UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended~~September 28, 2017~~March 29, 2018

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number1-12604

THE MARCUS CORPORATION

(Exact name of registrant as specified in its charter)

Wisconsin		39-1139844
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 East Wisconsin Avenue, Suite 1900 Milwaukee, Wisconsin		53202-4125
(Address of principal executive offices)		(Zip Code)

~~Registrant’s telephone number, including area code:(414) 905-1000~~

Registrant’s telephone number, including area code: (414) 905-1000

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.

Yesx

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yesx

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 (Check One).

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨
(Do not check if a smaller reporting company)		~~Smaller reporting company~~ ¨
		Emerging growth company	¨

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).

Yes¨

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~~NOVEMBER 3~~may 4, ~~2017~~2018 – ~~19,242,578~~19,467,087

CLASS B COMMON STOCK OUTSTANDING AT~~NOVEMBER 3~~May 4, ~~2017 –8,596,301~~2018 – 8,523,485

THE MARCUS CORPORATION

INDEX

		Page

PART I – FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements:

	Consolidated Balance Sheets ~~(September 28, 2017~~ (March 29, 2018 and December ~~29, 2016)~~28, 2017)	3

	Consolidated Statements of Earnings ~~(13 and 39~~ (13 weeks ended ~~September 28, 2017~~March 29, 2018 and ~~September 29, 2016)~~March 30, 2017)	5

	Consolidated Statements of Comprehensive Income ~~(13 and 39~~ (13 weeks ended ~~September 28, 2017~~March 29, 2018 and ~~September 29, 2016)~~March 30, 2017)	6

	Consolidated Statements of Cash Flows ~~(39~~ (13 weeks ended ~~September 28, 2017~~March 29, 2018 and ~~September 29, 2016)~~March 30, 2017)	7

	Condensed Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1822

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3336

Item 4.	Controls and Procedures	3336

PART II – OTHER INFORMATION

Item 1A.	Risk Factors	3336

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3437

Item 4.	Mine Safety Disclosures	3437

Item 6.	Exhibits	3537

	Signatures	S-1

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

THE MARCUS CORPORATION

Consolidated Balance Sheets

(in thousands, except share and per share data)	September 28, 2017		December 29, 2016		March 29, 2018		December 28, 2017

ASSETS
Current assets:
Cash and cash equivalents	$	6,566	$	3,239	$	8,211	$	16,248
Restricted cash		7,904		5,466		5,195		4,499
Accounts and notes receivable, net of reserves of $170 and $204, respectively		24,269		14,761
Accounts and notes receivable, net of reserves of $213 and $161, respectively						19,157		27,230
Refundable income taxes		10,358		1,672		11,721		15,335
Other current assets		13,361		11,005		13,171		13,409
Total current assets		62,458		36,143		57,455		76,721

Property and equipment:
Land and improvements		138,464		134,306		146,887		146,887
Buildings and improvements		735,979		699,828		760,777		759,166
Leasehold improvements		86,811		80,522		93,686		93,451
Furniture, fixtures and equipment		339,984		312,334		352,956		351,879
Construction in progress		28,402		19,698		11,202		5,269
Total property and equipment		1,329,640		1,246,688		1,365,508		1,356,652
Less accumulated depreciation and amortization		491,446		457,490		512,067		496,588
Net property and equipment		838,194		789,198		853,441		860,064

Other assets:
Investments in joint ventures		4,951		6,096		4,408		4,239
Goodwill		43,527		43,735		43,457		43,492
Other		34,730		36,094		33,295		33,281
Total other assets		83,208		85,925		81,160		81,012

TOTAL ASSETS	$	983,860	$	911,266	$	992,056	$	1,017,797

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Balance Sheets

(in thousands, except share and per share data)	September 28, 2017			December 29, 2016			March 29, 2018			December 28, 2017

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	40,149		$	31,206		$	30,818		$	51,541
Taxes other than income taxes		17,547			17,261			17,271			19,638
Accrued compensation		15,971			17,007			13,642			15,627
Other accrued liabilities		39,485			46,561			49,239			53,291
Current portion of capital lease obligations		6,951			6,598			7,405			7,570
Current maturities of long-term debt		11,923			12,040			12,199			12,016
Total current liabilities		132,026			130,673			130,574			159,683

Capital lease obligations		20,881			26,106			26,559			28,282

Long-term debt		317,797			271,343			290,494			289,813

Deferred income taxes		50,657			46,433			38,240			38,233

Deferred compensation and other		46,256			45,064			56,640			56,662

Equity:
Shareholders’ equity attributable to The Marcus Corporation
Preferred Stock, $1 par; authorized 1,000,000 shares; none issued		─			─			–			–
Common Stock, $1 par; authorized 50,000,000 shares; issued 22,593,212 shares at September 28, 2017 and 22,489,976 shares at December 29, 2016		22,593			22,490
Class B Common Stock, $1 par; authorized 33,000,000 shares; issued and outstanding 8,596,301 shares at September 28, 2017 and 8,699,540 shares at December 29, 2016		8,596			8,700
Common Stock, $1 par; authorized 50,000,000 shares; issued 22,664,028 shares at March 29, 2018 and 22,655,517 shares at December 28, 2017								22,664			22,656
Class B Common Stock, $1 par; authorized 33,000,000 shares; issued and outstanding 8,525,485 shares at March 29, 2018 and 8,533,996 shares at December 28, 2017								8,525			8,534
Capital in excess of par		60,908			58,584			62,555			61,452
Retained earnings		371,653			351,220			405,434			403,206
Accumulated other comprehensive loss		(4,919	)		(5,066	)		(7,444	)		(7,425	)
		458,831			435,928			491,734			488,423
Less cost of Common Stock in treasury (3,353,845 shares at September 28, 2017 and 3,517,951 shares at December 29, 2016)		(43,628	)		(45,816	)
Less cost of Common Stock in treasury (3,211,111 shares at March 29, 2018 and 3,335,745 shares at December 28, 2017)								(42,251	)		(43,399	)
Total shareholders' equity attributable to The Marcus Corporation		415,203			390,112			449,483			445,024
Noncontrolling interest		1,040			1,535			66			100
Total equity		416,243			391,647			449,549			445,124

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	983,860		$	911,266		$	992,056		$	1,017,797

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Earnings

(in thousands, except per share data)	September 28, 2017						September 29, 2016						13 Weeks Ended
	13 Weeks			39 Weeks			13 Weeks			39 Weeks			March 29, 2018			March 30, 2017
Revenues:
Theatre admissions	$	50,246		$	166,222		$	46,859		$	137,783		$	63,006		$	63,841
Rooms		32,785			82,844			32,609			81,984			20,671			20,934
Theatre concessions		33,290			109,365			30,260			88,644			41,413			40,896
Food and beverage		18,670			52,487			17,991			50,784			15,803			15,040
Other revenues		18,827			53,629			16,976			45,922			19,526			17,243
														160,419			157,954
Cost reimbursements														7,772			7,502
Total revenues		153,818			464,547			144,695			405,117			168,191			165,456

