Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 18± 85K
2: EX-4.3 Instrument Defining the Rights of Security Holders 5± 25K
3: EX-10.4 Material Contract 11± 43K
4: EX-13 Annual or Quarterly Report to Security Holders 32± 145K
5: EX-21 Subsidiaries of the Registrant 2± 11K
6: EX-23.1 Consent of Experts or Counsel 1 6K
7: EX-27.1 Financial Data Schedule (Pre-XBRL) 1 8K
8: EX-27.2 Financial Data Schedule (Pre-XBRL) 1 8K
9: EX-27.3 Financial Data Schedule (Pre-XBRL) 1 8K
10: EX-27.4 Financial Data Schedule (Pre-XBRL) 1 8K
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended May 28, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to __________
Commission file number 1-12604
THE MARCUS CORPORATION
(Exact name of registrant)
Wisconsin 39-1139844
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 East Wisconsin Avenue - Suite 1700
Milwaukee, Wisconsin 53202-4220
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414) 905-1000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1 par value New York Stock Exchange
(Title of class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 such filing requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of August 7, 1998: $395,613,829.
Number of shares outstanding of each of the classes of the registrant's
capital stock as of August 7, 1998:
Common Stock, $1 par value: 18,517,345 shares
Class B Common Stock, $1 par value: 12,672,168 shares
DOCUMENTS INCORPORATED BY REFERENCE:
1998 Annual Report to Shareholders (incorporated by reference into Parts
I, II and IV); Proxy Statement for 1998 Annual Meeting of Shareholders (to
be filed with the Commission under Regulation 14A within 120 days after
the end of the registrant's fiscal year and, upon such filing, to be
incorporated by reference into Part III).
PART I
Unless the context indicates otherwise, references to the number
of the Company's various facilities set forth in this Form 10-K Annual
Report are as of May 28, 1998.
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Annual Report on Form 10-K 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 the statement will include words such as the
Company "believes," "anticipates," "expects" or words of similar import.
Similarly, statements that describe the Company's future plans, objectives
or goals are also forward-looking statements. Such forward-looking
statements are subject to certain risks and uncertainties which are
described in close proximity to such statements and which may cause actual
results to differ materially from those currently anticipated.
Shareholders, potential investors and other readers are urged to consider
these factors in evaluating the forward-looking statements and are
cautioned not to place undue reliance on such forward-looking statements.
The forward-looking statements included herein are made only as of the
date of this report and the Company undertakes no obligation to publicly
update such forward-looking statements to reflect subsequent events or
circumstances.
Item 1. Business.
The Marcus Corporation through its subsidiaries (collectively,
the "Company") is engaged in four business segments: limited-service
lodging; movie theatres; hotels and resorts; and restaurants.
The Company's limited-service lodging operations include a chain
of 156 Budgetel Inn limited-service facilities in 30 states and five
Woodfield Suites all-suite hotels in Wisconsin, Colorado and Ohio. Of the
156 Budgetel Inns, 106 are owned or operated by the Company and 50 are
franchised.
The Company operates 46 movie theatres with an aggregate of 361
screens throughout Wisconsin, Illinois, Minnesota and Ohio. The Company
also operates a family entertainment center, Funset Boulevard, in
Appleton, Wisconsin.
The Company's hotel and resort operations include the Pfister
and the Milwaukee Hilton, which are full-service hotels in Milwaukee,
Wisconsin, and the Grand Geneva Resort & Spa and the Miramonte Resort,
which are full-facility destination resorts in Lake Geneva, Wisconsin and
Indian Wells, California, respectively. The Company also manages three
hotels and a resort for third parties: the Mead Inn in Wisconsin Rapids,
Wisconsin, the Crowne-Plaza Northstar in Minneapolis, Minnesota, Beverly
Garland's Holiday Inn in North Hollywood, California and the Mission Point
Resort on Mackinac Island, Michigan.
The Company's restaurant division includes 31 KFC (Kentucky
Fried Chicken) restaurants in Wisconsin.
The Company is continuing its aggressive expansion plan that it
began in fiscal 1994. The Company's current plans include the following
goals:
- Converting Budgetel Inns to Baymont Inns and Baymont Inns &
Suites in fiscal 1999 and then increasing the total number
of Baymont Inns and Baymont Inns & Suites to over 400
within the next five years. Up to four Company-owned and
27 franchised properties are currently in development for
fiscal 1999. The Company currently believes that much of
this anticipated future growth will ultimately come from
its emphasis on opening new franchised Baymont Inns and
Baymont Inns & Suites.
