Marcus CEO Discusses Q2 2011 - Earnings Call Transcript
Marcus Corporation (MCS)
Q2 2011 Earnings Call
December 16, 2010 11:00 am ET
Executives
Gregory Marcus – President, Chief Executive Officer
Douglas Neis – Chief Financial Officer
Analysts
David Loeb – Robert W. Baird & Co.
Gregory Macosko – Lord Abbett
Presentation
Operator
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Marcus CEO Discusses F1Q2011 Results - Earnings Call Transcript
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The Marcus Corporation Q2 2010 Earnings Call Transcript
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The Marcus Corporation F3Q10 (Qtr End 02/25/10) Earnings Call Transcript
Good morning everyone and welcome to the Marcus Corporation Second Quarter Earnings conference call. My name is Keisha and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question and answer session towards the end of this conference. If at any time during the call you require assistance, please press star followed by zero and an operator will be happy to assist you. As a reminder, this conference is being recorded.
Joining us today are Greg Marcus, President and Chief Executive Officer, and Doug Neis, Chief Financial Officer of the Marcus Corporation.
At this time, I would like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.
Douglas Neis
Thank you and welcome to our fiscal 2011 second quarter conference call. As usual, I need to begin by stating we plan on making a number of forward-looking statements on our call today. Our forward statements can include but not be limited to statements about our future revenues and earnings expectations, our future REVPAR, occupancy rates, and room rate expectations for our hotels and resorts division, our expectations about the quality, quantity and audience appeal of film products expected to be made available to us in the future, our expectations about the future trends of the business group and leisure travel industry, and in our markets expectations and plans regarding growth in the number and type of our properties and facilities, expectations regarding various non-operating line items on our earnings statement, and our expectations regarding future capital expenditures. Of course, our actual results could differ materially from those projected or suggested by our forward-looking statements. Factors, risks and uncertainties which could impact our ability to achieve our expectations are included in the Risk Factors section of our 10-K and 10-Q filings which can be obtained from the SEC or the Company. We post all Regulation G disclosures when applicable on our website at
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So with that behind us, let’s talk about our fiscal 2011 second quarter results. We’re pleased to be reporting that the positive trends in our hotels and resorts division continued into our second quarter, resulting in significant year-over-year improvement from that division even after adjusting for last year’s impairment charge. Meanwhile, although our theater division is reporting a small increase in operating income, the fact remains that if not for last year’s one-time pension withdrawal liability charge, we would be reporting a decrease in operating results from this division during the quarter.
But before I get into the operating results, let me first briefly address any variations in the line items below operating income versus last year. As you can see, there really weren’t too many variations in most of these lines this time around.
Our investment income continues to be down slightly from the prior year as our remaining outstanding loans from our former timeshare business continue to be paid down; and our interest expense was down over $100,000 during our fiscal 2011 second quarter and is down approximately $400,000 year-to-date compared to the prior year’s same period, due primarily to reduced borrowings.
Other than a theater acquisition during the quarter, our capital spending remains relatively low, contributing to the reduced borrowing levels. As you know, our cash inflows are typically lower during the winter months, so we might see our debt levels rise in future periods. Our overall debt to capitalization ratio at the end of the quarter was a very strong 40%, down from 41% in our May fiscal 2010 year-end.
Moving down the P&L, we had a negative comparison in our gains and losses on disposition line this quarter and for the first half of this year compared to the same periods during fiscal 2010 because last year benefited from a favorable legal settlement related to original construction on the condominium units at our Platinum Hotel and Spa in Las Vegas.
And finally, our effective income tax rate during the first half of fiscal 2011 was 38.3% compared to 37% last year, with both years’ second quarter rates benefiting from adjustments in our year-to-date assumptions. I currently expect our tax rate for the final two quarters of the year to be closer to our historical 39 to 40% range pending any further changes in assumptions, lapses in statute of limitations or potential changes in federal state tax rates.
Shifting gears, our total capital expenditures including acquisitions during the first half of fiscal 2011 totaled just under 16 million compared to just under 11 million last year at this same time. The largest component of this year’s expenditures, of course, was the previously announced Appleton, Wisconsin theater acquisition. The remainder of the fiscal 2011 capital expenditures were again spread almost equally between our two divisions and represented typical renovation and maintenance capital at our existing properties.
At the beginning of the fiscal year, we estimated that our capital expenditures for fiscal 2011 could total in the 40 to $60 million range, noting that a portion of this estimate included a certain level of potential unidentified growth projects; and while several of these types of expenditures still could arise in the remaining six months of our fiscal year, my current assumption is that our estimated fiscal 2011 capital expenditures may more likely end up in the 30 to $40 million range, which would still be very consistent with or even slightly higher than the last three fiscal years. Of course, the actual timing of the various projects currently underway or proposed will certainly impact our final capital expenditure number, as will any current unidentified projects that could develop during the remainder of the fiscal year.
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