19 pandemic has been challenging for all theatre operators. A number of theatre operators have filed for bankruptcy relief and many others are facing difficult financial circumstances. Although we will prioritize our own finances, we will continue to consider potential acquisitions in the future. The movie theatre industry is very fragmented, with approximately 50% ofUnited States screens owned by the three largest theatre circuits and the other 50% owned by an estimated 800 smaller operators, making it very difficult to predict when acquisition opportunities may arise. We do not believe that we are geographically constrained, and we believe that we may be able to add value to certain theatres through our various proprietary amenities and operating expertise.
•Operational excellence and financial discipline. We have always been, and will continue to be, focused on improving the quality of the guest experience, our portfolio of assets, and our associate working environment, with a long-term view of financial success and profitability. During fiscal 2022 and beyond, we expect to execute 30
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on a number of strategies to maximize and further leverage our existing assets in a post-pandemic world. These strategies should include:
•Multiple strategies that are intended to further grow the division's revenues and profits. Our focus will shift from rebuilding in fiscal 2021 to accelerating excellence in fiscal 2022, with guest experience at the forefront. Strategies will include leveraging our food and beverage expertise to further distinguish us from our competition. In addition to rebuilding our banquet and catering business as group demand improves, we will leverage hotel food and beverage concepts developed by ourMarcus Restaurant Group , featuring premier brands such asMason Street Grill , ChopHouse®, Miller Time®Pub & Grill and SafeHouse restaurants. •Sales, marketing and revenue management strategies designed to further increase our profitability. The priority will be to further accelerate the pace of the recovery from the COVID-19 pandemic, focusing on leveraging strong leisure demand, driving average daily rate, rebuilding group demand and growing ancillary revenues.
• Human resources and technology strategies designed to achieve operational excellence and improve the work environment for associates, while adapting to a changing labor market. We will continue to focus on developing our customer service delivery and technology enhancements to improve customer interactions through mobile platforms and other customer touch points.
•A continued focus on financial discipline as we continue to recover from the pandemic without sacrificing our commitment to operational excellence.
•Portfolio Management. We have invested approx.
•Hotel renovations. We regularly renovate and update our hotels and resorts. For example, we made additional reinvestments in theHilton Madison Monona Terrace in fiscal 2019. Early in fiscal 2021, we renovated the lobby and initiated select guest room improvements at theGrand Geneva Resort & Spa . •Hotel branding changes. We closed theInterContinental Milwaukee in earlyJanuary 2019 and undertook a substantial renovation project that converted this hotel into the unbranded experiential arts hotel, the Saint Kate. The newly renovated hotel reopened duringJune 2019 . Our future plans for our hotels and resorts division also include continued reinvestment in our existing properties to maintain and enhance their value. We anticipate additional reinvestments during fiscal 2022 and fiscal 2023 at theGrand Geneva Resort & Spa andThe Pfister Hotel . To maintain our existing hotels and resorts, we currently anticipate that our fiscal 2022 capital expenditures in this division will total approximately$20 -$25 million . We have been very opportunistic in our past hotel investments as we have, on many occasions, acquired assets at favorable terms and then improved the properties and operations to create value. Unlike our theatre assets where the majority of our return on investment comes from the annual cash flow generated by operations, a portion of the return on our hotel investments is derived from effective portfolio management, which includes determining the proper branding strategy for a given asset, the proper level of investment and upgrades and identifying an effective divestiture strategy for the asset when appropriate. As a result, we may periodically explore opportunities to monetize all or a portion of one or more owned hotels. We will consider many factors as we actively review opportunities to execute this strategy, including income tax considerations, the ability to retain management, pricing and individual market considerations. We evaluate strategies for our hotels on an asset-by-asset basis. We have not set a specific goal for the number of hotels that may be considered for this strategy, nor have we set a specific timetable. It is possible that we may sell a particular hotel or hotels during fiscal 2022 or beyond if we determine that such action is in the best interest of our shareholders. •Strategic growth. The COVID-19 pandemic has been challenging for most hotel operators and many are facing difficult financial circumstances. As a result, transactional activity in the hotel industry has been extremely limited during the last two years. Although we will prioritize our own finances, our hotels and resorts division expects to 31
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continue to seek opportunities to invest in new hotels and increase the number of rooms under management in the future. Growth opportunities we may explore in the future include:
•Seeking opportunities where we may act as an investment fund sponsor or joint venture partner in acquiring additional hotel properties. We continue to believe that opportunities to acquire high-quality hotels at reasonable valuations will be present in the future for well-capitalized companies, and we believe that there are partners available to work with us when the appropriate hotel assets are identified. Advantages of this growth strategy include the ability to accelerate our growth through smaller investments in an increased number of properties, while earning management fees and potentially receiving a promoted interest in the hotel investments. InDecember 2021 , we announced the formation of a joint venture with funds managed bySearchlight Capital Partners ("Searchlight"), a leading global private investment firm, to co-invest in lifestyle hotels, resorts and high-quality full-service properties. Through this joint venture, we acquired theKimpton Hotel Monaco Pittsburgh , which we will manage, onDecember 16, 2021 . We hope to acquire additional hotels using this strategy in fiscal 2022 and beyond. •Pursuing additional management contracts for other owners, some of which may include small equity investments similar to the investments we have made in the past with strategic equity partners. Although total revenues from an individual hotel management contract are significantly less than from an owned hotel, the operating margins are generally significantly higher due to the fact that all direct costs of operating the property are typically borne by the owner of the property. Management contracts provide us with an opportunity to increase our total number of managed rooms without a significant investment, thereby increasing our returns on equity. InApril 2019 , we assumed management of the 468-roomHyatt Regency Schaumburg hotel inSchaumburg, Illinois . InAugust 2021 , we assumed management of theCoralville Hotel & Conference Center inCoralville, Iowa . Owned by theCity of Coralville , this 286-room hotel was recently rebranded under the Hyatt Regency brand asHyatt Regency Coralville Hotel & Conference Center . The property will undergo a phased renovation focusing on the restaurant and all hotel guest rooms. Conversely, we will occasionally lose management contracts due to various circumstances.
Business
•We periodically review opportunities to make investments in long-term growth opportunities that may not be entirely related to our two primary businesses (but typically have some connection to entertainment, food and beverage, hospitality, real estate, etc.). Although we will prioritize our own finances, we expect to continue to review such opportunities in the future. •In addition to operational and growth strategies in our operating divisions, we will continue to seek additional opportunities to enhance shareholder value, including strategies related to our dividend policy and share repurchases. We increased our regular quarterly common stock cash dividend rate by 6.7% during the first quarter of fiscal 2019 and 6.3% during the first quarter of fiscal 2020, prior to temporarily suspending dividend payments in response to the COVID-19 pandemic. In prior years, we have periodically paid special dividends and repurchased shares of our common stock under our existing Board of Directors stock repurchase authorizations. The Credit Agreement currently allows us, if we believe it is in the best interest of our shareholders, to once again return capital to shareholders through dividends or share repurchases beginning in the first quarter of fiscal 2022, up to a maximum of$1.55 million per quarter (approximately$0.05 /share/quarter if a dividend). Our Board of Directors elected to not declare a dividend during the first quarter of fiscal 2022, but will continue to evaluate this option for future quarters. The current restriction on dividends and share repurchases will remain in place until the first quarter of fiscal 2023 or until the Term Loan A is repaid and we have returned to our financial covenants in place prior to the restriction (whichever comes first). •We will also continue to evaluate opportunities to sell real estate when appropriate, allowing us to benefit from the underlying value of our real estate assets. When possible, we will attempt to avail ourselves of the provisions of Internal Revenue Code §1031 related to tax-deferred like-kind exchange transactions. We are actively marketing a significant number of pieces of surplus real estate and other non-core real estate. During the fourth quarter of fiscal 2020, we sold two land parcels and a former budget theatre, generating total proceeds of approximately$3.0 million . During fiscal 2021, we sold an equity interest in a joint venture, several land parcels, another former 32
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budget theatre and an operating retail center, generating total proceeds of$22.1 million . As ofDecember 30, 2021 , we had letters of intent or contracts to sell several pieces of real estate with a carrying value of$4.9 million and we believe we may receive total sales proceeds from real estate sales during the next year totaling approximately$10 -$20 million , depending upon demand for the real estate in question. The actual number, mix and timing of our potential future new facilities and expansions and/or divestitures will depend, in large part, on industry, economic and COVID-19 pandemic conditions, our financial performance and available capital, the competitive environment, evolving customer needs and trends, and the availability of attractive acquisition and investment opportunities. It is likely that our growth goals and strategies will continue to evolve and change in response to these and other factors, and there can be no assurance that we will achieve our current goals. Each of our goals and strategies are subject to the various risk factors discussed above in this Annual Report on Form 10-K.