- Increasing its number of movie theatre screens to 500 by
the year 2000, with expected continued expansion outside of
Wisconsin. Up to 66 new screens are currently planned to
be opened by the Company in fiscal 1999, including 16 new
screens recently completed at the Company's second location
in Columbus, Ohio. Other current expansions include 49 new
screens to be added to existing locations in Wisconsin,
Illinois and Minnesota and completion of the Company's
first large screen IMAX/R/ 2D/3D theatre at its new
Columbus location. The Company also has current plans to
add stadium seating to a majority of its existing screens
by the end of fiscal 2000.
- Adding one or two hotel properties each year over the next
few fiscal years, either Company-owned or managed for
others. In some cases, the Company may own only a partial
interest in the new properties. The Company recently
announced plans for the development of new hotels in
Madison, Wisconsin and Chicago, Illinois. The Madison
Hilton, which is a public/private endeavor with the City of
Madison, is anticipated to be a 222-room Company-owned
property scheduled to open in 2000. The 250-room downtown
Chicago luxury hotel is currently planned to be developed
and managed by the Company.
- Increasing its number of Woodfield Suites. The Company has
two Company-owned Woodfield Suites scheduled to open late
in fiscal 1999 and is evaluating additional sites.
- Expanding and enhancing the Company's KFC franchise. The
Company's first KFC/Taco Bell 2-in-1 unit, a conversion of
an existing KFC, opened in early fiscal 1998, and the
Company plans to open at least two additional 2-in-1
conversions in fiscal 1999.
The actual number, mix and timing of potential future new facilities and
expansions will depend in large part on continuing favorable industry and
general economic conditions, the Company's financial performance and
available capital, the competitive environment, evolving customer needs
and trends, and the availability of attractive opportunities. It is
likely that the Company's expansion goals will continue to evolve and
change in response to these and other factors and there can be no
assurance that these current goals will be achieved.
Business Segment Data
Certain business segment data for the Company's three most
recent fiscal years relating to the Company's four industry segments is
set forth in footnote 11 to the Notes to Consolidated Financial Statements
included on Page 31 of the Company's 1998 Annual Report to Shareholders,
which pages are incorporated by reference herein.
Limited-Service Lodging Operations
Budgetel Inns
The Company owns, operates or franchises 156 limited-service
facilities, with over 16,000 available rooms, under the name "Budgetel
Inns" in 30 states. Of this total, 50 Budgetel Inns are operated through
franchisees, 97 are Company-owned or operated and nine are operated under
joint venture agreements. During fiscal 1998, two new Company-owned units
and 11 new franchised units were opened, with an additional 27 franchised
units under construction or development at fiscal year-end. Depending
upon continuing favorable industry conditions and attractive
opportunities, the Company currently plans to add up to 31 new Budgetel
Inns in fiscal 1999 (including up to four Company-owned and up to 27
franchised facilities).
During fiscal 1998, the Company announced that it was changing
the name of Budgetel Inns to Baymont Inns and Baymont Inns & Suites. The
Company plans to convert Company-owned and franchised units to the Baymont
name by approximately October 31, 1998. The name change, which was
endorsed by the Budgetel Franchise Advisory Council and franchisees, is
intended to help expand the Company's customer base, increase revenue per
available room (RevPAR) and increase development opportunities.
Targeted at the business traveler, Budgetel Inns feature an
upscale, contemporary exterior appearance, are generally located in high
traffic commercial areas in close proximity to interstate highway exits
and major thoroughfares and vary in size between 60 and 150 rooms.
The Company believes that providing amenities not typically
associated with limited-service facilities distinguishes Budgetel Inns
from many of its competitors. These amenities include executive conference
centers, room-delivered complimentary continental breakfasts, king-sized
beds, free local telephone calls, incoming fax transmissions, non-smoking
rooms, in-room coffee makers, remote control cable televisions, extra-long
telephone cords and large working desks. Additional amenities, including
voice mail, hair dryers, irons and ironing boards and complimentary copies
of USA Today are being introduced in conjunction with the Baymont name
change. To enhance customer security, all Budgetel Inns feature "card
key" room locking systems and provide well-lighted parking areas and all-
night front desk staffing. The interior of each Budgetel Inn is
refurbished in accordance with a strict periodic schedule.
Budgetel Inns has a national franchise program and has increased
its emphasis on opening more franchised Inns. Support offices in Atlanta,
Chicago and Dallas and a service office in Florida are intended to help
support expansion of the Budgetel Inn franchise. Franchisees pay an
initial franchise fee and annual marketing assessments, reservation system
assessments and royalty fees based on room revenues. The Company is
qualified to sell, and anticipates ultimately selling, franchises in all
50 states.
