MARCUS CORP - Annual Report: 2019 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 26, 2019

For the transition period from ___________ to ___________

Commission File Number 1-12604

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.       ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The aggregate market value of the registrant’s common equity held by non-affiliates as of June 27, 2019 was approximately $703,219,990. This value includes all shares of the registrant’s common stock, except for treasury shares and shares beneficially owned by the registrant’s directors and executive officers listed in Part I below.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock outstanding at February 17, 2020 – 23,023,221

Class B common stock outstanding at February 17, 2020 – 7,925,504

Portions of the registrant’s definitive Proxy Statement for its 2020 annual meeting of shareholders, which will be filed with the Commission under Regulation 14A within 120 days after the end of our fiscal year, will be incorporated by reference into Part III to the extent indicated therein upon such filing.

PART I

Special Note Regarding Forward-Looking Statements

Certain matters discussed in this Annual Report on Form 10-K and the accompanying annual report to shareholders, particularly in the Shareholders’ Letter and Management’s Discussion and Analysis, are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements may generally be identified as such because the context of such statements include words such as we “believe,” “anticipate,” “expect” or words of similar import. Similarly, statements that describe our future plans, objectives or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which may cause results to differ materially from those expected, including, but not limited to, the following: (1) the availability, in terms of both quantity and audience appeal, of motion pictures for our theatre division, as well as other industry dynamics such as the maintenance of a suitable window between the date such motion pictures are released in theatres and the date they are released to other distribution channels; (2) the effects of adverse economic conditions in our markets, particularly with respect to our hotels and resorts division; (3) the effects on our occupancy and room rates of the relative industry supply of available rooms at comparable lodging facilities in our markets; (4) the effects of competitive conditions in our markets; (5) our ability to achieve expected benefits and performance from our strategic initiatives and acquisitions; (6) the effects of increasing depreciation expenses, reduced operating profits during major property renovations, impairment losses, and preopening and start-up costs due to the capital intensive nature of our businesses; (7) the effects of weather conditions, particularly during the winter in the Midwest and in our other markets; (8) our ability to identify properties to acquire, develop and/or manage and the continuing availability of funds for such development; (9) the adverse impact on business and consumer spending on travel, leisure and entertainment resulting from terrorist attacks in the United States or other incidents of violence in public venues such as hotels and movie theatres; (10) a disruption in our business and reputational and economic risks associated with civil securities claims brought by shareholders; (11) our ability to timely and successfully integrate the Movie Tavern operations into our own circuit; and (12) our ability to achieve the additional revenues and operating income that we anticipate from our additional week of operations in fiscal 2020 and certain extraordinary events that will take place in or near Milwaukee during fiscal 2020, such as the Democratic National Convention and The Ryder Cup. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this Form 10-K and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

We are engaged primarily in two business segments: movie theatres and hotels and resorts.

As of December 26, 2019, our theatre operations included 91 movie theatres with 1,106 screens throughout 17 states (Wisconsin, Illinois, Iowa, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Arkansas, Colorado, Georgia, Kentucky, Louisiana, New York, Pennsylvania, Texas and Virginia), including one movie theatre with 6 screens in Wisconsin owned by a third party and managed by us. We also operate a family entertainment center, Funset Boulevard, that is adjacent to one of our theatres in Appleton, Wisconsin, and own the Ronnie’s Plaza retail outlet in St. Louis, Missouri, an 84,000 square foot retail center featuring 21 shops and other businesses to which we lease retail space. As of the date of this Annual Report, we are the 4^th largest theatre circuit in the United States.

As of December 26, 2019, our hotels and resorts operations included eight wholly-owned or majority-owned and operated hotels and resorts in Wisconsin, Illinois, Nebraska and Oklahoma. We also managed 12 hotels, resorts and other properties for third parties in Wisconsin, California, Minnesota, Nevada, Nebraska, Illinois and Texas. As of December 26, 2019, we owned or managed approximately 5,400 hotel and resort rooms.

Both of these business segments are discussed in detail below. For information regarding the revenues, operating income or loss, assets and certain other financial information of these segments for the last three full fiscal years, please see our Consolidated Financial Statements and the accompanying Note 14 in Part II below.

Strategic Plans

Please see our discussion under “Current Plans” in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Theatre Operations

At the end of fiscal 2019, we owned or operated 91 movie theatre locations with a total of 1,106 screens in Wisconsin, Illinois, Iowa, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Arkansas, Colorado, Georgia, Kentucky, Louisiana, New York, Pennsylvania, Texas and Virginia. We averaged 12.2 screens per location at the end of fiscal 2019, compared to 13.1 screens per location at the end of fiscal 2018, compared to 13.0 screens at the end of fiscal 2017. Included in the fiscal 2019 and fiscal 2018 totals is one theatre with six screens that we manage for a third party and included in the fiscal 2017 total are two theatres with 11 screens that we managed for third parties. Our 90 company-owned facilities include 49 megaplex theatres (12 or more screens), representing approximately 67% of our total screens, 40 multiplex theatres (two to 11 screens) and one single-screen theatre. At the end of fiscal 2019, we operated 1,077 first-run screens, 6 of which we operated under management contracts, and 29 budget-oriented screens.

We invested over $350 million, excluding acquisitions, to further enhance the movie-going experience and amenities in new and existing theatres over the last six and one-half calendar years, with more investments planned for fiscal 2020. These investments include:

New theatres. In April 2017, we opened our new 10-screen Southbridge Crossing Cinema in Shakopee, Minnesota. This state-of-the-art theatre includes DreamLounger^SM recliner seating in all auditoriums, two UltraScreen DLX^® auditoriums, as well as a Take Five^SM Lounge and Zaffiro’s^® Express outlet. In June 2017, we opened our first stand-alone all in-theatre dining location, branded BistroPlex^® located in Greendale, Wisconsin. This theatre features eight in-theatre dining auditoriums with DreamLounger recliners, including two SuperScreen DLX^® auditoriums, plus a separate full-service Take Five Lounge. In October 2019, we opened our new eight-screen Movie Tavern^® by Marcus theatre in Brookfield, Wisconsin. This new theatre became the first Movie Tavern by Marcus in Wisconsin. It includes eight auditoriums, each with laser projection and comfortable DreamLounger recliner seating, a full-service bar and food and drink center, and a new delivery-to-seat service model that also allows guests to order food and beverage via our mobile phone application or in-theatre kiosk. Another new nine-screen theatre is currently under construction in Tacoma, Washington, with an expected opening date during our fiscal 2020 fourth quarter. In addition, we will consider additional sites for potential new theatre locations in both new and existing markets.

Theatre acquisitions. In addition to building new theatres, we believe acquisitions of existing theatres or theatre circuits is also a viable growth strategy for us. On February 1, 2019, we acquired the assets of Movie Tavern, a New Orleans-based industry leading circuit known for its in-theatre dining concept featuring chef-driven menus, premium quality food and drink and luxury seating. Now branded Movie Tavern by Marcus, the acquired circuit consisted of 208 screens at 22 locations in nine states – Arkansas, Colorado, Georgia, Kentucky, Louisiana, New York, Pennsylvania, Texas and Virginia. The purchase price consisted of $30 million in cash, subject to certain adjustments, and 2,450,000 shares of our common stock (157,056 of which have been placed in escrow to secure certain post-closing indemnification obligations of the seller under the asset purchase agreement), for a total purchase price of approximately $139.3 million, based upon our closing share price on January 31, 2019. The acquisition of the Movie Tavern circuit increased our total number of screens by an additional 23%. The movie theatre industry is very fragmented, with approximately 50% of United States screens owned by the three largest theatre circuits and the other 50% owned by an estimated 800 smaller operators, making it very difficult to predict when acquisition opportunities may arise. We do not believe that we are geographically constrained, and we believe that we may be able to add value to certain theatres through our various proprietary amenities and operating expertise.

DreamLounger recliner additions. These luxurious, state-of-the-art recliners allow guests to go from upright to a full-recline position in seconds. These seat changes require full auditorium remodels to accommodate the necessary 84 inches of legroom, resulting in the loss of approximately 50% of the existing traditional seats in an average auditorium. To date, the addition of DreamLoungers has increased attendance at each of our applicable theatres, outperforming nearby competitive theatres and growing the overall market attendance in most cases. Initially, 12 of the 22 acquired Movie Tavern theatres had recliner seating. We added DreamLounger recliner seats to four additional existing Movie Tavern theatres during fiscal 2019, as well as one Marcus Wehrenberg^® theatre and one newly built Movie Tavern theatre. As of December 26, 2019, we offered all DreamLounger recliner seating in 63 theatres, representing approximately 72% of our company-owned, first-run theatres. Including our premium, large format (PLF) auditoriums with recliner seating, as of December 26, 2019, we offered our DreamLounger recliner seating in approximately 77% of our company-owned, first-run screens, a percentage we believe to be the highest among the largest theatre chains in the nation. We completed the addition of DreamLounger recliner seats to another Movie Tavern location during the first quarter of fiscal 2020, and we are currently evaluating opportunities to add our DreamLounger premium seating to several additional theatres during the second half of fiscal 2020.

UltraScreen DLX and SuperScreen DLX (DreamLounger eXperience) conversions. We introduced one of the first PLF presentations to the industry when we rolled out our proprietary UltraScreen^® concept approximately 20 years ago. We later introduced our UltraScreen DLX concept by combining our premium, large-format presentation with DreamLounger recliner seating and Dolby^® Atmos™ immersive sound to elevate the movie-going experience for our guests. More recently, we began including heated DreamLounger recliner seating in our DLX auditoriums. During fiscal 2019, we opened one new UltraScreen DLX at an existing Marcus Wehrenberg theatre and converted one existing screen into an UltraScreen DLX auditorium at a Movie Tavern by Marcus theatre. During fiscal 2019, we also converted 26 existing screens at 13 Movie Tavern by Marcus theatres and two existing screens at one Marcus Wehrenberg theatre to SuperScreen DLX auditoriums and opened one new SuperScreen DLX auditorium at a newly built Movie Tavern by Marcus theatre. Most of our PLF screens now include the added feature of heated DreamLounger recliner seats. As of December 26, 2019, we had 31 UltraScreen DLX auditoriums, one traditional UltraScreen auditorium, 80 SuperScreen DLX auditoriums (a slightly smaller screen than an UltraScreen but with the same DreamLounger seating and Dolby Atmos sound) and three IMAX^® PLF screens at 63 of our theatre locations. As of December 26, 2019, we offered at least one PLF screen in approximately 72% of our first-run, company-owned theatres – once again a percentage we believe to be the highest percentage among the largest theatre chains in the nation. Our PLF screens generally have higher per-screen revenues and draw customers from a larger geographic region compared to our standard screens, and we charge a premium price to our guests for this experience. We are currently evaluating opportunities to convert several additional existing screens to SuperScreen DLX auditoriums in fiscal 2020. In addition, our new theatre under construction in Tacoma, Washington will include one PLF auditorium.

Signature cocktail and dining concepts. We have continued to further enhance our food and beverage offerings within our existing theatres. We believe our 50-plus years of food and beverage experience in the hotel and restaurant businesses provides us with a unique advantage and expertise that we can leverage to further grow revenues in our theatres. The concepts we are expanding include:

We offer a “$5 Tuesday” promotion at every theatre in our circuit that includes a free complimentary-size popcorn to our loyalty program members. We have seen our Tuesday attendance increase dramatically since the introduction of the $5 Tuesday promotion. We believe this promotion has increased movie-going frequency and reached a customer who may have stopped going to the movies because of price, creating another “weekend” day for us without adversely impacting the movie-going habits of our regular weekend customers. We introduced our $5 Tuesday promotion with the free popcorn for loyalty members at our Marcus Wehrenberg theatres immediately upon acquisition in December 2016 and did the same thing in February 2019 with our newly acquired Movie Tavern theatres. We experienced an increase in Tuesday performance at the Marcus Wehrenberg theatres and have seen a similar response from customers at our Movie Tavern theatres. We also offer a “$6 Student Thursday” promotion at all of our locations that has been well received by that particular customer segment. In addition, we offer a $6 “Young-at-Heart” program for seniors on Friday afternoons that was also introduced to our Movie Tavern locations during our fiscal 2019 first quarter.

We offer what we believe to be a best-in-class customer loyalty program called Magical Movie Rewards^SM. We currently have approximately 3.8 million members enrolled in the program. Approximately 42% of all transactions in our theatres during fiscal 2019 were completed by registered members of the loyalty program. The program allows members to earn points for each dollar spent and access special offers available only to members. The rewards are redeemable at the box office, concession stand or at the many Marcus Theatres^® food and beverage venues. In addition, we have partnered with Movio, a global leader in data analysis for the cinema industry, to allow more targeted communication with our loyalty members. The software provides us with insight into customer preferences, attendance habits and general demographics, which we believe will help us deliver customized communication to our members. In turn, members of this program can enjoy and plan for a more personalized movie-going experience. The program also gives us the ability to cost effectively promote non-traditional programming and special events, particularly during non-peak time periods. We believe that this will result in increased movie-going frequency, more frequent visits to the concession stand, increased loyalty to Marcus Theatres and ultimately, improved operating results. The acquired Wehrenberg theatres offered a loyalty program to their customers that had approximately 200,000 members. We converted these members to our Magical Movie Rewards program during fiscal 2017. The acquired Movie Tavern theatres did not offer a loyalty program to their customers. We introduced our Magical Movie Rewards program to these theatres during the second quarter of fiscal 2019 after all necessary technology requirements were completed.

We have recently enhanced our mobile ticketing capabilities, our downloadable Marcus Theatres mobile application, and our marcustheatres.com website. We also recently added food and beverage ordering capabilities to our mobile application at select theatres, including our recently opened Movie Tavern location in Brookfield, Wisconsin. We will continue to install additional theatre-level technology, such as new ticketing kiosks, digital menu boards and concession advertising monitors. Each of these enhancements is designed to improve customer interactions, both at the theatre and through mobile platforms and other electronic devices.

The addition of digital technology throughout our circuit (we offer digital cinema projection on 100% of our first-run screens) has provided us with additional opportunities to obtain non-motion picture programming from other new and existing content providers, including live and pre-recorded performances of the Metropolitan Opera, as well as sports, music and other events, at many of our locations. We offer weekday and weekend alternate programming at many of our theatres across our circuit. The special programming includes classic movies, live performances, comedy shows and children’s performances. We believe this type of programming is more impactful when presented on the big screen and provides an opportunity to continue to expand our audience base beyond traditional moviegoers.

Revenues for the theatre business, and the motion picture industry in general, are heavily dependent on the general audience appeal of available films, together with studio marketing, advertising and support campaigns, factors over which we have no control. Consistent with prior periods in which blockbusters accounted for a significant portion of our total admission revenues, our top 15 performing films accounted for 48% of our fiscal 2019 total admission revenues and 42% of our fiscal 2018 total admission revenues. The following five fiscal 2019 films accounted for nearly 26% of our total admission revenues for our circuit: Avengers: Endgame, The Lion King, Frozen 2, Toy Story 4 and Captain Marvel.

We obtain our films from several national motion picture production and distribution companies, and we are not dependent on any single motion picture supplier. Our booking, advertising, concession purchases and promotional activities are handled centrally by our administrative staff.

We strive to provide our movie patrons with high-quality picture and sound presentation in clean, comfortable, attractive and contemporary theatre environments. All of our movie theatre complexes feature digital cinema technology; either digital sound, Dolby or other stereo sound systems; acoustical ceilings; side wall insulation; engineered drapery folds to eliminate sound imbalance, reverberation and distortion; tiled floors; cup-holder chair-arms; and computer-controlled heating, air conditioning and ventilation. We offer stadium seating, a tiered seating system that permits unobstructed viewing, at substantially all of our first-run screens. Computerized box offices permit all of our movie theatres to sell tickets in advance and all of our theatres offer reserved seating. Our theatres are accessible to persons with disabilities and provide wireless headphones for hearing-impaired moviegoers. Other amenities at certain theatres include touch-screen, computerized, self-service ticket kiosks, which simplify advance ticket purchases. We have an agreement to allow moviegoers to buy tickets on Fandango, the largest online ticket-seller.

