The Marcus' CEO Hosts Annual Shareholder Meeting (Transcript)

Oct.17.13 | About: Marcus Corporation (MCS)

The Marcus Corporation (NYSE:MCS)

Annual Shareholder Meeting Call

October 17, 2013 10:00 AM ET


Steve Marcus - Chairman

Greg Marcus - President and CEO

Tom Kissinger - Senior Executive Vice President, General Counsel and Secretary

Rolando Rodriguez - Executive Vice President of the Marcus Corporation and President and CEO of Marcus Theatres

Doug Neis - CFO and Treasurer


Steve Marcus

Good morning, I guess you don’t recognize me. I am Steve Marcus, Chairman of the Marcus Corporation and I want to welcome you to our 2013 Annual Shareholders Meeting. And speaking for our managers and associates, welcome to the InterContinental Milwaukee Hotel. Thank you for joining us today and thank you also to our shareholders who are listening to the live webcast of today’s meeting on the internet.

Before we begin, I would like to ask you to turn off your cell phones if you have with already so that everyone can enjoy the meeting without interruption. Thank you very much. And now let’s begin the meeting with the introduction of our executive management team. They are Greg Marcus, President and Chief Executive Officer; Tom Kissinger, Senior Executive Vice President, General Counsel and Secretary; Rolando Rodriguez, Executive Vice President of the Marcus Corporation and President and CEO of Marcus Theatres.

This is Rolando’s first annual meeting as the new leader of our Theatre division. And I know he has been looking forward to meeting and talking with our shareholders. Next Doug Neis, Chief Financial Officer and Treasurer; Bill Reynolds, Senior Managing Director of MCS Capital, our Hotel Investment Business and Karen Spindler, our Director of Corporate Human Resources.

The members of our Executive Management Team are trusted leaders that are instrumental not only in managing our day to day operations but more importantly in developing and executing our growth strategies. Their talent and experience are truly an asset to our company. That brings us to the business portion of the meeting. All shareholders present should have submitted their proxies prior to entering the meeting. If there any shareholders present who have not yet voted or who have previously submitted a proxy and now would like to revote their proxy, please go to the registration desk where you can vote and/or revote your proxy.

And now I will call on Tom Kissinger to report on the mailing of meeting notices the presence of a quorum to know their necessary legalities. Tom?

Tom Kissinger

Thank you, Mr. Chairman. Notice of this annual meeting together with a proxy statement proxy card and an annual report were mailed on September 6, 2013 to all holders of record of our common and Class C commons shares as of August 6, 2013. Based on proxies received prior to the meeting, a quorum is present for all purposes at this meeting and is represented by 88.7% of the common shares and 91.5% of the Class B common shares for combined total of 91.03 of all eligible votes.

Before I move ahead, Steve I would like to also remind our shareholders and guests that as we share information with you today, we’ll talking about our plans and expectations for the future with the Securities and Exchange Commission to file these plans as forward-looking statements. That means I am legally obligated to inform you that our actual results may materially differ from those projected and additional information about our plans as well as factors, risks and uncertainties which may impact our expectations, futures results of operations or financial conditions are included in the risk factor section of our 10-K and 10-Q filings.

So Steve, with that out of way, I will turn it back to you.

Steve Marcus

Thank you very much, Tom. We have three items on the agenda today. The first is the election of our board of directors. I’d like to introduce the board nominees to you now and I will ask the board members to stand during their introduction. They are Greg Marcus, our President and Chief Executive Officer, Jack McKeithan, Jr., Chairman and Chief Executive Officer of Tamarack Petroleum Company. Jack serves on our audit committee as well as our corporate governance and nominating committee.

Diane Marcus Gershowitz, an investor and real estate manager, who was in Chicago, as many of you know Diane is my sister. She serves on the finance committee. Tim Hoeksema, retired Chairman, President and CEO of Midwest Air Group Incorporated. Tim serves on the corporate governance and nominating committee.

Bud Selig, Commissioner of Major League Baseball, Bud serves the compensation committees and also serves on the finance committee and Bud is here. (inaudible) extra innings right.