During fiscal 1998, the Company tested a new Inn and Suites
concept, which combines two-room suites along with traditional rooms at
the same facility. Due to positive results of four test sites in diverse
markets throughout the country, the Company currently plans to convert the
majority of its Company-owned properties to Baymont Inns and Suites. All
new Inns and Suites properties will feature lobby breakfasts, swimming
pools, 25-inch in-room televisions and fitness facilities.
Fiscal 1998 was the first full year the Company offered travel
agent commissions for all of its Budgetel Inns. The Company's "Pay-In-A-
Day" program benefits travel agents by issuing commission checks within 24
hours of the guest's check-out.
Woodfield Suites
The Company operates five mid-priced, all-suite hotels under the
name "Woodfield Suites." In addition to opening a Madison, Wisconsin
facility in early fiscal 1998, the Company has started construction of two
new Company-owned properties, one in Bannockburn (suburban Chicago),
Illinois, and another near the River Walk in San Antonio, Texas, which are
scheduled to open late in fiscal 1999. The San Antonio property will be
the prototype for future new construction.
Woodfield Suites offers all of its guests the use of a
centrally-located swimming pool, whirlpool and game room. Most suites
have a bedroom and separate living room and feature an extra-length bed,
sleeper sofa for additional guests, microwave, refrigerator, wet bar,
television and hair dryer. Some suites also have a kitchenette. All
guests receive a complimentary continental breakfast and are invited to a
complimentary cocktail hour. Meeting rooms and two-line telephones
equipped with dataports in every suite enhance Woodfield Suites' appeal
for business travelers.
Hotels and Resorts Operations
The Pfister Hotel
The Company owns and operates the Pfister Hotel in downtown
Milwaukee. The Pfister Hotel, a full service, luxury hotel, has 307 rooms
(including 80 luxury suites), three restaurants, two cocktail lounges, a
night club, an indoor swimming pool, an exercise facility and a 275-car
parking ramp. The Pfister has 20,000 square feet of banquet and
convention facilities. Banquet and meeting rooms accommodate up to 3,000
persons and the hotel features two large ballrooms, including one of the
largest ballrooms in the Milwaukee metropolitan area, with banquet seating
for 1,200 people. A portion of the Pfister's first-floor space is leased
for use by retail tenants. In fiscal 1998, the Pfister Hotel earned its
22nd consecutive four-diamond award from the American Automobile
Association. The Pfister is also a member of Preferred Hotels and Resorts
Worldwide Association, an organization of independent luxury hotels and
resorts, and the Association of Historic Hotels of America. During fiscal
1998, plans were finalized to create a full-service health club and a new
cocktail lounge on the top floor of the hotel, which will replace the
existing night club.
The Milwaukee Hilton
The Company owns and operates the 500-room Milwaukee Hilton.
All 500 guest rooms, bathrooms, public areas and a significant portion of
meeting space were remodeled in 1995. The Hilton franchise affiliation
has benefitted the Milwaukee Hilton through the Hilton's international
centralized reservation and marketing system, advertising cooperatives and
frequent stay programs. During fiscal 1999, the Company expects to begin
construction on a 250-room addition. The addition will include meeting
rooms, a family water park fun center and a skywalk to the Midwest Express
Center convention facility.
The Grand Geneva Resort & Spa
The Grand Geneva Resort & Spa in Lake Geneva, Wisconsin is a
full-facility destination resort located on 1,300 acres. The largest
convention resort in Wisconsin includes 355 guest rooms, 50,000 square
feet of banquet, meeting and exhibit space, three speciality restaurants,
two cocktail lounges, two championship golf courses, several ski-hills,
four indoor and five outdoor tennis courts, three swimming pools, a spa
and fitness complex, horse stables and an on-site airport. The Company
has plans underway for the development of a 100-unit vacation ownership
complex.
Miramonte Resort
The Miramonte Resort in Indian Wells, California, a boutique
luxury resort located on 11 landscaped acres, opened in January 1998
following an extensive renovation. The resort includes 14 two-story
Tuscan style buildings housing 226 guest rooms, one restaurant, one lounge
and 9,500 square feet of banquet, meeting and exhibit space, including a
5,000 square foot grand ballroom. Additionally, there is a fully equipped
fitness center and two outdoor swimming pools, each with an adjacent
jacuzzi spa and sauna. New amenities include outdoor meeting facilities,
a golf concierge and Rolls Royce limousine service.