Operating results
Consolidated financial comparisons
The following table sets forth revenues, operating income (loss), other income (expense), net earnings (loss) and net earnings (loss) per diluted common share for the past three fiscal years (in millions, except for per share and percentage change data) : F21 v. F20 F20 v. F19 F2021 F2020 Amt. Pct. F2019 Amt. Pct. Revenues$ 458.2 $ 237.7 $ 220.6 92.8 %$ 820.9 $ (583.2) (71.0) % Operating income (loss) (41.5) (178.4) 137.0 76.8 % 68.2 (246.6) (361.7) % Other income (expense), net (17.5) (17.4) (0.2) (1.1) % (13.8) (3.6) (26.3) % Net earnings attributable to noncontrolling interests - - - - % 0.1 (0.1) (123.5) % Net earnings (loss) attributable to The Marcus Corporation$ (43.3) $ (124.8) $ 81.6 65.3 %$ 42.1 $ (167.0) (396.4) % Net earnings (loss) per common share - diluted$ (1.42) $ (4.13) $ 2.71 65.6 %$ 1.35 $ (5.48) (405.9) %
Fiscal 2021 vs. Fiscal 2020
Revenues, operating loss, net loss attributable toThe Marcus Corporation and net loss per diluted common share improved significantly during fiscal 2021 compared to fiscal 2020. Increased revenues from both our theatre division and hotels and resorts division contributed to the improvement during fiscal 2021 compared to fiscal 2020, during which the majority of our theatres and hotels were closed for large portions of the second and third quarters due to the impact of the COVID-19 pandemic. Our theatres and hotels were operating fairly normally during the first two and one-half months of fiscal 2020 until the onset of the pandemic in mid-March. Both of our operating divisions were impacted by nonrecurring items during fiscal 2021 and fiscal 2020 that are described in detail below. Net loss attributable toThe Marcus Corporation during fiscal 2021 was negatively impacted by increased interest expense compared to fiscal 2020, partially offset by increased gains on disposition of property, equipment and other assets. Net loss attributable toThe Marcus Corporation and net loss per diluted common share during fiscal 2020 were favorably impacted by a favorable income tax benefit described below. Our operating loss during fiscal 2021 was favorably impacted by state government grants and federal tax credits of approximately$10.7 million , or approximately$0.25 per diluted common share. Our operating loss during fiscal 2021 was negatively impacted by impairment charges of approximately$5.8 million , or approximately$0.14 per diluted common share, primarily related to two operating theatres, three permanently closed theatres and surplus real estate that we intend to sell. Our operating performance during fiscal 2020 was negatively impacted by nonrecurring expenses totaling approximately$11.5 million , or approximately$0.27 per diluted common share, including payments to and on behalf of laid off employees. Nonrecurring expenses during fiscal 2020 also included extensive cleaning costs, supply purchases and employee training, among other items, related to the reopening of selected theatre and hotel properties and implementing new operating protocols. In addition, impairment charges related to intangible assets and several theatre locations negatively impacted our fiscal 2020 operating loss by approximately$24.7 million , or approximately$0.59 per diluted 33
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common share. Conversely, our operating performance during fiscal 2020 was favorably impacted by nonrecurring state governmental grants totaling approximately$7.0 million , or approximately$0.17 per diluted common share, and net insurance proceeds of approximately$1.8 million , or approximately$0.04 per diluted common share, related to COVID-19 pandemic related insurance claims. Our additional 53rd week of operations contributed approximately$5.1 million in revenues and did not have a material impact on our operating loss or net loss during fiscal 2020. Operating losses from our corporate items, which include amounts not allocable to the business segments, increased during fiscal 2021 compared to fiscal 2020 due primarily to increased non-cash long-term incentive compensation expenses and the fact that we reduced the salaries and bonus accruals of executives and corporate staff and suspended board cash compensation during fiscal 2020 to preserve liquidity at the onset of the pandemic. Operating losses from our corporate items were also favorably impacted during fiscal 2020 by the net insurance proceeds of$1.8 million described above. We recognized investment income of$0.6 million during fiscal 2021 compared to investment income of$0.6 million during fiscal 2020. Investment income includes interest earned on cash and cash equivalents, as well as increases/decreases in the value of marketable securities and increases in the cash surrender value of a life insurance policy. Investment income during fiscal 2022 may vary compared to fiscal 2021, primarily dependent upon changes in the value of marketable securities. Interest expense totaled$18.7 million during fiscal 2021, an increase of$2.4 million , or 14.9%, compared to interest expense of$16.3 million during fiscal 2020. The increase in interest expense during fiscal 2021 was due in part to increased borrowings and an increase in our average interest rate, as discussed in the Liquidity section of this MD&A below. Interest expense during fiscal 2021 included approximately$2.2 million in noncash amortization of debt issuance costs. During fiscal 2022, we estimate that noncash amortization of debt issuance costs will be approximately$1.6 million , excluding the impact of any new debt issuance costs. We currently expect our total interest expense to decrease during fiscal 2022 due to decreased borrowings. Changes in our borrowing levels due to variations in our operating results, capital expenditures, acquisition opportunities (or the lack thereof) and asset sale proceeds, among other items, may impact, either favorably or unfavorably, our actual reported interest expense in future periods, as may changes in short-term interest rates. We incurred other expense of$2.5 million during fiscal 2021, an increase of approximately$1.5 million , or 154.6%, compared to other expense of$1.0 million during fiscal 2020. Other expense consists primarily of the non-service cost components of our periodic pension costs. During fiscal 2020, other expense was partially offset by other income of approximately$1.4 million related to the receipt ofMovie Tavern acquisition escrow funds returned to us in conjunction with a negotiated early release of remaining escrow funds to the seller. Based upon information from an actuarial report for our pension plans, we expect other expense to be approximately$2.4 million during fiscal 2022. We reported net gains on disposition of property, equipment and other assets of approximately$3.2 million and$0.9 million , respectively, during fiscal 2021 and fiscal 2020. The net gains on disposition of property, equipment and other assets during fiscal 2021 included the sale of surplus land, the sale of an equity investment in a joint venture, the sale of a former budget movie theatre and the sale of a retail center, partially offset by losses on items disposed of during the year by both divisions. The net gains on disposition of property, equipment and other assets during fiscal 2020 were due primarily to the sale of two surplus land parcels and one theatre, partially offset by losses on items disposed of during the year by both divisions. The timing of our periodic sales and disposals of property, equipment and other assets results in variations each year in the gains or losses that we report on dispositions of property, equipment and other assets. We anticipate the potential for additional disposition gains or losses from periodic sales of property, equipment and other assets, during fiscal 2022 and beyond, as discussed in more detail in the "Current Plans" section of this MD&A. We reported equity losses from an unconsolidated joint venture of approximately$0.1 million and$1.5 million , respectively, during fiscal 2021 and fiscal 2020. The equity loss during fiscal 2021 consisted of our pro-rata share of losses from theKimpton Hotel Monaco Pittsburgh inPittsburgh, Pennsylvania , acquired inmid-December 2021 and in which we have a 10% minority ownership interest. We will report our proportionate share of any earnings or losses of this hotel as equity earnings or losses from unconsolidated joint ventures during fiscal 2022. The equity loss during fiscal 2020 consisted of our pro-rata share of losses from theOmaha Marriott Downtown atThe Capitol District hotel inOmaha, Nebraska (the "Omaha Marriott ") - a hotel we manage and in which we had a 10% minority ownership interest. The loss during fiscal 2020 included losses from the hotel and an other-than-temporary impairment loss of approximately$0.8 million in which we determined that the fair value of our equity method investment in the hotel joint venture was less than its carrying value.The Omaha Marriott has performed well historically from an operational perspective, but was experiencing overall losses due to depreciation and interest expense, further exasperated by the COVID-19 pandemic. 34
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At the beginning of the 2021 financial year, following a recapitalization of the hotel, we sold our interest in this property. We continue to manage the hotel.
The operating results of one majority-owned hotel,The Skirvin Hilton , are included in the hotels and resorts division revenue and operating income (loss) during fiscal 2021 and fiscal 2020, and the after-tax net earnings or loss attributable to noncontrolling interests is deducted from or added to net earnings (loss) on the consolidated statements of earnings (loss). As a result of the noncontrolling interest balance reaching zero during the second quarter of fiscal 2020, we do not expect to report additional net losses attributable to noncontrolling interests in future periods until the hotel returns to profitability. We reported income tax benefits during fiscal 2021 and fiscal 2020 of$15.7 million and$70.9 million , respectively. The larger income tax benefit during fiscal 2020 was primarily the result of the significant losses before income taxes incurred as a result of the closing of the majority of our properties inMarch 2020 and the subsequent reduction in our operating performance due to the COVID-19 pandemic. Our fiscal 2020 income tax benefit was also favorably impacted by an adjustment of approximately$20.1 million , or approximately$0.65 per share, resulting from several accounting method changes, theMarch 27, 2020 signing of the CARES Act and a provision of a COVID Relief stimulus bill passed inDecember 2020 that allowed us to deduct$10.1 million of qualified expenses paid for by Paycheck Protection Program (PPP) loans. One of the provisions of the CARES Act allowed our 2020 taxable losses to be carried back to prior fiscal years during which the federal income tax rate was 35% compared to the current statutory federal income tax rate of 21%. Our fiscal 2020 effective income tax rate, after adjusting for earnings (losses) from noncontrolling interests that are not tax-effected because the entity involved is a tax pass-through entity, was 36.2% and benefitted from the adjustments described above. Excluding these favorable adjustments to income tax benefit, our effective income tax rate during fiscal 2020 was 26.0%. Our fiscal 2021 effective income tax rate was 26.6%. We currently anticipate that our fiscal 2022 effective income tax rate may be in the 24-26% range, excluding any potential further changes in federal or state income tax rates or other one-time tax benefits. Weighted-average diluted shares outstanding were 31.4 million during fiscal 2021 and 31.0 million during fiscal 2020. All per share data in this MD&A is presented on a fully diluted basis, however, for periods when we report a net loss, common stock equivalents are excluded from the computation of diluted loss per share as their inclusion would have an anti-dilutive effect. In future periods, weighted-average diluted shares will include shares from the conversion of convertible notes to the extent conversion is dilutive in such periods.
Theaters
Our oldest and historically most profitable division is our theatre division. The theatre division contributed 59.2% of our consolidated revenues and 127.0% of our consolidated operating loss, excluding corporate items, during fiscal 2021, compared to 55.8% and 73.5%, respectively, during fiscal 2020 and 67.9% and 88.4%, respectively, during fiscal 2019. As ofDecember 30, 2021 , the theatre division operated motion picture theatres inWisconsin ,Illinois ,Iowa ,Minnesota ,Missouri ,Nebraska ,North Dakota ,Ohio ,Arkansas ,Colorado ,Georgia ,Kentucky ,Louisiana ,New York ,Pennsylvania ,Texas andVirginia , a family entertainment center inWisconsin . The following tables set forth revenues, operating income (loss), operating margin, screens and theatre locations for the last three fiscal years: F21 v. F20 F20 v. F19 F2021 F2020 Amt. Pct. F2019 Amt. Pct. (in millions, except percentages) Revenues$ 271.2 $ 132.6 $ 138.6 104.5 %$ 557.1 $ (424.5) (76.2) % Operating income (loss)$ (27.6) $ (121.4) $ 93.9 77.3 %$ 76.9 $ (198.3) (257.9) % Operating margin (10.2) % (91.6) % 13.8 % 35
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Number of screens and locations at period-end (1)(2) F2021 F2020 F2019 Theatre screens 1,064 1,097 1,106 Theatre locations 85 89 91 Average screens per location 12.5 12.3 12.2
(1)Includes 6 screens at a location managed for another owner at the end of fiscal 2020 and fiscal 2019.
(2)Includes 22 budget screens at two locations at the end of fiscal 2020 and 29 budget screens at three locations at the end of fiscal 2019. Compared to first-run theatres, budget theatres generally have lower box office revenues and associated film costs, but higher concession sales as a percentage of box office revenues.
The following table provides a more detailed breakdown of the theater division’s revenue components for the last three fiscal years:
F21 v. F20 F20 v. F19 F2021 F2020 Amt. Pct. F2019 Amt. Pct. (in millions, except percentages)
Entrance recipes
$ 284.1 $ (219.3) (77.2) % Concession revenues 118.7 56.7 62.0 109.2 % 231.2 (174.5) (75.5) % Other revenues 21.8 10.8 11.0 102.1 % 40.8 (30.1) (73.6) % 271.2 132.3 138.9 105.0 % 556.2 (423.9) (76.2) % Cost reimbursements 0.1 0.3 (0.2) (72.8) % 0.9 (0.6) (63.1) % Total revenues$ 271.2 $ 132.6 $ 138.6 104.5 %$ 557.1 $ (424.5) (76.2) % As described above in the "Current Plans" section of this MD&A, onFebruary 1, 2019 , we acquired the assets ofMovie Tavern . As a result, fiscal 2019 revenues included 11 months of operations from these theatres.