Costs and expenses:
Theatre operations		44,403			145,844			39,579			118,048			54,655			54,685
Rooms		10,658			30,117			10,608			30,409			9,501			9,198
Theatre concessions		9,567			30,666			8,611			24,440			11,961			11,118
Food and beverage		15,125			44,093			14,498			41,797			14,065			13,467
Advertising and marketing		6,296			17,880			5,540			16,033			5,114			5,562
Administrative		16,876			51,654			15,702			45,638			17,282			16,529
Depreciation and amortization		12,993			37,544			10,474			31,025			13,904			12,248
Rent		3,113			9,718			2,051			6,277			2,951			3,273
Property taxes		5,052			14,575			4,168			12,306			5,214			5,078
Other operating expenses		8,300			24,255			8,781			24,854			8,756			8,343
Reimbursed costs														7,772			7,502
Total costs and expenses		132,383			406,346			120,012			350,827			151,175			147,003

Operating income		21,435			58,201			24,683			54,290			17,016			18,453

Other income (expense):
Investment income		119			229			8			25
Investment income (loss)														(36	)		72
Interest expense		(3,367	)		(9,454	)		(2,127	)		(6,993	)		(3,309	)		(2,924	)
Gain (loss) on disposition of property, equipment and other assets		(449	)		(420	)		239			(478	)
Equity earnings (losses) from unconsolidated joint ventures, net		(12	)		75			161			270
Other expense														(496	)		(428	)
Loss on disposition of property, equipment and other assets														–			(399	)
Equity earnings from unconsolidated joint ventures, net														52			55
		(3,709	)		(9,570	)		(1,719	)		(7,176	)		(3,789	)		(3,624	)

Earnings before income taxes		17,726			48,631			22,964			47,114			13,227			14,829
Income taxes		6,908			18,571			8,712			18,236			3,421			5,712
Net earnings		10,818			30,060			14,252			28,878			9,806			9,117
Net loss attributable to noncontrolling interests		(160	)		(495	)		(120	)		(282	)		(15	)		(336	)
Net earnings attributable to The Marcus Corporation	$	10,978		$	30,555		$	14,372		$	29,160		$	9,821		$	9,453

Net earnings per share – basic:
Common Stock	$	0.41		$	1.14		$	0.54		$	1.09		$	0.36		$	0.35
Class B Common Stock	$	0.36		$	1.02		$	0.49		$	0.99		$	0.33		$	0.32

Net earnings per share – diluted:
Common Stock	$	0.39		$	1.08		$	0.51		$	1.05		$	0.35		$	0.33
Class B Common Stock	$	0.37		$	1.01		$	0.48		$	0.98		$	0.32		$	0.31

Dividends per share:
Common Stock	$	0.125		$	0.375		$	0.113		$	0.338		$	0.150		$	0.125
Class B Common Stock	$	0.114		$	0.341		$	0.102		$	0.307		$	0.136		$	0.114

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Comprehensive Income

(in thousands)	September 28, 2017						September 29, 2016						13 Weeks Ended
	13 Weeks			39 Weeks			13 Weeks			39 Weeks
													March 29, 2018			March 30, 2017
Net earnings	$	10,818		$	30,060		$	14,252		$	28,878		$	9,806		$	9,117

Other comprehensive income (loss), net of tax:
Change in unrealized gain on available for sale investments, net of tax benefit of $0, $9, $0 and $0, respectively		-			(14	)		-			-
Amortization of the net actuarial loss and prior service credit related to the pension, net of tax effect of $35, $106, $110 and $110, respectively		54			161			163			163
Fair market value adjustment of interest rate swap, net of tax benefit of $0, $0, $0 and $95, respectively		-			-			-			(143	)
Reclassification adjustment on interest rate swap included in interest expense, net of tax effect of $0, $0, $0 and $25, respectively		-			-			-			38
Reclassification adjustment related to interest rate swap de-designation, net of tax effect of $0, $0, $0 and $63, respectively		-			-			-			96

Other comprehensive income		54			147			163			154
Change in unrealized gain on available for sale investments, net of tax benefit of $0 and $9, respectively														–			(14	)

Amortization of the net actuarial loss and prior service credit related to the pension, net of tax effect of $41 and $35, respectively														114			54

Fair market value adjustment of interest rate swaps, net of tax benefit of $63 and $0, respectively														(170	)		–

Reclassification adjustment on interest rate swaps included in interest expense, net of tax effect of $10 and $0, respectively														26			–

Other comprehensive income (loss)														(30	)		40

Comprehensive income		10,872			30,207			14,415			29,032			9,776			9,157

Comprehensive loss attributable to noncontrolling interests		(160	)		(495	)		(120	)		(282	)		(15	)		(336	)

Comprehensive income attributable to The Marcus Corporation	$	11,032		$	30,702		$	14,535		$	29,314		$	9,791		$	9,493

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

Consolidated Statements of Cash Flows

	39 Weeks Ended						13 Weeks Ended
(in thousands)	September 28, 2017			September 29, 2016			March 29, 2018			March 30, 2017

OPERATING ACTIVITIES:
Net earnings	$	30,060		$	28,878		$	9,806		$	9,117
Adjustments to reconcile net earnings to net cash provided by operating activities:
Earnings on investments in joint ventures		(75	)		(270	)		(52	)		(55	)
Distributions from joint ventures		351			414			–			109
Loss on disposition of property, equipment and other assets		420			478			–			399
Amortization of favorable lease right		250			250			83			83
Depreciation and amortization		37,544			31,025			13,904			12,248
Amortization of debt issuance costs		209			226			73			68
Shared-based compensation		1,867			1,358			596			505
Deferred income taxes		4,231			6,461			54			1
Deferred compensation and other		1,682			526			(201	)		(440	)
Contribution of the Company’s stock to savings and profit-sharing plan		1,024			905			1,130			890
Changes in operating assets and liabilities:
Accounts and notes receivable		(7,896	)		(2,090	)		8,073			1,115
Other current assets		(2,220	)		(1,041	)		238			(456	)
Accounts payable		1			(6,592	)		(13,641	)		6,110
Income taxes		(8,686	)		(7,329	)		3,614			4,467
Taxes other than income taxes		286			(2,682	)		(2,367	)		(318	)
Accrued compensation		(1,036	)		3,147			(1,985	)		(3,889	)
Other accrued liabilities		(7,076	)		(8,823	)		(7,348	)		(4,070	)
Total adjustments		20,876			15,963			2,171			16,767
Net cash provided by operating activities		50,936			44,841			11,977			25,884

