The Marcus (MCS)
F4Q12 Earnings Call
July 26, 2012 11:30 AM ET
Greg Marcus - President & CEO
Doug Neis - CFO
David Loeb - Baird
Brian Rafn - Morgan Dempsey Capital
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Good morning everyone and welcome to the Marcus Corporation Fourth Quarter Earnings Conference Call. My name is Breen, I will be your operator for today. At this time all participants are on listen-only mode. (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.
Thank you. Welcome everybody to fiscal 2012 fourth quarter and year end conference call. As usual I do need to begin by stating we plan of making a number of forward-looking statements on our call. Forward-looking statements could include but not be limited to statements about our future revenue and earnings expectations. Our future RevPAR occupancy rates and room rates expectations for our hotels and resorts and division, expectations about the quality and quantity and audience appeal of film product expected to be made available to us in the future. Expectations about the future trends in the business group and leisure, travel industry in our markets, expectations and plans regarding growth in a number and type of our properties and facilities.
Expectations regarding various non-operating line items on our earnings statement and expectations regarding future capital expenditures. Of course our actual results could differ materially from those projected or suggest by our forward-looking statements. Factors, risks and uncertainties which could impact our ability to achieve our expectations are included in the risk factor section of our 10K and 10Q filings which we can be obtained in the SEC or the company.
We will also post our Regulation G disclosures when applicable on our website at www.marcuscorp.com.
So with that let’s begin, by talking about our fiscal 2012 fourth quarter and year end results as you can see we ended the year very strong, certainly pleased of your reporting and other significantly improved quarter compared to last year thanks to much stronger results from your Theater division and continued positive trends in our hotels and resorts division.
I am going to take you through some of the detail behind the numbers and then turn the call over to Greg for his comments. Before I get into the operating results let me first briefly address any variations and line items below operating income versus last year. The first unusual item is right off the bat is on the investment income line, during our fourth quarter we recognized a one-time gain of nearly $800,000. On the sales securities that withheld it was investment for some time.
Looking at the fiscal year results, this unusual amount becomes more pronounced due to an approximately $700,000 adjustment to investment income made last year, that was related to the change and estimate of interest income, earned data on the funds we invest several years ago in conjunction with the public portion of the Hilton Milwaukee parking garage.
We view both gain recorded this year and the loss recorded last year as one time unusual items. Investment income is historically included interest earned on cash, cash equivalents and notes receivable including notes related to prior sales of time share units on hotels, resorts division and we currently expect return to reporting investment income on just those items during fiscal 2013.
Moving on we reported another reduction on interest expense during the fourth quarter compared to the same period last year. Our interest expense was down approximately $240,000 during the fourth quarter and ended the year down nearly $1.1 million compared to the prior year same prior year due primarily to reduce borrowings, we are able to fund our fiscal 2012 capital expenditures, dividends and share repurchases out of operating cash flow eliminating the need for additional incremental debt during the year.
Based upon on our current expectations for increased capital expenditures during fiscal 2013, we currently believe our interest expense will likely increase during fiscal 2013 compared to the year that was thus completed.
Our total debt remains at historically low levels and our comparable debt to capitalization ratio at the end of the year was 37% down from 39% at the end of the year last year. I do want to point out that current maturities and long term debt on our balance sheet as of May 31, 2012 include a $15.1 million mortgage related to our Skirvin Hilton Hotel that has a maturity date in December of 2012 and 71 million in borrowings under our revolving credit agreement with a maturity date in April 2013.
We fully expect to refinance both of these debt agreements during fiscal 2013 at which time these borrowings will be reclassified as long term debt. So from my point of view, our only true current maturities during fiscal 2013 are the approximately 11.8 million due on our senior notes and other debt.
Looking at the next line, gains and losses from disposition of fixed assets, last year’s fourth quarter include some furniture and equipment write-offs related to hotel renovations and as a reminder the primary reason for the favorable comparison on this line for the full fiscal year was last year’s $750,000 loss that was related to an adverse legal judgment that was related our Las Vegas property. There were no significant variations in the last line and the other income expense section that equity gains and losses on investments line during the fourth quarter.