We have a master license agreement with a subsidiary of Cinedigm Digital Cinema Corp. to deploy digital cinema systems in the majority of our company-owned theatre locations. Under the terms of the agreement, Cinedigm’s subsidiary purchased the digital projection systems and licensed them to us under a long-term arrangement. The costs to deploy this new technology are being covered primarily through the payment of virtual print fees from studios to our selected implementation company, Cinedigm. Our goals from digital cinema included delivering an improved film presentation to our guests, increasing scheduling flexibility, providing a platform for additional 3D presentations as needed, as well as maximizing the opportunities for alternate programming that may be available with this technology. As of December 26, 2019, we had the ability to offer digital 3D presentations in 386, or approximately 36%, of our first-run screens, including the vast majority of our UltraScreens. We have the ability to increase the number of digital 3D capable screens we offer to our guests in the future as needed, based on the number of digital 3D films anticipated to be released during future periods and our customers’ response to these 3D releases.

We sell food and beverage concessions in all of our movie theatres. We believe that a wide variety of food and beverage items, properly merchandised, increases concession revenue per patron. Although popcorn and soda remain the traditional favorites with moviegoers, we continue to upgrade our available concessions by offering varied choices. For example, some of our theatres offer hot dogs, pizza, ice cream, pretzel bites, frozen yogurt, coffee, mineral water and juices. We have also added self-serve soft drink dispensers and grab-and-go candy, frozen treat and bottled drink kiosks to many of our theatres. In recent years, we have added signature cocktail and dining concepts as described above. The response to our new food and beverage offerings has been positive, and we have plans to expand these food and beverage concepts at additional locations in the future.

We have a variety of ancillary revenue sources in our theatres, with the largest related to the sale of pre-show and lobby advertising (through our current advertising providers, Screenvision and National CineMedia). We also obtain ancillary revenues from corporate and group meeting sales, sponsorships, internet surcharge fees and alternate auditorium uses. We continue to pursue additional strategies to increase our ancillary revenue sources.

We also own a family entertainment center, Funset Boulevard, adjacent to our 14-screen movie theatre in Appleton, Wisconsin. Funset Boulevard features a 40,000 square foot Hollywood-themed indoor amusement facility that includes a restaurant, party room, laser tag center, virtual reality games, arcade, outdoor miniature golf course and batting cages.

We also own and operate the Ronnie’s Plaza retail outlet in St. Louis, Missouri, an 84,000 square foot retail center featuring 21 shops and other businesses to which we lease retail space.

Hotels and Resorts Operations

Owned and Operated Hotels and Resorts

The Pfister^® Hotel

We own and operate The Pfister Hotel, which is located in downtown Milwaukee, Wisconsin. The Pfister Hotel is a full-service luxury hotel and has 307 guest rooms (including 71 luxury suites), the exclusive Pfister VIP Club Lounge, two restaurants (including our signature restaurant, Mason Street Grill), three cocktail lounges, a state-of-the-art WELL Spa^® + Salon, a high-tech executive boardroom, high-end retail space leased to tenants and a 275-car parking ramp. The Pfister also has 25,000 square feet of banquet and convention facilities, including one of the largest ballrooms in the Milwaukee metropolitan area. In 2018, we celebrated The Pfister Hotel’s 125^th anniversary. In 2019, The Pfister Hotel earned its 43^rd consecutive AAA Four Diamond Award from the American Automobile Association, which represents every year the award has been in existence. Also in 2019, The Pfister was recognized as a top hotel in the Midwest in Condé Nast Traveler’s Readers’ Choice Awards and the number one downtown Milwaukee hotel by U.S. News & World Report. The Pfister currently holds the TripAdvisor^® Certificate of Excellence distinction and is a member of Preferred Hotels and Resorts, an organization of independent luxury hotels and resorts, and Historic Hotels of America.

The Hilton Milwaukee City Center

We own and operate the 729-room Hilton Milwaukee City Center. The hotel has two cocktail lounges, three restaurants (including our first Miller Time^® Pub & Grill), and an 870-car parking ramp. Directly connected to the Wisconsin Center convention facility by skywalk, the hotel offers more than 30,000 square feet of meeting and event spaces with state-of-the-art technologies. In 2019, the Hilton Milwaukee City Center earned its eighth consecutive AAA Four Diamond Award from the American Automobile Association and was recognized by Meetings Today as the Best of MidAmerica winner.

Hilton Madison Monona Terrace

We own and operate the 240-room Hilton Madison Monona Terrace in Madison, Wisconsin. The Hilton Madison Monona Terrace is connected by skywalk to the Monona Terrace Community and Convention Center and has five meeting rooms totaling 4,200 square feet, an indoor swimming pool, a fitness center, a lounge and a restaurant. The Hilton Madison Monona Terrace currently holds the TripAdvisor^® Certificate of Excellence distinction. A major renovation of this hotel was completed in 2019, including common areas and guestrooms.

The Grand Geneva^® Resort & Spa

We own and operate the Grand Geneva Resort & Spa in Lake Geneva, Wisconsin. This destination resort is located on 1,300 acres and includes 355 guest rooms, 29 new two and three bedroom villas, the exclusive Geneva Club Lounge, over 60,000 square feet of banquet, meeting and exhibit space, over 13,000 square feet of ballroom space, three specialty restaurants, two cocktail lounges, two championship golf courses, a ski hill, indoor and outdoor tennis courts, three swimming pools, a state-of-the-art WELL Spa^® + Salon and fitness complex, horse stables and an on-site airport. In 2019, the Grand Geneva Resort & Spa earned its 21^st consecutive AAA Four Diamond Award from the American Automobile Association. The resort was also recognized as one of the top five resorts in the Midwest in Condé Nast Traveler’s Readers’ Choice Awards and named among the top two Best Resorts in Wisconsin by U.S. News & World Report for 2019. The resort currently holds the TripAdvisor^® Certificate of Excellence distinction and was named to the TripAdvisor^® Award of Excellence Hall of Fame.

The Skirvin Hilton

We are the principal equity partner and operator of The Skirvin Hilton hotel in Oklahoma City, Oklahoma, the oldest hotel in Oklahoma. This historic hotel has 225 rooms, including 20 one-bedroom suites and one Presidential Suite. The Skirvin Hilton has a restaurant, lounge, fitness center, indoor swimming pool, business center and approximately 18,500 square feet of meeting space. In 2019, The Skirvin Hilton earned its 12^th consecutive AAA Four Diamond Award from the American Automobile Association and was named among the top three Best Hotels in Oklahoma City by U.S. News & World Report. The hotel currently holds the TripAdvisor^® Certificate of Excellence distinction. In 2016, we completed a major renovation project at The Skirvin Hilton Hotel, which included renovations of all guestrooms and the lobby and bar areas. Our equity interest in this hotel was 60% as of December 26, 2019.

AC Hotel Chicago Downtown

Pursuant to a long-term lease, we operate the AC Hotel Chicago Downtown, a 226-room hotel in Chicago, Illinois. Located in the heart of Chicago’s shopping, dining and entertainment district, the AC Hotel by Marriott lifestyle brand targets the millennial traveler searching for a design-led hotel in a vibrant location with high-quality service. The AC Hotel Chicago Downtown features urban, simplistic and clean designs with European aesthetics and elegance, the latest technology and communal function spaces. Amenities include the AC Lounge, a bar area with cocktails, craft beers, wine and tapas, and the AC Kitchen, serving a European-inspired breakfast menu. The AC Hotel Chicago Downtown also features an indoor swimming pool, fitness room, 3,000 square feet of meeting space and an on-site parking facility. The hotel currently holds the TripAdvisor^® Certificate of Excellence distinction. Our SafeHouse^® Chicago is in space connected to this hotel and the hotel has additional space leased to an area restaurant.

The Lincoln Marriott Cornhusker Hotel

We own and operate The Lincoln Marriott Cornhusker Hotel in downtown Lincoln, Nebraska. The Lincoln Marriott Cornhusker Hotel is a 297-room, full-service hotel with 45,600 square feet of meeting space and a Miller Time Pub & Grill. We also own the Cornhusker Office Plaza, which is a seven-story building with a total of 85,592 square feet of net leasable office space connected to the hotel by a three-story atrium that is used for local events and exhibits.

Saint Kate^®–The Arts Hotel

In January 2019, we closed for renovation one of our owned hotels, the InterContinental Milwaukee hotel, and reopened it in June 2019 as Saint Kate–The Arts Hotel. Located in the heart of Milwaukee’s theatre and entertainment district, the 219-room hotel features art-inspired guestrooms, 13,000 square feet of flexible meeting space, 11 event rooms and three restaurants, as well as two bars and lounge areas. The hotel also includes a theatre that features plays, lectures, classes and musical and dance performances, a world-class gallery space, and other event spaces that host rotating exhibitions, screenings, workshops and more. Saint Kate–The Arts Hotel was named as a Best New Hotel of 2019 in the USA Today 10Best Readers’ Choice Awards.

Managed Hotels, Resorts and Other Properties

We also manage hotels, resorts and other properties for third parties, typically under long-term management agreements. Revenues from these management contracts may include both base management fees, often in the form of a fixed percentage of defined revenues, and incentive management fees, typically calculated based upon defined profit performance. We may also earn fees for technical and preopening services before a property opens, as well as for ongoing accounting and technology services.

In April 2019, we assumed management of the Hyatt Regency Schaumburg in Schaumburg, Illinois. The newly renovated Hyatt Regency Schaumburg is conveniently located approximately 15 miles from Chicago O’Hare International Airport and 30 miles from downtown Chicago and is near some of Chicagoland’s most popular attractions and energetic business hubs. This 468-room hotel has more than 30,000 square feet of indoor and outdoor meeting and event space and versatile venues such as a 3,100 square foot terrace. The hotel and its event venues feature the latest audiovisual and state-of-the-art technology, innovative on-site catering and complimentary parking for guests.

We manage the Murieta Inn and Spa in Rancho Murieta, California. Located near wine country and within the development containing the renowned Murieta Equestrian Center, the largest equestrian facility in California, the 83-room hotel features The Gate, a one-of-a-kind restaurant and bar that offers fresh, seasonal menus using ingredients from the hotel’s five-acre farm and state-of-the-art greenhouse. The hotel has a resort-style outdoor pool and a luxury salon and day spa. The Murieta Inn and Spa also offers up to 15,000 square feet of indoor and outdoor meeting and event space with the latest audio visual and state-of the-art technology. The hotel currently holds the TripAdvisor^® Certificate of Excellence distinction.

We manage the DoubleTree by Hilton El Paso Downtown in El Paso, Texas. Situated in El Paso’s Museum District, near the city’s prominent convention and performing arts center, the 200-room DoubleTree by Hilton El Paso Downtown features a rooftop pool and sun deck, along with 8,500 square feet of meeting space.

We manage the Courtyard by Marriott El Paso Downtown/Convention Center, which opened in August 2018. The Courtyard by Marriott El Paso Downtown/Convention Center has 151 guest rooms, two meeting rooms and an outdoor terrace-top pool.

We manage the Crowne Plaza-Northstar Hotel in Minneapolis, Minnesota. The Crowne Plaza-Northstar Hotel is located in downtown Minneapolis and has 222 guest rooms, 10,000 square feet of meeting space, an outdoor Skygarden for group events, a restaurant, a cocktail lounge and an exercise facility.

We manage The Garland hotel in North Hollywood, California. The Garland hotel has 257 recently renovated guest rooms, including 12 suites, over 23,000 square feet of meeting and event space, including an amphitheater, a ballroom and an outdoor event venue ideal for weddings, a restaurant, well-equipped fitness center and an outdoor swimming pool with two hot tubs. The mission-style hotel is located on seven acres near Universal Studios Hollywood. The hotel currently holds the TripAdvisor^® Certificate of Excellence distinction. In 2019, The Garland was recognized as a top hotel in Los Angeles in Condé Nast Traveler’s Readers’ Choice Awards for the fifth year in a row. Additionally, The Garland was recognized as a Top 10 hotel in greater Los Angeles as ranked by the 2019 Travel + Leisure World’s Best Awards.

We manage the Hilton Garden Inn Houston NW/Willowbrook in Houston, Texas. The Hilton Garden Inn Houston NW/Willowbrook has 171 guest rooms, a ballroom, a restaurant, a fitness center, a convenience mart and a swimming pool. The hotel currently holds the TripAdvisor^® Certificate of Excellence distinction.

We manage the Hilton Minneapolis/Bloomington in Bloomington, Minnesota. This hotel offers 257 rooms, 9,200 square feet of meeting space, an indoor swimming pool and a fitness center. The hotel currently holds the TripAdvisor^® Certificate of Excellence distinction.

We manage and own a 10% minority equity interest in the Omaha Marriott Downtown at The Capitol District hotel. The 333-room, 12-story full service hotel serves as an anchor for the Capitol District, an upscale urban destination dining and entertainment community in downtown Omaha, Nebraska. The development also includes 218 luxury residential apartments, office space, a parking garage and retail space for restaurants, shops and entertainment. It also features a plaza for events and concerts. The hotel currently holds the TripAdvisor^® Certificate of Excellence distinction.

We formerly managed the Heidel House Resort & Spa in Green Lake, Wisconsin. On May 20, 2019, the owners of this resort closed this property permanently.

We formerly managed the Sheraton Chapel Hill Hotel in Chapel Hill, North Carolina. In August 2019, the owners sold the hotel, and as a result our contract to manage the hotel was terminated.

We also provide hospitality management services, including check-in, housekeeping and maintenance, for a vacation ownership development adjacent to the Grand Geneva Resort & Spa branded as the Holiday Inn Club Vacations at Lake Geneva Resort. The development includes 68 two-room timeshare units (136 rooms) and a timeshare sales center.

We also manage two condominium hotels under long-term management contracts. Revenues from these management contracts are larger than typical management contracts because, under an agreed-upon rental pool arrangement, room revenues are shared at a defined percentage with individual condominium owners. In addition, we own all of the common areas of these facilities, including all restaurants, lounges, spas and gift shops, and retain all of the revenues from these outlets.

We manage the Timber Ridge Lodge, an indoor/outdoor water park and condominium hotel complex in Lake Geneva, Wisconsin. The Timber Ridge Lodge is a 225-unit condominium hotel on the same campus as the Grand Geneva Resort & Spa. The Timber Ridge Lodge has meeting rooms totaling 3,640 square feet, a general store, a restaurant-cafe, a snack bar and lounge, a fitness center and an entertainment arcade. The hotel currently holds the TripAdvisor^® Certificate of Excellence distinction.

We manage the Platinum Hotel & Spa, a condominium hotel in Las Vegas, Nevada just off the Las Vegas Strip, and own the hotel’s public space. The Platinum Hotel & Spa has 255 one and two-bedroom suites. This non-gaming, non-smoking hotel also has an on-site restaurant, lounge, a WELL Spa^® + Salon and 14,897 square feet of meeting space, including 6,336 square feet of outdoor space. The hotel currently holds the TripAdvisor^® Certificate of Excellence distinction. We own 16 previously unsold condominium units at the Platinum Hotel & Spa.

We own a 0.49% minority interest in The Hotel Zamora and Castile Restaurant in St. Pete Beach, Florida. We have agreed to sell this interest to the majority owner during the next several years.

We own the SafeHouse in Milwaukee, Wisconsin after purchasing it in 2015. The SafeHouse is an iconic, spy-themed restaurant and bar that has operated in Milwaukee for over 50 years. We opened a new SafeHouse location in Chicago, Illinois in 2017 and also opened the EscapeHouse Chicago, a complimentary business capitalizing on the popularity of cooperative team escape games.