INVESTING ACTIVITIES:
Capital expenditures		(87,265	)		(58,084	)		(15,974	)		(22,229	)
Proceeds from disposals of property, equipment and other assets		4,558			594			23			9
Decrease (increase) in restricted cash		(2,438	)		12,479
Decrease in other assets		584			3,686
Sale of interest in joint venture		—			1,000
Decrease (increase) in other assets								(81	)		419
Contribution in joint venture								(117	)		–
Net cash used in investing activities		(84,561	)		(40,325	)		(16,149	)		(21,801	)

FINANCING ACTIVITIES:
Debt transactions:
Proceeds from borrowings on revolving credit facilities		254,000			250,188
Repayment of borrowings on revolving credit facilities		(236,500	)		(191,188	)
Proceeds from borrowings on revolving credit facility								49,000			79,000
Repayment of borrowings on revolving credit facility								(48,000	)		(114,000	)
Proceeds from borrowings on long-term debt		65,000			—			–			65,000
Principal payments on long-term debt		(35,894	)		(51,863	)		(173	)		(24,399	)
Debt issuance costs		(370	)		(491	)		–			(365	)
Repayments of capital lease obligations		(782	)		—
Principal payments on capital lease obligations								(432	)		(255	)
Equity transactions:
Treasury stock transactions, except for stock options		(463	)		(6,053	)		(404	)		52
Exercise of stock options		2,083			3,553			929			455
Dividends paid		(10,122	)		(9,016	)		(4,070	)		(3,366	)
Distributions to noncontrolling interest		—			(448	)		(19	)		–
Net cash provided by (used in) financing activities		36,952			(5,318	)		(3,169	)		2,122

Net increase (decrease) in cash and cash equivalents		3,327			(802	)
Cash and cash equivalents at beginning of period		3,239			6,672
Cash and cash equivalents at end of period	$	6,566		$	5,870
Net increase (decrease) in cash, cash equivalents and restricted cash								(7,341	)		6,205
Cash, cash equivalents and restricted cash at beginning of period								20,747			8,705
Cash, cash equivalents and restricted cash at end of period							$	13,406		$	14,910

Supplemental Information:
Interest paid, net of amounts capitalized	$	9,354		$	6,772		$	3,727		$	2,533
Income taxes paid		23,025			19,107
Income taxes paid (refunded)								(147	)		1,244
Change in accounts payable for additions to property and equipment		8,942			(1,930	)		(7,082	)		5,376

See accompanying condensed notes to consolidated financial statements.

THE MARCUS CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 13 ~~AND 39~~ WEEKS ENDED ~~SEPTEMBER 28, 2017~~MARCH 29, 2018

1. General

~~Accounting Policies~~ - Refer to the Company’s audited consolidated financial statements (including footnotes) for the fiscal year ended December 29, 2016, contained in the Company’s Annual Report on Form 10-K, for such year, for a description of the Company’s accounting policies.

Basis of Presentation -– The unaudited consolidated financial statements for the 13 ~~and 39~~ weeks ended ~~September 28,~~March 29, 2018 and March 30, 2017 ~~and September 29, 2016~~ have been prepared by the Company. In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary to present fairly the unaudited interim financial information at ~~September 28, 2017,~~March 29, 2018, and for all periods presented, have been made. The results of operations during the interim periods are not necessarily indicative of the results of operations for the entire year or other interim periods. However, the unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December ~~29, 2016.~~28, 2017.

~~Restricted Cash~~Immaterial Restatement of Prior Year Financial Statements – ~~Restricted cash consists~~Beginning in the fiscal 2018 first quarter, the Company began appropriately presenting cost reimbursements and reimbursed costs on a gross basis and presented two new line items in the consolidated statements of ~~bank accounts~~earnings. These cost reimbursements and reimbursed costs were previously reported on a net basis. Reimbursed costs primarily consist of payroll and related ~~to capital expenditure reserve funds, sinking funds, operating reserves and replacement reserves~~expenses at managed properties where the Company is the employer and may include ~~amounts held by~~certain operational and administrative costs as provided for in the Company's contracts with owners. These costs are reimbursed back to the Company. As these costs have no added markup, the revenue and related expense have no impact on operating income or net earnings. Cost reimbursements and reimbursed costs, which totaled $7,502,000 for the 13 weeks ended March 30, 2017, have been separately presented in the prior year statement of earnings to correct the prior year presentation. The Company believes this correction is immaterial to the consolidated financial statements.

Accounting Policies – Refer to the Company’s audited consolidated financial statements (including footnotes) for the fiscal year ended December 28, 2017, contained in the Company’s Annual Report on Form 10-K for such year, for a ~~qualified intermediary agent~~description of the Company’s accounting policies.

During the 13 weeks ended March 29, 2018, there were no significant changes made to the Company’s significant accounting policies other than the changes attributable to the adoption of the Financial Accounting Standards Board Accounting Standards Update No. 2014-09,Revenue from Contracts with Customers, which was adopted on December 29, 2017. These revenue recognition policy updates are applied prospectively in the Company’s financial statements from December 29, 2017 forward. Reported financial information for the historical comparable period was not revised and continues to be used for tax-deferred, like-kind exchange transactions. At September 28, 2017, approximately $3,057,000 of net sales proceeds were held with a qualified intermediary. Restricted cash is not considered cash and cash equivalents for purposes ofreported under the ~~statement of cash flows.~~accounting standards in effect during the historical periods.

Depreciation and Amortization -– Depreciation and amortization of property and equipment are provided using the straight-line method over the shorter of the estimated useful lives of the assets or any related lease terms. Depreciation expense totaled ~~$12,946,000~~$14,036,000 and ~~$37,368,000~~$12,172,000 for the 13 ~~and 39~~ weeks ended ~~September 28,~~March 29, 2018 and March 30, 2017, ~~respectively, and $10,537,000 and $31,214,000 for the 13 and 39 weeks ended September 29, 2016,~~ respectively.