Fiscal 2021 vs. Fiscal 2020
Our theatre division revenues increased and operating loss decreased significantly during fiscal 2021 compared to fiscal 2020 due in large part to the fact that we temporary closed all of our theatres onMarch 17, 2020 in response to the COVID-19 pandemic. Increased revenues during the fiscal 2021 fourth quarter compared to the prior year also contributed to our improved theatre division operating performance during fiscal 2021 compared to fiscal 2020. Despite the favorable comparisons to fiscal 2020, all of our theatres continued to operate with significantly reduced attendance during fiscal 2021 compared to pre-pandemic levels. Our theatres were operating fairly normally during the first two and one-half months of fiscal 2020 until the onset of the pandemic in mid-March. Other than six theatres that were reopened during the last week of the fiscal 2020 second quarter, all of our theatres were closed during all of the second quarter and the majority of the third quarter of fiscal 2020. During the five-plus months that most of our theatres were closed, the only additional revenues we reported were the result of five parking lot cinemas opened during the second quarter, curbside sales of popcorn, pizza and other food items and restaurant takeout sales from our three Zaffiro's restaurants and bars. Over the seven-day periodbetween August 21 and August 28, 2020 , we reopened a majority of our theatres in conjunction with the release of several new films, resulting in a total of 72 reopened theatres, representing 80% of our company-owned theatres. InOctober 2020 , we temporarily closed several theatres due to changes in the release schedule for new films, reducing our percentage of theatres open to approximately 66%. In November andDecember 2020 , new state and local restrictions in several of our markets required us to temporarily reclose several theatres, further negatively impacting our fiscal 2020 results. Even when open, all of our reopened theatres were operating at significantly reduced attendance levels in fiscal 2020, further negatively impacting our fiscal 2020 operating loss. We began the first quarter of fiscal 2021 with approximately 52% of our theatres open. As state and local restrictions were eased in several of our markets and several new films were released by movie studios, we gradually reopened theatres, ending the fiscal 2021 first quarter with approximately 74% of our theatres open, ending the fiscal 2021 second quarter with approximately 95% of our theatres open and ending the fiscal 2021 third and fourth quarters with all of 36
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our current theatres open. The majority of our reopened theatres operated with reduced operating days (Fridays, Saturdays, Sundays and Tuesdays) and reduced operating hours during the fiscal 2021 first quarter. By the end ofMay 2021 , we had returned the vast majority of our theatres to normal operating days (seven days per week) and operating hours. Our operating loss during fiscal 2021 was negatively impacted by impairment charges of approximately$5.8 million primarily related to surplus real estate that we intend to sell. Conversely, nonrecurring state government grants from five states and federal tax credits totaling approximately$7.2 million for COVID-19 relief favorably impacted our theatre division operating loss during fiscal 2021. Our theatre division operating loss during the five-plus months our theatres were closed during fiscal 2020 primarily reflected costs that remained after we temporarily closed all of our theatres and laid off the vast majority of our hourly theatre staff, as well as a portion of our corporate staff. These costs included a certain number of salaried theatre management staff as well as the remaining corporate staff, all of whom were subject to a reduction in pay. Additional ongoing costs included utilities and repairs and maintenance (both at reduced levels), rent, property taxes and depreciation. During the last month of our fiscal 2020 third quarter, we brought back an appropriate level of theatre and corporate staff to meet anticipated reduced levels of initial new film supply and customer demand in our recently reopened theatres. Our theatre division operating results during fiscal 2020 were negatively impacted by nonrecurring expenses totaling approximately$5.8 million related to expenses incurred (primarily payroll continuation payments to employees temporarily laid off) due to the closing of all of our movie theatres during the first quarter and subsequent costs incurred for cleaning, supply purchases and employee training, among other items, related to the reopening of our theatre properties and implementing new operating protocols. Impairment charges reported during fiscal 2020 related to intangible assets and several theatre locations also negatively impacted our theatre division fiscal 2020 operating loss by approximately$24.7 million . Conversely, our operating loss during fiscal 2020 was favorably impacted by approximately$5.8 million of state government grants awarded from seven states for COVID-19 relief. The additional week of operations favorably impacted our theatre division revenues during fiscal 2020 by approximately$2.6 million and did not have a material impact on our operating loss. Although rent continued to be expensed monthly, discussions with our landlords resulted in deferral, or in a limited number of situations, abatements, of the majority of our rent payments during our fiscal 2020 second quarter. While the results of negotiations varied by theatre, the most common result of these discussions was a deferral of rent payments for April, May and June, with repayment generally occurring in subsequent periods, most often beginning in calendar 2021. In order to evaluate our fiscal 2021 theatre operating results, we believe it is also beneficial to compare our revenues to pre-pandemic levels. The following table compares the components of revenues for the theatre division for fiscal 2021 to fiscal 2019: F21 v. F19 F2021 F2019 Amt. Pct. (in millions, except percentages)
Admission revenues$ 130.7 $ 284.1 $ (153.4) (54.0) % Concession revenues 118.7 231.2 (112.6) (48.7) % Other revenues 21.8 40.8 (19.1) (46.7) % 271.2 556.2 (285.0) (51.2) % Cost reimbursements 0.1 0.9 (0.8) (90.0) % Total revenues$ 271.2 $ 557.1 $ (285.8) (51.3) % In order to better understand the current pace of the theatre industry recovery and our ability to outperform the industry, the following table compares the percentage change in our fiscal 2021 admissions revenues to the corresponding percentage change inthe United States box office revenues (as compiled by us from data received from Comscore, a national box office reporting service for the theatre industry) during each quarter of fiscal 2021 compared to the same quarter during fiscal 2019: 37
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Table of Contents F21 v. F19 1st Qtr. (1) 2nd Qtr. 3rd Qtr. 4th Qtr. Total Pct. change in Marcus admission revenues -81.9 % -70.0 % -45.2 % -21.4 % -54.0 % Pct. change inU.S. box office revenues -89.7 % -73.9 % -52.8 % -23.5 % -59.6 % Marcus performance vs. U.S. +7.8 pts +3.9 pts +7.6 pts +2.1 pts +5.6
points
(1)
According to the data received from Comscore, our theatres outperformed the industry during fiscal 2021 compared to fiscal 2019 by 5.6 percentage points. Based upon this metric, we believe we have been one of the top performing theatre circuits during fiscal 2021 of the top 10 circuits in theU.S. Additional data received and compiled by us from Comscore indicates our admission revenues during fiscal 2021 represented approximately 3.5% of the total admission revenues in theU.S. during the period (commonly referred to as market share in our industry). This represents a notable increase over our reported market share of approximately 3.2% during the comparable fiscal 2019 period, prior to the pandemic. Closed theatres in other markets in theU.S. partially contributed to our outperformance, particularly during the first quarter of fiscal 2021. We also believe our overall outperformance of the industry has been attributable to the investments we have made in new features and amenities in our theatres and our implementation of innovative operating, pricing and marketing strategies that increased attendance relative to our peers, particularly at our recently acquiredMovie Tavern locations. Our goal is to continue our past pattern of outperforming the industry, but with the majority of our renovations now completed, our ability to do so in any given quarter will likely be partially dependent upon film mix, weather and the competitive landscape in our markets. Sales attributable to our Marcus Private Cinema ("MPC") program have exceeded expectations, partially offsetting reduced traditional attendance and contributing to our industry outperformance, particularly during the first quarter of fiscal 2021 when more governmental restrictions were in place and the vaccine rollout was in its early stages. Under this program, a guest may purchase an entire auditorium for up to 20 of his or her friends and family for a fixed charge, ranging from$99 to$275 (depending upon the film and number of weeks it has been in theatres). At its peak during the majority of the weeks during our fiscal 2021 first quarter, we averaged over 1,500 MPC events per week, accounting for approximately 21% of our admission revenues during those weeks. Total theatre attendance increased 81.5% during fiscal 2021 compared to fiscal 2020, when our theatres were closed for major portions of the year and the number of new films released was greatly reduced, resulting in increases in both admission revenues and concession revenues. Conversely, a decrease in the number of new films, the lack of awareness of theatres being open (due in part to limited new film advertising), ongoing state and local capacity restrictions and customer concerns regarding visiting indoor businesses, all negatively impacted attendance during fiscal 2021 as compared to fiscal 2019. As described above, attendance from MPC events (estimated to average 13 guests per event) partially offset the reduction in traditional movie going attendance, particularly during the fiscal 2021 first quarter. Our highest grossing films during fiscal 2021 included Spider-Man: No Way Home, Black Widow, Venom: Let There Be Carnage, Shang-Chi and the Legend of the Ten Rings, and F9 The Fast Saga. One of these five films (Black Widow) was released "day-and-date" on streaming services. We believe such "day-and-date" releases negatively impact theatrical revenues, particularly in week two and beyond of a films' release. We also believe "day-and-date" releases increase piracy, further impacting potential revenues. Due to the impact of three particularly strong blockbusters (generally defined as films grossing more than$100 million nationally) released during fiscal 2019 (Avengers: Endgame, Lion King, Frozen 2), compared with only one extremely strong blockbuster released during fiscal 2021 (Spider-Man: No Way Home) the film slate during fiscal 2021 was generally weighted less towards our top movies compared to fiscal 2019. A decreased reliance on just a few blockbuster films during a given quarter often has the effect of slightly reducing our film rental costs during the period, as generally the better a particular film performs, the greater the film rental cost tends to be as a percentage of box office receipts. As a result of a more balanced film slate and the fact that films released during fiscal 2021 generally did not perform at pre-pandemic admission revenue levels, our overall film rental cost decreased during fiscal 2021 compared to more recent prior years. The quantity of wide-release films shown in our theatres and number of wide-release films provided by the six major studios increased significantly during fiscal 2021 compared to fiscal 2020, but remained below pre-pandemic levels. A film is generally considered "wide release" if it is shown on over 600 screens nationally, and these films generally have the greatest impact on box office receipts. We played 79 wide-release films at our theatres during fiscal 2021 compared to 48 wide-release films during fiscal 2020. Prior to the pandemic, we played 117 wide-release films at our theatres during fiscal 2019. In total, we played 318 films and 200 alternate content attractions at our theatres during fiscal 2021 compared to 134 films and 207 alternate content attractions during fiscal 2020. Prior to the pandemic, we played a total of 285 films 38