Our Wisconsin Hospitality Linen Service (WHLS) business unit provides commercial laundry services for our hotel and resort properties in Wisconsin and for other unaffiliated hotels in the Midwest. WHLS currently processes nearly 16 million pounds of linen each year. WHLS has been a leader in commercial laundry services for the hospitality industry in the Midwest for over 20 years.

We have taken our highly-regarded web development team and created a new business unit managed by the hotels and resorts division called Graydient Creative. Graydient focuses on website design and development, branding and print design, social media management and new software and application development for both our own properties and third party clients.

We operate many award winning restaurants and lounges within our hotel portfolio that have earned distinctions such as the TripAdvisor^® Certificate of Excellence and the Wine Spectator Award of Excellence.

In 2017, we were awarded the Service Excellence Award by Governor Scott Walker at the Wisconsin Governor’s Conference on Tourism. The Service Excellence Award honors a Wisconsin business that has achieved significant success and growth by providing exceptional service to its customers and a strong charitable involvement in its community. Marcus^®  Hotels & Resorts received the award for its ongoing commitment to supporting Wisconsin charities and tourism-driven initiatives. In 2019, we were one of ten nationwide recipients of the Americans for the Arts’ Arts and Business Partnership Award, which recognizes businesses for their exceptional involvement with the arts that enriches the workplace, enhances education and transforms communities.

Both of our businesses experience intense competition from national, regional and local chain and franchise operations, some of which have substantially greater financial and marketing resources than we have.  Most of our facilities are located in close proximity to competing facilities.

Our movie theatres compete with large national movie theatre operators, such as AMC Entertainment, Cinemark and Regal Cinemas, as well as with a wide array of smaller first-run exhibitors.  Movie exhibitors also face competition from a number of other movie exhibition delivery systems, such as streaming services, digital downloads, video-on-demand, pay-per-view television, DVDs and network and syndicated television.  We also face competition from other forms of entertainment competing for the public’s leisure time and disposable income.

Our hotels and resorts compete with the hotels and resorts operated and/or franchised by Hyatt Corporation, Marriott Corporation, Hilton Worldwide and others, along with other regional and local hotels and resorts.  Increasingly, we also face competition from new channels of distribution in the travel industry, such as peer-to-peer inventory sources that allow travelers to book stays on websites that facilitate short-term rental of homes and apartments from owners, thereby providing an alternative to hotel rooms, such as Airbnb, Vrbo and HomeAway.  We compete for hotel management agreements with a wide variety of national, regional and local management companies based upon many factors, including the value and quality of our management services, our reputation, our ability and willingness to invest our capital in joint venture projects, the level of our management fees and our relationships with property owners and investors.

We believe that the principal factors of competition in both of our businesses, in varying degrees, are the price and quality of the product, quality and location of our facilities and customer service.  We believe that we are well positioned to compete on the basis of these factors.

Our first fiscal quarter typically produces the weakest operating results in our hotels and resorts division due primarily to the effects of reduced travel during the winter months. Our second and third fiscal quarters often produce our strongest operating results because these periods coincide with the typical summer seasonality of the movie theatre industry and the summer strength of the lodging business. Due to the fact that the week between Christmas and New Year’s Eve is historically one of the strongest weeks of the year for our theatre division, the specific timing of the last Thursday in December has an impact on the results of our fiscal first and fourth quarters in that division, particularly when we have a 53-week year.

Environmental Regulation

Federal, state and local environmental legislation has not had a material effect on our capital expenditures, earnings or competitive position. However, our activities in acquiring and selling real estate for business development purposes have been complicated by the continued emphasis that our personnel must place on properly analyzing real estate sites for potential environmental problems. This circumstance has resulted in, and is expected to continue to result in, greater time and increased costs involved in acquiring and selling properties associated with our various businesses.

As of December 26, 2019, we had approximately 10,500 employees, approximately 67% of whom were employed on a variable or part-time basis. A number of our (1) hotel employees at the Crowne Plaza Northstar in Minneapolis, Minnesota are covered by a collective bargaining agreement that expires on October 31, 2020; (2) operating engineers at The Pfister Hotel and the Hilton Milwaukee City Center are covered by collective bargaining agreements that expire on April 30, 2020 and December 31, 2019, respectively; (3) hotel employees at the Hilton Milwaukee City Center and The Pfister Hotel are covered by a collective bargaining agreement that expires on February 14, 2022; (4) painters in the Hilton Milwaukee City Center and The Pfister Hotel are covered by a collective bargaining agreement that expires on May 31, 2022; and (5) operating engineers at the Hyatt Regency Schaumburg are covered by a collective bargaining agreement that expires on February 29, 2020.

As of the end of fiscal 2019, approximately 6% of our employees were covered by a collective bargaining agreement, of which approximately 16% were covered by an agreement that will expire within one year.

Website Information and Other Access to Corporate Documents

Our corporate website is www.marcuscorp.com. All of our Form 10-Ks, Form 10-Qs and Form 8-Ks, and amendments thereto, are available on this website as soon as practicable after they have been filed with the SEC. We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report. In addition, our corporate governance guidelines and the charters for our Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee are available on our website. If you would like us to mail you a copy of our corporate governance guidelines or a committee charter, please contact Thomas F. Kissinger, Senior Executive Vice President, General Counsel and Secretary, The Marcus Corporation, 100 East Wisconsin Avenue, Suite 1900, Milwaukee, Wisconsin 53202-4125.

The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected.

The Lack of Both the Quantity and Audience Appeal of Motion Pictures May Adversely Affect Our Financial Results.

The financial results of our movie theatre business and the motion picture industry in general are heavily dependent on the general audience appeal of available films, together with studio marketing, advertising and support campaigns, factors over which we have no control. The relative success of our movie theatre business will continue to be largely dependent upon the quantity and audience appeal of films made available by the movie studios and other producers. Poor performance of films, a disruption in the production of films due to events such as a strike by actors, writers or directors, or a reduction in the marketing efforts of the film distributors to promote their films could have an adverse impact on our business and results of operations. Also, our quarterly results of operations are significantly dependent on the quantity and audience appeal of films that we exhibit during each quarter. As a result, our quarterly results may be unpredictable and somewhat volatile.

Our Financial Results May be Adversely Impacted by Unique Factors Affecting the Theatre Exhibition Industry, Such as the Shrinking Video Release Window, the Increasing Piracy of Feature Films and the Increasing Use of Alternative Film Distribution Channels and Other Competing Forms of Entertainment.

Over the last decade, the average video release window, which represents the time that elapses from the date of a film’s theatrical release to the date a film is released to other channels, including streaming services, video on-demand (VOD) and DVD, has decreased from approximately six months to, in some cases, less than three months. In the past, more than one studio has discussed their interest in creating a new, shorter premium VOD window. We can provide no assurance that these release windows, which are determined by the film studios, will not shrink further, which could have an adverse impact on our movie theatre business and results of operations.

Piracy of motion pictures is prevalent in many parts of the world. Technological advances allowing the unauthorized dissemination of motion pictures increase the threat of piracy by making it easier to create, transmit and distribute high quality unauthorized copies of such motion pictures. The proliferation of unauthorized copies and piracy of motion pictures may have an adverse effect on our movie theatre business and results of operations.

We face competition for movie theatre patrons from a number of alternative motion picture distribution channels, such as DVD, network, cable and satellite television, video on-demand, pay-per-view television, digital downloads and streaming services. The number of streaming services has been increasing and, in some cases, streaming services are producing theatrical-quality original content that is bypassing the theatrical release window entirely. Periodically, internet ticketing intermediaries introduce services and products with the stated intention of increasing movie-going frequency. The actual impact these services and products may have on our relationship with the customer and our results of operations is unknown at this time. We also compete with other forms of entertainment competing for our patrons’ leisure time and disposable income such as concerts, amusement parks, sporting events, home entertainment systems, video games and portable entertainment devices such as MP3 players, tablet computers and smart phones. An increase in popularity of these alternative film distribution channels and competing forms of entertainment may have an adverse effect on our movie theatre business and results of operations.

A Deterioration in Relationships with Film Distributors Could Adversely Affect Our Ability to Obtain Commercially Successful Films or Increase Our Costs to Obtain Such Films.

We rely on the film distributors for the motion pictures shown in our theatres. Our business depends to a significant degree on maintaining good relationships with these distributors. Deterioration in our relationships with any of the major film distributors could adversely affect our access to commercially successful films or increase our costs to obtain such films and adversely affect our business and results of operations. Because the distribution of motion pictures is in large part regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases and consent decrees, we cannot ensure a supply of motion pictures by entering into long-term arrangements with major distributors. Rather, we must compete for licenses on a film-by-film and theatre-by-theatre basis and are required to negotiate licenses for each film and for each theatre individually. We are periodically subject to audits on behalf of the film distributors to ensure that we are complying with the applicable license agreements.

The Relative Industry Supply of Available Rooms at Comparable Lodging Facilities May Adversely Affect Our Financial Results.

Historically, a material increase in the supply of new hotel rooms in a market can destabilize that market and cause existing hotels to experience decreasing occupancy, room rates and profitability. If such over-supply occurs in one or more of our major markets, we may experience an adverse effect on our hotels and resorts business and results of operations.

Adverse Economic Conditions in Our Markets May Adversely Affect Our Financial Results.

Downturns or adverse economic conditions affecting the United States economy generally, and particularly downturns or adverse economic conditions in the Midwest and in our other markets, adversely affect our results of operations, particularly with respect to our hotels and resorts division. Poor economic conditions can significantly adversely affect the business and group travel customers, which are the largest customer segments for our hotels and resorts division. Specific economic conditions that may directly impact travel, including financial instability of air carriers and increases in gas and other fuel prices, may adversely affect our results of operations. Additionally, although our theatre business has historically performed well during economic downturns as consumers seek less expensive forms of out-of-home entertainment, a significant reduction in consumer confidence or disposable income in general may temporarily affect the demand for motion pictures or severely impact the motion picture production industry, which, in turn, may adversely affect our results of operations.

If the Amount of Sales Made Through Third-Party Internet Travel Intermediaries Increases Significantly, Consumer Loyalty to Our Hotels Could Decrease and Our Revenues Could Fall.

We expect to derive most of our business from traditional channels of distribution. However, consumers now use internet travel intermediaries regularly. Some of these intermediaries are attempting to increase the importance of price and general indicators of quality (such as “four-star downtown hotel”) at the expense of brand/hotel identification. These agencies hope that consumers will eventually develop brand loyalties to their reservation system rather than to our hotels. If the amount of sales made through internet travel intermediaries increases significantly and consumers develop stronger loyalties to these intermediaries rather than to our hotels, we may experience an adverse effect on our hotels and resorts business and results of operations.

Each of Our Business Segments and Properties Experience Ongoing Intense Competition.

In each of our businesses we experience intense competition from national, regional and local chain and franchise operations, some of which have substantially greater financial and marketing resources than we have. Most of our facilities are located in close proximity to other facilities which compete directly with ours. The motion picture exhibition industry is fragmented and highly competitive with no significant barriers to entry. Theatres operated by national and regional circuits and by small independent exhibitors compete with our theatres, particularly with respect to film licensing, attracting patrons and developing new theatre sites. Moviegoers are generally not brand conscious and often choose a theatre based on its location, its selection of films and its amenities. With respect to our hotels and resorts division, our ability to remain competitive and to attract and retain business and leisure travelers depends on our success in distinguishing the quality, value and efficiency of our lodging products and services from those offered by others. If we are unable to compete successfully in either of our divisions, this could adversely affect our results of operations.

We May Not Achieve the Expected Benefits and Performance of Our Strategic Initiatives and Acquisitions.

Our key strategic initiatives in our theatre and hotels and resorts divisions often require significant capital expenditures to implement. We expect to benefit from revenue enhancements and/or cost savings as a result of these initiatives. However, there can be no assurance that we will be able to generate sufficient cash flow from these initiatives to provide the return on investment we anticipated from the required capital expenditures.

There also can be no assurance that we will be able to generate sufficient cash flow to realize anticipated benefits from any strategic acquisitions that we may enter into, including our acquisition of the Movie Tavern business. Although we have a history of successfully integrating acquisitions into our existing theatre and hotels and resorts businesses, any acquisition may involve operating risks, such as (1) the difficulty of assimilating and integrating the acquired operations and personnel into our current business; (2) the potential disruption of our ongoing business; (3) the diversion of management’s attention and other resources; (4) the possible inability of management to maintain uniform standards, controls, policies and procedures; (5) the risks of entering markets in which we have little or no expertise; (6) the potential impairment of relationships with employees; (7) the possibility that any liabilities we may incur or assume may prove to be more burdensome than anticipated; and (8) the possibility the acquired property or properties do not perform as expected.

Our Businesses are Heavily Capital Intensive and Preopening and Start-Up Costs, Increasing Depreciation Expenses and Impairment Charges May Adversely Affect Our Financial Results.

Both our movie theatre and hotels and resorts businesses are heavily capital intensive. Purchasing properties and buildings, constructing buildings, renovating and remodeling buildings and investing in joint venture projects all require substantial upfront cash investments before these properties, facilities and joint ventures can generate sufficient revenues to pay for the upfront costs and positively contribute to our profitability. In addition, many growth opportunities, particularly for our hotels and resorts division, require lengthy development periods during which significant capital is committed and preopening costs and early start-up losses are incurred. We expense these preopening and start-up costs currently. As a result, our results of operations may be adversely affected by our significant levels of capital investments. Additionally, to the extent we capitalize our capital expenditures, our depreciation expenses may increase, thereby adversely affecting our results of operations.

We periodically consider whether indicators of impairment of long-lived assets held for use are present. Demographic changes, economic conditions and competitive pressures may cause some of our properties to become unprofitable. Deterioration in the performance of our properties could require us to recognize impairment losses, thereby adversely affecting our results of operations.

Our Ability to Identify Suitable Properties to Acquire, Develop and Manage Will Directly Impact Our Ability to Achieve Certain of Our Growth Objectives.

A portion of our ability to successfully achieve our growth objectives in both our theatre and hotels and resorts divisions is dependent upon our ability to successfully identify suitable properties to acquire, develop and manage. Failure to successfully identify, acquire and develop suitable and successful locations for new lodging properties and theatres will substantially limit our ability to achieve these important growth objectives.

Our Ability to Identify Suitable Joint Venture Partners or Raise Equity Funds to Acquire, Develop and Manage Hotels and Resorts Will Directly Impact Our Ability to Achieve Certain of Our Growth Objectives.

In addition to acquiring or developing hotels and resorts or entering into management contracts to operate hotels and resorts for other owners, we have from time to time invested, and expect to continue to invest, as a joint venture partner. We have also indicated that we may act as an investment fund sponsor in order to acquire additional hotel properties. A portion of our ability to successfully achieve our growth objectives in our hotels and resorts division is dependent upon our ability to successfully identify suitable joint venture partners or raise equity funds to acquire, develop and manage hotels and resorts. Failure to successfully identify suitable joint venture partners or raise equity for an investment fund will substantially limit our ability to achieve these important growth objectives.

Adverse Economic Conditions, Including Disruptions in the Financial Markets, May Adversely Affect Our Ability to Obtain Financing on Reasonable and Acceptable Terms, if at All, and Impact Our Ability to Achieve Certain of Our Growth Objectives.

We expect that we will require additional financing over time, the amount of which will depend upon a number of factors, including the number of theatres and hotels and resorts we acquire and/or develop, the amount of capital required to refurbish and improve existing properties, the amount of existing indebtedness that requires repayment in a given year and the cash flow generated by our businesses. Downturns or adverse economic conditions affecting the United States economy generally, and the United States stock and credit markets specifically, may adversely impact our ability to obtain additional short-term and long-term financing on reasonable terms or at all, which would negatively impact our liquidity and financial condition. As a result, a prolonged downturn in the stock or credit markets would also limit our ability to achieve our growth objectives.