Philip Milstein, principal of Ogden CAP Properties, LLC in New York City. Phil serves the audit committee and also serves on the compensation and finance committees. Bronson Haase, Bronson is the retired President of Pabst Farms Equity Ventures, retired President and CEO of Wisconsin Gas Company and former President and CEO of Ameritech Wisconsin. Bronson serves our corporate governance and nominating committee.

Jim Ericson, retired Chairman, President and CEO of Northwestern Mutual Life Insurance Company. Jim serves two committees, compensation and finance. Brian Stark, Founding Principal, Chief Executive Officer and Chief Investment Officer of Stark Investments in Milwaukee. He serves on the audit committee and on the corporate governance and nominating committee.

I saved Bruce Olson for last because I want to give him some special recognition. Bruce retired last month after 39 years with the Marcus Corporation serving most recently as Senior Vice President of the Marcus Corporation and President of Marcus Theatres. My father and I hired Bruce in 1974. He was promoted to a leadership role with Marcus Theatres in 1978 at the [right old age] of 28 and became President of the division in 1988.

Bruce's career with the company also included overseeing our former restaurant division. He was instrumental in developing our 18 Applebee’s restaurants as well as many of our Kentucky Fried Chicken stores and numerous other restaurants. But his most significant role by far was with Marcus Theatres. Bruce learned the business from my father not only embraced but enhanced his legacy of being at the forefront of innovation in the industry. We had 78 screens when Bruce became Vice President, there was no such thing as a megaplex, our largest theatre had 3 screens and we also had outdoor theatres at that time.

And with Bruce's leadership we’ve grown to become the fifth largest theatre circuit in United States. Bruce built the majority of the theatres we outbreak today and oversaw several major acquisitions that expanded the chain into adjacent states and into new markets.

On top of this growth, distinctive branded features that set Marcus Theatres apart, such as UltraScreen, Take Five Lounge, MDX, the Marcus Digital Xperience and BigScreen Bistro were all created under Bruce’s leadership. Most importantly he developed an exceptional management team that’s working very closely with Rolando to build those many years of success. While Bruce is retired from day-to-day management responsibilities, he will continue on with us as a member of our Board of Directors, the position he has held since 1996.

We worked closely with someone for nearly 40 years, it’s difficult to summarize the relationship and all that’s been achieved in just a few words. So let me say very simply Bruce on behalf of our shareholders, managers and associates thank you very much for your many contributions to the growth and to success of Marcus Theatres.

It’s truly been an honor to work with you during all these years and a pleasure to work with you and we wish you all the best. Incidentally I have to say those historic photos are priceless.

On that note let’s return to the business of the meeting and nominations for election to the board of directors. Along with the board of members I just introduce I am also up for reelection today.

When we talk about our company being built on trust, it does start with our Board and everything they do. Our Board is committed to representing you, our shareholders to high standards and good corporate governance. As a part of these high standards our audit, compensation and corporate governance and nominating committees are comprised entirely of outside directors. The insights and expertise of our Board members are valuable to me, Greg and our whole management team in operating the business and planning for our future growth. So another thank you is in order this time to our Board for their ongoing commitment and support.

The second item on the agenda is to approve by advisory vote, the compensation of our named executive officers as disclosed in the proxy statement for this meeting. Our executive compensation program is designed to foster an ownership mentality and entrepreneurial spirit in our management team. This is an advisory vote that will not be binding on our Board, but the compensation committee will consider the outcome of the vote when evaluating the effectiveness of our compensation program and we’re making future compensation decisions for our named executive officers.

And the final item we’re considering today is to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2014.

I will now ask our secretary to announce the results of the voting on these three items.

Tom Kissinger

Mr. Chairman regarding the election of the Board of Directors based on the proxies delivered by the company’s shareholders prior to the meeting, each director on the nominated slate received no less than 92,831,294 votes. This means that at least 96.3% of the votes cast for voted in favor of the re-election of each of the directors and that the entire slate of directors has been elected to serve until the next annual meeting.