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and 190 alternate content attractions at our theatres during fiscal 2019. Based upon projected film and alternate content availability, we currently estimate that we may once again show an increased number of films and alternate content events on our screens during fiscal 2022 compared to fiscal 2021, but we expect the number of wide-release films shown during fiscal 2022 to remain below pre-pandemic levels. Our average ticket price increased 11.1% during fiscal 2021 compared to fiscal 2020 and increased by 10.7% compared to fiscal 2019. A larger proportion of admission revenues from our proprietary premium large format screens (with a higher ticket price) and the increase in MPC events contributed to the increase in our average ticket price during fiscal 2021, as did modest price increases implemented during the year, partially offset by the fact that we continued to offer older "library" film product for only$5.00 per ticket during portions of the first half of fiscal 2021 when there was limited availability of new films. During the fiscal 2020 third and fourth quarters, we charged our normal pricing for new film releases and charged only$5.00 for older "library" film product, which negatively impacted our average ticket price. We currently expect our average ticket price to increase during fiscal 2022, but film mix and the impact of pricing strategies discussed in the "Current Plans" section above will likely impact our final result. Our average concession revenues per person increased by 15.6% during fiscal 2021 compared to fiscal 2020 and increased by 23.4% compared to fiscal 2019. As customers have returned to "normal" activities such as going to the movie theatre, they have demonstrated a propensity to spend at a higher rate than before the pandemic closures. In addition, a portion of the increase in our average concession revenues per person during fiscal 2021 may be attributed to shorter lines at our concession stand due to reduced attendance (during periods of high attendance, some customers do not purchase concessions because the line is too long). We also believe that an increased percentage of customers buying their concessions in advance using our website, kiosk or our mobile app likely contributed to higher average concession revenues per person, as our experience has shown that customers are more likely to purchase more items when they order and pay electronically. We expect to continue to report increased average concession revenues per person in future periods, but whether our customers will continue to spend at these current significantly higher levels in future periods is currently unknown. Other revenues, which include management fees, pre-show advertising income, family entertainment center revenues, surcharge revenues, mobile app revenues, rental income and gift card breakage income, increased by$11.0 million during fiscal 2021 compared to fiscal 2020, but decreased by$19.1 million compared to fiscal 2019. The fluctuations in other revenue were primarily due to the impact of changes in attendance on internet surcharge ticketing fees and preshow advertising income. We currently expect other revenues (particularly pre-show advertising and surcharge revenues), to increase in fiscal 2022 if attendance increases as we anticipate, partially offset by a decrease in rental income due to the sale of a retail center inMissouri during the fourth quarter of fiscal 2021. The film product release schedule for fiscal 2022, which had been changing in response to reduced near-term customer demand and changing state and local restrictions in various key markets in theU.S. and the world as a result of the ongoing COVID-19 pandemic, has solidified in recent months. With strong performances from several recent films, film studios have shown an increased willingness to begin releasing many of the new films that had previously been delayed. Several films that have contributed to our early fiscal 2022 first quarter results include Spider-Man: No Way Home, Sing 2, American Underdog, Scream, Jackass Forever, Death on the Nile, and Uncharted. Although it is possible that more schedule changes may occur, new films scheduled to be released during the remainder of fiscal 2022 that have potential to perform very well include The Batman, Morbius, Sonic the Hedgehog 2, Ambulance, Fantastic Beasts: The Secrets of Dumbledore, Doctor Strange in the Multiverse of Madness,Downton Abbey : ANew Era , DC Super Pets, Top Gun: Maverick,Jurassic World : Dominion, Lightyear, Minions: The Rise of Gru,Thor : Love and Thunder, Bullet Train, Where the Crawdads Sing, Black Adam, Puss In Boots: The Last Wish, Spider-Man: Across the Spider-Verse,Halloween Ends, The Flash, Black Panther: Wakanda Forever, Creed III, Avatar 2, Aquaman 2 and Mario. We believe that with a greater percentage of the population now vaccinated, and assuming that concerns over the Delta, Omicron or any new variants of COVID-19 do not result in significant new restrictions, demand for out-of-home entertainment will continue to increase during fiscal 2022. The early list of films scheduled to be released during fiscal 2023 also appears quite strong. Revenues for the theatre business and the motion picture industry in general are heavily dependent on the general audience appeal of available films, together with studio marketing, advertising and support campaigns and the maintenance of appropriate "windows" between the date a film is released in theatres and the date a motion picture is released to other channels, including premium video-on-demand ("PVOD"), video on-demand ("VOD"), streaming services and DVD. These are factors over which we have no control (see additional detail in the "Impact of COVID-19 Pandemic" section above). We currently believe that "day-and-date" film release experiments such as those tested by Warner Brothers andDisney during 2021 will not become the norm as the pandemic fully subsides. Warner Brothers has already indicated that it intends to return to an exclusive 45-day theatrical window with a significant number of its films during fiscal 2022. After 39
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the success of the exclusive theatrical release of Shang-Chi and the Legend of the Ten Rings,Disney announced that the remainder of its fiscal 2021 films would receive an exclusive theatrical window as well.Disney announced in early 2022 that they will retain flexibility for future film distribution, particularly for family films, which have been impacted more significantly by the pandemic. Early in our fiscal 2021 third quarter, we ceased providing management services to a 6-screen managed theatre. Early in our fiscal 2021 fourth quarter, we made the decision to not reopen three remaining closed theatres, consisting of one former budget-oriented theatre and twoMovie Tavern theatres with leases that will expire within the next year. One former budget-oriented theatre was converted to first-run during fiscal 2021 and as a result, we no longer operate any budget-oriented theatres. One of the Marcus Wehrenberg theatres that we reopened inMay 2021 completed a renovation during fiscal 2021 that added DreamLounger recliner seating, as well as Reel Sizzle® andTake FiveSM Lounge outlets, to the theatre.Hotels and Resorts The hotels and resorts division contributed 40.7% of our consolidated revenues during fiscal 2021, compared to 44.0% and 32.1%, respectively, during fiscal 2020 and fiscal 2019. The hotels and resorts division contributed 26.5% and 11.6%, respectively, of consolidated operating income (loss), excluding corporate items, during fiscal 2020 and fiscal 2019. During fiscal 2021 the hotels and resorts division contributed operating income compared with a consolidated operating loss, excluding corporate items. As ofDecember 30, 2021 , the hotels and resorts division owned and operated three full-service hotels in downtownMilwaukee, Wisconsin , a full-service destination resort inLake Geneva, Wisconsin and full-service hotels inMadison, Wisconsin ,Chicago, Illinois ,Lincoln, Nebraska andOklahoma City, Oklahoma (we have a majority-ownership position in theOklahoma City, Oklahoma hotel). In addition, the hotels and resorts division managed 11 hotels, resorts and other properties for other owners. Included in the 11 managed properties is one hotel owned by a joint venture in which we have a minority interest and two condominium hotels in which we own some or all of the public space. The following tables set forth revenues, operating income (loss), operating margin and rooms data for the hotels and resorts division for the past three fiscal years: F21 v. F20 F20 v. F19 F2021 F2020 Amt. Pct. F2019 Amt. Pct. (in millions, except percentages) Revenues$ 186.6 $ 104.6 $ 82.0 78.4 %$ 263.4 $ (158.7) (60.3) % Operating income (loss)$ 5.9 $ (43.9) $ 49.8 113.4 %$ 10.1 $ (53.9) (536.7) % Operating margin 3.1 % (41.9) % 3.8 % Available rooms at period-end F2021 F2020 F2019 Company-owned 2,628 2,628 2,627 Management contracts with joint ventures 248 333
333
Management contracts with condominium hotels 480 480
480
Management contracts with other owners 2,088 1,691 1,945 Total available rooms 5,444 5,132 5,385 40
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The following table provides a more detailed breakdown of the revenue components of the hotels and resorts division for the past three fiscal years:
F21 v. F20 F20 v. F19 F2021 F2020 Amt. Pct. F2019 Amt. Pct. (in millions, except percentages) Room revenues$ 77.7 $ 35.4 $ 42.3 119.4 %$ 105.9 $ (70.5) (66.6) % Food/beverage revenues 47.1 24.8 22.3 89.7 % 74.7 (49.8) (66.8) % Other revenues 43.2 27.6 15.7 56.9 % 46.5 (19.0) (40.8) % 168.0 87.8 80.2 91.4 % 227.1 (139.3) (61.4) % Cost reimbursements 18.7 16.9 1.8 10.7 % 36.3 (19.4) (53.5) % Total revenues$ 186.6 $ 104.6 $ 82.0 78.4 %$ 263.4 $ (158.7) (60.3) %
Fiscal 2021 vs. Fiscal 2020
Our hotels and resorts division returned to profitability during fiscal 2021, reporting operating income compared to a significant operating loss during fiscal 2020, due to significantly increased revenues during fiscal 2021. All of our company-owned hotels and resorts contributed to the improved operating results during fiscal 2021. Our fiscal 2021 operating income also benefited from a state government grant and federal tax credits totaling approximately$3.4 million . Division revenues and operating loss during fiscal 2020 were significantly impacted by the COVID-19 pandemic. Room revenues and food and beverage revenues began decreasing due to COVID-19 pandemic related cancellations inMarch 2020 , even before we temporarily closed all of our hotels in late March/early April. In addition, our restaurants and bars were required to close during the last 10 days of the fiscal 2020 first quarter due to the COVID-19 pandemic. We subsequently reopened four of our company-owned hotels late in our fiscal 2020 second quarter (The Pfister Hotel , theGrand Geneva Resort & Spa ,The Skirvin Hilton and theHilton Madison Monona Terrace ), three company-owned hotels during our fiscal 2020 third quarter (theHilton Milwaukee City Center ,The Lincoln Marriott Cornhusker Hotel and theAC Hotel Chicago Downtown ) and our remaining company-owned hotel in our fiscal 2020 fourth quarter (Saint Kate -The Arts Hotel ). Once reopened, all of our company-owned hotels operated with significantly reduced occupancies compared to prior years due to the impact of the COVID-19 pandemic. The majority of our restaurants and bars in our hotels subsequently reopened in conjunction with the hotel reopenings beginning inJune 2020 . In addition to the impact of significantly reduced revenues, our hotel division operating loss during fiscal 2020 was negatively impacted by nonrecurring expenses totaling approximately$5.7 million related to costs associated with initially closing our hotels (primarily payments to and on behalf of laid off employees) and extensive cleaning costs, supply purchases and employee training, among other items, related to the reopening of selected hotel properties and implementing new operating protocols. Conversely, our operating loss during fiscal 2020 was favorably impacted by approximately$1.2 million of state government grants awarded from two states for COVID-19 relief. The additional week of operations in fiscal 2020 favorably impacted our hotels and resorts division revenues by approximately$2.5 million and did not have a material impact on our operating loss. Other revenues during fiscal 2021 and fiscal 2020 included ski, spa and golf revenues at ourGrand Geneva Resort & Spa , management fees, laundry revenues, parking revenues and rental revenues. Other revenues increased during fiscal 2021 compared to fiscal 2020 due to increased occupancies at our hotels and resorts. Cost reimbursements increased during fiscal 2021 compared to fiscal 2020 due to the fact that managed hotels were temporarily closed for portions of fiscal 2020 and had reduced revenues upon reopening. 41
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As a result of the significantly reduced revenues during fiscal 2020, we believe it is also beneficial to compare our revenues to pre-pandemic levels. The following table compares the components of revenues for the hotels and resorts division for fiscal 2021 to fiscal 2019: F21 v. F19 F2021 F2019 Amt. Pct. (in millions, except percentages) Room revenues$ 77.7 $ 105.9 $ (28.2) (26.6) % Food/beverage revenues 47.1 74.7 (27.6) (36.9) % Other revenues 43.2 46.5 (3.3) (7.1) % 168.0 227.1 (59.1) (26.0) % Cost reimbursements 18.7 36.3 (17.6) (48.5) % Total revenues$ 186.6 $ 263.4 $ (76.7) (29.1) % A decline in transient and group business contributed significantly to our reduced revenues during fiscal 2021 compared fiscal 2019. A decrease in group business subsequently led to a corresponding decrease in banquet and catering revenues, negatively impacting our reported fiscal 2021 food and beverage revenues compared to fiscal 2019. Other revenues decreased during fiscal 2021 compared to fiscal 2019, but the decrease was less than the decrease in room revenues and food and beverage revenues during fiscal 2021 compared to fiscal 2019, primarily due to increased revenues from one of our condominium hotels and increased ski and golf revenues at theGrand Geneva Resort & Spa , partially offset by decreased management fees. Cost reimbursements decreased during fiscal 2021 compared to fiscal 2019 due to reduced revenues and reduced operating costs at our managed hotels.
