Marcus Reports In-Line, But Net Income Declined

| About: Marcus Corporation (MCS)

The Marcus Corporation (NYSE:MCS) recorded first quarter 2011 earnings of 34 cents per share, in line with the Zacks Consensus Estimate as well as year-ago quarter. However, net income of the company declined 1.9% from the prior-year quarter to $10 million due to a higher effective income tax rate.

The entertainment and lodging company’s revenues upped 3.5% year over year to $114 million and surpassed the Zacks Consensus Estimate of $113 million. The upside in revenues was driven by a solid performance of the company’s lodging division, Marcus Hotels and Resorts, offsetting the weak performance of movie theater division, Marcus Theater.

The Milwaukee-based company’s lodging division posted a 14.1% hike in revenues and revenue per available room (RevPAR) increased 15.7% in the quarter as it experienced an increase in occupancy levels due to the economic recovery resulting in a return of business travels with leisure demand picking up as well.

Marcus’ theater division reported a drop of 3.3% in revenues, given fewer strong-performing films. The company has received encouraging responses from customers for 3D movies after introducing 3D technology in 8 UltraScreen theaters. Hence, it remains focused on showcasing a larger number of 3D movies to viewers, and is thereby planning to install 3D digital in 3 additional UltraScreen halls.

Operating income of Marcus spiked up 2.4% to $19.4 million in the reported quarter. However, operating margin declined 20 basis points (bps) to 17.0% due to an increase in total cost and expenses.

Interest expense fell from $3.0 million to $2.7 million, primarily due to reduced borrowings.

The company also announced recently that it has signed an agreement to buy the College Avenue 16 Cinema in Appleton, from Regal Entertainment Group. The financial details of the transaction were not disclosed.

Financial Position

At the end of the quarter, the company had cash and cash equivalents of $10 million, long- term debt of $182.8 million and shareholder’s equity of $340.7 million. The company’s debt to capitalization ratio was below 40% at the end of first quarter. During the quarter, the company repurchased $0.4 million shares.

Marcus currently retains a Zacks #2 Rank, which translates into a short-term Buy rating.