On the advisory vote to approve compensation of our named executive officers, 95.6% of the votes cast were voted in favor of the executive compensation program. And then a ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2014, 99.9% of the votes cast were voted in favor of this ratification.

Steve Marcus

Thank you very much, Tom. I hope Deloitte & Touche will take comfort in the fact that they have a higher percentage than our elected representative in Washington. That completes the business portion of the meeting. I will now adjourn the official business meeting so that we can continue with an update on our operations.

The theme of our fiscal 2013 annual report, as well as for today’s meeting is built on trust. We chose this theme because earlier this year we were recognized by Forbes Magazine as one of America’s 100 most trustworthy companies. We’re thrilled to be included in this ranking, which identify the most transparent and trustworthy businesses that trade on major American stock exchanges. Since there are about 8,000 companies in that mix, to be one of only a 100 to receive this designation is truly an honor. It’s a result of our ongoing commitment to our core values and to being a strong ethical and long managed company.

As shareholders, I believe we can all take great pride in this recognition knowing that we are well represented by our Board and that our company is a model for good corporate governance. But the concept of trust also applies to other critical elements of our business, our customers and associates.

And to give you more insights into how trust is an integral part of everything we do, I will turn the program over to our CEO, Greg Marcus.

Greg Marcus

Thank you, dad. Thank you, Steve. I think the answers are pretty much, I think actually does and usually when in crowd, I have to yell Steve because you didn’t understand. So for us it is truly all about trust. From the day my grandfather founded the company, our customers have trusted us to provide quality, value and an experience that exceeds their expectations. And we’ve trusted our associates to make that experience the best it can be. But every day is a new day with new opportunities.

My mantra to our associates is to make sure we always remember what is an ordinary day for us, catering a wedding or banquet selling popcorn and candy at the concession stand or serving customers at one of our restaurants can be an extraordinary day for our guests.

Over the next few minutes you are going to hear about how we plan to build on our valued relationships and trusted brands to pursue exciting growth opportunities in our few divisions. We began with the reports on our lodging division, Marcus Hotels & Resorts. An update will be presented by Tom Kissinger. Tom was recently promoted to Senior Executive Vice President of the Marcus Corporation, along with that role comes the opportunity to take on response, added responsibilities when needed.

As you may know, Kirk Rose who was President of Marcus Hotels resigned recently to take another position. Tom is now heading up the Hotel division as we search for new president. I selected Tom for this division leadership role, because his 20 years of experience with the company have given him broad and deep knowledge of our operations. He also had strong and close working relationships with the hotel management team and I know he will do an excellent job with this assignment.

With that lead in, I'll turn the program over to Tom.

Tom Kissinger

Thanks, Greg. Okay, I'll start again. Thanks Greg and good morning. Everyone hear that, I'll say it now. Good morning Steve, good morning. I'm going to put my other hand on you all for just a minute, I really I'm truly very excited to be part of Hotel division in this interim role feel privileged to lead this division. We have such as great team, I’ve known these people a long time and very excited about being able to work with them for a while and believe we'll do fantastic things together.

So with that, let me update you on our key initiatives and let you know what is going on in the division and let's get started. The great job our associates do in making an ordinary day for us and extraordinary day for our guests is reflected in our guest service scores that are among the highest for our brands.

The industry-wide measure of hotel performance is revenue per available room or RevPAR. Our RevPAR increased 3.4% in fiscal 2013. This was due to the continued rebound of the lodging industry, which helped us to achieve record occupancy for the year along with the 2.1% increase in the average daily rate.

Our total room count increased 14% last year to approximately 5,400 rooms at 20 properties in 11 states. We added two new hotels during the year, the Cornhusker, a Marriott Hotel in downtown Lincoln, Nebraska where we have the majority owner and manager and the Westin Atlanta Perimeter North in the suburb of Atlanta, Georgia where we are the manager and a minority owner.