The following table shows certain operating statistics, including our average occupancy percentage (number of occupied rooms as a percentage of available rooms), our average daily rate (“ADR”) and our total revenue per available room (“RevPAR”) ). , for company-owned properties:
F21 v. F20 Operating Statistics(1) F2021 F2020 Amt. Pct. Occupancy percentage 48.1 % 36.9 % 11.3 pts 30.5 % ADR$ 163.64 $ 136.76 $ 26.88 19.7 % RevPAR$ 78.78 $ 50.44 $ 28.34 56.2 % (1)These operating statistics represent averages of our comparable eight distinct company-owned hotels and resorts, branded and unbranded, in different geographic markets with a wide range of individual hotel performance. The statistics are not necessarily representative of any particular hotel or resort. The statistics only include the periods the hotels were open during fiscal 2020. RevPAR increased at all eight of our company-owned properties during fiscal 2021 compared to fiscal 2020. The "drive-to leisure" travel customer provided the most demand during fiscal 2021, with weekend business quite strong at the majority of our properties. During fiscal 2021, our non-group business represented approximately 67% of our total rooms revenue, compared to approximately 56% during fiscal 2019 prior to the pandemic - an indication that group business continues to lag. Non-group retail pricing was very strong in the majority of our markets, with large demand drivers during our fiscal 2021 third quarter in ourMilwaukee market (Milwaukee Bucks playoffs, major league baseball, Summerfest and theRyder Cup ) and significant leisure demand at GrandGeneva contributing to increased occupancy percentages and ADR. 42
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As a result of the significantly reduced revenues during 2020, we believe it is also beneficial to compare our operating statistics to pre-pandemic levels. The following table sets forth certain operating statistics for fiscal 2021 and fiscal 2019, including our average occupancy percentage, our ADR, and our RevPAR, for company-owned properties: F21 v. F19 Operating Statistics(1) F2021 F2019 Amt. Pct. Occupancy percentage 49.6 % 73.6 % (24.0) pts (32.6) % ADR$ 160.38 $ 154.42 $ 5.96 3.9 % RevPAR$ 79.51 $ 113.65 $ (34.14) (30.0) % (1)These operating statistics represent averages of our comparable seven distinct company-owned hotels and resorts, branded and unbranded, in different geographic markets with a wide range of individual hotel performance. The statistics are not necessarily representative of any particular hotel or resort. The statistics exclude the Saint Kate, as this hotel was closed for the majority of the first half of fiscal 2019. According to data received fromSmith Travel Research and compiled by us in order to analyze our fiscal 2021 results, comparable "upper upscale" hotels throughoutthe United States experienced a decrease in RevPAR of 39.6% during fiscal 2021 compared to fiscal 2019. Data received fromSmith Travel Research for our various "competitive sets" - hotels identified in our specific markets that we deem to be competitors to our hotels - indicates that these hotels experienced a decrease in RevPAR of 36.9% during fiscal 2021 compared to fiscal 2019. Thus, we believe we outperformed the industry and our competitive sets during fiscal 2021 by approximately 9.6 and 6.9 percentage points, respectively. Higher class segments of the hotel industry, such as luxury and upper upscale, continue to experience lower occupancies compared to lower class hotel segments such as economy and midscale. In order to better understand the current pace of the hotel industry recovery, the following table sets forth the change in our average occupancy percentage, ADR and RevPAR for each quarterly period of fiscal 2021 compared to the same quarters during fiscal 2019 (excluding the Saint Kate): F21 v. F19 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Occupancy percentage (35.8) pts (26.9) pts (17.1) pts (16.5) pts ADR 1.9 % (11.8) % 10.3 % 5.5 % RevPAR (54.5) % (42.2) % (12.4) % (19.7) % As noted above, the "drive-to leisure" travel customer provided the most demand during fiscal 2021. Leisure travel historically peaks in our fiscal third quarter and decreases during our fiscal first and fourth quarters as students go back to school and we experience colder weather in our predominantly Midwestern hotels. Transient business and group business travel subsequent to the onset of the COVID-19 pandemic has remained significantly below fiscal 2019 levels. Our company-owned hotels, and in particular our largest hotels, have historically derived a significant portion of their revenues from group business, and as a result, we are more susceptible to variations in RevPAR from quarter to quarter depending upon the strength of the group business market during that particular quarter. Group business also tends to have an impact on our food and beverage revenues because groups are more likely to use our banquet and catering services during their stay. As indicated by the increase in ADR during fiscal 2021 compared to fiscal 2019, non-group retail pricing held relatively strong, with most of any periodic decreases in ADR due to a reduction in market pricing resulting from the lack of transient business and group business travel midweek. Looking to future periods, overall occupancy in theU.S. has slowly increased since the initial onset of the COVID-19 pandemic inMarch 2020 , reaching its highest level since the start of the pandemic during our fiscal 2021 third quarter. In the near term, we expect most demand will continue to come from the drive-to leisure segment. Leisure travel in our markets has a seasonal component to it, peaking in the summer months and slowing down as children return to school and the weather turns colder. Most organizations implemented travel bans at the onset of the pandemic and have generally only allowed essential travel, which will likely limit business travel in the near term, although we are beginning to experience some increases in travel from this customer segment. There also are indications that many of these travel bans are beginning to be lifted gradually. Our company-owned hotels have experienced a material decrease in group bookings compared to pre-pandemic periods. As of the date of this report in early fiscal 2022, our group room revenue bookings for fiscal 2022 - commonly referred to in the hotels and resorts industry as "group pace" - is running ahead of where we were at the same time in early fiscal 2021, but behind where we would typically be at this same time of the year pre-pandemic. 43
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We are encouraged by the fact that we continue to experience increased booking activity for fiscal 2022 and beyond. Banquet and catering revenue pace for fiscal 2022 is also running behind where we would typically be at this same time of the year pre-pandemic. Increased wedding bookings have contributed to banquet and catering revenue in fiscal 2021. During early fiscal 2022, the Omicron variant has resulted in additional short term delays in the recovery of business travel. We have experienced some group cancellations during the first quarter of fiscal 2022, which have generally resulted in the shifting of events and re-bookings to later in the year. As COVID-19 case levels have begun to decline, we have experienced improving booking activity once again, indicating consumer comfort may be increasing. Forecasting what future RevPAR growth or decline will be during the next 18 to 24 months is very difficult at this time. The non-group booking window remains very short, with most bookings occurring within three days of arrival, making even short-term forecasts of future RevPAR growth very difficult. Hotel revenues have historically tracked very closely with traditional macroeconomic statistics such as the Gross Domestic Product, so we will be monitoring the economic environment very closely. After past shocks to the system, such as the terrorist attacks onSeptember 11, 2001 and the 2008 financial crisis, hotel demand took longer to recover than other components of the economy. Conversely, we now anticipate that hotel supply growth will be limited for the foreseeable future, which can be beneficial for our existing hotels. Most industry experts believe the pace of recovery will be steady over the next couple of years. We are encouraged by the demand from drive-to leisure customers during fiscal 2021, which exceeded our expectations. We will continue to focus on reaching the drive-to leisure market through aggressive campaigns promoting creative packages for our guests. Overall, we generally expect our revenue trends to track or exceed the overall industry trends for our segment of the industry, particularly in our respective markets. During the third quarter of fiscal 2021, we assumed management of theCoralville Hotel & Conference Center inCoralville, Iowa . Owned by theCity of Coralville , this 286-room hotel was recently rebranded under the Hyatt Regency brand asHyatt Regency Coralville Hotel & Conference Center . The property will undergo a phased renovation focusing on the restaurant and all hotel guest rooms. Late in the fourth quarter of fiscal 2021, we assumed management and acquired a minority interest in theKimpton Hotel Monaco Pittsburgh , a 248-room hotel situated in the center of downtownPittsburgh, Pennsylvania . Conversely, we ceased management of theCrowne Plaza-Northstar Hotel inMinneapolis, Minnesota during our fiscal 2021 fourth quarter. We also ceased management of TheDoubleTree byHilton El Paso Downtown and the Courtyard byMarriott El Paso Downtown/Convention Center effectiveFebruary 28, 2022 . As of the date of this filing, our current portfolio of hotels and resorts includes 17 owned and managed properties across the country. As discussed in the "Current Plans" section of this MD&A, although we will prioritize our own finances, we will consider a number of potential growth opportunities that may impact fiscal 2022 and future period operating results. In addition, if we were to sell one or more hotels during fiscal 2022, our fiscal 2022 operating results could be significantly impacted. The extent of any such impact will likely depend upon the timing and nature of the growth opportunity (pure management contract, management contract with equity, joint venture investment, or other opportunity) or divestiture (management retained, equity interest retained, etc.).
Adjusted EBITDA
Adjusted EBITDA is a measure used by management and our board of directors to assess our financial performance and enterprise value. We believe that Adjusted EBITDA is a useful supplemental measure for us and investors, as it eliminates certain expenses that are not indicative of our core operating performance and facilitates a comparison of our core operating performance on a consistent basis from period to period. We also use Adjusted EBITDA as a basis to determine certain annual cash bonuses and long-term incentive awards, to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other peer companies using similar measures. Adjusted EBITDA is also used by analysts, investors and other interested parties as a performance measure to evaluate industry competitors. Adjusted EBITDA is a non-GAAP measure of our financial performance and should not be considered as an alternative to net earnings (loss) as a measure of financial performance, or any other performance measure derived in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of liquidity or free cash flow for management's discretionary use. Adjusted EBITDA has its limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
We define Adjusted EBITDA as net income (loss) attributable to
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earnings or losses from unconsolidated joint ventures, net earnings or losses attributable to noncontrolling interests, income taxes and depreciation and amortization, adjusted to eliminate the impact of certain items that we do not consider indicative of our core operating performance. These further adjustments are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same as or similar to some of the items eliminated in the adjustments made to determine Adjusted EBITDA, such as acquisition expenses, preopening expenses, accelerated depreciation, impairment charges and other adjustments. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. Definitions and calculations of Adjusted EBITDA differ among companies in our industries, and therefore Adjusted EBITDA disclosed by us may not be comparable to the measures disclosed by other companies.
The following table presents our reconciliation of Adjusted EBITDA (in millions):
F2021 F2020 F2019 Net earnings (loss) attributable to The Marcus Corporation$ (43.3) $ (124.8) $ 42.0 Add (deduct): Investment income (0.6) (0.6) (1.4) Interest expense 18.7 16.3 11.8 Other expense (income) 2.5 1.0 1.9
Loss (gain) on disposal of property, plant and equipment and other assets
(3.2) (0.9) 1.1
Loss on equity of unconsolidated joint ventures, net 0.1
1.5 0.3 Net loss attributable to noncontrolling interests - - 0.1 Income tax expense (benefit) (15.7) (70.9) 12.3 Depreciation and amortization 72.1 75.1 72.3 Share-based compensation expenses (1) 9.3 4.4 3.5 Acquisition and preopening expenses (2)(3) - - 9.3 Property closure/reopening expenses (4)(5) - 11.5 - Impairment charges (6) 5.8 24.7 1.9 Government grants and federal tax credits (7) (10.7) (7.0) - Insurance proceeds (8) - (1.8) - Total Adjusted EBITDA$ 35.1 $ (71.6) $ 155.2
The following tables present our reconciliation of Adjusted EBITDA by reportable operating segment (in millions):
F2021 F2020 Hotels & Hotels & Theatres Resorts Corp. Items Total Theatres Resorts Corp. Items Total
Operating profit (loss)
Amortization and depreciation 51.7
20.2 0.3 72.1 53.5 21.1 0.5 75.1 Share-based compensation (1) 2.3 1.7 5.3 9.3 1.1 0.7 2.6 4.4 Property closure/reopening expenses (4) (5) - - - - 5.8 5.7 - 11.5 Impairment charges (6) 5.8 - - 5.8 24.7 - - 24.7 Government grants and federal tax credits (7) (7.2) (3.4) (0.1) (10.7) (5.8) (1.2) - (7.0) Insurance proceeds (8) - - - - - - (1.8) (1.8) Adjusted EBITDA$ 24.9 $ 24.4 $ (14.3) $ 35.1 $ (42.2) $ (17.6) $ (11.8) $ (71.6) 45
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Table of Contents F2019 Hotels & Theatres Resorts Corp. Items Total Operating income (loss)$ 76.9 $ 10.1 $ (18.8) $ 68.2 Depreciation and amortization 51.2 20.4 0.6 72.3 Share-based compensation (1) 0.9 0.6 2.1 3.5 Acquisition/preopening expenses (2)(3) 2.5 6.8 0.0 9.3 Impairment charges (6) 1.9 0.0 0.0 1.9 Adjusted EBITDA$ 133.3 $ 37.9 $ (16.0) $ 155.2
(1) Non-cash charge related to stock-based compensation programs.