Accumulated Other Comprehensive Loss – Accumulated other comprehensive loss presented in the accompanying consolidated balance sheets consists of the following, all presented net of tax:

Available for
Sale
Investments Pension
Obligation Accumulated
Other
Comprehensive
Loss

(in thousands)
Balance at December 29, 2016 $ 3 $ (5,069 ) $ (5,066 )
Change in unrealized gain on available for sale investments (14 ) - (14 )
Amortization of the net actuarial loss and prior service credit - 161 161
Net other comprehensive income (loss) (14 ) 161 147
Balance at September 28, 2017 $ (11 ) $ (4,908 ) $ (4,919 )
8

Swap
Agreements
Available
for Sale
Investments
Pension
Obligation
Accumulated
Other
Comprehensive
Loss

(in thousands)
Balance at December 31, 2015 $ 9 $ (11 ) $ (5,219 ) $ (5,221 )
Amortization of the net actuarial loss and prior service credit - - 163 163
Other comprehensive loss before reclassifications (143 ) - - (143 )
Amounts reclassified from accumulated other comprehensive loss⁽¹⁾ 134 - - 134
Net other comprehensive income (loss) (9 ) - 163 154
Balance at September 29, 2016 $ - $ (11 ) $ (5,056 ) $ (5,067 )

⁽¹⁾ ~~Amounts are included in interest expense in the consolidated statements of earnings.~~
Interest
Rate
Swaps Available
for Sale
Investments Pension
Obligation Accumulated
Other
Comprehensive
Loss
(in thousands)
Balance at December 28, 2017 $ - $ (11 ) $ (7,414 ) $ (7,425 )
Amortization of the net actuarial loss and prior service credit - - 114 114
Other comprehensive loss before reclassifications (170 ) - - (170 )
Amounts reclassified from accumulated other comprehensive loss 26 ⁽¹⁾ 11 ⁽²⁾ - 37
Net other comprehensive income (loss) (144 ) 11 114 (19 )
Balance at March 29, 2018 $ (144 ) $ - $ (7,300 ) $ (7,444 )

⁽¹⁾ Amount is included in interest expense in the consolidated statement of earnings.
⁽²⁾ Amount was reclassified to retained earnings on December 29, 2017 in connection with the Company’s adoption of ASU No. 2016-01.

Available
for Sale
Investments Pension
Obligation Accumulated
Other
Comprehensive
Loss
(in thousands)
Balance at December 29, 2016 $ 3 $ (5,069 ) $ (5,066 )
Change in unrealized gain on available for sale investments (14 ) - (14 )
Amortization of the net actuarial loss and prior service credit - 54 54
Net other comprehensive income (loss) (14 ) 54 40
Balance at March 30, 2017 $ (11 ) $ (5,015 ) $ (5,026 )

Earnings Per Share -– Net earnings per share (EPS) of Common Stock and Class B Common Stock is computed using the two class method. Basic net earnings per share is computed by dividing net earnings by the weighted-average number of common shares outstanding. Diluted net earnings per share is computed by dividing net earnings by the weighted-average number of common shares outstanding, adjusted for the effect of dilutive stock options using the treasury method. Convertible Class B Common Stock is reflected on an if-converted basis. The computation of the diluted net earnings per share of Common Stock assumes the conversion of Class B Common Stock, while the diluted net earnings per share of Class B Common Stock does not assume the conversion of those shares.

Holders of Common Stock are entitled to cash dividends per share equal to 110% of all dividends declared and paid on each share of Class B Common Stock. As such, the undistributed earnings for each period are allocated based on the proportionate share of entitled cash dividends. The computation of diluted net earnings per share of Common Stock assumes the conversion of Class B Common Stock and, as such, the undistributed earnings are equal to net earnings for that computation.

9

The following table illustrates the computation of Common Stock and Class B Common Stock basic and diluted net earnings per share for net earnings and provides a reconciliation of the number of weighted-average basic and diluted shares outstanding:

13 Weeks
Ended
September 28,
2017

13 Weeks
Ended
September 29,
2016

39 Weeks
Ended
September 28,
2017

39 Weeks
Ended
September 29,
2016

13 Weeks Ended
March 29, 2018 13 Weeks Ended
March 30, 2017
(in thousands, except per share data) (in thousands, except per share data)
Numerator:
Net earnings attributable to The Marcus Corporation $ 10,978 $ 14,372 $ 30,555 $ 29,160 $ 9,821 $ 9,453
Denominator:
Denominator for basic EPS 27,825 27,574 27,773 27,522 27,895 27,708
Effect of dilutive employee stock options 525 427 637 343 539 675
Denominator for diluted EPS 28,350 28,001 28,410 27,865 28,434 28,383
Net earnings per share - basic:
Net earnings per share – basic:
Common Stock $ 0.41 $ 0.54 $ 1.14 $ 1.09 $ 0.36 $ 0.35
Class B Common Stock $ 0.36 $ 0.49 $ 1.02 $ 0.99 $ 0.33 $ 0.32
Net earnings per share - diluted:
Net earnings per share – diluted:
Common Stock $ 0.39 $ 0.51 $ 1.08 $ 1.05 $ 0.35 $ 0.33
Class B Common Stock $ 0.37 $ 0.48 $ 1.01 $ 0.98 $ 0.32 $ 0.31

Equity– Activity impacting total shareholders’ equity attributable to The Marcus Corporation and noncontrolling interests for the 3913 weeks ended ~~September 28,~~March 29, 2018 and March 30, 2017 ~~and September 29, 2016~~ was as follows:

Total
Shareholders’
Equity
Attributable to
The Marcus
Corporation Noncontrolling
Interests Total
Shareholders’
Equity
Attributable to
The Marcus
Corporation Noncontrolling
Interests
(in thousands)
(in thousands)
Balance at December 29, 2016 $ 390,112 $ 1,535
Balance at December 28, 2017 $ 445,024 $ 100
Net earnings attributable to The Marcus Corporation 30,555 – 9,821 -
Net loss attributable to noncontrolling interests – (495 ) - (15 )
Distributions to noncontrolling interests - (19 )
Cash dividends (10,122 ) – (4,070 ) -
Exercise of stock options 2,083 – 929 -
Savings and profit sharing contribution 1,024 – 1,130 -
Treasury stock transactions, except for stock options (463 ) – (404 ) -
Share-based compensation 1,867 – 596 -
Other comprehensive income, net of tax 147 –
Balance at September 28, 2017 $ 415,203 $ 1,040
Cumulative effect of adopting ASU No. 2014-09 (3,513 ) -
Other comprehensive loss, net of tax (30 ) -
Balance at March 29, 2018 $ 449,483 $ 66

10

Total
Shareholders’
Equity
Attributable to
The Marcus
Corporation Noncontrolling
Interests Total
Shareholders’
Equity
Attributable to
The Marcus
Corporation Noncontrolling
Interests
(in thousands)
(in thousands)
Balance at December 31, 2015 $ 363,352 $ 2,346
Balance at December 29, 2016 $ 390,112 $ 1,535
Net earnings attributable to The Marcus Corporation 29,160 – 9,453 -
Net loss attributable to noncontrolling interests – (282 ) - (336 )
Distributions to noncontrolling interests – (448 )
Cash dividends (9,016 ) – (3,366 ) -
Exercise of stock options 3,553 – 455 -
Savings and profit sharing contribution 905 – 890 -
Treasury stock transactions, except for stock options (6,053 ) – 52 -
Share-based compensation 1,358 – 505 -
Other 39 –
Other comprehensive income, net of tax 154 – 40 -
Balance at September 29, 2016 $ 383,452 $ 1,616
Balance at March 30, 2017 $ 398,141 $ 1,199

Fair Value Measurements -– Certain financial assets and liabilities are recorded at fair value in the consolidated financial statements. Some are measured on a recurring basis while others are measured on a non-recurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. A fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.