We're currently managing major renovation projects at both properties totalling $24 million. The Cornhusker renovation includes the addition of our second Miller Time Pub & Grill restaurant. Although it has been opened just a few weeks, the customer response has been excellent. As you may remember, we first introduced this concept at the Hilton Milwaukee. It’s all about pairing great food with great beer and relaxing comfortable atmosphere that features more decor and memorabilia.

At almost everything here has its own tradition, so here is a question for you. How many of you know how to drink beer out of a boot? We have one gentleman raising his hand. The answer is easy for our certified beer experts called Cicerones who know there is a trick to this. If you don’t have the toe of the boot pointed down, you end up with beer all over your face. Actually you can do that with other boot, right?

Cicerones help guest choose the perfect beer from the 20 we have on tab to a company their menu selection making Miller Time Pub & Grill a fun place for beer enthusiast and now this is alike. We also continue to invest in our existing properties by adding new features that sets our hotels apart in their markets. This past year we added exclusive pub lawn at the Pfister Hotel in Milwaukee and a Grand Geneva Resort & Spa in Lake Geneva, Wisconsin.

As you can see from the photos, the lawn does have a comfortable livery type feel with book shelves, a fire place, plenty of comfortable seating and workstations. Guests can enjoy snacks and beverages all day at an on-site club, concierge is ready to help assist with whatever they need. At the Pfister, we've also added a high-tech executive board room adjacent to the club lounge on the 23rd floor with amazing views.

In total, we've invested more than $60 million in our existing hotels over the past five fiscal years and is more to come. In additions of renovation projects with the Cornhusker and the Western Atlanta a major renovation of the 176 tower guest rooms of the Pfister will begin in a few weeks. This is a final phase of a multi-year, multi-million dollar renovation of our Hotel flagship properties.

Many of you know the story of how Ben Marcus, our company founder, purchased the Pfister out of bankruptcy in 1962. Last year we celebrated 50 years in the hospitality business. This year is another milestone, the 120th birthday of the Pfister.

To honor it’s history and significant place in Milwaukee’s heritage, we've produced a documentary about the hotel. I’d like to share a clip from the film with you now.


That short video really captures the personal story behind our entry into the hotel business. And so that lead MPTV as Bruce's own and documentary called Inside the Pfister about the hotels role as a hospitality gateway to Milwaukee. The program will air on channel 10 and 36 on October 31, at 7:30 pm, it will also repeat the following evening.

With the Pfister as the foundation we've built a strong lodging business. We believe the time is right to leverage that success and grow the portfolio. We are working to increase our number of rooms under management through strategic alliances with industry leaders such as LEM Capital, our minority partner in the Cornhusker and Carey Watermark and the Arden Group who are our joint venture partners in the Western Atlanta. Our ability to make small equity investments as part of the management contract as we did with the Western Atlanta is also a plus.

The two new hotels were sourced through MCS Capital, our hotel investment affiliate led by Bill Reynolds. Bill is also leading our efforts to establish MCS Capital as an investment fund sponsor, joint venture partner or solo investor in acquiring additional hotel properties.

As a hotel management company, we bring a lot to the table. We are up for all the services hotel owners and developers need from operations, sales and marketing to accounting and legal. We also have successful food and beverage concepts like Miller Time Pub & Grill, Mason Street Grill and our ChopHouse restaurants so that we can bring to other locations just as we are doing at the Cornhusker.

We have 50 years of experience and existing portfolio of distinctive branded and independent properties, many of these like the Pfister, Skirvin Hilton in Oklahoma City and the Grand Geneva are the leaders in their markets.

The broader industry outlook is also favorable for our growth. In spite of reductions in government travel, overall demand is still high, especially in the upper, upscale segment where we operate.

The fastest growing market segments are upscale limited services and boutique hotels that appeal to younger professionals who are not quite as well to a specific brand. These attractive market segments are also on our radar screen. The market is heating up with more development and activity and we've seen for several years. As a result, we have a solid pipeline of potential opportunities. But as you know we don't believe in growth for growth sake. So every product has to be a good fit and provide a good return for our shareholders.