(2) Acquisition and pre-opening costs related to the
acquisition.
(3) Pre-opening costs and initial start-up losses related to the conversion of the
(4)Reflects nonrecurring costs related to the required closure of all of our movie theatres due to the COVID-19 pandemic, plus subsequent nonrecurring costs related to reopening theatres. (5)Reflects nonrecurring costs related to the closure of our hotels and resorts due to reduced occupancy as a result of the COVID-19 pandemic, plus subsequent nonrecurring costs related to reopening hotels. (6)Non-cash impairment charges related to two operating theatres, three permanently closed theatres and surplus theatre real estate for the fiscal 2021 periods and intangible assets (trade name) and several theatre locations for the fiscal 2020 and fiscal 2019 periods.
(7) Reflects one-time government grants and federal tax credits provided to our theaters and hotels for COVID-19 pandemic relief.
(8)Reflects non-recurring net insurance proceeds received for insurance claims related to COVID-19.
The following table sets forth Adjusted EBITDA by reportable operating segment for the last three fiscal years (in millions, except for variance percentage): F21 v. F20 F20 v. F19 F2021 F2020 Amt. Pct. F2019 Amt. Pct. (in millions, except percentages) Theatres$ 24.9 $ (42.2) $ 67.1 (159.1) %$ 133.3 $ (175.5) (131.6) % Hotels and resorts 24.4 (17.6) 42.0 (239.0) % 37.9 (55.5) (146.3) % Corporate items (14.3) (11.8) (2.4) 20.5 % (16.0) 4.2 (26.3) %
Adjusted EBITDA
Our theatre division returned to positive Adjusted EBITDA during fiscal 2021 due to increased attendance, increased revenues per person, and strong cost controls, as described in the Theatres section above. Our hotels and resorts division returned to positive Adjusted EBITDA during fiscal 2021 due to improved occupancy percentages and ADR, and strong cost controls, as described in theHotels and Resorts section above. As a result, we were pleased to report positive consolidated Adjusted EBITDA during fiscal 2021 as we continue to recover from the pandemic.
Cash and capital resources
Liquidity
Our movie theatre and hotels and resorts businesses, when open and operating normally, each generate significant and consistent daily amounts of cash, subject to previously-noted seasonality, because each segment's revenue is derived predominantly from consumer cash purchases. Under normal circumstances, we believe that these relatively consistent and predictable cash sources, as well as the availability of unused credit lines, would be adequate to support the ongoing operational liquidity needs of our businesses. A detailed description of our liquidity as ofDecember 30, 2021 is described in detail above in the "Impact of the COVID-19 Pandemic" section of this MD&A. 46
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Maintaining and protecting a strong balance sheet has always been a core value ofThe Marcus Corporation during our 86-year history, and, despite the COVID-19 pandemic, our financial position remains strong. As ofDecember 30, 2021 , we had a cash balance of approximately$17.7 million ,$221.4 million of availability under our$225.0 million revolving credit facility, and our debt-to-capitalization ratio (including short-term borrowings) was 0.37. With our strong liquidity position, combined with the expected receipt of additional state grants, income tax refunds and proceeds from the sale of surplus real estate (discussed above), we believe we are positioned to meet our obligations as they come due and continue to sustain our operations for one year from the date of this report, as well as our longer-term capital requirements for periods beyond one year from the date of this report, even if our properties continue to generate reduced revenues during these periods. We will continue to work to preserve cash and maintain strong liquidity to endure the impacts of the global pandemic, even if it continues for a prolonged period of time.
credit agreement
OnJanuary 9, 2020 , we entered into a Credit Agreement with several banks, includingJPMorgan Chase Bank, N.A ., as Administrative Agent, andU.S. Bank National Association , as Syndication Agent. OnApril 29, 2020 , we entered into the First Amendment, onSeptember 15, 2020 we entered into the Second Amendment, and onJuly 13, 2021 , we entered into the Third Amendment (the Credit Agreement, as amended by the First Amendment, the Second Amendment and the Third Amendment, hereinafter referred to as the "Credit Agreement"). The Credit Agreement provides for a revolving credit facility that matures onJanuary 9, 2025 with an initial maximum aggregate amount of availability of$225 million . We may request an increase in the aggregate amount of availability under the Credit Agreement by an aggregate amount of up to$125 million by increasing the revolving credit facility or adding one or more tranches of term loans. Our ability to increase availability under the Credit Agreement is subject to certain conditions, including, among other things, the absence of any default or event of default or material adverse effect under the Credit Agreement. In conjunction with the First Amendment, we also added an initial$90.8 million term loan facility that was scheduled to mature onSeptember 22, 2021 . In conjunction with the Third Amendment entered into early in our fiscal 2021 third quarter, the term loan facility was reduced to$50.0 million and the maturity date was extended toSeptember 22, 2022 . Borrowings under the Credit Agreement generally bear interest at a variable rate equal to: (i) LIBOR, subject to a 1% floor, plus a specified margin based upon our consolidated debt to capitalization ratio as of the most recent determination date; or (ii) the base rate (which is the highest of (a) the prime rate, (b) the greater of the federal funds rate and the overnight bank funding rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR), subject to a 1% floor, plus a specified margin based upon our consolidated debt to capitalization ratio as of the most recent determination date. In addition, the Credit Agreement generally requires us to pay a facility fee equal to 0.125% to 0.25% of the total revolving commitment, depending on our consolidated debt to capitalization ratio, as defined in the Credit Agreement. However, pursuant to the First Amendment and the Second Amendment: (A) in respect of revolving loans, (1) we are charged a facility fee equal to 0.40% of the total revolving credit facility commitment and (2) the specified margin is 2.35% for LIBOR borrowings and 1.35% for ABR borrowings, which facility fee rate and specified margins will remain in effect until the end of the first fiscal quarter ending after the end of any period in which any portion of the term loan facility remains outstanding or the testing of any financial covenant in the Credit Agreement is suspended (the "specified period"); and (B) in respect of term loans, the specified margin is 2.75% for LIBOR borrowings and 1.75% for ABR borrowings, in each case, at all times. The Credit Agreement contains various restrictions and covenants applicable to us and certain of our subsidiaries. Among other requirements, the Credit Agreement (a) limits the amount of priority debt (as defined in the Credit Agreement) held by our restricted subsidiaries to no more than 20% of our consolidated total capitalization (as defined in the Credit Agreement), (b) limits our permissible consolidated debt to capitalization ratio to a maximum of 0.55 to 1.0, (c) requires us to maintain a consolidated fixed charge coverage ratio of at least 3.0 to 1.0 as of the end of the fiscal quarter endingMarch 30, 2023 and each fiscal quarter thereafter, (d) restricts our ability and certain of our subsidiaries' ability to incur additional indebtedness, pay dividends and other distributions (the restriction on dividends and other distributions does not apply to subsidiaries), and make voluntary prepayments on or defeasance of our 4.02% Senior Notes dueAugust 2025 , 4.32% Senior Notes dueFebruary 2027 , the notes or certain other convertible securities, (e) requires our consolidated EBITDA not to be less than or equal to (i)$10 million as ofDecember 30, 2021 for the two consecutive fiscal quarters then ending, (ii)$25 million as ofMarch 31, 2022 for the three consecutive fiscal quarters then ending, (iii)$50 million as ofJune 30, 2022 for the four consecutive fiscal quarters then ending, (iv)$65 million as ofSeptember 29, 2022 for the four consecutive fiscal quarters then ending, or (v)$70 million as ofDecember 29, 2022 for the four consecutive fiscal quarters then ending, (f) requires our consolidated liquidity not to be less than or equal to (i)$100 million as ofSeptember 30, 2021 , 47
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(ii)$100 million as ofDecember 30, 2021 , (iii)$100 million as ofMarch 31, 2022 , (iv)$100 million as ofJune 30, 2022 , or (v)$50 million as of the end of any fiscal quarter thereafter until and including the fiscal quarter endingDecember 29, 2022 ; however, each such required minimum amount of consolidated liquidity would be reduced to$50 million for each such testing date if the initial term loans are paid in full as of such date, and (g) prohibits us and certain of our subsidiaries from incurring or making capital expenditures, in the aggregate for us and such subsidiaries, (i) during fiscal 2021 in excess of the sum of$40.0 million plus certain adjustments, or (ii) during our 2022 fiscal year in excess of$50 million plus certain adjustments. Pursuant to the Credit Agreement, we are required to apply net cash proceeds received from certain events, including certain asset dispositions, casualty losses, condemnations, equity issuances, capital contributions, and the incurrence of certain debt, to prepay outstanding term loans, with the exception that we are allowed to sell certain surplus real estate up to$29 million without prepaying the outstanding term loans. In addition, if, at any time during the specified period, we and certain of our subsidiaries' aggregate unrestricted cash on hand exceeds$75 million , the Credit Agreement requires us to prepay revolving loans under the Credit Agreement by the amount of such excess, without a corresponding reduction in the revolving commitments under the Credit Agreement. In connection with the Credit Agreement: (i) we and certain of our subsidiaries have pledged, subject to certain exceptions, security interests and liens in and on (a) substantially all of their respective personal property assets and (b) certain of their respective real property assets, in each case, to secure the Credit Agreement and related obligations; and (ii) certain of our subsidiaries have guaranteed our obligations under the Credit Agreement. The foregoing security interests, liens and guaranties will remain in effect until the Collateral Release Date (as defined in the Credit Agreement). The Credit Agreement contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then, among other things, the lenders may declare any outstanding obligations under the Credit Agreement to be immediately due and payable and exercise rights and remedies against the pledged collateral.