The Company’s assets and liabilities measured at fair value are classified in one of the following categories:

Level 1 -– Assets or liabilities for which fair value is based on quoted prices in active markets for identical instruments as of the reporting date. At ~~September~~March 29, 2018 and December 28, 2017, ~~and December 29, 2016,~~ respectively, the Company’s ~~$70,000~~$4,031,000 and ~~$93,000~~$4,053,000 of ~~available for sale securities were valued using Level 1 pricing inputs~~debt and ~~were included in other current assets. At September 28, 2017 and December 29, 2016, respectively, the Company’s $3,859,000 and $1,927,000 of trading~~equity securities were valued using Level 1 pricing inputs and were included in other current assets.

Level 2 -– Assets or liabilities for which fair value is based on pricing inputs that were either directly or indirectly observable as of the reporting date. At ~~September~~March 29, 2018 and December 28, 2017, ~~and December 29, 2016,~~ respectively, the ~~$28,000~~$197,000 liability and ~~$6,000~~$13,000 asset related to the Company’s interest rate swap ~~contract was~~contracts were valued using Level 2 pricing inputs.

11
Level 3 -– Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which result in the use of management estimates. At ~~September~~March 29, 2018 and December 28, 2017, ~~and December 29, 2016,~~ none of the Company’s fair value measurements were valued using Level 3 pricing inputs.
11

Defined Benefit Plan – The components of the net periodic pension cost of the Company’s unfunded nonqualified, defined-benefit plan are as follows:

13 Weeks
Ended
September 28,
2017

13 Weeks
Ended
September 29,
2016

39 Weeks
Ended
September 28,
2017

39 Weeks
Ended
September 29,
2016

13 Weeks Ended
March 29, 2018 13 Weeks Ended
March 30, 2017
(in thousands) (in thousands)
Service cost $ 192 $ 216 $ 574 $ 648 $ 232 $ 191
Interest cost 339 351 1,017 1,055 341 339
Net amortization of prior service cost and actuarial loss 89 91 267 273 155 89
Net periodic pension cost $ 620 $ 658 $ 1,858 $ 1,976 $ 728 $ 619
Service cost is included in Administrative expense while all other components are recorded within Other expense outside of operating income in the consolidated statements of earnings.

New Accounting Pronouncements -In ~~May 2014,~~February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~No. 2014-09,~~~~Revenue from Contracts with Customers~~, 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. In August 2015, the FASB issued ASU No. 2015-14,~~Revenue from Contracts with Customers: Deferral of Effective Date~~ (ASU 2015-14), to defer the effective date of the new revenue recognition standard by one year. The new standard is effective for the Company in fiscal 2018. The guidance may be adopted using either a full retrospective or modified retrospective approach. The Company has selected the modified retrospective method for adoption of ASU No. 2014-09 and its related ASU amendments. Under this method, the Company will recognize the cumulative effect of the changes in retained earnings at the date of adoption, but will not restate prior periods.
The Company has performed a review of the requirements of the new revenue standard and related ASUs and is monitoring the activity of the FASB as it relates to specific interpretive guidance. The Company is reviewing customer contracts and is in the process of applying the five-step model of the new revenue standard to each of its key identified revenue streams and is comparing the results to its current accounting practices. The Company believes that the adoption of the new standard will primarily impact its accounting for its loyalty programs, gift cards and customer incentives. The Company’s preliminary assessment is that the adoption of the new standard will have an immaterial impact on the Company’s overall operating results. The Company continues to assess all potential impacts of adopting this new revenue standard on its consolidated financial statements and related disclosures.
12
~~In January 2016, the FASB issued ASU No. 2016-01,~~~~Recognition and Measurement of Financial Assets and Financial Liabilities~~, which primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements of financial instruments. The new standard is effective for the Company in fiscal 2018, with early adoption permitted for certain provisions of the statement. Entities must apply the standard, with certain exceptions, using a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year of adoption. The Company does not believe the adoption of the new standard will have a material effect on its consolidated financial statements.
~~In February 2016, the FASB issued 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 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 will also require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from the leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The new standard is effective for the Company in fiscal 2019 and early application is permitted. The Company is evaluating the effect that the guidance will have on its consolidated financial statements and related disclosures.

In ~~August 2016, the FASB issued ASU No. 2016-15,~~~~Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments~~, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new standard is effective for the Company beginning in fiscal 2018, with early adoption permitted. The standard must be applied using a retrospective transition method for each period presented. The Company does not believe the adoption of the new standard will have a material effect on its consolidated financial statements.
~~In November 2016, the FASB issued ASU No. 2016-18,~~~~Statement of Cash Flows (Topic 230) – Restricted Cash.~~ASU No. 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As such, restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and ending of period total amount shown on the statement of cash flows. The new standard is effective for the Company in fiscal 2018 and must be applied on a retrospective basis. Early adoption is permitted including adoption in an interim period. The Company reported a $2,438,000 investing cash outflow and a $12,479,000 investing cash inflow, respectively, related to a change in restricted cash for the 39 weeks ended September 28, 2017 and September 29, 2016. Subsequent to the adoption of ASU No. 2016-18, the change in restricted cash would be excluded from the change in cash flows from investing activities and included in change in total cash, restricted cash and cash equivalents as reported in the statement of cash flows.
13
~~In January 2017, the FASB issued ASU No. 2017-01,~~~~Business Combinations (Topic 805) – Clarifying the Definition of a Business,~~ which clarifies the definition of a business with the objective of adding guidance and providing a more robust framework to assist reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for the Company in fiscal 2018 and must be applied prospectively, with early adoption permitted. The Company does not believe the adoption of the new standard will have a material effect on its consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04,~~Intangibles-Goodwill~~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 the Company in fiscal 2020 and must be applied ~~prospectively, with early adoption permitted.~~prospectively. The Company does not believe the new standard will have a material effect on its consolidated financial statements.

