Marcus Theatres Citiplace

Overview:

With this company, it’s either showtime or bedtime. The Marcus Corporation operates movie theaters and hotels primarily in the Midwest. It owns or operates more than 55 theaters boastingsome 695 screens in Iowa, Illinois, Minnesota, Nebraska, North Dakota, Ohio, and Wisconsin. Its Marcus Hotels subsidiary owns and operates nearly 10 hotels and resorts in Illinois, Missouri, Oklahoma, and Wisconsin; it also manages 10 hotels for third parties in a handful of US states. Other holdings also include Funset Boulevard, a family entertainment center adjacent to one of its Wisconsin theatres. Chairman Stephen Marcus and his sister, Diane Marcus Gershowitz, together control more than 75% of the firm.

Operations

The Marcus Corporation owns and/or manages more than 4,700 hotel rooms. Properties include the Pfister Hotel in downtown Milwaukee, Wisconsin; the Four Points by Sheraton Chicago Downtown/Magnificent Mile; and the Hotel Phillips in Kansas City, Missouri.

The company offers digital 3D systems at more than 35 of its movie theater properties. About three-fourths of its theater portfolio are megaplex theaters (12 or more screens). Marcus Corporation also offers its Big Screen Bistro in-theater dining concept at two locations.

Geographic Reach

The theater division has operations in Wisconsin, Illinois, Ohio, Minnesota, Iowa, North Dakota, and Nebraska and a family entertainment center in Wisconsin. The hotels and resorts business has owned and operated hotels and resorts in Wisconsin, Missouri, Illinois and Oklahoma. It manages properties for third parties in Wisconsin, Minnesota, Ohio, Texas, Missouri, Nevada, and California.

Strategy

Marcus is working on upgrades at its theater facilities. It is adding special 70-foot-wide screens (called UltraScreens) to some locations, and rolling out digital 3D cinema technology at its theaters. It is also introducing new food and beverage offerings at its theaters. In 2012, Marcus opened its second Zaffiro’s Pizzeria and Bar, a full-service restaurant, at its St. Cloud, Minnesota theater, and its third Zaffiro’s at its New Berlin, Wisconsin theater.

Mergers and Acquisitions

In 2012 the company’s Marcus Hotels division acquired the Westin Atlanta Perimeter North hotel through a joint venture it formed with Carey Watermark Investors and The Arden Group. The 372-room hotel was purchased for $57 million from an affiliate of DiamondRock Hospitality Company. The joint venture’s goal is to fund renovations that will position the property as a high-end hotel in the North Atlanta market.

Also in 2012 Marcus acquired a former OMNIMAX theatrer in the Duluth Entertainment Convention Center in Duluth, Minnesota. The previous year the company expanded its theater operations when it purchased a 16-screen theatre in Appleton, Wisconsin, from Regal Entertainment Group.

Financial Analysis

The company’s revenue was increased by 10% in 2012 as compared to 2011. Revenues at the theatre division increased due to a stronger slate of movies that year, as well as a significant increase in average concession sales per person. Revenues at the hotels and resorts division were favorably impacted by higher occupancy rates and average daily rates during fiscal 2012.

Net income increased by 68% in 2012 versus 2011. The growth was due to higher revenues combined with a decrease in interest expenses attributed to reduced borrowings during 2012.

The company’s cash flow increased by $7.9 million in 2012 over 2011, thanks to the favorable timing of the payment of accrued compensation and deferred compensation.

Company Background

CEO Gregory Marcus is the third generation of the Marcus family to run the company and is the son of Stephen Marcus, who serves as company chairman. (Stephen is the son of family patriarch Ben Marcus, who founded the company in the midst of the Great Depression, opening his first movie theater in 1935. The Polish immigrant opened his first hotel in 1960 and later bought the historic Pfister Hotel out of bankruptcy.)