With that in mind, we are also working to improve the profitability of our existing hotels. We've implemented human resource and cost improvement strategies that are designed to maintain our traditionally high standards and improve our operating margins. When you put this altogether I hope you can see why we are so optimistic about the future for our hotel business and why Marcus Hotels & Resorts is a growing and trusted brand in the lodging industry.

Thank you. And now I'll turn the program back to Greg.

Greg Marcus

Thanks Tom for the update on Marcus Hotels & Resorts. We're fortunate to have not just one but two trusted brands, which brings us to the division where The Marcus Corporation got its start.

Marcus Theatres. Earlier, you met the new leader of Marcus Theatres, Rolando Rodriguez. Rolando has been with us about 2.5 months now and I can tell you he’s hit the ground running, actually my script says, hit the ground running, he has hit the ground sprinting, if you want to know the truth. He is -- hard to keep up with the guy, but it’s fantastic, a wonderful energy that he’s brought for our company. He comes to us with a broad range of experience in the Motion Picture industry. That includes more than 30 years with AMC Theatres the second largest movie theatre chain in the world.

For the past two years he was CEO, President and Board Member of Rave Cinemas, in Dallas, which had been the fifth largest theatre circuit in the U.S. until it was sold in May. His carrier also includes five years with Wal-Mart in various roles, including Vice President and Regional General Manager for four states.

If you think he looks a little young to have a 37 year carrier behind him, you’re right. Rolando started with AMC as an offshore at the age of 15. He worked his way up from there getting two degrees and a vast amount of experience in all aspects of the motion picture business along the way.

Please join me in welcoming Rolando to his first Marcus Corporation Annual Meeting.

Rolando Rodriguez

Thank you, Greg. Appreciate that. Good morning, everyone. What a pleasure to be here. It’s absolutely a tremendous honor to become part of this great organization, an amazing team at the Marcus Corporation and in particular the opportunity is to lead the Theatre division.

Needless to say this has been an amazing and well respected brand for many years in the industry. In particular, I just want to take the minute and it’s really my honor and pleasure to be following Bruce Olson, amazing legacy. So it’s something that I am very pleased and proud about and thank you for your support, Bruce. It has been a busy time, but what has been clear to me right from the start is the great team that we have at the Marcus Theatres. I am thoroughly enjoying and getting to know our corporate culture, managers and associates [investing] in our theatres.

I am sure you won’t be surprised to hear the question that I am asked most often is why I want to move from Dallas to Milwaukee?

Do I have any idea of what it is like in the winter? I have grown up in the Midwest, actually considered it my home, my wife and I actually were born there, or she was born there, I actually call it my home. So we’re very, very excited about being here. On top of that, my wife and daughter, they will be joining us here, very excited to be joining the ranks of the Packers fan. And in particular, we were never really big strong supporters of the cowboys so we are looking forward to becoming part of the Packer nation. We want to be involved in the community where we live and work and are looking forward to exploring our new city and state and all they have to offer.

So if movies are dramatic visual experience, I would like to begin my report with a short video that shows why I am so excited about being part of the Marcus Theatres. Let’s watch.


Wow, hopefully you are as excited as I am. Needless to say the video cover both movies and amenities, but that's just the beginning. Marcus Theatres is on a role with a bright future ahead. One of the things that impresses me the most about the company is its culture of innovation. Marcus Theatres is one of the first in the industry with premium, large format 70-feet widescreen which are branded the UltraScreen.

Creative food and beverage concepts are another example. I have been to lots of theatres around the country and as shareholders you should be pleased to know that our cocktail lounges and dining concepts are step above the rest. When it comes to new ideas, our division either innovates or is very good at learning from the competition and making them even better.

My goal is to build on the solid roots by introducing an embracing change that helps to define the feature of the movie going experience. Earlier you heard about Greg's companywide mantra to make everyday extraordinary for our guest. I’d like to describe my management philosophy through three mantras of my own, talent, attendance and profitability, TAP for short.