In February ~~2017,~~2018, the FASB issued ASU No. 2018-02,Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in ASU No. 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The amendments in ASU No. 2018-02 also require certain disclosures about stranded tax effects. The new standard is effective for fiscal years beginning after December 15, 2018, and early adoption in any period is permitted. The Company is currently evaluating the effect that ASU No. 2018-02 will have on its consolidated financial statements and related disclosures.
On December 29, 2017, the Company adopted ASU No. 2016-01,Recognition and Measurement of Financial Assets and Financial Liabilities, which primarily affects the accounting for equity investments, financial liabilities under fair value option, and the presentation and disclosure requirements of financial instruments. Upon adoption, the Company made an immaterial cumulative effect adjustment to reclassify the unrealized loss of an equity investment previously classified as available for sale from accumulated other comprehensive loss to opening retained earnings. All future changes in fair value for this equity security will be recognized through net earnings. In addition, the Company holds two investments that were previously accounted for under the cost method of accounting, which under ASU No. 2016-01 were deemed to not have readily determinable fair values and thus were not impacted by the adoption of ASU No. 2016-01. The adoption of this standard did not have a material impact on such investments or the Company’s consolidated financial statements.
12
On December 29, 2017, the Company adopted ASU No. 2016-15,Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The standard must be applied using a retrospective transition method for each period presented. The adoption of the new standard did not have an effect on the Company’s consolidated financial statements.
On December 29, 2017, the Company adopted ASU No. 2016-18,Statement of Cash Flows (Topic 230) - Restricted Cash. ASU No. 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As such, restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning of period and ending of period total amount shown on the statement of cash flows. ASU No. 2016-18 was applied on a retrospective basis and prior periods were adjusted to conform to the current period’s presentation. Upon adoption, the Company recorded a $1,274,000 increase in net cash used in investing activities for the 13 weeks ended March 30, 2017 related to reclassifying the changes in its restricted cash balance from investing activities to cash and cash equivalent balances within the consolidated statement of cash flows.
On December 29, 2017, the Company adopted ASU No. 2017-01,Business Combinations (Topic 805) - Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance and providing a more robust framework to assist reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The adoption of the new standard did not have an effect on the Company’s consolidated financial statements.
On December 29, 2017, the Company adopted ASU No. 2017-05,“Other Income –- Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial ~~Assets.”~~Assets. ASU No. 2017-05 clarifies the scope and accounting of a financial asset that meets the definition of an “in-substance nonfinancial asset” and defines the term “in-substance nonfinancial asset.” It also covers the transfer of nonfinancial assets to another entity in exchange for a non-controlling ownership interest in that entity. The ~~new guidance is effective for interim and annual periods beginning after December 15, 2017. The Company does not believe that the~~ adoption of the new standard ~~will~~did not have ~~a material~~an effect on ~~its~~the Company’s consolidated financial statements.

~~In March~~On December 29, 2017, the ~~FASB issued~~Company adopted ASU No. 2017-07,Compensation –- Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Benefit ~~Cost.~~Cost. The ASU requires the service cost component of net periodic benefit cost to be presented in the same income statement line item as other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit cost are to be presented separately, in an appropriately titled line item outside of any subtotal of operating income or disclosed in the footnotes. The standard also limits the amount eligible for capitalization to the service cost component. ~~The standard is effective for~~ASU No. 2017-07 was applied on a retrospective basis and the prior period was adjusted to conform to the current period’s presentation. During the 13 weeks ended March 30, 2017, expense of $428,000 was reclassified from operating income to other expense outside of operating income in the consolidated statement of earnings.
On December 29, 2017, the Company ~~in fiscal 2018 and it is currently assessing the impact this standard will have on its consolidated financial statements and related disclosures.~~
~~In May 2017, the FASB issued~~adopted ASU No. 2017-09,Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, to provide clarity and reduce both the diversity in practice and cost and complexity when applying the guidance in Topic 718,Compensation - Stock Compensation. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ~~ASU No. 2017-09 is effective for the Company in fiscal 2018 and must be applied prospectively to an award modified on or after the~~The adoption ~~date. Early adoption is permitted. The Company does not believe~~of the new standard ~~will~~did not have ~~a material~~an effect on ~~its~~the Company’s consolidated financial statements.

On December 29, 2017, the Company early adopted ASU No. 2017-12,Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting recognition and presentation requirements in Accounting Standards Codification 815,Derivatives and Hedging (Topic 815). ASU No. 2017-12 is designed to improve the transparency and understandability of information about an entity’s risk management activities and to reduce the complexity of and simplifying the application of hedge accounting. The adoption of the new standard did not have an effect on the Company’s consolidated financial statements.

On December 29, 2017, the Company adopted and applied to all contracts ASU No. 2014-09,Revenue from Contracts with Customers, 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. The Company elected the modified retrospective method for the adoption of ASU No. 2014-09 and its related ASU amendments. Under this method, the Company recognized the cumulative effect of the changes in retained earnings at the date of adoption, but did not restate the 13 weeks ended March 30, 2017, which continues to be reported under the accounting standards in effect for that time period.
The Company performed a review of the requirements of ASU No. 2014-09 and related ASUs in preparation for adoption of the new standard. The Company reviewed its key revenue streams and related customer contracts and has applied the five-step model of the standard to these revenue streams and compared the results to its current accounting practices. The majority of the Company’s revenues continue to be recognized in a manner consistent with historical practice.
Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance of obligations by transferring the promised services to the customer. A service is transferred to a customer when, or as, the customer obtains control of that service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company’s progress in satisfying the performance obligation in a manner that depicts the transfer of the services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised service. The amount of revenue recognized reflects the consideration entitled to in exchange for those services.
The disaggregation of revenues by business segment for the 13 weeks ended March 29, 2018 is as follows (in thousands):
Reportable Segment
Theatres Hotels/Resorts Corporate Total
Theatre admissions $ 63,006 $ - $ - $ 63,006
Rooms - 20,671 - 20,671
Theatre concessions 41,413 - - 41,413
Food and beverage - 15,803 - 15,803
Other revenues⁽¹⁾ 8,037 11,401 88 19,526
Cost reimbursements 479 7,293 - 7,772
Total revenues $ 112,935 $ 55,168 $ 88 $ 168,191
⁽¹⁾ Included in other revenues is an immaterial amount related to rental income that is not considered contract revenue from contracts with customers under ASC No. 2014-09.
The Company recognizes revenue from its rooms as earned on the close of business each day. Revenue from theatre admissions, theatre concessions and food and beverage sales are recognized at the time of sale.