Operated and Managed Hotels
The Company operates the Crowne Plaza-Northstar Hotel in
Minneapolis, Minnesota. The Crowne Plaza - Northstar Hotel is located in
downtown Minneapolis and has 226 rooms, 13 meeting rooms, 6,370 square
feet of ballroom and convention space, one restaurant, one cocktail lounge
and an exercise facility.
The Company manages the Mead Inn in Wisconsin Rapids, Wisconsin.
The Mead Inn has 154 guest rooms, 11 meeting rooms totaling 8,180 square
feet of meeting space, two cocktail lounges, two restaurants and an indoor
pool with a sauna and whirlpool. During fiscal 1998, the Company provided
planning and technical assistance for construction of a new 89-room tower
and expanded conference and health club facilities.
The Company manages Beverly Garland's Holiday Inn in North
Hollywood, California. The Beverly Garland has 255 rooms, including 12
suites, meeting space for up to 600, including an amphitheater and
ballroom, and an outdoor swimming pool and lighted tennis courts. The
mission-style hotel is located on seven acres near Universal Studios.
During fiscal 1998, the Company entered into a management
contract to operate the Mission Point Resort on Mackinac Island, Michigan.
The Mission Point Resort is a seasonal property and has 239 rooms, a 3,000
square foot health club and fitness center, three restaurants, tennis
courts, a swimming pool and a 575-seat theatre.
New Developments
After the end of fiscal 1998, the Company announced plans for
new hotels in Madison, Wisconsin and Chicago, Illinois. The Madison
Hilton, which is a public/private endeavor with the City of Madison, is
anticipated to be a 222-room Company-owned hotel located adjacent to the
new Monona Terrace Convention Center and is scheduled to open in 2000.
The 250-room downtown Chicago luxury hotel is currently planned to be
developed and managed by the Company and will feature 10,000 square feet
of meeting space, a fitness center and roof garden.
Theatre Operations
The Company operates 46 movie theatre locations with an
aggregate of 361 screens in Wisconsin, Illinois, Minnesota and Ohio for an
average of 7.8 screens per location, compared to an average of 7.4 screens
per location at the end of fiscal 1997 and 6.1 at the end of fiscal 1996.
The Company's facilities include 44 multi-screen complexes and two single-
screen theatres. The theatre division's long-term growth strategy is to
focus on multi-screen theatres having between 12 and 20 screens which
typically vary in seating capacity from 150 to 450 seats per screen.
Multi-screen theatres allow the Company to offer a more diversified
selection of films to attract additional customers, exhibit movies in
larger or smaller auditoriums within the same theatre depending on the
popularity of the movie and benefit from the economies of having common
box office, concession, projection and lobby facilities. Most of the
Company's movie theatres feature exclusively first-run films.
The Company added 66 new screens during fiscal 1998, including a
new 12-plex in Menomonee Falls, Wisconsin and a 16-screen theatre in
Pickerington (Columbus), Ohio. During the final weeks of fiscal 1998, the
Company also completed the purchase of five suburban Minneapolis/St. Paul,
Minnesota theatres with a total of 38 screens (32 first-run and six budget
screens). Upon opening its new location in Menomonee Falls, the Company
converted an existing five-screen complex in that city into a budget-
oriented theatre. As of May 28, 1998, the Company operated 329 first-run
screens and 32 budget-oriented screens. The Company plans on opening up
to 66 additional new screens in fiscal 1999.
The results of the Company's movie theatre business and the
motion picture industry in general are largely dependent upon the box
office appeal and marketing of available first-run films. Movie
production has been stimulated by additional demand from ancillary markets
such as home video, pay-per-view and cable television, as well as
increased demand from foreign film markets. The annual number of first-
run film releases has more than doubled since the late 1970s. Fiscal 1998
featured such box office hits as Titanic, Men in Black, Good Will Hunting,
As Good as It Gets, Tomorrow Never Dies, Lost World, My Best Friend's
Wedding, Batman & Robin and Air Force One.
The Company obtains its films from the national motion picture
production and distribution companies and is not dependent on any single
motion picture supplier. Booking, advertising, refreshment purchases and
promotion are handled centrally by an administrative staff.
