The Marcus Corporation (MCS)
F1Q2011 Earnings Call Transcript
September 16, 2010 11:00 am ET
Doug Neis – CFO and Treasurer
Greg Marcus – President and CEO
David Loeb – Robert W. Baird & Company
Herb Buchbinder – Wells Fargo
Marla Backer – Hudson Square
Previous Statements by MCS
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everyone, and welcome to The Marcus Corporation first quarter earnings conference call. My name is Omicka, and I will be your operator for today. (Operator instructions) 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.
Well thank you and welcome to our fiscal 2011 first quarter conference call. As usual I need to begin by saying that we plan on making a number of forward-looking statements in our call today. Forward-looking statements could 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 in the business group in 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 lines 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 will, of course, post all Regulation G disclosures when applicable on our website at www.marcuscorp.com.
So with that let us talk about our fiscal 2011 first quarter results. The positive trends in our hotels and resorts division continued in our first quarter resulting in substantial year-over-year improvements in that division, but even though our theatre business reported reduced operating results, we were able to report increased revenues, operating income and pre-tax earnings this quarter. So we are pleased with that.
Before I get into quarter results, however, 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 any significant variations in most of these line terms. The activity on our investment income, gains and losses on dispositions, and equity earnings and losses lines was very limited with no significant variations compared to last year. At this point in time, I don’t expect we will see significant variations in these same line items in future fiscal ’11 quarters as well, barring any unforeseen dispositions or anything along those lines during the year.
Meanwhile our interest expense was down over $300,000 during our fiscal 2011 first quarter compared to the prior year due primarily to reduced borrowings. As you know, during the summer and we were at the peak of our cash inflows, while at the same time we generally refrain from significant capital spending. As in the past, we will likely see our debt level rise in the future periods now that the summer is behind us.
Our overall debt to capitalization ratio at the end of the quarter was a very strong 39.5%, down from 41% in our recent May year-end due to the aforementioned strong cash flow summer for us. And finally, the only reason that our net earnings for a quarter were slightly lower than last year was because of a higher effective income tax rate during fiscal 2011.
Our effective income tax rate during the first quarter this year was approximately 14.2% compared to an effective income tax rate last year during the first quarter of 36.5%. This is really all about last year, the last year’s rate benefited from a decrease in the amount of unrecognized tax benefits as a result of a lapse of the applicable statute of limitations. This year’s annual tax rate is expected to return to our historical 38% to 40% range, excluding any further lapses in statute of limitations or potential changes in federal or state tax rates.
Shifting gears, our total capital expenditures during the first quarter of fiscal 2011 totaled approximately $2 million compared to just under $7 million last year. Of course, last year we were in the midst of the ongoing renovations at our Grand Geneva and Hilton Milwaukee properties. As I noted earlier, we generally tend to limit our capital spending during our busy summer time period, and the amount we did spend this year was spent equally between our two divisions. At this early stage of our fiscal year, despite the low CapEx number during our first quarter, I have no reason to adjust our previous estimate for capital expenditure for fiscal 2011 of an amount in the $40 million to $60 million range.
In fact, as you saw yesterday we announced an acquisition of a theatre in Appleton, Wisconsin. We are also still finalizing the scope and timing of the various requested projects by our two divisions, and we anticipate proceeding with many of these projects as the year unfolds. The actual timing of various projects currently under way or proposed will certainly impact our final capital expenditure number as will any currently unidentified projects that could develop during our fiscal year.