Investing Through Partnerships or Joint Ventures Decreases Our Ability to Manage Risk.

Joint venture partners may have shared control or disproportionate control over the operation of our joint venture assets. Therefore, our joint venture investments may involve risks such as the possibility that our joint venture partner in an investment might become bankrupt or not have the financial resources to meet its obligations, or have economic or business interests or goals that are inconsistent with our business interests or goals, or be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. Consequently, actions by our joint venture partners might subject hotels and resorts owned by the joint venture to additional risk. Further, we may be unable to take action without the approval of our joint venture partners. Alternatively, our joint venture partners could take actions binding on the joint venture without our consent.

Our Properties are Subject to Risks Relating to Acts of God, Terrorist Activity and War and Any Such Event May Adversely Affect Our Financial Results.

Acts of God, natural disasters, war (including the potential for war), terrorist activity (including threats of terrorist activity), incidents of violence in public venues such as hotels and movie theatres, epidemics (such as SARs, bird flu and swine flu), travel-related accidents, as well as political unrest and other forms of civil strife and geopolitical uncertainty may adversely affect the lodging and movie exhibition industries and our results of operations. Terrorism or other similar incidents may significantly impact business and leisure travel or consumer choices regarding out-of-home entertainment options and consequently demand for hotel rooms or movie theatre attendance may suffer. In addition, inadequate preparedness, contingency planning, insurance coverage or recovery capability in relation to a major incident or crisis may prevent operational continuity and consequently impact the reputation of our businesses.

We Rely on Our Information Systems to Conduct Our Business, and Any Failure to Protect Our Information Systems and Other Confidential Information Against Cyber Attacks or Other Information Security Breaches or Any Failure or Interruption to the Availability of Our Information Systems Could Have a Material Adverse Effect on Our Business.

The operation of our business depends on the efficient and uninterrupted operation of our information technology systems. Our information technology systems may become unavailable or may fail to perform as anticipated, for any reason, including cyber attacks, loss of power, or human error. Information security risks have generally increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber attacks. Any significant interruption in or failure of our information systems or any breach of our information systems or other confidential information could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, expose us to litigation, increase our costs or cause losses. As cyber and other information security threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures or to investigate and remediate any information security vulnerabilities.

Recalls of Food Products and Associated Costs Could Adversely Affect Our Reputation and Financial Condition.

We may be found liable if the consumption of any of the food products we sell in our theatres or hotels causes illness or injury. We are also subject to recall by product manufacturers or if the food products become contaminated. Recalls could result in losses due to the cost of the recall, the destruction of the product and lost sales due to the unavailability of the product for a period of time.

We are Subject to Substantial Government Regulation, Which Could Entail Significant Cost.

We are subject to various federal, state and local laws, regulations and administrative practices affecting our business, and we must comply with provisions regulating health and sanitation standards, equal employment, environmental, and licensing for the sale of food and alcoholic beverages. Our properties must also comply with Title III of the Americans with Disabilities Act of 1990, or ADA. Compliance with the ADA requires that public accommodations “reasonably accommodate” individuals with disabilities and that new construction or alterations made to “commercial facilities” conform to accessibility guidelines unless “structurally impracticable” for new construction or technically infeasible for alterations. Non-compliance with the ADA could result in the imposition of injunctive relief, fines or an award of damages to private litigants or additional capital expenditures to remedy such noncompliance. Changes in existing laws or implementation of new laws, regulations and practices could also have a significant impact on our business. For example, a significant portion of our staff level employees are part time workers who are paid at or near the applicable minimum wage in the relevant jurisdiction. Increases in the minimum wage and implementation of reforms requiring the provision of additional benefits would increase our labor costs.

We are Subject to Complex Taxation and Could be Subject to Changes in Our Tax Rates, the Adoption of New Tax Legislation or Exposure to Additional Tax Liabilities.

We are subject to different forms of taxation at the federal, state and local jurisdictions where we operate. Current economic and political conditions make tax rates in any jurisdiction subject to significant change. A recent example includes the U.S. Tax Cuts and Jobs Act signed into law in December 2017. Our future effective tax rate could be affected by changes in the mix of earnings in jurisdictions with differing tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation. In addition, the tax authorities may not agree with the determinations we have made and such disagreements could result in lengthy legal disputes and, ultimately, in the payment of additional amounts for tax, interest and penalties. If our effective tax rate were to increase, or if the ultimate determination of our taxes owed in the U.S. or any of our jurisdictions is for an amount in excess of amounts previously accrued, our operating results, cash flows and financial condition could be adversely affected.

Our Business and Operations Could be Negatively Affected if We Become Subject to Any Securities Litigation or Shareholder Activism, Which Could Cause Us to Incur Significant Expense, Hinder Execution of Investment Strategy and Impact Our Stock Price.

While we are currently not subject to any securities litigation or shareholder activism, due to the potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert the attention of our management and board of directors and resources from our business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation or activist shareholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation or shareholder activism.

Adverse Weather Conditions, Particularly During the Winter in the Midwest and in Our Other Markets, May Adversely Affect Our Financial Results.

Poor weather conditions adversely affect business and leisure travel plans, which directly impacts our hotels and resorts division. In addition, theatre attendance on any given day may be negatively impacted by adverse weather conditions. In particular, adverse weather during peak movie-going weekends or holiday periods may negatively affect our results of operations. Adverse winter weather conditions may also increase our snow removal and other maintenance costs in both of our divisions.

Our Results May be Seasonal, Resulting in Unpredictable and Varied Quarterly Results.

Our first fiscal quarter typically produces the weakest operating results in our hotels and resorts division due primarily to the effects of reduced travel during the winter months. Our second and third fiscal quarters often produce our strongest operating results because these periods coincide with the typical summer seasonality of the movie theatre industry and the summer strength of the lodging business. Due to the fact that the week between Christmas and New Year’s Eve is historically one of the strongest weeks of the year for our theatre division, the specific timing of the last Thursday in December has an impact on the results of our fiscal first and fourth quarters in that division, particularly when we have a 53-week year.

None.

We own the real estate of a substantial portion of our facilities, including, as of December 26, 2019, The Pfister Hotel, the Hilton Milwaukee City Center, the Hilton Madison at Monona Terrace, the Grand Geneva Resort & Spa, Saint Kate–The Arts Hotel, The Lincoln Marriott Cornhusker Hotel, The Skirvin Hilton (majority ownership), and the majority of our theatres. We lease the remainder of our facilities. As of December 26, 2019, we also managed one hotel for a joint venture in which we have a minority interest and 12 hotels, resorts and other properties and one theatre that is owned by a third party. Additionally, we own properties acquired for the future construction and operation of new facilities. All of our properties are suitably maintained and adequately utilized to cover the respective business segment served.

Our owned, leased and managed properties are summarized, as of December 26, 2019, in the following table:

Certain of the individual properties or facilities identified above are subject to purchase money or construction mortgages or commercial lease financing arrangements, but we do not consider these encumbrances, individually or in the aggregate, to be material.

All of our operating property leases expire on various dates after the end of fiscal 2020 (assuming we exercise all of our renewal and extension options).

All 22 Movie Tavern theatres acquired in February 2019 are leased from unrelated parties.

None.

Not applicable.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Each of our executive officers is identified below together with information about each officer’s age, position and employment history for at least the past five years:

Stephen H. Marcus has been our Chairman of the Board since December 1991. He served as our Chief Executive Officer from December 1988 to January 2009 and as our President from December 1988 until January 2008. Mr. Marcus has worked at our company for 58 years.

Gregory S. Marcus joined our company in March 1992 as Director of Property Management/Corporate Development. He was promoted in 1999 to our Senior Vice President – Corporate Development and became an executive officer in July 2005. He has served as our President since January 2008 and was elected our Chief Executive Officer in January 2009. He was elected to serve on our Board of Directors in October 2005. He is the son of Stephen H. Marcus, our Chairman of the Board.

Thomas F. Kissinger joined our company in August 1993 as our Secretary and Director of Legal Affairs. In August 1995, he was promoted to our General Counsel and Secretary and in October 2004, he was promoted to Vice President, General Counsel and Secretary. In August 2013, he was promoted to Senior Executive Vice President, General Counsel and Secretary. He also formerly served as interim President of Marcus Hotels & Resorts. Prior to August 1993, Mr. Kissinger was an associate with the law firm of Foley & Lardner LLP for five years.

Douglas A. Neis joined our company in February 1986 as Controller of the Marcus Theatres division and in November 1987, he was promoted to Controller of Marcus Restaurants. In July 1991, Mr. Neis was appointed Vice President of Planning and Administration for Marcus Restaurants. In September 1994, Mr. Neis was also named as our Director of Technology and in September 1995 he was elected as our Corporate Controller. In September 1996, Mr. Neis was promoted to Chief Financial Officer and Treasurer. In August 2018, Mr. Neis was promoted to Executive Vice President, Chief Financial Officer and Treasurer.

Rolando B. Rodriguez joined our company in August 2013 as our Executive Vice President and President and Chief Executive Officer of Marcus Theatres Corporation. Mr. Rodriguez served as Chief Executive Officer and President and as a board member of Rave Cinemas in Dallas, Texas for two years until its sale in May 2013. Prior to May 2011, he served in various positions with Wal-Mart for five years. He began his career in 1975 at AMC Theatres, serving for 30 years in various positions including senior vice president of North American field operations, senior vice president food & beverage group and executive vice president, North America operations service. In January 2017, Mr. Rodriguez was named Chairman of Marcus Theatres Corporation.

Our executive officers are generally elected annually by our Board of Directors after the annual meeting of shareholders. Each executive officer holds office until his successor has been duly qualified and elected or until his earlier death, resignation or removal.

PART II

(a)       Stock Performance Graph

The following information in this Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities and Exchange Act of 1934 and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into such a filing.

Set forth below is a graph comparing the annual percentage change during our last five full fiscal years and the transition period beginning on May 29, 2015 and ended December 31, 2015 in our cumulative total shareholder return (stock price appreciation on a dividend reinvested basis) of our Common Shares to the cumulative total return of: (1) a composite peer group index selected by us that we have used historically (the “old” composite peer group index), (2) the composite peer group index selected by us that we intend to use going forward (the “new” composite peer group index) and (3) companies included in the Russell 2000 Index. The old composite peer group index is comprised of the Dow Jones U.S. Hotels Index (weighted 35%) and a theatre index that we selected that includes Regal Entertainment Group and Cinemark Holdings, Inc. (weighted 65%). The results shown reflect the fact that Regal Entertainment Group ceased trading on February 28, 2018. The new composite index is comprised of the Dow Jones U.S. Hotels Index (weighted 35%) and a theatre index that we selected that includes Cinemark Holdings, Inc. and AMC Entertainment Holdings, Inc. (weighted 65%).

The indices within the composite peer group index are weighted to approximate the relative annual revenue contributions of each of our business segments to our total annual revenues over the past several fiscal years. The shareholder returns of the companies included in the Dow Jones U.S. Hotels Index and the theatre index that we selected are weighted based on each company’s relative market capitalization as of the beginning of the presented periods.

From May 29, 2014 to December 26, 2019

Our Common Stock, $1 par value, is listed and traded on the New York Stock Exchange under the ticker symbol “MCS.” Our Class B Common Stock, $1 par value, is neither listed nor traded on any exchange.

On February 17, 2020, there were 1,152 shareholders of record of our Common Stock and 37 shareholders of record of our Class B Common Stock.

The following table sets forth information with respect to purchases made by us or on our behalf of our Common Stock during the period indicated.

Five-Year Financial Summary

Results of Operations

We report our consolidated and individual segment results of operations on a 52- or 53-week fiscal year ending on the last Thursday in December. We divide our fiscal year into three 13-week quarters and a final quarter consisting of 13 or 14 weeks. Our primary operations are reported in two business segments: theatres, and hotels and resorts.

Fiscal 2017 was a 52-week year, beginning on December 30, 2016 and ending on December 28, 2017. Fiscal 2018 was a 52-week year, beginning on December 29, 2017 and ending on December 27, 2018. Fiscal 2019 was a 52-week year, beginning on December 28, 2018 and ending on December 26, 2019.

Fiscal 2020 will be a 53-week year, which began on December 27, 2019 and will end on December 31, 2020. We anticipate that our reported results for fiscal 2020 will benefit from the additional week of reported operations. In particular, the additional week of operations will most benefit our theatre division, as it includes the traditionally strong movie-going week between Christmas and New Year’s Day. The last time we had an additional week of operations was during our 31-week transition period ending on December 31, 2015 (the “Transition Period”). Our additional 31st week of operations that year benefited both of our operating divisions (particularly our theatre division due to a new Star Wars film) and contributed approximately $17.4 million in additional revenues and $6.2 million in additional operating income to our final five-week period and Transition Period results. After interest expense and income taxes, we estimate that the extra week of operations contributed approximately $3.6 million to our Transition Period net earnings, or approximately $0.13 per diluted common share. Although there can be no assurance that we will realize similar benefits in fiscal 2020, it is important to note that our theatre operations in 2015 did not include our two most recent acquisitions and we had a higher effective income tax rate.

Our first fiscal quarter typically produces the weakest operating results in our hotels and resorts division due primarily to the effects of reduced travel during the winter months. The quality of film product in any given quarter typically impacts the operating results in our theatre division. Our second and third fiscal quarters generally produce our strongest operating results because these periods coincide with the typical summer seasonality of the movie theatre industry and the summer strength of the lodging business. Due to the fact that the week between Christmas and New Year’s Eve is historically one of the strongest weeks of the year for our theatre division, the specific timing of the last Thursday in December impacts the results of our fiscal first and fourth quarters in that division, particularly when we have a 53-week year.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) generally discusses fiscal 2019 and fiscal 2018 items and year-to-year comparisons between fiscal 2019 and fiscal 2018. Discussions of fiscal 2017 items and year-to-year comparisons between fiscal 2018 and fiscal 2017 that are not included in this MD&A can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2018.

Implementation of New Accounting Standards

During fiscal 2019, we adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), intended to improve financial reporting related to leasing transactions. ASU No. 2016-02 requires a lessee to recognize a right-of-use (“ROU”) asset and a lease liability for most leases. The new guidance requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from the leases. Leases are now classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statements of net earnings. ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, amended ASU No. 2016-02 and allows entities the option to initially apply Topic 842 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We adopted the new accounting standard as of the first day of fiscal 2019 using the modified retrospective approach, which results in the cumulative effect of adoption recognized at the date of application, rather than as of the earliest period presented. As a result, no adjustment was made to prior period financial information and disclosures.  

In conjunction with the adoption of the new standard, companies were able to elect several practical expedients to aid in the transition to Topic 842. We elected the package of practical expedients which permits us to forego reassessment of our prior conclusions related to lease identification, lease classification and initial direct costs. Topic 842 also provides practical expedients for an entity’s ongoing accounting. We elected the practical expedient to not separate lease and non-lease components for all of our leases. We also made a policy election not to apply the lease recognition requirements for short-term leases. As a result, we did not recognize ROU assets or lease liabilities for short-term leases that qualify for the policy election (those with an initial term of 12 months or less which do not include a purchase or renewal option which is reasonably certain to be exercised), but instead will recognize these lease payments as lease costs on a straight-line basis over the lease term.

Adoption of this new standard resulted in a material impact related to the recognition of ROU assets and lease liabilities on the consolidated balance sheet for assets currently subject to operating leases. We recognized lease liabilities representing the present value of the remaining future minimum lease payments for all of our operating leases as of December 28, 2018 of $81.5 million. We recognized ROU assets for all assets subject to operating leases in an amount equal to the operating lease liabilities, adjusted for the balances of long-term prepaid rent, favorable lease intangible assets, deferred lease expense, unfavorable lease liabilities and deferred lease incentive liabilities as of December 28, 2018.