The Company strives to provide its movie patrons with high-
quality picture and sound presentation in clean, comfortable, attractive
and contemporary theatre environments. Substantially all of the Company's
movie theatre complexes feature 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; loge seats; cup-holder chair-arms; and computer-
controlled heating, air conditioning and ventilation. Computerized box
offices permit all of the Company's movie theatres to sell tickets in
advance. Most of the Company's theatres are accessible to persons with
disabilities and provide wireless headphones for hearing-impaired
moviegoers. Other amenities at certain theatres include THX auditoriums,
which allow customers to hear the softest and loudest sounds, and touch-
screen, computerized, self-service ticket kiosks, which simplify advance
ticket purchases. The Company also operates an exclusive customer
information telephone system in Milwaukee and Madison, allowing customers
to call for information regarding the locations, times and titles of
movies being shown by the Company throughout each metropolitan area. The
Company is also testing Tele-ticketing, a new service that enables
moviegoers to reserve seats over the telephone using a credit card, at
three locations.
The Company has enhanced its offerings of amenities at certain
theatres by introducing stadium seating, a tiered seating system that
permits unobstructed viewing. The Company is now installing stadium
seating in all of its new theatres and is continuing an extensive program
to add stadium seating to a majority of its existing screens by the end of
fiscal 2000. The Company also intends to add two new large screen IMAX/R/
2D/3D theatres, the first scheduled to open in fall of 1998 in Columbus,
Ohio, and the second in 1999 in Addison (suburban Chicago), Illinois.
The Company sells food and beverage concessions at all of its
movie theatres. The Company believes that a wide variety of food and
beverage items, properly merchandised, increases concession revenue per
patron. Although popcorn still remains the traditional favorite with
moviegoers, the Company continues to upgrade its available concessions by
offering a wide range of choices. For example, some of the Company's
theatres offer hot dogs, pizza, ice cream, pretzel bites, frozen yogurt,
coffee, mineral water and juices.
In early fiscal 1997, the Company opened its first family
entertainment center, Funset Boulevard, adjacent to its 11-screen movie
theatre in Appleton, Wisconsin. Funset Boulevard features a 40,000 square
foot Hollywood-themed indoor amusement facility, including a restaurant,
party rooms, a laser tag center, virtual reality games, a miniature golf
course and an arcade.
Restaurant Operations
The Company has non-exclusive franchise rights to operate KFC
restaurants in the Milwaukee metropolitan area and in northeast Wisconsin.
The Company has operated KFC restaurants for 38 years and currently
operates 30 KFC restaurants and one KFC/Taco Bell 2-in-1 restaurant. The
Company is the largest operator of KFC restaurants in Wisconsin, based on
the number of facilities operated. The restaurants feature Kentucky Fried
Chicken and other franchisor-authorized food items.
Virtually all of the Company's KFC restaurants feature inside
seating for approximately 40 customers, drive-thru windows and updated
electronic equipment to better facilitate food preparation and order
processing. Fourteen locations in the Fox Valley and Milwaukee
metropolitan areas offer home delivery.
The Company's KFC locations operate under individual franchise
agreements, all of which were renewed in early fiscal 1998 for a term of
20 years. Franchise royalties approximate 4% of net sales and, in
addition, an initial flat fee of $20,000 is payable for each new KFC
restaurant.
The KFC franchisor specifies certain product requirements and
provides for certain approved suppliers of products and supplies in order
to maintain quality standards.
The Company is exploring various expansion and acquisition
opportunities for its KFC operations. Early in fiscal 1998, the Company
opened its first combined two-in-one KFC and Taco Bell location in
Milwaukee, Wisconsin. Additional two-in-one locations are under
consideration, with at least two additional two-in-one conversions planned
for fiscal 1999.
Competition
In each of its businesses the Company experiences intense
competition from national and/or regional chain and franchise operations,
some of which have substantially greater financial and marketing resources
than the Company. Most of the Company's facilities are located in close
proximity to other facilities which compete directly with those of the
Company.
The Company's Budgetel Inns compete with such national limited-
service lodging chains as Days Inn, Hampton Inn (owned by The Promus
Companies Incorporated), Fairfield Inn (owned by Marriott Corporation),
Red Roof Inn, La Quinta Inn, Comfort Inn and others, as well as a large
number of regional and local chains. The Company's Woodfield Suites
compete with such national chains as Embassy Suites, Comfort Suites,
AmeriSuites and Courtyard by Marriott, as well as other regional and local
all-suite facilities.
The Company's hotels and resorts compete with the hotels and
resorts operated by Hyatt Corporation, Marriott Corporation, Ramada Inns,
Holiday Inns and Wyndham Hotels, along with other regional and local
hotels and resorts.
In the restaurant business, the Company's KFC restaurants
compete locally with Hardee's, Boston Market, Popeye's and similar
national, as well as regional, fast food chains and individual restaurants
offering chicken.