4.02% Senior Bonds and 4.32% Senior Bonds
OnJune 27, 2013 , we entered into a Note Purchase Agreement (the "4.02% Senior Notes Agreement") with the several purchasers party to the 4.02% Senior Notes Agreement, pursuant to which we issued and sold$50 million in aggregate principal amount of our 4.02% Senior Notes dueAugust 14, 2025 (the "4.02% Notes") in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). We used the net proceeds from the issuance and sale of the 4.02% Notes to reduce existing borrowings under our revolving credit facility and for general corporate purposes. OnDecember 21, 2016 , we entered into a Note Purchase Agreement (the "4.32% Senior Notes Agreement") with the several purchasers party to the 4.32% Senior Notes Agreement, pursuant to which we issued and sold$50 million in aggregate principal amount of our 4.32% Senior Notes dueFebruary 22, 2027 (the "4.32% Notes" and the 4.02% Notes, are together referred to hereafter as the "Notes") in a private placement exempt from the registration requirements of the Securities Act. We used the net proceeds of the sale of the 4.32% Notes to repay outstanding indebtedness and for general corporate purposes. OnJuly 13, 2021 we entered into an amendment to the 4.02% Senior Notes Agreement (the "4.02% Fourth Amendment"). The 4.02% Senior Notes Agreement, as previously amended and as amended by the 4.02% Fourth Amendment, is hereafter referred to as the "Amended 4.02% Senior Notes Agreement." OnJuly 13, 2021 we entered into an amendment to the 4.32% Senior Notes Agreement (the "4.32% Fourth Amendment"). The 4.32% Senior Notes Agreement, as previously amended and as amended by the 4.32% Fourth Amendment, is hereafter referred to as the "Amended 4.32% Senior Notes Agreement". The Amended 4.02% Senior Notes Agreement and the Amended 4.32% Senior Notes Agreement are together referred to hereafter as the "Amended Senior Notes Agreements." Interest on the 4.02% Notes is payable semi-annually in arrears on the 14th day of February and August in each year and at maturity. Interest on the 4.32% Notes is payable semi-annually in arrears on the 22nd day of February and August in each year and at maturity. Beginning onAugust 14, 2021 and on the 14th day of August each year thereafter to and includingAugust 14, 2024 , we will be required to prepay$10 million of the principal amount of the 4.02% Notes. Additionally, we may make optional prepayments at any time upon prior notice of all or part of the Notes, subject to the payment of a make-whole amount (as defined in the Amended Senior Notes Agreements, as applicable). Furthermore, until the last day of the first fiscal quarter ending after the Collateral Release Date (as defined in the Amended Senior Notes Agreements, as applicable), we are required to pay a fee to each Note holder in an amount equal to 0.975% of the aggregate principal amount of Notes held by such holder. Such fee is payable quarterly (0.24375% of the aggregate principal amount of the Notes per quarter). The entire outstanding principal balance of the 4.32% Notes will be due and payable on February 48
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22, 2027. The entire unpaid principal balance of the 4.02% Notes will be due and payable onAugust 14, 2025 . The Notes rank pari passu in right of payment with all of our other senior unsecured debt. The Amended Senior Notes Agreements contain various restrictions and covenants applicable to us and certain of our subsidiaries. Among other requirements, the Amended Senior Notes Agreements (a) limit the amount of priority debt held by us or by our restricted subsidiaries to 20% of our consolidated total capitalization, (b) limit our permissible consolidated debt to 65% of our consolidated total capitalization, (c) require us to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0 as of the end of the fiscal quarter endingMarch 30, 2023 and each fiscal quarter thereafter, (d) require our consolidated EBITDA not to be less than or equal to (i)$10 million as ofDecember 30, 2021 for the two consecutive fiscal quarters then ending, (ii)$25 million as ofMarch 31, 2022 for the three consecutive fiscal quarters then ending, (iii)$50 million as ofJune 30, 2022 for the four consecutive fiscal quarters then ending, (iv)$65 million as ofSeptember 29, 2022 for the four consecutive fiscal quarters then ending, or (v)$70 million as ofDecember 29, 2022 for the four consecutive fiscal quarters then ending, (e) require our consolidated liquidity not to be less than or equal to (i)$100 million as ofSeptember 30, 2021 , (ii)$100 million as ofDecember 30, 2021 , (iii)$100 million as ofMarch 31, 2022 , (iv)$100 million as ofJune 30, 2022 , or (v)$50 million as of the end of any fiscal quarter thereafter until and including the fiscal quarter endingDecember 29, 2022 ; however, each such required minimum amount of consolidated liquidity would be reduced to$50 million for each such testing date if the initial term loans under the Credit Agreement are paid in full as of such date, and (f) prohibit us and certain of our subsidiaries from incurring or making capital expenditures, in the aggregate for us and such subsidiaries, (i) during fiscal 2021 in excess of the sum of$40.0 million plus certain adjustments, or (ii) during our 2022 fiscal year in excess of$50 million plus certain adjustments. In connection with the Amended Senior Notes Agreements: (i) we and certain of our subsidiaries have pledged, subject to certain exceptions, security interests and liens in and on (a) substantially all of their respective personal property assets and (b) certain of their respective real property assets, in each case, to secure the Notes and related obligations; and (ii) certain subsidiaries of ours have guaranteed our obligations under the Amended Senior Notes Agreements and the Notes. The foregoing security interests, liens and guaranties will remain in effect until the Collateral Release Date. The Amended Senior Notes Agreements also contain customary events of default. If an event of default under the Amended Senior Notes Agreements occurs and is continuing, then, among other things, the purchasers may declare any outstanding obligations under the Amended Senior Notes Agreements and the Notes to be immediately due and payable and the Note holders may exercise their rights and remedies against the pledged collateral.
Convertible Notes
OnSeptember 17, 2020 , we entered into a purchase agreement (the "Purchase Agreement") withJ.P. Morgan Securities LLC , as representative of the several initial purchasers (the "Initial Purchasers"), to issue and sell$100.05 million aggregate principal amount of our 5.00% Convertible Senior Notes due 2025 (the "Convertible Notes") of which an aggregate principal amount of$13.05 million of Notes was issued pursuant to the exercise by the Initial Purchasers of their option to purchase additional Convertible Notes. We offered and sold the Convertible Notes to the Initial Purchasers in reliance on the exemption from registration provided by Section 4(a) (2) of the Securities Act, and for resale by the Initial Purchasers to persons reasonably believed to be qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A under the Securities Act. We relied on these exemptions from registration based in part on representations made by the Initial Purchasers in the Purchase Agreement. The shares of the Company's common stock, par value$1.00 per share (the "Common Stock"), issuable upon conversion of the Convertible Notes, if any, have not been registered under the Securities Act and may not be offered or sold inthe United States absent registration or an applicable exemption from registration requirements. To the extent that any shares of the Common Stock are issued upon conversion of the Convertible Notes, they will be issued in transactions anticipated to be exempt from registration under the Securities Act by virtue of Section 3(a)(9) thereof because no commission or other remuneration is expected to be paid in connection with conversion of the Convertible Notes and any resulting issuance of shares of the Common Stock. The Purchase Agreement includes customary representations, warranties and covenants by us and customary closing conditions. Under the terms of the Purchase Agreement, we agreed to indemnify the Initial Purchasers against certain liabilities. The Convertible Notes were issued pursuant to an indenture (the "Indenture"), datedSeptember 22, 2020 , between our company andU.S. Bank National Association , as trustee. The net proceeds from the sale of the Convertible Notes were approximately$78.6 million (after deducting the Initial Purchasers' fees and our estimated fees and expenses related to the offering and the cost of the capped call transactions). We used approximately$16.9 million of net proceeds from the offering to pay the cost of the Capped Call Transactions (as defined below). We used the remainder of the net proceeds from the offering to repay borrowings under our revolving credit facility and for general corporate purposes. The 49
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Convertible Notes are senior unsecured obligations and rank (i) senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Convertible Notes; (ii) equal in right of payment to any of our unsecured indebtedness that is not so subordinated; (iii) effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and (iv) structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. The Convertible Notes bear interest fromSeptember 22, 2020 at a rate of 5.00% per year. Interest will be payable semiannually in arrears onMarch 15 andSeptember 15 of each year, beginning onMarch 15, 2021 . The Convertible Notes may bear additional interest under specified circumstances relating to our failure to comply with our reporting obligations under the Indenture or if the Convertible Notes are not freely tradable as required by the Indenture. The Convertible Notes will mature onSeptember 15, 2025 , unless earlier repurchased or converted. Prior toMarch 15, 2025 , the Convertible Notes will be convertible at the option of the holders only under the following circumstances: (i) during any fiscal quarter commencing after the fiscal quarter ending onDecember 31, 2020 (and only during such fiscal quarter), if the last reported sale price of the Common Stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period immediately after any five consecutive trading day period, or the measurement period, in which the trading price per$1,000 principal amount of the Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Common Stock and the conversion rate on each such trading day; or (iii) upon the occurrence of specified corporate events. On or afterMarch 15, 2025 , the Convertible Notes will be convertible at the option of the holders at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Convertible Notes may be settled, at our election, in cash, shares of Common Stock or a combination thereof. The initial conversion rate is 90.8038 shares of Common Stock per$1,000 principal amount of the Convertible Notes (equivalent to an initial conversion price of approximately$11.01 per share of Common Stock), representing an initial conversion premium of approximately 22.5% to the$8.99 last reported sale price of the Common Stock onThe New York Stock Exchange onSeptember 17, 2020 . If we undergo certain fundamental changes, holders of Convertible Notes may require us to repurchase for cash all or part of their Convertible Notes for a purchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, if a make-whole fundamental change occurs prior to the maturity date, we will, under certain circumstances, increase the conversion rate for holders who convert Convertible Notes in connection with such make-whole fundamental change. We may not redeem the Convertible Notes before maturity and no "sinking fund" is provided for the Convertible Notes. The Indenture includes covenants customary for securities similar to the Convertible Notes, sets forth certain events of default after which the Convertible Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving our company and certain of our subsidiaries after which the Convertible Notes become automatically due and payable. During our fiscal 2021 second, third and fourth quarters, and our fiscal 2022 first quarter, the Convertible Notes were (are) eligible for conversion at the option of the holders as the last reported sale price of the Common Stock was greater than or equal to 130% of the applicable conversion price for at least 20 trading days during the last 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter. We have the ability to settle the conversion in Common Stock.
Capped call transactions
In connection with the pricing of the Convertible Notes onSeptember 17, 2020 , and in connection with the exercise by the Initial Purchasers of their option to purchase additional Convertible Notes onSeptember 18, 2020 , we entered into privately negotiated Capped Call Transactions (the "Capped Call Transactions") with certain of the Initial Purchasers and/or their respective affiliates and/or other financial institutions (the "Capped Call Counterparties"). The Capped Call Transactions are expected generally to reduce potential dilution of our common stock upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of such converted Convertible Notes, as the case may be, in the event that the market price per share or our common stock, as measured under the terms of the Capped Call Transactions, is greater than the strike price of the Capped Call Transactions, which initially corresponds to the conversion price of the Convertible Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Convertible Notes. If, however, the market price per share of our common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions, there would nevertheless be dilution to the extent that such market price exceeds the cap price of 50
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the Capped Call Transactions. The cap price of the Capped Call Transactions will initially be$17.98 per share (in no event shall the cap price be less than the strike price of$11.0128 ), which represents a premium of 100% over the last reported sale price of the Common Stock of$8.99 per share onThe New York Stock Exchange onSeptember 17, 2020 , and is subject to certain adjustments under the terms of the Capped Call Transactions. The Capped Call Transactions are separate transactions entered into by us with the Capped Call Counterparties, are not part of the terms of the Convertible Notes and will not change the rights of holders of the Convertible Notes under the Convertible Notes and the Indenture.