The adoption of the new standard did not have a material effect on our consolidated statements of net earnings.

During fiscal 2018, we adopted ASU No. 2014-09, Revenue from Contracts with Customers (ASU No. 2014-09), a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. We selected the modified retrospective method for adoption of ASU No. 2014-09 and its related ASU amendments. Under this method, we recognized the cumulative effect of the changes in retained earnings at the date of adoption and did not restate prior periods.

The adoption of the new standard primarily impacted our accounting for our loyalty programs and internet ticket fee revenue. Adopting this new standard during fiscal 2018 had the following impact on our financial statements:

We recorded a one-time cumulative effect reduction to retained earnings, net of income taxes, of approximately $2.6 million during fiscal 2018 related to the adoption of ASU No. 2014-09.

Consolidated Financial Comparisons

The following table sets forth revenues, operating income, other income (expense), net earnings and net earnings per common share for the past three fiscal years (in millions, except for per share and percentage change data) :

Fiscal 2019 versus Fiscal 2018

Our revenues increased during fiscal 2019 compared to fiscal 2018 due primarily to increased revenues from our theatre division. Our operating income (earnings before other income/expense and income taxes) decreased during fiscal 2019 compared to fiscal 2018 due to a decrease in both theatre division and hotels and resorts division operating income and a small increase in corporate operating losses. Both of our operating divisions were negatively impacted by nonrecurring expenses during fiscal 2019. Net earnings attributable to The Marcus Corporation for fiscal 2019 decreased compared to fiscal 2018 due to decreased operating income, partially offset by increased investment income and decreased interest expense and income taxes.

On February 1, 2019, we acquired the assets of Movie Tavern^® consisting of 22 dine-in theatres with 208 screens located in nine states. A detailed description of this acquisition is included below in the “Current Plans” section of this MD&A. The acquisition increased our total number of screens by 23%, resulting in increased revenues from our theatre division during fiscal 2019 compared to fiscal 2018. Excluding acquisition and preopening expenses, the acquisition did not have a material impact on operating income during fiscal 2019. Operating income from our theatre division during fiscal 2019 was unfavorably impacted by reduced attendance at our comparable theatres due to a weaker slate of movies during fiscal 2019 compared to fiscal 2018, partially offset by increased concession sales per person due to our expanded food and beverage offerings as well as an increase in our average ticket price and other revenues. Acquisition and preopening expenses related to the Movie Tavern acquisition and the opening of a newly built Movie Tavern theatre in Brookfield, Wisconsin negatively impacted our operating income by approximately $2.5 million, or $0.06 per diluted common share, during fiscal 2019 and by approximately $1.7 million, or $0.04 per diluted common share, during fiscal 2018. An impairment charge related to a specific theatre location negatively impacted our fiscal 2019 operating income by approximately $1.9 million, or $0.04 per diluted common share.

We closed the InterContinental Milwaukee hotel (the “InterContinental Milwaukee”) in early January 2019 and began a substantial renovation project that converted this hotel into an experiential arts hotel named Saint Kate^®–The Arts Hotel (the “Saint Kate”). The newly renovated hotel reopened during the first week of June 2019 (although a portion of the rooms and food and beverage outlets didn’t fully open until later in the month). Revenues from our hotels and resorts division during fiscal 2019 compared to fiscal 2018 were unfavorably impacted by the closing of the hotel for nearly six months for renovation, the negative impact of comparing a newly opened independent hotel (i.e. the Saint Kate) to a stabilized branded hotel (i.e. the InterContinental Milwaukee) and the impact of a major renovation at our Hilton Madison hotel during the first half of fiscal 2019, offset by increased room revenues and food and beverage revenues from our other six owned hotels and increased cost reimbursements from managed hotels during fiscal 2019 compared to fiscal 2018. Decreased operating income from our hotels and resorts division during fiscal 2019 compared to fiscal 2018 was primarily due to preopening expenses and initial start-up losses related to the InterContinental Milwaukee closure and conversion to the Saint Kate. These costs totaled approximately $6.8 million, or $0.16 per diluted common share during fiscal 2019. Operating income from our hotels and resorts division during fiscal 2018 was unfavorably impacted by preopening expenses of approximately $500,000 and accelerated depreciation of approximately $3.7 million related to the fiscal 2019 conversion of the former InterContinental Milwaukee hotel into the Saint Kate. These non-recurring items negatively impacted our fiscal 2018 net earnings by approximately $0.11 per diluted common share.

Operating losses from our corporate items, which include amounts not allocable to the business segments, increased during fiscal 2019 compared to fiscal 2018 due in part to increased long-term incentive compensation expenses. In addition, our fiscal 2019 operating loss from our corporate items was negatively impacted by non-recurring items totaling approximately $550,000 related to a depreciation adjustment and a payroll tax audit settlement.

We recognized investment income of $1.4 million during fiscal 2019 compared to investment income of $208,000 during fiscal 2018. Investment income includes interest earned on cash and cash equivalents, as well as increases/decreases in the value of marketable securities and increases in the cash surrender value of a life insurance policy. Investment income increased during fiscal 2019 due to increases in the value of marketable securities. Investment income during fiscal 2020 may vary compared to fiscal 2019, primarily dependent upon changes in the value of marketable securities.

Interest expense totaled $11.8 million during fiscal 2019, a decrease of $1.3 million, or 9.8%, compared to interest expense of $13.1 million during fiscal 2018. The decrease in interest expense during fiscal 2019 was due to reduced borrowing levels compared to fiscal 2018. We currently do not expect a material change in interest expense during fiscal 2020. Changes in our borrowing levels due to variations in our operating results, capital expenditures, acquisition opportunities (or the lack thereof), share repurchases and asset sale proceeds, among other items, may impact, either favorably or unfavorably, our actual reported interest expense in future periods, as may changes in short-term interest rates.

We incurred other expense of $1.9 million during fiscal 2019, a decrease of approximately $100,000, or 3.2%, compared to other expense of $2.0 million during fiscal 2018. Other expense consists of the non-service cost components of our periodic pension costs. Based upon information from an actuarial report for our pension plans, we expect other expense to increase by approximately $400,000 during fiscal 2020 compared to fiscal 2019.

We reported net losses on disposition of property, equipment and other assets of $1.1 million during fiscal 2019, compared to net losses on disposition of property, equipment and other assets of $1.3 million during fiscal 2018. The net losses during fiscal 2019 and fiscal 2018 were due primarily to losses related to old theatre seats and other items disposed of in conjunction with theatre renovations. The timing of our periodic sales and disposals of property, equipment and other assets results in variations each year in the gains or losses that we report on dispositions of property, equipment and other assets. We anticipate the potential for additional disposition losses resulting from theatre renovations, as well as disposition gains or losses from periodic sales of property, equipment and other assets, during fiscal 2020 and beyond. As discussed in more detail in the “Current Plans” section of this MD&A, we may report gains in future years from the potential sale of existing hotel assets.

We reported a net equity loss from an unconsolidated joint venture of $274,000 and $399,000, respectively, during fiscal 2019 and fiscal 2018. The net equity losses during both fiscal years consisted of our pro-rata share of losses from the Omaha Marriott Downtown at The Capitol District hotel in Omaha, Nebraska (the “Omaha Marriott”) – a hotel we manage and in which we have a 10% minority ownership interest. The Omaha Marriott is actually performing well from an operational perspective, but is experiencing overall losses due to depreciation and interest expense. We currently do not expect significant variations in net equity losses from unconsolidated joint ventures during fiscal 2020 compared to fiscal 2019, unless we significantly increase the number of joint ventures in which we participate during fiscal 2020.

The operating results of one majority-owned hotel, The Skirvin Hilton, are included in the hotels and resorts division revenue and operating income during fiscal 2019 and fiscal 2018, and the after-tax net earnings or loss attributable to noncontrolling interests is deducted from or added to net earnings on the consolidated statements of earnings. We reported net earnings attributable to noncontrolling interest of $98,000 and $74,000, respectively, during fiscal 2019 and fiscal 2018.

We reported income tax expense during fiscal 2019 of $12.3 million, a decrease of approximately $800,000, or 6.1%, compared to income tax expense of $13.1 million during fiscal 2018. The decrease in income tax expense during fiscal 2019 was the result of the reduced earnings before income taxes, partially offset by an increased effective income tax rate. Our fiscal 2018 income tax expense and effective income tax rate were favorably impacted by a reduction in deferred tax liabilities of approximately $1.9 million related to tax accounting method changes we made subsequent to the signing of the Tax Cut and Jobs Act of 2017. Our fiscal 2019 effective income tax rate, after adjusting for earnings from noncontrolling interests that are not tax-effected because the entity involved is a tax pass-through entity, was 22.7% compared to our fiscal 2018 effective income tax rate of 19.7%, which benefited from the reduction in deferred income tax liabilities described above. Excluding the favorable adjustment to income tax expense for the reduction in deferred tax liabilities, our effective income tax rate during fiscal 2018 was also 22.7%. We currently anticipate that our fiscal 2020 effective income tax rate may increase to the 24-26% range, depending upon the amount of excess tax benefits on share-based compensation that we recognize and excluding any potential further changes in federal or state income tax rates or other one-time tax benefits.

Weighted-average shares outstanding were 31.2 million during fiscal 2019 and 28.7 million during fiscal 2018. All per share data in this MD&A is presented on a fully diluted basis.

Current Plans

Our aggregate cash capital expenditures, acquisitions and purchases of interests in, and contributions to, joint ventures were approximately $94 million during fiscal 2019, including approximately $30 million in cash consideration paid in conjunction with the Movie Tavern acquisition described below, compared to $59 million during fiscal 2018 and $115 million during fiscal 2017. We currently anticipate that our fiscal 2020 cash capital expenditures will be in the $65-$85 million range, excluding any presently unidentified acquisitions that may arise during the year. We will, however, continue to monitor our operating results and economic and industry conditions so that we may adjust our plans accordingly.

Our current strategic plans include the following goals and strategies:

Theatres

Now branded Movie Tavern by Marcus, we have begun introducing new amenities to select Movie Tavern theatres, including our proprietary premium large format (PLF) screens and DreamLounger recliner seating, signature programming, such as $5 movies on Tuesdays with a free complimentary-size popcorn for loyalty members, and proven marketing, loyalty and pricing programs that will continue to benefit Movie Tavern guests in the future.

We believe selective, disciplined acquisitions create a compelling opportunity to expand into new growth markets and leverage our proven success. The movie theatre industry is very fragmented, with approximately 50% of United States screens owned by the three largest theatre circuits and the other 50% owned by an estimated 800 smaller operators, making it very difficult to predict when acquisition opportunities may arise. We do not believe that we are geographically constrained, and we believe that we may be able to add value to certain theatres through our various proprietary amenities and operating expertise. In addition, by using shares of our common stock as a significant component of the purchase consideration for the Movie Tavern acquisition, we believe our balance sheet remains positioned to consider additional acquisitions in the future.

DreamLounger recliner additions. These luxurious, state-of-the-art recliners allow guests to go from upright to a full-recline position in seconds. These seat changes require full auditorium remodels to accommodate the necessary 84 inches of legroom, resulting in the loss of approximately 50% of the existing traditional seats in an average auditorium. To date, the addition of DreamLoungers has increased attendance at each of our applicable theatres, outperforming nearby competitive theatres and growing the overall market attendance in most cases. Initially, 12 of the 22 acquired Movie Tavern theatres had recliner seating. We added DreamLounger recliner seats to four additional acquired Movie Tavern theatres during fiscal 2019, as well as one Marcus Wehrenberg^® theatre and one newly built Movie Tavern. As of December 26, 2019, we offered all DreamLounger recliner seating in 63 theatres, representing approximately 72% of our company-owned, first-run theatres. Including our PLF auditoriums with recliner seating, as of December 26, 2019, we offered our DreamLounger recliner seating in approximately 77% of our company-owned, first-run screens, a percentage we believe to be the highest among the largest theatre chains in the nation. We completed the addition of DreamLounger recliner seats to another Movie Tavern location during the first quarter of fiscal 2020, and we are currently evaluating opportunities to add our DreamLounger seating to several additional theatres during the second half of fiscal 2020.

UltraScreen DLX^® and SuperScreen DLX^® (DreamLounger eXperience) conversions. We introduced one of the first PLF presentations to the industry when we rolled out our proprietary UltraScreen^® concept approximately 20 years ago. We later introduced our UltraScreen DLX concept by combining our premium large-format presentation with DreamLounger recliner seating and Dolby^® Atmos™ immersive sound to elevate the movie-going experience for our guests. More recently, we began including heated DreamLounger recliner seating in our DLX auditoriums. During fiscal 2019, we opened one new UltraScreen DLX at an existing Marcus Wehrenberg theatre and converted one existing screen into an UltraScreen DLX auditorium at a Movie Tavern by Marcus theatre. During fiscal 2019, we also converted 26 existing screens at 13 Movie Tavern by Marcus theatres and two existing screens at one Marcus Wehrenberg theatre to SuperScreen DLX auditoriums (a slightly smaller screen than an UltraScreen but with the same DreamLounger seating and Dolby Atmos sound) and opened one new SuperScreen DLX auditorium at a newly built Movie Tavern by Marcus theatre. Most of our PLF screens now include the added feature of heated DreamLounger recliner seats. As of December 26, 2019, we had 31 UltraScreen DLX auditoriums, one traditional UltraScreen auditorium, 80 SuperScreen DLX auditoriums and three IMAX^® PLF screens at 63 of our theatre locations. As of December 26, 2019, we offered at least one PLF screen in approximately 72% of our first-run, company-owned theatres – a percentage we believe to be the highest percentage among the largest theatre chains in the nation.

Our PLF screens generally have higher per-screen revenues and draw customers from a larger geographic region compared to our standard screens, and we charge a premium price to our guests for this experience. We are currently evaluating opportunities to convert several additional existing screens to SuperScreen DLX auditoriums during fiscal 2020. In addition, our new theatre currently under construction in Tacoma, Washington will include one PLF auditorium.

Signature cocktail and dining concepts. We have continued to further enhance our food and beverage offerings within our existing theatres. We believe our 50-plus years of food and beverage experience in the hotel and restaurant businesses provides us with a unique advantage and expertise that we can leverage to further grow revenues in our theatres. The concepts we are expanding include:

Marketing initiatives. We offer a “$5 Tuesday” promotion at every theatre in our circuit that includes a free complimentary-size popcorn to our loyalty program members. We have seen our Tuesday attendance increase dramatically since the introduction of the $5 Tuesday promotion. We believe this promotion has increased movie going frequency and reached a customer who may have stopped going to the movies because of price, creating another “weekend” day for us without adversely impacting the movie-going habits of our regular weekend customers. We introduced our $5 Tuesday promotion with the free popcorn for loyalty members at our Marcus Wehrenberg theatres immediately upon acquisition in December 2016 and did the same thing in February 2019 with our newly acquired Movie Tavern theatres. We experienced an increase in Tuesday performance at the Marcus Wehrenberg theatres and have seen a similar response from customers at our Movie Tavern theatres. We also offer a “$6 Student Thursday” promotion at all of our locations that has been well received by that particular customer segment. In addition, we offer a $6 “Young-at-Heart” program for seniors on Friday afternoons that was also introduced to our Movie Tavern locations during our fiscal 2019 first quarter.