The Company's movie theatres compete with large national movie
theatre operators, such as American Multi-Cinema, Cinemark, Regal Cinemas,
Loews/Cineplex and Carmike Cinemas, as well as with a wide array of
smaller first-run and discount exhibitors. Although movie exhibitors also
generally compete with the home video, pay-per-view and cable television
markets, the Company believes that such ancillary markets have assisted
the growth of the movie theatre industry by encouraging the production of
first-run movies released for initial movie theatre exhibition, which
establishes the demand for such movies in these ancillary markets.
The Company believes that the principal factors of competition
in each of its businesses, in varying degrees, are the price and quality
of its product, quality and location of its facilities, and customer
service. The Company believes that it is well positioned to compete on the
basis of these factors.
Seasonality
Historically, the Company's first and fourth fiscal quarters
have produced the strongest operating results, since such periods coincide
with the typical summer seasonality of the movie theatre industry and the
spring and summer strength of the travel and food service aspects of the
Company's business. In addition, the Company's historical method of
reporting on a 16 or 17-week fourth quarter has always contributed to the
larger results in such quarter.
Research and Development
Research and development expenditures for the Company are not
material.
Environmental Regulation
The Company does not expect federal, state or local
environmental legislation to have a material effect on the Company's
capital expenditures, earnings or competitive position. However, the
Company's activities in acquiring and selling real estate for business
development purposes have been complicated by the continued emphasis
placed by Company personnel 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 the Company's
various businesses.
Employees
As of the end of fiscal 1998, the Company had approximately
7,000 employees, a majority of whom were employed on a part-time basis. A
majority of the Company's hotel employees in Milwaukee, Wisconsin are
covered by collective bargaining agreements which expire in June 2002. A
number of the Company's hotel employees in Minneapolis, Minnesota are
covered by collective bargaining agreements which expire in April 2000.
Relations with employees have been satisfactory and there have been no
work stoppages due to labor disputes.
Item 2. Properties.
The Company owns a substantial portion of its facilities,
including the Pfister Hotel, the Milwaukee Hilton, the Grand Geneva Resort
and Spa and the Miramonte Resort, all of the Company-owned Budgetel Inns
and Woodfield Suites, the majority of its theatres and restaurants, and
leases the remainder. The Company also manages four hotel properties for
third parties. Additionally, the Company owns properties acquired for the
future construction and operation of new Company operating facilities.
Some of its properties are leased from entities owned by principal
shareholders of the Company. All of the Company's properties are suitably
maintained and adequately utilized to cover the respective business
segment served.
The operating properties owned, leased and franchised by the
Company as of May 28, 1998 are summarized in the following table:
[Enlarge/Download Table]
Leased
Total Number Leased From from Managed for Managed for
of Facilities Unrelated Related Related Unrelated Owned By
Business Segment in Operation Owned(1) Parties Parties Parties Parties Franchisees(2)
Restaurants:
KFC 31 30 1 0 0 0 0
Movie Theatres: 46 33 12 1 0 0 0
Hotels and Resorts:
Hotels 5 2 0 0 0 3 0
Resorts 3 2 0 0 0 1 0
Limited-Service Lodging:
Budgetel 156 96 0 0 9 1 50
Woodfield Suites 5 5 0 0 0 0 0
----- ----- ----- ----- ----- ----- -----
TOTALS 246 168 13 1 9 5 50
===== ===== ===== ===== ===== ===== =====
_______________
(1) Two of the KFC restaurants, two of the movie theatres and two of the
Budgetel Inns are on land leased from unrelated parties under long-
term leases. One of the Budgetel Inns is located on land leased from
related parties. The Company's partnership interests in nine
Budgetel Inns that it manages and one movie theatre that it leases
are not included in this column.
(2) The Company manages one Budgetel Inn for a franchisee.
Certain of the above individual properties or facilities are
subject to purchase money or construction mortgages or commercial lease
financing arrangements; none of these encumbrances are considered in the
aggregate to be material to the Company.
The terms of over 90% of the Company's operating property leases
expire on various dates after 1999 (assuming exercise by the Company of
all renewal and extension options).
Item 3. Legal Proceedings.
The Company does not believe that any pending legal proceeding
involving the Company is material to its business. No legal proceeding
required to be disclosed under this item was terminated during the fourth
quarter of the Company's 1998 fiscal year.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's
shareholders during the fourth quarter of the Company's 1998 fiscal year.