The concept is simple. The best talent will know and understand our customers to drive traffic to our theatres which in turn generate profit. Our UltraScreens meet all three of these goals, they are unique in their markets, they drove customers from a larger geographic region and they have higher per screen revenues than traditional theatre environment.

We opened our 14th UltraScreen at the Duluth Cinema this past year and our newest UltraScreen will open in November at Gurnee Mills in Gurnee Mills, Illinois. The new Gurnee UltraScreen auditorium will also feature the latest immersive sound technology that can best be described (inaudible). It has three layers of sound that are so realistic you really feel like you’re part of the movie. Our Take Five cocktail lounges are perfect for customers who want to socialize before or after the movie. They too are good source of added revenues and profit. In late August we opened our fifth Take Five lounge at the remodeled Point Cinema in Madison, Wisconsin. If you’re in the area I invite all of you to please stop in. The new lounge also serves our popular Zaffiro's pizza and other great brands that appeals to customers and expands our concession revenue base.

The big news just a few weeks ago was the introduction of the Majestic Cinema of Omaha in Omaha, Nebraska. This was formally the 20 Grand Cinema, but the renovations were so expensive and the results so spectacular that we felt that deserve as gracious and elegant new name. The most dramatic change at the new Majestic is the addition of the luxurious reclining seats in all auditoriums. As with our other unique amenities, these seats too have a brand name, in fact the only one in the industry [Green Lounger].

These oversized recliners offer the ultimating comfort going from upright to forward cline at the touch of a button. To make the experience even better we double the leg room between rows, the customer response has been tremendous and we plan to expand Green Lounger seating to the other select theatres in the future.

Other new additions to the Majestic of Omaha include our sixth Take Five lounge and our Zaffiro's Express. To further expand our audience beyond our core base of traditional movie goers, we recently launched our new Theatre Entertainment Network. This network offers week day alternative programming at 29 of our locations for just $5 a ticket. The programming includes classic movies, live performance, comedy shows and children’s entertainment at a very affordable price.

It’s amazing how impactful this type of program is on the big screen and we are building a good following for these performances. Our creative ideas are not limited to theatres themselves however, we want to make it easy as possible for our customers to find a theatre, select a movie and even buy tickets and our new mobile app does exactly that. The new app available for free for Apple and Android smartphones and tablets is easy to navigate. Customers can search by theatre or by movie, view trailers and even buy tickets and select their reserve seat.

There is no need to print a ticket, theatres just show their phone at the box office and the cashier scans it for an admission. And there are no more new customer, and there are many more customer benefits to come. Right now we’re getting ready to launch our new loyalty program. When we go live with this program, it will offer our guest even more great reasons to visit the Marcus Theatres.

The bottom-line of all of our new amenities and initiatives is to continuously improve customer experience and monetize them to benefit all of our shareholders, which brings us back to TAP.

All of the new features, I’ve highlighted fit the criteria of TAP, talent, attendance and profitability. They were developed and refined by our talented team of managers and associates, they meet the needs of our customers and drive attendance, whether it’s for a movie, a pizza or performance of the metropolitan opera. And they contribute the profit as illustrated by our record operating income in the first quarter. And last year although our revenues were down, average concession sales per person increased by 5.7%. That was a direct result of our food and beverage expansion strategy.

Looking to the future, we are going to continue expand our UltraScreens, as well as Take Five Lounges, Sapores Pizza and [Green Lawn] just two more theatres. We will also continue to invest in updating our existing locations and adding new services like the mobile app that leverage technology to make a trip to the movies easier than ever. We’re looking at both organic growth and growth through acquisitions. We currently own and operate 685 screens in 55 locations in seven Mid-Western states.

Organically, we may consider selective new builds such as a new theatre in Sun Prairie, Wisconsin which should replace our existing East Gate Theatre in Madison. Construction on this new theatre will potentially begin later this fiscal year.

We’ll also consider expansion opportunities in new markets that are synergistic with our seven state footprint. Acquisitions are another source of potential growth. We’ve added more than 230 screens over the past six years, that’s how we’ve expanded our presence into neighboring states such as Iowa, North Dakota, Minnesota and Nebraska.