Revenues from advanced ticket and gift card sales are recorded as deferred revenue and are recognized when tickets or gift cards are redeemed. Gift card breakage income is recognized based upon historical redemption patterns and represents the balance of gift cards for which the Company believes the likelihood of redemption by the customer is remote. Gift card breakage income is recorded in other revenues in the consolidated statements of earnings. The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements.
Other revenues include management fees for theatres and hotels under management agreements. The management fees are recognized as earned based on the terms of the agreements. The management fees include variable consideration that is recognized based on the Company’s right to invoice as the amount invoiced corresponds directly to the value transferred to the customer. Other revenues also include family entertainment center revenues and revenues from Hotels/Resorts outlets such as spa, ski, golf and parking, each of which are recognized at the time of sale. In addition, other revenues include pre-show advertising income in our theatres. Pre-show advertising revenue includes variable consideration, primarily based on attendance levels, that is allocated to distinct time periods that make up the overall performance obligation. The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements.
Cost reimbursements primarily consist of payroll and related expenses at managed properties where the Company is the employer and may include certain operational and administrative costs as provided for in the Company’s contracts with owners. These costs are reimbursed back to the Company. As these costs have no added markup, the revenue and related expense have no impact on operating income or net earnings. The adoption of ASU No. 2014-09 did not have an effect on how revenue is recognized for these arrangements.
The timing of the Company’s revenue recognition may differ from the timing of payment by customers. However, the Company typically receives payment within a very short period of time of when the revenue is recognized. The Company records a receivable when revenue is recognized prior to payment and it has an unconditional right to payment. Alternatively, when payment precedes the provision for the related services, deferred revenue is recorded until the performance obligation is satisfied.
Revenues do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales tax.
Due to adoption of ASU No. 2014-09, on the first day of fiscal 2018, the Company recorded a one-time cumulative effect adjustment to the balance sheet as follows:
Balance at December 28, 2017 Cumulative Adjustment Balance at December 29, 2017
(in thousands)
Other accrued liabilities $ 53,291 $ 3,296 $ 56,587
Deferred compensation and other 56,662 217 56,879
Retained earnings 403,206 (3,513 ) �� 399,693
The one-time cumulative effect adjustment to the balance sheet is due to a change in accounting for the Company’s loyalty programs. The Company offers a customer loyalty program to its theatre customers called Magical Movie Rewards. The program allows members to earn points for each dollar spent and access special offers available only to members. The rewards are redeemable at any Marcus Theatre box office, concession stand or food and beverage venue. The Company also offers a customer loyalty program to its Hotels & Resorts customers which allows members to earn points for each dollar spent in its restaurants. The rewards are redeemable at any of the Company’s hotel outlets including spas, restaurants, and golf. Under ASU No. 2014-09, the portion of Theatre admission revenues, Theatre concession revenues and Food and beverage revenues attributable to loyalty points earned by customers are deferred as a reduction of these revenues until related reward redemption. Through December 28, 2017, the Company recorded the estimated incremental cost of redeeming loyalty points at the time they were earned in Advertising and marketing expense. The change had the effect of an immaterial reduction of theatre admission revenues and a corresponding immaterial increase in theatre concession revenues with an offsetting increase in other long-term liabilities based upon historical customer reward redemption patterns.

In accordance with ASU No. 2014-09, the Company has concluded that it is the principal (as opposed to agent) in the arrangement with third-party internet ticketing companies in regards to sale of internet tickets to customers, and therefore, recognizes ticket fee revenue based on a gross transaction price. As such, internet ticket fee revenue is deferred and recognized when the related film exhibition takes place on a gross transaction price basis. Through December 28, 2017, the Company recorded internet ticket fee revenues net of third-party commission or service fees. The change had the effect of increasing other revenues and other operating expense but had no impact on net earnings or cash flows from operations.
The adoption of ASU No. 2014-09 during the 13 weeks ended March 29, 2018 had the following effect on our consolidated financial statements (in thousands):
For the 13 weeks ended March 29, 2018
Statement of Earnings As Reported ASU No. 2014-09 Impact Adjusted (1)
Revenues
Theatre admissions $ 63,006 $ (606 ) $ 63,612
Theatre concessions 41,413 418 40,995
Food and beverage 15,803 (21 ) 15,824
Other revenues 19,526 1,287 18,239
Total revenues 168,191 1,078 167,113

Costs and expenses
Theatre operations 54,655 154 54,501
Theatre concessions 11,961 139 11,822
Advertising and marketing 5,114 (490 ) 5,604
Other operating expenses 8,756 1,202 7,554
Total costs and expenses 151,175 1,005 150,170

Operating income 17,016 73 16,943
Income taxes 3,421 19 3,402
Net earnings attributable to The Marcus Corporation 9,821 54 9,767

Balance Sheet
Other accrued liabilities 49,239 3,369 45,870
Total current liabilities 130,574 3,369 127,205
Deferred compensation and other 56,640 217 56,423
Retained Earnings 405,434 (3,586 ) 409,020
Shareholders equity attributable to The Marcus Corporation 449,483 (3,586 ) 453,069
Total equity 449,549 (3,586 ) 453,135
⁽¹⁾ The amounts reflect each affected financial statement line item as they would have been reported under US GAAP prior to the adoption of ASU No. 2014-09.

The Company had deferred revenue from contracts with customers of $32,913,000 and $36,007,000 as of March 29, 2018 and December 29, 2017, respectively, which includes the one-time cumulative effect adjustment to the balance sheet on the first day of fiscal 2018. The Company had no contract assets as of March 29, 2018 and December 28, 2017. During the 13 weeks ended March 29, 2018, the Company recognized revenue of $10,201,000 ($9,252,000 from the Theatres segment and $850,000 from the Hotels/Resorts segment) that was included in deferred revenues as of December 29, 2017.
A significant majority of the Company’s revenue is recorded in less than one year from the original contract. As of March 29, 2018, the amount of transaction price allocated to the remaining performance obligations under the Company’s advanced tickets sales was $4,817,000 and is reflected in the Company’s consolidated balance sheet as part of deferred revenues, which is included in other accrued liabilities. The Company recognizes revenue as the tickets are redeemed, which is expected to occur within the next 1.3 years. As of March 29, 2018, the amount of transaction price allocated to the remaining performance obligations under the Hotels and Resorts loyalty program was $233,000 and is reflected in the Company’s consolidated balance sheet in deferred compensation and other. The Company recognizes revenue upon reward redemption, which is expected to occur within the next two years.
As part of the Company's adoption of ASU No. 2014-09, the Company elected to use the following practical expedients: (i) not to adjust the promised amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the period between the Company's transfer of a promised product or service to a customer and when the customer pays for that product or service will be one year or less; (ii) not to assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer; (iii) to expense costs as incurred for costs to obtain contracts when the amortization period would have been one year or less, which mainly includes internal sales and development compensation; (iv) not to disclose remaining performance obligations when the remaining performance obligations have original expected durations of one year or less; and (v) not to disclose remaining performance obligations when variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms a single performance obligation (which exists in the Company’s management fee contracts and its pre-show advertising contracts).