Summary
Our long-term debt has scheduled annual principal payments, net of amortization of debt issuance costs, of$11.0 million and$11.0 million in fiscal 2022 and fiscal 2023, respectively. We believe that the actions we have taken over the past two years will allow us to have sufficient liquidity to meet our obligations as they come due and to comply with our debt covenants for at least 12 months from the issuance date of the consolidated financial statements. However, future compliance with our debt covenants could be impacted if we are unable to return to closer-to-normal operations as currently expected, which could be impacted by matters that are not entirely in our control, such as the continuation of protective actions that federal, state and local governments have taken, the impact of any new variants of COVID-19 on customer behavior and the timing of new movie releases (as described in the Impact of the COVID-19 Pandemic section of this MD&A). Future compliance with our debt covenants could also be impacted if the speed of recovery of our theatres and hotels and resorts businesses is slower than currently expected. For example, our current expectations are that our theatre division will continue to improve during fiscal 2022 (but still report results below comparable periods in fiscal 2019), before beginning to progressively return to closer-to-normal performance as we enter fiscal 2023. Our current expectations for our hotels and resorts division are that we will continue to show improvement in each succeeding quarter compared to the prior year, but continue to underperform compared to pre-COVID-19 pandemic years. We do not expect to return to pre-COVID-19 occupancy levels during fiscal 2022 due to an expected lag in business and group travel. It is possible that the impact of COVID-19 may be greater than currently expected across one or both of our divisions such that we may be unable to comply with our debt covenants in future periods. In such an event, we would either seek covenant waivers or attempt to amend our covenants, though there is no certainty that we would be successful in such efforts.
Financial condition
Fiscal 2021 vs. Fiscal 2020
Net cash provided by operating activities totaled$46.3 million during fiscal 2021, compared to net cash used in operating activities of$68.6 million during fiscal 2020, an increase of$114.8 million . The increase in net cash provided by operating activities in fiscal 2021 was due primarily to a reduced net loss and the favorable timing in the collection of government grant receivables, receipt of refundable income taxes and payment of accounts payable, accrued compensation and other accrued liabilities, partially offset by the unfavorable timing in the collection of accounts receivable during fiscal 2021. Net cash provided by investing activities during fiscal 2021 totaled$10.9 million , compared to net cash used in investing activities during fiscal 2020 of$12.1 million , an increase of$23.0 million . The increase in net cash provided by investing activities was primarily the result of a decrease in capital expenditures, the receipt of$22.1 million in proceeds from disposals of property, equipment and other assets during fiscal 2021 (compared to$4.5 million of similar proceeds in fiscal 2020), and the receipt of$11.4 million in conjunction with collection of a split dollar life insurance policy receivable, partially offset by the fact we received$5.2 million in proceeds from the sale of trading securities during fiscal 2020 and contributed$2.4 million to theKimpton Hotel Monaco Pittsburgh joint venture in fiscal 2021. We did not incur any acquisition-related capital expenditures during fiscal 2021 or fiscal 2020. Total cash capital expenditures (including normal continuing capital maintenance and renovation projects) totaled$17.1 million during fiscal 2021 compared to$21.4 million during fiscal 2020, a decrease of$4.3 million , or 20.0%. We incurred capital expenditures of approximately$1.8 million during fiscal 2020 related to development costs of a proposed new theatre, but we subsequently abandoned plans to build this theatre. We did not incur any capital expenditures related to developing new theatres in fiscal 2021, nor did we did incur any capital expenditures related to developing new hotels during either period. We incurred approximately$10.3 million of capital expenditures in our theatre division during fiscal 2021, including costs associated with the renovation of a theatre. We incurred approximately$15.8 million of capital expenditures during fiscal 2020 in our theatre division, including costs associated with the addition of four new screens, DreamLounger recliner seating and a SuperScreen DLX® auditorium at an existingMovie Tavern theatre and the addition of DreamLounger recliner seating to another existingMovie Tavern theatre. Also during fiscal 2020, we began a project to 51
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add DreamLounger recliner seating, as well asReel Sizzle and Take Five Lounge outlets, to an existingMarcus Wehrenberg theatre (this project was completed in fiscal 2021). We incurred approximately$6.8 million of capital expenditures in our hotels and resorts division during fiscal 2021, including costs related to a lobby renovation at the Grand Geneva. We also incurred capital expenditures in our hotels and resorts division during fiscal 2020 of approximately$4.7 million , consisting primarily of maintenance capital projects at our company-owned hotels and resorts. Our current estimated fiscal 2022 cash capital expenditures, which we anticipate may be in the$35 -$45 million range, are described in greater detail in the "Current Plans" section of this MD&A. Net cash used in financing activities during fiscal 2021 totaled$47.2 million , compared to net cash provided by financing activities during fiscal 2020 of$69.1 million . During fiscal 2021, we increased our borrowings under our revolving credit facility as needed to fund our cash needs and used excess cash to reduce our borrowings under our revolving credit facility. As short-term revolving credit facility borrowings became due, we replaced them as necessary with new short-term revolving credit facility borrowings. As a result, we added$178.5 million of new short-term revolving credit facility borrowings, and we made$178.5 million of repayments on short-term revolving credit facility borrowings during fiscal 2021. Net cash provided by operating and investing activities during fiscal 2021 was used to repay$40.3 million of short-term borrowings, including the early repayment of a portion of our term loan facility, as described above. We did not issue any new long-term debt during fiscal 2021. During the first quarter of fiscal 2020, at the onset of the pandemic, we drew down on the full amount available under our revolving credit facility (after taking into consideration outstanding letters of credit that reduce revolver availability). We also incurred$90.8 million of new short-term borrowings early in our fiscal 2020 second quarter and issued$100.05 million in convertible notes in our fiscal 2020 third quarter, the majority of which was used to repay existing borrowings under our revolving credit facility. Net cash provided by financing activities during fiscal 2020 was reduced by$16.9 million of capped call transactions. As a result, we added$221.5 million of new short-term revolving credit facility borrowings, and we made$302.5 million of repayments on short-term revolving credit facility borrowings during fiscal 2020 (net decrease in borrowings on our credit facility of$81.0 million ). We received$6.7 million in proceeds from borrowings against the cash surrender value of a life insurance policy during fiscal 2021. We received Payroll Protection Program ("PPP") loan proceeds during the second quarter of fiscal 2020, the majority of which were used for qualifying expenses during such quarter that we believed would result in forgiveness of the loan under provisions of the CARES Act. During the third quarter of fiscal 2021, we received notification that qualifying expenses for all of our PPP loans were forgiven. The portion of the PPP loan proceeds that were not used for qualifying expenses totaling approximately$3.4 million contributed to net cash provided by financing activities during fiscal 2020. Principal payments on long-term debt were approximately$10.7 million during fiscal 2021, including a$10.0 million installment payment on senior notes, compared to payments of$9.4 million during fiscal 2020, which included a$9.0 million final payment on senior notes that matured inApril 2020 . We incurred$0.2 million and$7.6 million in debt issuance costs during fiscal 2021 and fiscal 2020, respectively. Our debt-to-capitalization ratio (including short-term borrowings but excluding our finance and operating lease obligations) was 0.37 atDecember 30, 2021 , compared to 0.37 atDecember 31, 2020 . A change in the accounting for our convertible senior notes (described in Note 1 of the notes to our consolidated financial statements included in this annual report on Form 10-K) contributed to the increase in our debt-to-capitalization ratio. Based upon our current expectations for our fiscal 2022 operating results and capital expenditures, we anticipate that our total long-term debt and debt-to-capitalization ratio may modestly decrease during fiscal 2022. Our actual total long-term debt and debt-to-capitalization ratio at the end of fiscal 2022 are dependent upon, among other things, our actual operating results, capital expenditures, asset sales proceeds and potential equity transactions during the year. During fiscal 2021 and fiscal 2020 we did not repurchase any shares of our common stock in the open market. As ofDecember 30, 2021 , approximately 2.7 million shares of our common stock remained available for repurchase under prior Board of Directors repurchase authorizations. Under these authorizations, we may repurchase shares of our common stock from time to time in the open market, pursuant to privately-negotiated transactions or otherwise, depending upon a number of factors, including prevailing market conditions. We did not make any dividend payments during fiscal 2021. We made one quarterly dividend payment totaling$5.1 million during fiscal 2020 before suspending dividends. Our Credit Agreement, as recently amended, required us to temporarily suspend our quarterly dividend payments and prohibited us from repurchasing shares of our common stock in 52
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the open market through the end of fiscal 2021. The Credit Agreement also limits the total amount of quarterly dividend payments or share repurchases during the four subsequent quarters beginning with the first quarter of fiscal 2022 to no more than$1.55 million per quarter, unless we have paid off the Term Loan A and returned to compliance with prior financial covenants under the Credit Agreement (specifically, the consolidated fixed charge coverage ratio), at which point we have the ability to declare quarterly dividend payments and/or repurchase shares of our common stock in the open market as we deem appropriate.
Contractual obligations, business commitments and future uses of cash
The following schedule details our contractual obligations atDecember 30, 2021 (in thousands): Payments Due by Period Less Than After Total 1 Year 1-3 Years 4-5 Years 5 Years Long-term debt$ 215,144 $ 10,967 $ 22,118 $ 124,346 $ 57,713 Interest on fixed-rate long term debt(1) 41,368 10,710 18,254 10,095 2,309 Pension obligations 46,827 1,697 3,734 4,561 36,835 Operating lease obligations 310,190 26,803 52,152 50,711 180,524 Finance lease obligations 23,794 3,404 6,218 5,714 8,458 Short-term borrowings 47,346 47,346 - - - Construction commitments 11,776 11,776 - - - Total contractual obligations$ 696,445 $ 112,703 $ 102,476 $ 195,427 $ 285,839 ________________ (1)Interest on variable-rate debt obligations is excluded due to significant variations that may occur in each year related to the amount of variable-rate debt and the accompanying interest rate.
Additional details describing our long-term debt are included in Note 7 to our consolidated financial statements.
As ofDecember 30, 2021 , we had no additional material purchase obligations other than those created in the ordinary course of business related to property and equipment, which generally have terms of less than 90 days. We had long-term obligations related to our employee benefit plans, which are discussed in detail in Note 10 to our consolidated financial statements. We have not included uncertain tax obligations in the table of contractual obligations set forth above due to uncertainty as to the timing of any potential payments.
From
In connection with the mortgage loan obtained by theKimpton Hotel Monaco Pittsburgh ("Monaco") joint venture, we provided an environmental indemnity and a "bad boy" guaranty that provides that the lender can recover losses from us for certain bad acts of theMonaco joint venture, such as but not limited to fraud, intentional misrepresentation, voluntary incurrence of prohibited debt, prohibited transfers of the collateral, and voluntary bankruptcy of theMonaco joint venture. Under the terms of theMonaco joint venture operating agreement, Searchlight has agreed to fully indemnify us under the "bad boy" guarantees for any losses other than those attributable to our own bad acts and has agreed to indemnify us to its proportionate liability under the environmental liability. Additional detail describing theMonaco joint venture is included in Note 13 to our consolidated financial statements.
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