The movie theatre is very fragmented. However, with about 50% or 50% of the U.S. screens owned by approximately 800 smaller operators, as a result it’s difficult to predict when opportunities may arise. But if they do, we’re in a good position to pursue them.

Our revenue were down for the fiscal 2013 due to a weaker film slate and extra week in fiscal 2012 results, which made for a difficult comparison. But our first quarter was very strong with record operating performance from a calendar year standpoint industry experts are predicting record box office revenues for 2013. This will be on top of the previous record set in 2012. With the strong start to our fiscal year, the Marcus Theatre team looks forward to building on this momentum and continue to earn the trust of our customers each and every day.

Thank you. And now I will turn the program over to Greg.

Greg Marcus

Thanks, Rolando. We welcome your fresh perspectives and with the outstanding team you are working with, we know you will continue to grow the business and I am certain with your focus on profitability, you are remaking my ordinary days extraordinary. There is one more project we are working on that you may have been following in the local press, the Corners of Brookfield.

This is a $150 million mixed use open air development that would feature 400,000 square feet of retail and 150 luxury residential apartments. It will be anchored by the first Von Maur department store in Wisconsin. While the seconds in time the good news is we are making progress. We are talking with potential majority equity partners, the Corner of Brookfield is working on a development agreement and our leasing activities continue to move forward.

However, as we have always said, we will not playground until all these items sold into place. We’re hopeful that the project will come together in the near future, so stay tuned. That brings us to the financial report, which will be presented by Doug Neis, our Chief Financial Officer, Doug?

Doug Neis

Well, thank you very much, Greg and good morning everybody. I will begin with an overview of our fiscal 2013 results and then discuss our performance for the first quarter of fiscal 2014.

You heard about the progress we made in both of our divisions this past year, but from a financial standpoint, fiscal 2013 simply didn't measure up for the strong performance we had in the prior year. This was due to a number of factors, including a weaker film slate for Marcus Theatres and the fact that 2013 was a normal 52 week year compared to the 53 week year that we had in fiscal 2012. There were also several unusual items that reduced our results.

Total revenues for fiscal 2013 were $412.8 million, a slight decrease from the prior year. And operating income, net earnings attributable to the Marcus Corporation and net earnings per diluted common share were also below the levels of the prior year.

Now our both divisions were impacted by the extra week that we had in the prior year in 2012 that compares to the effective Marcus Theatres the most, because that extra week included the busy Memorial Day weekend. The unusual items I mentioned totaled approximately $4.8 million or about $0.10 per diluted common share and included approximately $3.3 million of cost associated with the settlement of law suites related to our Las Vegas property and $1.5 million of impairment charges primarily in our Theatre division. Without the extra week last year and excluding the unusual items, earnings per share for fiscal 2013 were essentially even with the prior year in spite of the weaker film slate.

For fiscal 2013, Marcus Theatres contributed approximately 53% of our revenues and 79% of our operating income. But you can also see on the slide when compared to last two years as well, how Marcus Hotels is coming back after the lodging industry downturn during the recession. Prior the recession, Marcus Hotels contributed about 35% to 40% of our operating income, so we're making good progress as we’re recovering that business.

This chart now shows our capital expenditures including our acquisitions over the last five years. Our total capital expenditure of nearly $24 million of last year included many of the projects that you heard about earlier. We're anticipating the capital expenditures maybe in the $60 million to $90 million range this year including renovations and new features that we have already announced for our existing Theatre and Hotel properties and potential new theatres in the Madison area and potential growth opportunities in our Hotel division. However as I point out every year, the amount is always subject to change based on timing, projects and other factors.

Our debt to total capitalization ratio was 44% at the end of fiscal 2013 and dropped to 42% at the end of first quarter of fiscal 2014. In addition to our low debt our credit facilities are also extremely well positioned, along with cash in our balance sheet, we had $175 million in available credit lines at the end of our first quarter. We completed a new $225 million credit facility during the year and in August we closed on $50 million of senior notes at very favorable terms.