Loyalty program. We offer what we believe to be a best-in-class customer loyalty program called Magical Movie Rewards^SM. We currently have approximately 4.0 million members enrolled in the program. Approximately 42% of all transactions in our theatres during fiscal 2019 were completed by registered members of the loyalty program. The program allows members to earn points for each dollar spent and access special offers available only to members. The rewards are redeemable at the box office, concession stand or at the many Marcus Theatres^® food and beverage venues. In addition, we have partnered with Movio, a global leader in data analysis for the cinema industry, to allow more targeted communication with our loyalty members. The software provides us with insight into customer preferences, attendance habits and general demographics, which we believe will help us deliver customized communication to our members. In turn, members of this program can enjoy and plan for a more personalized movie-going experience. The program also gives us the ability to cost effectively promote non-traditional programming and special events, particularly during non-peak time periods. We believe that this will result in increased movie-going frequency, more frequent visits to the concession stand, increased loyalty to Marcus Theatres and, ultimately, improved operating results. The acquired Wehrenberg theatres offered a loyalty program to their customers that had approximately 200,000 members. We converted these members to our Magical Movie Rewards program during fiscal 2017 and program membership at our Marcus Wehrenberg theatres has subsequently increased. The acquired Movie Tavern theatres did not offer a loyalty program to their customers. We introduced our Magical Movie Rewards program to these theatres during the second quarter of fiscal 2019 after all necessary technology requirements were completed.

Technology enhancements. We have recently enhanced our mobile ticketing capabilities, our downloadable Marcus Theatres mobile application, and our marcustheatres.com website. We also recently added food and beverage ordering capabilities to our mobile application at select theatres, including our recently opened Movie Tavern location in Brookfield, Wisconsin. We will continue to install additional theatre-level technology, such as new ticketing kiosks, digital menu boards and concession advertising monitors. Each of these enhancements is designed to improve customer interactions, both at the theatre and through mobile platforms and other electronic devices.

Hotels and Resorts

Corporate

The actual number, mix and timing of our potential future new facilities and expansions and/or divestitures will depend, in large part, on industry and economic conditions, our financial performance and available capital, the competitive environment, evolving customer needs and trends, and the availability of attractive acquisition and investment opportunities. It is likely that our growth goals and strategies will continue to evolve and change in response to these and other factors, and there can be no assurance that we will achieve our current goals. Each of our goals and strategies are subject to the various risk factors discussed above in this Annual Report on Form 10-K.

Theatres

Our oldest and most profitable division is our theatre division. The theatre division contributed 67.9% of our consolidated revenues and 88.4% of our consolidated operating income, excluding corporate items, during fiscal 2019, compared to 63.2% and 87.7%, respectively, during fiscal 2018 and 61.7% and 86.2%, respectively, during fiscal 2017. As of December 26, 2019, the theatre division operated motion picture theatres in Wisconsin, Illinois, Iowa, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Arkansas, Colorado, Georgia, Kentucky, Louisiana, New York, Pennsylvania, Texas and Virginia, a family entertainment center in Wisconsin and a retail center in Missouri. The following tables set forth revenues, operating income, operating margin, screens and theatre locations for the last three fiscal years:

The following table provides a further breakdown of the components of revenues for the theatre division for the last three fiscal years:

As described above in the “Current Plans” section of this MD&A, on February 1, 2019, we acquired the assets of Movie Tavern, a New Orleans-based industry leading circuit known for its in-theatre dining concept featuring chef-driven menus, premium quality food and drink and luxury seating. The acquired circuit consists of 208 screens at 22 locations in nine states – Arkansas, Colorado, Georgia, Kentucky, Louisiana, New York, Pennsylvania, Texas and Virginia. The purchase price consisted of $30 million in cash, subject to certain adjustments, and 2,450,000 shares of our common stock, for a total purchase price of approximately $139.3 million, based upon our closing share price on January 31, 2019. The acquisition of the Movie Tavern circuit increased our total number of screens by an additional 23%. The impact that the Movie Tavern acquisition has had on our key financial measures and metrics is described further in the discussion below.

Fiscal 2019 versus Fiscal 2018

Our theatre division fiscal 2019 revenues increased by 24.7% compared to fiscal 2018 due to the newly acquired Movie Tavern theatres, increased other revenues and increases in our average ticket price and average concession revenues per person at our comparable theatres, partially offset by the impact of decreased attendance at comparable theatres due to a weaker film slate during fiscal 2019. The 22 acquired Movie Tavern theatres contributed approximately $125.8 million to our theatre division revenues during the 47 weeks that we owned these theatres during fiscal 2019. We also opened a new eight-screen Movie Tavern by Marcus theatre in Brookfield, Wisconsin early in our fiscal 2019 fourth quarter that favorably impacted our admission revenues and concession revenues in fiscal 2019 compared to fiscal 2018.

Total theatre attendance increased 8.8% and total admission revenues increased 15.3% during fiscal 2019 compared to fiscal 2018. Excluding Movie Tavern and the newly opened theatre, fiscal 2019 attendance and admission revenues at our comparable theatres decreased approximately 8.6% and 5.5%, respectively, compared to the prior year. The following table sets forth our percentage change in comparable theatre attendance during each of the interim periods of fiscal 2019 compared to the same periods during fiscal 2018. In addition, the table compares the percentage change in our fiscal 2019 comparable theatre admission revenues to the corresponding percentage change in the United States box office revenues (excluding new builds for the top 10 theatre circuits) during the same periods (as compiled by us from data received from Comscore, a national box office reporting service for the theatre industry):

Our comparable theatres outperformed the industry during fiscal 2019 by 0.5 percentage points, and we have outperformed the industry during 19 of the last 24 quarters. In general, we believe our overall outperformance of the industry has been attributable to the investments we have made in new features and amenities in select theatres and our implementation of innovative operating and marketing strategies that have increased attendance, including our $5 Tuesday promotion and our customer loyalty program (all of which are described in the “Current Plans” section of this MD&A). Our goal is to continue our past pattern of outperforming the industry, but with the financial impact of the majority of our completed renovations for our legacy circuit now reflected in our current results, our ability to do so in any given quarter will likely be partially dependent upon film mix, weather, the competitive landscape in our markets and the impact of local sporting events.

We did not include the performance of our Movie Tavern theatres, which we acquired in February 2019, in the comparison to the industry because we did not own Movie Tavern during fiscal 2018. Based upon data available to us from the previous owner, however, we believe that our Movie Tavern theatres outperformed the industry by approximately seven percentage points during the 11 months that we owned them during fiscal 2019. We believe that this outperformance was once again attributable to investments we have made in new features and amenities in select theatres (all of which are described in the “Current Plans” section of this MD&A) and our implementation of innovative operating and marketing strategies that have increased attendance, including our $5 Tuesday promotion and our customer loyalty program.

Theatre attendance and corresponding box office revenues vary significantly from quarter to quarter due to a variety of factors. The third quarter of fiscal 2019 was a particularly good quarter for the industry and included strong performances from two of our top four films for fiscal 2019, The Lion King and Toy Story 4, as well as a strong horror film, It Chapter Two, which was released during the historically slower movie-going month of September. We believe that a favorable film mix during the third quarter of fiscal 2019 compared to the third quarter of fiscal 2018 may also have had a positive impact on our comparative performance versus the overall industry. We believe our theatres outperformed our normal share of the total box office on the films noted above, as family-oriented films and horror films represent genres that have historically performed very well in our legacy Midwestern markets.

Conversely, the first quarter of fiscal 2019 was a particularly weak quarter for the industry compared to the prior year. The first quarter of fiscal 2018 benefited from several strong 2017 holdover films, such as Star Wars: The Last Jedi, Jumanji: Welcome to the Jungle and The Greatest Showman. We did not have as many strong holdovers from 2018 to benefit the first quarter of fiscal 2019. The reductions in fiscal 2019 first quarter attendance and admission revenues were also due to the fact that our highest grossing film of fiscal 2018, Black Panther, was released during February 2018, and February 2019 film product could not match those results. We also believe that snowier and colder Midwestern weather and a less favorable film mix in the fiscal 2019 first quarter compared to last year may also have had a slight negative impact on our comparative performance versus the overall industry. We believe our Midwestern circuit outperformed our normal share of the total box office on all three of the above referenced 2017 holdover films last year, negatively impacting our relative performance to the U.S. box office during the first quarter of fiscal 2019.

Finally, while our fiscal 2019 second quarter and fourth quarter comparable theatre admission revenues decreased compared to the prior year, we once again outperformed the industry during these periods. Favorable weather conditions and a film mix that included films such as Avengers: Endgame, Frozen 2 and Star Wars: The Rise of Skywalker (film franchises which historically have performed very well in our legacy Midwestern markets) likely contributed to our second and fourth quarter outperformance.

Revenues for the theatre business and the motion picture industry in general are heavily dependent on the general audience appeal of available films, together with studio marketing, advertising and support campaigns and the maintenance of a reasonably lengthy “window” between the date a film is released in theatres and the date a film is released to other channels, including video on-demand (VOD), streaming services and DVD. These are factors over which we have no control. Many current films are now released to ancillary markets within 75-90 days, and more than one studio has periodically discussed its interest in creating a new, shorter window. We have expressed our concerns to the studios regarding the impact that a shortened release window may have on future box office receipts. We have also indicated that we would not play films that did not respect the current theatrical exclusivity window and would seek adjustments in the current financial arrangements we have with film studios in the event that the film studios implement shorter release windows.

We believe that the most significant factor contributing to variations in theatre attendance during fiscal 2019, as in other periods, was the quantity and quality of films released during the respective periods compared to the films released during the same periods of the prior year. Blockbusters (generally defined as films grossing more than $100 million nationally) accounted for an increased percentage of our total admission revenues during fiscal 2019 compared to fiscal 2018 - our top 15 performing films accounted for 48% of our total admission revenues during fiscal 2019 compared to 42% during fiscal 2018. The following five top performing fiscal 2019 films, all distributed by Disney, accounted for nearly 26% of the total admission revenues for our circuit: Avengers: Endgame, The Lion King, Frozen 2, Toy Story 4 and Captain Marvel. The top five performing films during fiscal 2018 accounted for approximately 23% of our total admission revenues.

The quantity of wide-release films shown in our theatres and number of wide-release films provided by the six major studios decreased during fiscal 2019 compared to fiscal 2018. A film is generally considered “wide release” if it is shown on over 600 screens nationally, and these films generally have the greatest impact on box office receipts. We played 117 wide-release films (including 29 digital 3D films) at our theatres during fiscal 2019 compared to 132 wide-release films (including 24 digital 3D films) during fiscal 2018. In total, we played 285 films and 190 alternate content attractions at our theatres during fiscal 2019 compared to 344 films and 216 alternate content attractions during fiscal 2018. Based upon projected film and alternate content availability, we currently estimate that we may show an increased number of films and alternate content events on our screens during fiscal 2020 compared to fiscal 2019.

Our average ticket price increased 8.0% during fiscal 2019 compared to fiscal 2018, due in part to the addition of Movie Tavern theatres in certain markets where competitive pricing is slightly higher than in our legacy Midwestern markets. Excluding Movie Tavern theatres, our average ticket price at comparable theatres increased 3.4% during fiscal 2019 compared to fiscal 2018. At the beginning of the second quarter of fiscal 2019, we implemented selected ticket price increases at certain locations in order to reflect the competitive market in which those theatres operate. In addition, we enacted a modest price increase for our proprietary PLF screens and converted our admission ticket pricing to a sales tax additive (or “tax-on-top”) model, consistent with the majority of our competitors. These modest ticket price increases likely had a favorable impact on our average ticket price during fiscal 2019. The fact that our top performing films during the fiscal 2019 performed particularly well in our PLF screens (with a corresponding price premium), and that we have more PLF screens this year than we did the prior year, also contributed to our increased average ticket price during fiscal 2019 compared to the prior year. Conversely, a strong line-up of Disney family-oriented films released during fiscal 2019, such as Dumbo, Aladdin, Toy Story 4, The Lion King and Frozen 2, likely had an unfavorable impact on our average ticket price during fiscal 2019, as films that generally appeal to a younger audience result in a higher percentage of lower-priced children’s tickets sold. The increase in our average ticket price contributed approximately $7.6 million to our comparable theatres admission revenues during fiscal 2019, partially offsetting the impact of reduced attendance on our overall decreased comparable theatre admission revenues during fiscal 2019 compared to fiscal 2018. We currently expect that our average ticket price may increase again at our comparable theatres during fiscal 2020, but film mix will likely once again impact our final result.

Total concession revenues increased 38.8% during fiscal 2019 compared to fiscal 2018. Excluding Movie Tavern theatres, concession revenues at our comparable theatres decreased approximately 2.4% compared to the prior year. Our average concession sales per person increased 27.6% during fiscal 2019 compared to fiscal 2018. Our Movie Tavern theatres had a significant favorable impact on our overall average concession sales per person, as the average concession sales per person at these dine-in theatres are on average more than double the average concession sales per person we generally achieve at our average theatre without a dine-in option. Excluding Movie Tavern, our average concession revenues per person at comparable theatres increased 6.9% during fiscal 2019 compared to fiscal 2018. The increase in our concession sales per person contributed approximately $10.6 million to our comparable theatres concession revenues during fiscal 2019, partially offsetting the impact of reduced attendance on our overall decreased comparable theatre concession revenues during fiscal 2019 compared to fiscal 2018. Pricing, concession/food and beverage product mix and film product mix are the three primary factors that impact our concession sales per person. A change in concession product mix, including increased sales of higher priced non-traditional food and beverage items from our increasing number of Take Five Lounges, Zaffiro’s Express, Reel Sizzle and in-theatre dining outlets, was the primary reason for our increased average concession sales per person during fiscal 2019. Conversely, we believe that the above-described change in film product mix during fiscal 2019 may have slightly reduced the growth of our overall average concession sales per person, as family-oriented and animated films such as the Disney films identified above tend not to contribute to sales of non-traditional food and beverage items as much as adult-oriented films. We currently expect to report an increase in our average concession sales per person at our comparable theatres during fiscal 2020 compared to fiscal 2019 due to our increased number of non-traditional food and beverage outlets, although as noted above, several factors may impact our actual results in this key metric.

Other revenues, which include management fees, pre-show advertising income, family entertainment center revenues, surcharge revenues, rental income and gift card breakage income, increased by $8.3 million during fiscal 2019 compared to fiscal 2018. This increase was primarily due to internet surcharge ticketing fees and preshow advertising income from our new Movie Tavern locations. We currently expect other revenues to continue to increase in fiscal 2020.

Our theatre division operating income and operating margin decreased during fiscal 2019 compared to fiscal 2018 due primarily to reduced attendance and revenues at comparable theatres as described above. Due to the significant investments we have made in our theatres over the last five years, we have higher fixed costs, such as rent, depreciation and amortization, and higher labor expenses, attributable in part to our increased number of new food and beverage outlets in our theatres. As a result, it is more difficult to remove costs when attendance declines as it did in several quarters during fiscal 2019, and operating margins are more likely to decline when that happens. Conversely, during periods with a strong film slate, operating margins potentially increase, as that same “leverage” should benefit our theatre division. Our fiscal 2019 operating margin was also negatively impacted by higher film costs, expressed as a percentage of admission revenues, compared to the prior year. Film cost percentage increased during fiscal 2019 primarily due to the increased percentage of our admission revenues that were derived from our top five blockbuster films during fiscal 2019 compared to fiscal 2018 (discussed above). Film costs, expressed as a percentage of admission revenues, are generally greater for the significant blockbuster films.

Due to the weaker 2019 film slate and anticipated ramp-up costs as we integrated the 22 acquired Movie Tavern theatres into our operating and marketing systems and programs, the Movie Tavern theatres, excluding acquisition and preopening expenses, did not have a significant impact on our theatre division operating income during fiscal 2019. Our theatre division operating margin also declined during fiscal 2019 compared to fiscal 2018 due to the impact of the Movie Tavern theatres. Our Movie Tavern theatres have a lower operating margin than our legacy theatres because all 22 acquired theatres are leased rather than owned (rent expense is generally significantly higher than depreciation expense). In addition, the fact that a larger portion of Movie Tavern revenues are derived from the sale of in-theatre food and beverage also results in lower operating margins, as food and labor costs are generally higher for those items compared to traditional concession items. Our operating income and operating margin were also negatively impacted during fiscal 2019 by approximately $2.5 million of acquisition and preopening expenses related to the Movie Tavern acquisition and the opening of a newly built Movie Tavern theatre in Brookfield, Wisconsin. Our operating income and operating margin were negatively impacted during fiscal 2018 by approximately $1.7 million of acquisition and preopening expenses related to the Movie Tavern acquisition.