EXECUTIVE OFFICERS OF COMPANY
Each of the current executive officers of the Company is
identified below together with information about each such officer's age,
current position with the Company and employment history for at least the
past five years:
Name Position Age
Stephen H. Marcus Chairman of the Board, President
and Chief Executive Officer 63
Bruce J. Olson Group Vice President 48
H. Fred Delmenhorst Vice President-Human Resources 57
Thomas F. Kissinger General Counsel and Secretary 38
Douglas A. Neis Chief Financial Officer and Treasurer 39
Stephen H. Marcus has been Chairman of the Board of the Company
since December 1991 and President and Chief Executive Officer since
December 1988. Mr. Marcus has been employed by the Company for 37 years.
Bruce J. Olson has been employed in his present position with
the Company since July 1991. He was elected to serve on the Company's
Board of Directors in April 1996. Mr. Olson previously served as Vice
President-Administration and Planning for the Company from September 1987
until July 1991 and as Executive Vice President and Chief Operating
Officer of Marcus Theatres Corporation from August 1978 until October
1988, when he was appointed President of that corporation. Mr. Olson
joined the Company in 1974.
H. Fred Delmenhorst has been the Vice President-Human Resources
since he joined the Company in December 1984.
Thomas F. Kissinger joined the Company in August 1993 as
Secretary and Director of Legal Affairs and in August 1995 was promoted to
General Counsel and Secretary. Prior thereto, Mr. Kissinger was
associated with the law firm of Foley & Lardner for five years.
Douglas A. Neis joined the Company in February 1986 as
Controller of the Marcus Theatres division. In November 1987, Mr. Neis
was promoted to Controller of Marcus Restaurants. In July 1991, he was
appointed Vice President of Planning and Administration for Marcus
Restaurants. In September 1994, Mr. Neis was also named Director of
Technology for the Company and in September 1995 he was elected Corporate
Controller for the Company. In September 1996, Mr. Neis was promoted to
Chief Financial Officer and Treasurer of the Company.
The executive officers of the Company are generally elected
annually by the 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
Item 5. Market for the Company's Common Equity and Related Shareholder
Matters.
The information required by this item is incorporated by
reference to the information pertaining thereto included on Page 34 of the
Company's 1998 Annual Report to Shareholders.
Item 6. Selected Financial Data.
The information required by this item is incorporated by
reference to the information pertaining thereto included on Page 33 of the
Company's 1998 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information required by this item is incorporated by
reference to the information pertaining thereto included on Pages 14
through 21 of the Company's 1998 Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is incorporated by
reference to the information pertaining thereto included on Pages 22
through 32 and 34 of the Company's 1998 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Company.
The information required by this item with respect to directors
is incorporated herein by reference to the information pertaining thereto
set forth under the caption entitled "Election of Directors" in the
definitive Proxy Statement for the Company's 1998 Annual Meeting of
Shareholders scheduled to be held September 28, 1998 (the "Proxy
Statement"). The required information with respect to executive officers
appears at the end of Part I of this Form 10-K.
Item 11. Executive Compensation.
The information required by this item is incorporated herein by
reference to the information pertaining thereto set forth under the
caption entitled "Executive Compensation" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated herein by
reference to the information pertaining thereto set forth under the
caption entitled "Stock Ownership of Management and Others" in the Proxy
Statement.
Item 13. Certain Relationships and Related Transactions.
The information required by this item, to the extent applicable,
is incorporated herein by reference to the information pertaining thereto
set forth under the caption entitled "Certain Transactions" in the Proxy
Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1) Financial Statements.
The consolidated financial statements of the Company as of May
28, 1998 and May 29, 1997 and for each of the three years in the period
ended May 28, 1998, together with the report thereon of Ernst & Young LLP,
dated July 22, 1998, appear on Pages 22 through 32 of the Company's 1998
Annual Report to Shareholders, and are incorporated herein by reference.
(a)(2) Financial Statement Schedules.
All schedules are omitted because they are inapplicable, not
required under the instructions or the financial information is included
in the consolidated financial statements or notes thereto.
(a)(3) Exhibits.
The exhibits filed herewith or incorporated by reference herein
are set forth on the attached Exhibit Index.*
(b) Reports on Form 8-K.
The Company did not file a Form 8-K with the Securities and
Exchange Commission during the fourth quarter of fiscal 1998.
__________________
* Exhibits to this Form 10-K will be furnished to shareholders upon
advance payment of a fee of $0.20 per page, plus mailing expenses.