So as you can see we're very well positioned financially and we have the capacity to pursue the potential growth and value creation opportunities that both Tom and Rolando shared with you.

So now I will take a look at our first quarter of fiscal 2014 which ended on August 29th. To summarize results, this was an excellent quarter for us. Revenues were a record to $129 million, up 9.4% from the prior year quarter and operating income increased 19% to $24.3 million.

Net earnings attributable to The Marcus Corporation increased 26% to $13.4 million and our net earnings per share increased 35% to $0.50 per common share. In terms of net earnings, this was our best first quarter since before the 2008 recession.

Operating income from Marcus Theatres increased 27% to a record $16.9 million, while revenues were up 10.8% for the quarter. These results reflect a broad slate of hit pictures that we had during the quarter and illustrates the positive impact good film product can have on our results.

Marcus Hotels also had a very solid quarter with a 7.9% increase in revenues and a 6.5% increase in operating income. Revenue per available room for our comparable company owned properties increased 4.5%. This was primarily driven by an increase in our average daily rates along with higher occupancy during our busy summer season.

In conclusion the Marcus Corporation is in very good shape. We're trusted by the investment community, as well as our customers, partners and communities because of our strong financial position, excellent product and high ethical standards. In other words, we're a good company to invest in and to do business with, that positions us well for continued growth.

That completes the financial report. I will turn the program back over to Greg.

Greg Marcus

Thank you, Doug. There is one more aspect of our company. That I know is of special interest to all of you here today. That is return of capital to shareholders. In December, we paid a special cash dividend of $1 per common share. We also advanced our regular third and fourth quarter dividends because of potential changes in the tax law at that point in time.

We've maintained our dividend at the current annual rate of $0.34 per common share in spite of ups and downs in the economy over the past few years. This provides a current yield of about 2.5%. We also return capital to our shareholders through share repurchases. We repurchased 2.2 million shares of our common stock in fiscal 2013 and another 48,000 shares in the first quarter.

With our strong cash flow and balance sheet, we believe that when timing and market conditions are appropriate, we are able to repurchase shares to enhance shareholder value while at the same time making quarterly cash dividend payments and continuing to invest in our businesses to facilitate our long-term growth.

When you combine the cash dividends with the increase in our stock price, our total return to shareholders for fiscal 2013 was a very respectable 11%. This follows a 30% return in fiscal 2012 and as you probably already know, our stock price has done pretty well so far in our fiscal 2014 not. Knocking on some wood here.

To wrap things up I would like to return to the theme of today's meeting, built on trust. You have heard about our plans for each of our divisions and our growth strategies. We couldn't do any of this without our strong board and management team and our outstanding associates who truly are the face of the Marcus Corporation to our guests. And of course we couldn't do it without the support and confidence of you, our shareholders. Thank you for placing your trust in us.

That brings us to the final item on our agenda, the question-and-answer session. If you are a shareholders and have a question please raise your hand and we'll get you a microphone, so everyone can hear your question. Anybody have a question?

I like it, we've answered all the questions, that's good. alright. Put the general counsel ahead, how much longer do I have to leave the floor open for questions. Let me know when I could go. Okay, questions are closed. Thank you Tom.

You could go back to bring Hotel division for analysts.

Tom Kissinger

Okay. There are few more items I need to cover. First we have our traditional Annual Meeting thank you gift that you can pick up at the registration desk as you leave. Today you will be receiving a $10 gift card that you can use at any Marcus Theatres or Marcus Hotels property.

If you like, you can use it today for lunch at Kil@Wat just on the hall, where you can sample the new menu and receive a 20% discount off your bill, just tell your server you are a Marcus Corporation shareholder. Finally, if you parked in the hotel's parking ramp today and didn't receive a pass for free parking, be sure to pick one up at the registration desk.

Thank you for attending today's annual meeting and we hope to see you again next year. Have a great day.

Question-and-Answer Session

There is no question question-and-answer session.

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