The Marcus (MCS) Q4 2014 earnings summary

Executive summary

• F2014 revenue rose 8.5% to $447.9M, operating income increased 26.6% to $48.4M, and net earnings attributable to shareholders reached $25.0M vs. $17.5M. Diluted EPS was $0.92 vs. $0.63.

• Growth reflected improved theatre attendance and higher hotel occupancy and room rates; net earnings also benefited from a $4.1M loss allocated to noncontrolling interests, including a settlement-related reallocation.

Financial highlights

• Theatre revenue increased 10.8% to $243.2M; hotels and resorts revenue increased 5.9% to $204.1M. Consolidated operating income was $48.4M, up from $38.2M.

• Net cash from operations was $66.4M, up 5.1%; capital expenditures were $56.7M vs. $22.6M, and cash used in investing activities was $57.7M.

• Reported results included a $4.1M loss attributable to noncontrolling interests, which increased earnings attributable to shareholders; the Skirvin settlement impact was estimated at ~$0.08 per diluted share after tax.

• Interest expense was $10.1M, up 8.1%; income tax expense was $16.8M, with an adjusted effective tax rate of 40.2% vs. 39.3%.

Outlook and guidance

• FY2015 total capital expenditures were projected at $70M-$90M, excluding unidentified acquisitions; theatre spending was estimated at $45M-$60M and hotels and resorts at $25M-$30M.

• Theatre plans included opening the 12-screen Palace at Sun Prairie in February 2015; summer 2014 box office was below the prior year on a weaker film slate, while attendance continued to outperform the industry.

• Fiscal 2015 theatre ticket-price and concession-spend comparisons were expected to decline at similar rates in H1; planned film and alternate-content volume was similar to F2014, with ~20 digital 3D films scheduled.

• FY2015 interest expense was expected to remain broadly stable; the effective tax rate was expected near 39%-40%, excluding changes in tax positions or rates.

• Hotel performance was expected to benefit from completed Pfister and Cornhusker renovations, while the Chicago hotel conversion and added room supply in Milwaukee and Oklahoma City posed near-term headwinds.