Requests for copies should be addressed to Thomas F. Kissinger,
General Counsel and Secretary, The Marcus Corporation, 250 East
Wisconsin Avenue, Suite 1700, Milwaukee, Wisconsin 53202.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
THE MARCUS CORPORATION
Date: August 25, 1998 By: /s/ Stephen H. Marcus
Stephen H. Marcus,
Chairman of the Board and
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Company and in the capacities as of the date indicated above.
By: /s/ Stephen H. Marcus By: /s/ Daniel F. McKeithan, Jr.
Stephen H. Marcus, Chairman Daniel F. McKeithan, Jr.,
of the Board and President Director
(Chief Executive Officer
By: /s/ Douglas A. Neis By: /s/ Diane Marcus Gershowitz
Douglas A. Neis, Treasurer Diane Marcus Gershowitz,
and Controller (Chief Director
Financial and Accounting
Officer)
By: /s/ Bruce J. Olson By: /s/ Timothy E. Hoeksema
Bruce J. Olson, Director Timothy E. Hoeksema, Director
By: /s/ Philip L. Milstein By: /s/ Allan H. Selig
Philip L. Milstein, Director Allan H. Selig, Director
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EXHIBIT INDEX
3.1 Restated Articles of Incorporation. [Incorporated by reference to
Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended November 13, 1997.]
3.2* Bylaws, as amended as of September 28, 1995. [Incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the fiscal year ended May 30, 1996.]
4.1 Senior Note Purchase Agreement dated May 31, 1990, between the
Company and The Northwestern Mutual Life Insurance Company.
[Incorporated by reference to Exhibit 4 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1990.]
4.2 The Marcus Corporation Note Purchase Agreement dated October 25,
1996. [Incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
November 14, 1996.]
4.3 First Supplement to Note Purchase Agreements dated May 15, 1998.
4.4 Other than as set forth in Exhibits 4.1, 4.2 and 4.3, the Company
has numerous instruments which define the rights of holders of
long-term debt. These instruments, primarily promissory notes,
have arisen from the purchase of operating properties in the
ordinary course of business. These instruments are not being filed
with this Annual Report on Form 10-K in reliance upon Item
601(b)(4)(iii) of Regulation S-K. Copies of these instruments will
be furnished to the Securities and Exchange Commission upon
request.
10.1 The Company is the guarantor and/or obligor under various loan
agreements in connection with operating properties (primarily
Budgetel Inns) which were financed through the issuance of
industrial development bonds. These loan agreements and the
additional documentation relating to these projects are not being
filed with this Annual Report on Form 10-K in reliance upon Item
601(b)(4)(iii) of Regulation S-K. Copies of these documents will
be furnished to the Securities and Exchange Commission upon
request.
10.2 Comprehensive Image Enhancement Agreement dated October 12, 1988,
between the Company and KFC Corporation. [Incorporated by
reference to Exhibit 10.11 to the Company's Annual Report on Form
10-K for the fiscal year ended May 25, 1989.]
10.3 Form of individual Kentucky Fried Chicken franchise agreement
between the Company and KFC Corporation. [Incorporated by
reference to Exhibit 10.3 to the Company's Annual Report on Form
10-K for the fiscal year ended May 29, 1997.]
10.4* The Marcus Corporation 1995 Equity Incentive Plan, as amended.
10.5* The Marcus Corporation 1994 Nonemployee Director Stock Option
Plan. [Incorporated by reference to Exhibit A to the Company's
1994 Proxy Statement.]
13 The Company's 1998 Annual Report to Shareholders, to the extent
incorporated by reference herein.
21 Subsidiaries of the Company as of May 28, 1998.
23.1 Consent of Ernst & Young LLP.
27.1 Financial Data Schedule for the fiscal year ended May 28, 1998.
27.2 Restated Financial Data Schedule for the fiscal year ended May 29,
1997.
27.3 Restated Financial Data Schedule for the nine months ended
February 6, 1997.
27.4 Restated Financial Data Schedule for the fiscal year ended May 30,
1996.
99 Proxy Statement for the 1998 Annual Meeting of Shareholders. (The
Proxy Statement for the 1998 Annual Meeting of Shareholders will
be filed with the Securities and Exchange Commission under
Regulation 14A within 120 days after the end of the Company's
fiscal year. Except to the extent specifically incorporated by
reference, the Proxy Statement for the 1998 Annual Meeting of
Shareholders shall not be deemed to be filed with the Securities
and Exchange Commission as part of this Annual Report on Form 10-
K.)
__________
* This exhibit is a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this form
pursuant to Item 14(c) of Form 10-K.
Dates Referenced Herein and Documents Incorporated by Reference
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