In addition to the screens added due to the Movie Tavern acquisition, we opened one new UltraScreen DLX at an existing Marcus Wehrenberg theatre during the first quarter of fiscal 2019. We also opened a new eight-screen Movie Tavern by Marcus theatre in Brookfield, Wisconsin early in our fiscal 2019 fourth quarter and added four new screens to an existing Movie Tavern theatre during the first quarter of fiscal 2020. We did not add any new screens to existing theatres or open any new theatres during fiscal 2018. We ceased managing one five-screen theatre during the second quarter of fiscal 2018, and we lost one screen at a Marcus Wehrenberg theatre during the second quarter of fiscal 2018 in conjunction with a renovation that expanded the size of two adjacent auditoriums.

Admission revenues at comparable theatres during the first quarter of fiscal 2020 through the date of this report have increased compared to the prior year comparable period due primarily to a strong week between December 27 and New Year’s Day, and a stronger January and February film slate compared to the prior year. Snow and extreme cold in the Midwest during the first quarter of fiscal 2019 likely also had a negative impact on admission revenues last year. In addition to December holdover films such as Star Wars: The Rise of Skywalker and Jumanji: The Next Level, films such as 1917, Bad Boys For Life, Dolittle and Sonic the Hedgehog have contributed positively to our early fiscal 2020 results. Comparisons for the remainder of the quarter may be negatively impacted by the strong performance from Captain Marvel during March 2019.

The film slate for the remainder of fiscal 2020 is expected to include a higher quantity of films and will likely be less dependent on major blockbusters. Whether a more diverse slate of films from multiple studios, without an Avengers or Star Wars movie, can match the box office performance of the Disney-centric franchise film line-up we experienced in fiscal 2019 is yet to be determined. Films that have potential to perform very well during the remainder of fiscal 2020 include Onward, A Quiet Place Part II, Mulan, Peter Rabbit 2: The Runaway, No Time to Die, Black Widow, Trolls: World Tour, Scoob!, The Spongebob Movie: Sponge On The Run, Fast & Furious 9, Wonder Woman 1984, Soul, Top Gun Maverick, In The Heights, Minions: The Rise Of Gru, Free Guy, Ghostbusters: Afterlife, Tenet, Jungle Cruise, Morbius, Bill & Ted Face The Music, The King’s Man, Venom 2, Death On The Nile, The Eternals, Raya and The Last Dragon, Godzilla vs. Kong, Dune, Coming To America sequel, The Croods 2 and West Side Story. Generally, an increase in the quantity of films released, particularly from the six major studios, increases the potential for more blockbusters in any given year. Our goal is to continue to outperform the industry, but with the majority of our renovations now completed for our circuit, our ability to do so in any given quarter will likely be partially dependent upon film mix, weather, the competitive landscape in our markets and the impact of local sporting events.

As noted above, fiscal 2020 will be a 53-week year, which began on December 27, 2019 and will end on December 31, 2020. We anticipate that our reported results for fiscal 2020 will benefit from the additional week of reported operations. In particular, the additional week of operations will most benefit our theatre division, as it includes the traditionally strong movie-going week between Christmas and New Year’s Day. The last time we had an additional week of operations was during the Transition Period. Our additional 31st week of operations that year, which included a new Star Wars film, contributed approximately $14.4 million in additional revenues and $5.7 million in additional operating income to our final five-week period and Transition Period results for our theatre division. Although there can be no assurance that we will realize similar benefits in fiscal 2020, it is important to note that our theatre operations in 2015 did not include our two recent acquisitions.

Hotels and Resorts

The hotels and resorts division contributed 32.1% of our consolidated revenues and 11.6% of our consolidated operating income, excluding corporate items, during fiscal 2019, compared to 36.8% and 12.3%, respectively, during fiscal 2018 and 38.2% and 13.8%, respectively, during fiscal 2017. As of December 26, 2019, the hotels and resorts division owned and operated three full-service hotels in downtown Milwaukee, Wisconsin, a full-service destination resort in Lake Geneva, Wisconsin and full-service hotels in Madison, Wisconsin, Chicago, Illinois, Lincoln, Nebraska and Oklahoma City, Oklahoma (we have a majority-ownership position in the Oklahoma City, Oklahoma hotel). In addition, the hotels and resorts division managed 12 hotels, resorts and other properties for other owners. Included in the 12 managed properties is one hotel owned by a joint venture in which we have a minority interest and two condominium hotels in which we own some or all of the public space. The following tables set forth revenues, operating income, operating margin and rooms data for the hotels and resorts division for the past three fiscal years:

The following table provides a further breakdown of the components of revenues for the hotels and resorts division for the last three fiscal years:

Fiscal 2019 versus Fiscal 2018

Our hotels and resorts division revenues increased 1.3% during fiscal 2019 compared to fiscal 2018 due primarily to an increase in cost reimbursements, partially offset by the fact that the InterContinental Milwaukee was closed during the majority of the first six months of fiscal 2019 as it underwent a major renovation that converted this hotel into the Saint Kate. The newly renovated hotel reopened during the first week of June 2019 (although a portion of the rooms and food and beverage outlets did not fully open until later in the month). Excluding this hotel and cost reimbursements from managed properties, total revenues during fiscal 2019 increased by 2.6% compared to fiscal 2018, due primarily to increased room revenues and food and beverage revenues at our seven other owned hotels and resorts, as well as increased other revenues.

Room revenues decreased during fiscal 2019 compared to fiscal 2018 due entirely to the closing of the InterContinental Milwaukee and its reopening as the Saint Kate, partially offset by increased revenue per available room, or RevPAR, at our remaining seven company-owned hotels. Excluding the Saint Kate, room revenues during fiscal 2019 increased by 1.1% compared to fiscal 2018, despite the fact that our Hilton Madison hotel was undergoing a major renovation during the first half of fiscal 2019 that negatively impacted our overall room revenues. Food and beverage revenues increased during fiscal 2019 compared to fiscal 2018 despite having a closed hotel for most of the first half of fiscal 2019. Excluding the Saint Kate, food and beverage revenues during fiscal 2019 increased by 3.8% compared to fiscal 2018, due primarily to increased banquet and catering revenues, and despite the negative impact from our Hilton Madison hotel while it was under renovation. Other revenues increased during fiscal 2019 compared to fiscal 2018 due in part to increased management fees and revenues from our company-owned laundry facility. Cost reimbursements also increased during fiscal 2019 compared to fiscal 2018 due to an increase in the number of management contracts in this division.

Hotels and resorts division operating income and operating margin decreased by 19.5% and 1.0 percentage points (from 4.8% to 3.8%), respectively, during fiscal 2019 compared to fiscal 2018 due entirely to approximately $6.8 million of preopening expenses and initial startup losses related to the closing and conversion of the InterContinental Milwaukee into the Saint Kate. We also had approximately $1.1 million of additional depreciation and amortization attributable to this hotel during fiscal 2019 due to the new investment made at this property. Our operating income during fiscal 2018 was negatively impacted by preopening expenses of approximately $500,000 and accelerated depreciation expense of approximately $3.7 million also related to the Saint Kate conversion. Excluding this hotel from both years, our fiscal 2019 operating income would have improved by approximately $1.2 million, or 7.6% ($17.4 million in fiscal 2019 compared to $16.2 million in fiscal 2018). Again excluding this hotel, our operating margin was 6.8% during fiscal 2019 compared to 6.5% during fiscal 2018. This same-hotel improvement can be attributed to increased revenues and a continued focus on cost controls and operating efficiency and was achieved despite the fact that the renovation at the Hilton Madison hotel negatively impacted our operating results during fiscal 2019.

Initial guest and community reaction to the new Saint Kate hotel has been very favorable. As an independent hotel, we expected that it would take a period of time for this hotel to ramp up, particularly with group business, and as a result our fiscal 2019 second half comparisons of Saint Kate to a stabilized branded hotel during the prior year were unfavorable. The Saint Kate is achieving a higher average daily room rate than the hotel it replaced and its food and beverage revenues are exceeding the previous hotel as well. We believe that over time, the new hotel will ultimately outperform the previous hotel.

The following table sets forth certain operating statistics, including our average occupancy percentage (number of occupied rooms as a percentage of available rooms), our average daily room rate (“ADR”), and our total revenue per available room (“RevPAR”), for company-owned properties:

RevPAR increased at five of our seven comparable company-owned properties during fiscal 2019 compared to fiscal 2018. As noted above, our Hilton Madison hotel underwent a major renovation during the first half of fiscal 2019, negatively impacting our overall operating statistics. Excluding the Hilton Madison, our remaining six comparable company-owned hotels experienced a RevPAR increase of 2.4% during fiscal 2019 compared to fiscal 2018. According to data received from Smith Travel Research and compiled by us in order to analyze our fiscal 2019 results, comparable “upper upscale” hotels throughout the United States experienced an increase in RevPAR of 1.0% during fiscal 2019. Data received from Smith Travel Research for our various “competitive sets” – hotels identified in our specific markets that we deem to be competitors to our hotels – indicates that these hotels experienced an increase in RevPAR of 2.7% during fiscal 2019. As a result, excluding the Hilton Madison, our RevPAR performance during fiscal 2019 exceeded the national averages and was in-line with our competitive sets.

The following table sets forth the change in our average occupancy percentage, ADR and RevPAR for each quarterly period of fiscal 2019 compared to fiscal 2018 (excluding the InterContinental Milwaukee, which is now the Saint Kate):

As indicated in the table above, our RevPAR performance varied from quarter to quarter, driven primarily by variations in group business during each quarter. If the Hilton Madison hotel is excluded from the first two quarters due to the renovation underway during those periods, our first quarter and second quarter RevPAR for our remaining six comparable company-owned hotels increased 2.6% and 5.4%, respectively during those periods compared to the prior year same periods. Our company-owned hotels, and in particular our largest hotels, derive a significant portion of their revenues from group business, and as a result, we are more susceptible to variations in RevPAR from quarter to quarter depending upon the strength of the group business market during that particular quarter. Group business also tends to have an impact on our food and beverage revenues because groups are more likely to use our banquet and catering services during their stay. As indicated in the quarterly results above, reduced group business negatively impacted several of our hotels during the first quarter of fiscal 2019 and increased group business favorably impacted several of our hotels during the second, third and fourth quarters of fiscal 2019 compared to the same periods in fiscal 2018. According to data received from Smith Travel Research and compiled by us in order to analyze our fiscal 2019 quarterly results, we outperformed our competitive sets during the second and fourth quarters of fiscal 2019 and underperformed our competitive sets during the first and third quarters of fiscal 2019.

Our comparable hotel RevPAR growth of 1.0% during fiscal 2019 compared to fiscal 2018 was entirely the result of an increase in our comparable ADR. We experienced increases in our ADR during all four fiscal 2019 quarters and five of our seven comparable company-owned hotels (including the Hilton Madison, but excluding the Saint Kate) reported increased ADR during fiscal 2019 compared to fiscal 2018. Group business also has an impact on our ADR. Typically, when we have substantial blocks of rooms committed to group business, we are able to raise rates with non-group business. Our largest increase in ADR during fiscal 2019 – the second quarter – coincided with our largest increases in group business during the year. Conversely, leisure customers tend to be very loyal to online travel agencies, which is one of the reasons why we continue to experience some rate and margin pressure. While we have been selective in choosing the online portals to which we grant access to our inventory, such portals are part of the booking landscape today, and our goal is to use them in the most efficient way possible.

Nationally, the pace of RevPAR growth has been declining over the past several years and many published reports by those who closely follow the hotel industry suggest that the United States lodging industry will experience very limited overall growth in RevPAR in calendar 2020, with some markets possibly experiencing small declines. Whether the relatively positive trends in the lodging industry over the last several years will continue depends in large part on the economic environment, as hotel revenues have historically tracked very closely with traditional macroeconomic statistics such as the gross domestic product. We also continue to monitor hotel supply in our markets, as increased supply without a corresponding increase in demand may have a negative impact on our results.

We generally expect our future revenue trends to track the overall industry trends, particularly in our respective markets. We are encouraged by the fact that, as of the date of this Annual Report on Form 10-K, our group room revenue bookings for future periods in fiscal 2020 – something commonly referred to in the hotels and resorts industry as “group pace” – are ahead of our group room revenue bookings for future periods as of the same date last year. Banquet and catering revenue pace for fiscal 2020 is also currently ahead of where we were last year at this same time. Conversely, several of our markets, including Oklahoma City, Oklahoma, Chicago, Illinois and Milwaukee, Wisconsin, have experienced an increase in room supply over the past several years that may be an impediment to any substantial increases in ADR in the near term. Milwaukee will be hosting the Democratic National Convention in the summer of 2020, which we believe will not only favorably impact fiscal 2020 results (group pace is up significantly for 2020), but has the potential to have a positive long-term impact on the overall market. We also expect our Milwaukee hotels to benefit in September 2020 from the fact that a major golf tournament, The Ryder Cup, will be held one hour north of the city in Kohler, Wisconsin.

As discussed in the “Current Plans” section of this MD&A, we currently anticipate beginning major renovations at The Pfister Hotel and Grand Geneva Resort & Spa late in fiscal 2020, with the majority of the work likely to be performed during fiscal 2021. We do not currently expect these renovations to have any significant impact on fiscal 2020 operating results. We do expect favorable comparisons during fiscal 2020 (compared to fiscal 2019 results) at the Hilton Madison, now that renovations are complete, and the Saint Kate, as it will be open all year and should experience operating improvements as market awareness of this new hotel continues to increase. Additionally, as noted above, fiscal 2020 will be a 53-week year. The last time we had an additional week of operations was during our Transition Period. Our additional 31st week of operations that year contributed approximately $3.0 million in additional revenues and $700,000 in additional operating income to our final five-week period and Transition Period results for our hotels and resorts division. There can be no assurance that we will realize similar benefits in fiscal 2020.

Our hotels and resorts division operating results during fiscal 2019 benefited from three management contracts added during fiscal 2018 – the Murieta Inn and Spa in Rancho Murieta, California (added January 2018), along with the DoubleTree by Hilton Hotel El Paso Downtown (added April 2018) and Courtyard by Marriott El Paso Downtown/Convention Center (added August 2018), both in El Paso, Texas. In addition, on April 1, 2019, we assumed management of the Hyatt Regency Schaumburg hotel in Schaumburg, Illinois. Conversely, in May 2019, we ceased managing the Heidel House Resort & Spa in Green Lake, Wisconsin, after the owners of this resort decided to close this property permanently. Early in our fiscal 2019 third quarter, the owners of the Sheraton Chapel Hill Hotel in Chapel Hill, North Carolina sold the hotel, and as a result our contract to manage this hotel was terminated. The loss of these management contracts has partially offset the benefits of the new management contracts described above. As of the date of this filing, our current portfolio of hotels and resorts includes 20 owned and managed properties across the country.

As discussed in the “Current Plans” section of this MD&A, we are considering a number of potential growth opportunities that may impact fiscal 2020 operating results. In addition, if we were to sell one or more hotels during fiscal 2020, our fiscal 2020 operating results could be significantly impacted. The extent of any such impact will likely depend upon the timing and nature of the growth opportunity (pure management contract, management contract with equity, joint venture investment, or other opportunity) or divestiture (management retained, equity interest retained, etc.).

During our fiscal 2020 first quarter, Michael R. Evans joined us as the new president of Marcus Hotels & Resorts. Mr. Evans is a proven lodging industry executive with more than 20 years of experience in the hospitality industry with companies such as Marriott International, Inc. and MGM Resorts International. We believe that Mr. Evan’s proven development, operating and leadership experience and strong roots in the hospitality industry make him extremely qualified to build on our hotels and resorts division’s long history of success. Prior to Mr. Evans joining us, Greg Marcus, our president and chief executive officer, had assumed operational oversight of this division and served as acting-president of our hotels and resorts division during fiscal 2019, supported by a strong and experienced senior leadership team.

Liquidity and Capital Resources

Liquidity

Our theatre and hotels and resorts divisions each generate significant and relatively consistent daily amounts of cash, subject to seasonality described above, because each segment’s revenue is derived predominantly from consumer cash purchases. We believe that these relatively consistent and predictable cash sources, as well as the availability of $139 million of unused credit lines at the end of fiscal 2019, are adequate to support the ongoing operational liquidity needs of our businesses during fiscal 2020.

On January 9, 2020, we replaced our then existing $225 million credit agreement by entering into a new five-year credit agreement among us and several banks, including JPMorgan Chase Bank, N.A., as Administrative Agent, and U.S. Bank National Association, as Syndication Agent (the “Credit Agreement”), and we intend to use borrowings under the Credit Agreement for general corporate purposes. The Credit Agreement provides for a revolving credit facility that matures on January 9, 2025 with an initial maximum aggregate amount of availability of $225 million. We may request to increase the aggregate amount of availability under the Credit Agreement by an aggregate amount of up to $125 million by increasing the revolving credit facility or adding one or more tranches of term loans, subject to certain conditions, which include, among other things, the absence of any default or event of default or material adverse effect under the Credit Agreement.

Under the Credit Agreement, we have agreed to pay a facility fee, payable quarterly, equal to 0.125% to 0.250% of the total commitment, depending on our consolidated debt to capitalization ratio, as defined in the Credit Agreement. Certain borrowings, such as ABR borrowings, under the revolving credit facility bear interest, payable no less frequently than quarterly, at a rate equal to the alternate base rate, as defined in the Credit Agreement, plus the applicable rate, as defined in the Credit Agreement. Other borrowings, such as Eurodollar borrowings, under the revolving credit facility bear interest at a rate equal to the adjusted LIBO rate for the interest period, as defined in the Credit Agreement, plus the applicable rate.

The Credit Agreement contains various restrictions and covenants applicable to The Marcus Corporation and certain of our subsidiaries. Among other requirements, the Credit Agreement limits the amount of priority debt, as defined in the Credit Agreement, held by our restricted subsidiaries to no more than 20% of our consolidated total capitalization, as defined in the Credit Agreement, limits our permissible consolidated debt to total capitalization ratio to a maximum of 0.55 to 1.0 and requires us to maintain a minimum fixed charge coverage ratio (consolidated adjusted cash flow to consolidated interest and rental expense) of 3.0 to 1.0, as defined in the Credit Agreement.

The majority of our other long-term debt consists of senior notes and mortgages with annual maturities of $9.9 million and $11.0 million in fiscal 2020 and 2021, respectively.

The Credit Agreement and the senior notes impose various financial covenants applicable to The Marcus Corporation and certain of our subsidiaries. As of the date of this filing, we are in compliance with all of the financial covenants imposed by the Credit Agreement and the senior notes, and we expect to be able to meet such financial covenants during the remainder of fiscal 2020.

Financial Condition

Fiscal 2019 versus Fiscal 2018

Net cash provided by operating activities totaled $141.5 million during fiscal 2019 compared to $137.4 million during fiscal 2018, an increase of $4.1 million, or 3.0%. The increase in net cash provided by operating activities was due primarily to increased depreciation and amortization and deferred income taxes and the favorable timing in the payment of accounts payable in fiscal 2019, partially offset by reduced net earnings and the unfavorable timing in the collection of accounts receivable and payment of income taxes in fiscal 2019.

Net cash used in investing activities during fiscal 2019 totaled $93.9 million compared to $59.3 million during fiscal 2018, an increase of $34.6 million, or 58.5%. The increase in net cash used in investing activities was primarily the result of the $30.1 million cash consideration in the Movie Tavern acquisition and an increase in capital expenditures. We did not incur any acquisition-related capital expenditures during fiscal 2018.

Total cash capital expenditures (including normal continuing capital maintenance and renovation projects) totaled $64.1 million during fiscal 2019 compared to $58.7 million during fiscal 2018, an increase of $5.4 million, or 9.2%. We incurred capital expenditures of approximately $3.3 million and $600,000, respectively, during fiscal 2019 and fiscal 2018 related to development costs of one new theatre that opened during fiscal 2019. We did not incur any capital expenditures related to developing new hotels during either period. We incurred approximately $31.5 million and $43.6 million, respectively, of capital expenditures during fiscal 2019 and fiscal 2018 in our theatre division, including the aforementioned costs associated with constructing a new theatre, as well as costs associated with the addition of DreamLounger recliner seating, our Take Five Lounge and Zaffiro’s Express and food and beverage concepts, and UltraScreen DLX and SuperScreen DLX premium large format screens at selected theatres, each as described in the “Current Plans” section of this MD&A. We also incurred capital expenditures in our hotels and resorts division during fiscal 2019 of approximately $31.8 million, consisting primarily of costs associated with the conversion of the InterContinental Milwaukee into the Saint Kate and renovation of the Hilton Madison Monona Terrace, as well as normal maintenance capital projects at our other properties. We incurred approximately $14.9 million of capital expenditures in our hotels and resorts division during fiscal 2018, including costs associated with the renovation of the Hilton Madison and the conversion of the InterContinental Milwaukee into the Saint Kate, as well as other maintenance capital projects at our company-owned hotels and resorts. Our current estimated fiscal 2020 cash capital expenditures, which we anticipate may be in the $65-$85 million range, are described in greater detail in the “Current Plans” section of this MD&A.

Net cash used in financing activities during fiscal 2019 totaled $43.8 million compared to $76.9 million during fiscal 2018. The decrease in net cash used in financing activities of $33.1 million, or 43.0%, was due to a smaller reduction in our long term debt during fiscal 2019 compared to fiscal 2018, which primarily was the result of the use of cash for the Movie Tavern acquisition described above.

We used excess cash during fiscal 2019 and fiscal 2018 to reduce our borrowings under our revolving credit facility. As short-term borrowings became due, we replaced them as necessary with new short-term borrowings. As a result, we added $335.0 million of new short-term borrowings and we made $333.0 million of repayments on short-term borrowings during fiscal 2019 (net increase in borrowings on our credit facility of $2.0 million) compared to $203.0 million of new short-term borrowings and $254.0 million of repayments on short-term borrowings made during fiscal 2018 (net decrease in net borrowings on our credit facility of $51.0 million), accounting for the decrease in net cash used in financing activities during fiscal 2019.

We did not issue any new long-term debt during fiscal 2019 or fiscal 2018. Principal payments on long-term debt were $24.6 million during fiscal 2019 and included the repayment of a $14.6 million mortgage note on a hotel, compared to payments of $12.2 million during fiscal 2018.

Our debt-to-capitalization ratio (excluding our finance lease obligations) was 0.26 at December 26, 2019 compared to 0.33 at December 27, 2018. Based upon our current expectations for our fiscal 2020 capital expenditures and barring any currently unidentified acquisitions, we anticipate that our total long-term debt and debt-to-capitalization ratio will remain at our current relatively low levels during fiscal 2020. Our actual total long-term debt and debt-to-capitalization ratio at the end of fiscal 2020 are dependent upon, among other things, our actual operating results, capital expenditures, potential acquisitions, asset sales proceeds and potential equity transactions during the year.

We repurchased approximately 30,000 shares of our common stock for approximately $1.1 million and 83,000 shares of our common stock for approximately $2.9 million, respectively, during fiscal 2019 and fiscal 2018 in conjunction with the exercise of stock options. As of December 26, 2019, approximately 2.8 million shares of our common stock remained available for repurchase under prior Board of Directors repurchase authorizations. Under these authorizations, we may repurchase shares of our common stock from time to time in the open market, pursuant to privately-negotiated transactions or otherwise, depending upon a number of factors, including prevailing market conditions.

In conjunction with the Movie Tavern acquisition, we issued 2,450,000 shares of our common stock to the seller during the first quarter of fiscal 2019 (157,056 of which have been placed in escrow to secure certain post-closing indemnification obligations of the seller under the asset purchase agreement). This non-cash transaction reduced treasury stock and increased capital in excess of par by the value of the shares at closing of approximately $109.2 million.

We paid regular quarterly dividends totaling $19.3 million and $16.4 million, respectively, during fiscal 2019 and fiscal 2018. The increase in dividend payments was the result of an increased number of outstanding shares and a 6.7% increase in our regular quarterly dividend payment rate initiated in March 2019. During the first quarter of fiscal 2020, we increased our regular quarterly common stock cash dividend by an additional 6.3% to $0.17 per common share.

Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements

The following schedule details our contractual obligations at December 26, 2019 (in thousands):

Additional detail describing our long-term debt is included in Note 7 to our consolidated financial statements.

As of December 26, 2019, we had no additional material purchase obligations other than those created in the ordinary course of business related to property and equipment, which generally have terms of less than 90 days. We had long-term obligations related to our employee benefit plans, which are discussed in detail in Note 10 to our consolidated financial statements. We have not included uncertain tax obligations in the table of contractual obligations set forth above due to uncertainty as to the timing of any potential payments.

As of December 26, 2019, we had approximately eleven months remaining on our office lease.

As of December 26, 2019, we had no debt or lease guarantee obligations.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates, and we manage our exposure to this market risk by monitoring available financing alternatives.

Variable interest rate debt outstanding as of December 26, 2019 totaled $81.0 million, carried an average interest rate of 2.7% and represented 37.4% of our total debt portfolio. After adjusting for outstanding swap agreements described below, variable interest rate debt outstanding as of December 26, 2019 totaled $31.0 million, carried an average interest rate of 2.7% and represented 14.3% of our total debt portfolio. Our earnings are affected by changes in short-term interest rates as a result of our borrowings under our revolving credit facility. Based upon the interest rates in effect on our variable rate debt outstanding as of December 26, 2019, a 100 basis point increase in market interest rates would increase our annual interest expense by approximately $310,000, taking our outstanding swap agreements into consideration.

Fixed interest rate debt totaled $135.7 million as of December 26, 2019, carried an average interest rate of 4.4% and represented 62.6% of our total debt portfolio. After adjusting for outstanding swap agreements described below, fixed interest rate debt totaled $185.7 million as of December 26, 2019, carried an average interest rate of 4.2% and represented 85.7% of our total debt portfolio. Fixed interest rate debt included the following: senior notes bearing interest semiannually at fixed rates ranging from 4.02% to 6.55%, maturing in fiscal 2020 through 2027; and fixed rate mortgages and other debt instruments bearing interest from 3.00% to 5.75%, maturing in fiscal 2025 and 2042. The fair value of our fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of our fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. As of December 26, 2019, the fair value of our $109.0 million of senior notes was approximately $111.0 million. Based upon the respective rate and prepayment provisions of our remaining fixed interest rate mortgage and unsecured term note at December 26, 2019, the carrying amounts of such debt approximated fair value as of such date.

The variable interest rate debt and fixed interest rate debt outstanding as of December 26, 2019 matures as follows (in thousands):

We periodically enter into interest rate swap agreements to manage our exposure to interest rate changes. These swaps involve the exchange of fixed and variable interest rate payments. Payments or receipts on the agreements are recorded as adjustments to interest expense. We had one outstanding interest rate swap agreement at December 28, 2017 covering $25.0 million that expired on January 22, 2018. Under this swap agreement, we paid a defined fixed rate while receiving a defined variable rate based on LIBOR, effectively converting $25.0 million of our borrowing under our prior credit agreement to a fixed rate. The swap agreement did not materially impact our fiscal 2018 or fiscal 2017 earnings.

On March 1, 2018, we entered into two interest rate swap agreements covering $50.0 million of floating rate debt which require us to pay interest at a defined fixed rate while receiving interest at a defined variable rate of one-month LIBOR. The first swap has a notional amount of $25.0 million, expires on March 1, 2021 and has a fixed rate of 2.559%. The second swap has a notional amount of $25.0 million, expires on March 1, 2023 and has a fixed rate of 2.687%. The interest rate swaps are considered effective for accounting purposes and qualify as cash flow hedges. These swap agreements did not materially impact our fiscal 2019 earnings and we do not expect the interest rate swaps to materially impact our fiscal 2020 earnings.

Critical Accounting Policies and Estimates

This MD&A is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, we evaluate our estimates associated with critical accounting policies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect the most significant judgments and estimates used in the preparation of our consolidated financial statements.

Accounting Changes

In January 2017, the Financial Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) No. 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment, which eliminates Step 2 of the goodwill impairment test that had required a hypothetical purchase price allocation. Rather, entities should apply the same impairment assessment to all reporting units and recognize an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. Entities will continue to have the option to perform a qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. ASU No. 2017-04 is effective for us in fiscal 2020 and must be applied prospectively. We do not believe the new standard will have a material effect on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General, designed to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. ASU No. 2018-14 is effective for us in fiscal 2020 and early application is permitted. We do not believe the new standard will have a material effect on our consolidated financial statement disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The purpose of ASU No. 2018-13 is to improve the disclosures related to fair value measurements in the financial statements. The improvements include the removal, modification and addition of certain disclosure requirements primarily related to Level 3 fair value measurements. ASU No. 2018-13 is effective for us in fiscal 2020. The amendments in ASU No. 2018-13 should be applied prospectively. We do not expect ASU No. 2018-13 to have a significant impact on our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in ASU No. 2019-12 are designed to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify generally accepted accounting principles for other areas of Topic 740 by clarifying and amending existing guidance. ASU No. 2019-12 is effective for us in fiscal 2021 and early application is permitted. We are currently evaluating the effect the new standard will have on our consolidated financial statements.

On December 28, 2018, we adopted ASU No. 2016-02, Leases (Topic 842), which is intended to improve financial reporting related to leasing transactions. ASC 842 requires a lessee to recognize on the balance sheet assets and liabilities for rights and obligations created by leased assets with lease terms of more than 12 months. The new guidance also requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from the leases. See Note 8 for further discussion.

The information required by this item is set forth in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures About Market Risk” above.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 26, 2019. The Company’s auditors, Deloitte & Touche LLP, have issued an attestation report on our internal control over financial reporting. That attestation report is set forth in this Item 8.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of The Marcus Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Marcus Corporation and subsidiaries (the "Company") as of December 26, 2019 and December 27, 2018, and the related consolidated statements of earnings, comprehensive income, shareholders' equity, and cash flows, for each of the three years in the period ended December 26, 2019, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 26, 2019 and December 27, 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 26, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 26, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2020, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 8 to the financial statements, the Company changed its method of accounting for leases in the year ended December 26, 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842), using the modified retrospective method. 

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation of the property and equipment, favorable and unfavorable lease amounts, and the trade name intangible asset included the following, among others:

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s assessment of impairment indicators for long-lived assets included the following, among others:

/s/ Deloitte & Touche LLP

Milwaukee, Wisconsin

February 24, 2020

We have served as the Company's auditor since 2008.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of The Marcus Corporation

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of The Marcus Corporation and subsidiaries (the “Company”) as of December 26, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 26, 2019, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 26, 2019, of the Company and our report dated February 24, 2020, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s adoption of a new accounting standard.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Milwaukee, Wisconsin  

February 24, 2020

THE MARCUS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

See accompanying notes.

The Marcus Corporation

Consolidated Statements of EARNINGS

(in thousands, except per share data)

See accompanying notes.

The Marcus Corporation

Consolidated Statements of COMPREHENSIVE INCOME

(in thousands)

 See accompanying notes.

THE MARCUS CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except per share data)