2. Long-Term Debt and Capital Lease Obligations

Long-Term Debt -During the 3913 weeks ended ~~September 28,~~March 30, 2017, the Company issued $50,000,000 of unsecured senior notes privately placed with three institutional lenders. The notes bear interest at 4.32% per annum and mature in fiscal 2027. The Company used the net proceeds of the sale of the notes to repay outstanding indebtedness and for general corporate purposes.

14
Also during the 3913 weeks ended ~~September 28,~~March 30, 2017, a note that matured in January 2017 with a balance of $24,226,000 was repaid and replaced with borrowings on the ~~Company’s~~Company��s revolving credit facility and a new $15,000,000 mortgage note bearing interest at LIBOR plus 2.75%, effectively ~~4.0%~~3.75% at ~~September 28,~~March 30, 2017, requiring monthly principal and interest payments and maturing in fiscal 2020. The mortgage note is secured by the related land, building and equipment.

The Company utilizes derivatives principally to manage market risks and reduce its exposure resulting from fluctuations in interest rates. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions.

The Company entered into antwo interest rate swap ~~agreement~~agreements on ~~February 28, 2013~~March 1, 2018 covering ~~$25,000,000~~$50,000,000 of floating rate ~~debt, which~~debt. The first agreement has a notional amount of $25,000,000, expires ~~January 22, 2018,~~March 1, 2021, and requires the Company to pay interest at a defined rate of ~~0.96%~~2.559% while receiving interest at a defined variable rate of one-month LIBOR ~~(1.25%~~(1.938% at ~~September 28, 2017)~~March 29, 2018). The second agreement has a notional amount of $25,000,000, expires March 1, 2023, and requires the ~~swap is $25,000,000.~~Company to pay interest at a defined rate of 2.687% while receiving interest at a defined variable rate of one-month LIBOR (1.938% at March 29, 2018). The Company recognizes derivatives as either assets or liabilities on the consolidated balance sheets at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and on the type of hedging relationship. Derivatives that do not qualify for hedge accounting must be adjusted to fair value through earnings. For derivatives that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of accumulated other comprehensive ~~loss~~income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The Company’s interest rate swap agreements are considered effective and qualify as cash flow hedges. The Company assesses, both at the inception of each hedge and on an on-going basis, whether the derivatives that are used in its hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. As of March 29, 2018, the interest rate swaps were considered highly effective. The fair value of the interest rate swaps on March 29, 2018 was a liability of $197,000 and was included in deferred compensation and other in the consolidated balance sheet. The Company does not expect the interest rate swaps to have a material effect on earnings within the next 12 months.

The Company had an interest rate swap that expired in January 2018. The swap agreement covered $25,000,000 of floating rate debt that required the Company to pay interest at a defined fixed rate of 0.96% while receiving interest at a defined variable rate of one-month LIBOR. The Company’s interest rate swap agreement was considered effective and qualified as a cash flow hedge from inception through June 16, 2016, at which time the derivative was undesignated and the balance in accumulated other comprehensive loss ~~of $159,000 ($96,000 net of tax)~~ was reclassified into interest expense. As of June 16, 2016, the swap was considered ineffective for accounting ~~purposes.~~purposes and the change in fair value was recorded as an increase or decrease in interest expense. As such, the ~~$22,000 increase~~$13,000 decrease in ~~the~~ fair value of the swap for the 3913 weeks ended ~~September 28, 2017~~March 29, 2018 was recorded ~~as a reduction~~ to interest expense. ~~The Company does not expect the interest rate swap to have a material effect on earnings within the next four months, at which time the agreement will expire.~~

Capital Lease Obligations - During fiscal 2012, the Company entered into a master licensing agreement with CDF2 Holdings, LLC, a subsidiary of Cinedigm Digital Cinema Corp (CDF2), whereby CDF2 purchased on the Company’s behalf, and then deployed and licensed back to the Company, digital cinema projection systems (the “systems”) for use by the Company in its theatres. As of ~~September 28, 2017,~~March 29, 2018, 642 of the Company’s screens were utilizing the systems under a 10-year master licensing agreement with CDF2. Included in furniture, fixtures and equipment is $45,510,000 related to the digital systems as of ~~September~~March 29, 2018 and December 28, 2017, ~~and December 29, 2016,~~ which is being amortized over the remaining estimated useful life of the assets. Accumulated amortization of the digital systems was ~~$32,926,000~~$36,015,000 and ~~$28,294,000~~$34,471,000 as of ~~September~~March 29, 2018 and December 28, 2017, ~~and December 29, 2016,~~ respectively.
15

Under the terms of the master licensing agreement, the Company made an initial one-time payment to CDF2. The Company expects that the balance of CDF2’s costs to deploy the systems will be covered primarily through the payment of virtual print fees (VPF’s) from film distributors to CDF2 each time a digital movie is booked on one of the systems deployed on a Company screen. The Company agreed to make an average number of bookings of eligible digital movies on each screen on which a licensed system has been deployed to provide for a minimum level of VPF’s paid by distributors (standard booking commitment) to CDF2. To the extent the VPF’s paid by distributors are less than the standard booking commitment, the Company must make a shortfall payment to CDF2. Based upon the Company’s historical booking patterns, the Company does not expect to make any shortfall payments during the life of the agreement. Accounting Standards Codification No. 840,Leases, requires that the Company consider the entire amount of the standard booking commitment minimum lease payments for purposes of determining the capital lease obligation. The maximum amount per year that the Company could be required to pay is approximately $6,163,000 until the obligation is fully satisfied.

The Company’s capital lease obligation is being reduced as VPF’s are paid by the film distributors to CDF2. The Company has recorded the reduction of the obligation associated with the payment of VPF’s as a reduction of the interest related to the obligation and the amortization incurred related to the systems, as the payments represent a specific reimbursement of the cost of the systems by the studios. Based on the Company’s expected minimum number of eligible movies to be booked, the Company expects the obligation to be reduced by at least ~~$5,822,000~~$5,484,000 within the next 12 months. This reduction will be recognized as an offset to amortization and is expected to offset the majority of the amortization of the systems.

~~In conjunction with theatres acquired in December 2016, the~~The Company ~~became~~is the obligor of several movie theatre and equipment leases with unaffiliated third parties that qualify for capital lease accounting. Included in buildings and improvements as of ~~September~~March 29, 2018 and December 28, 2017 ~~and December 29, 2016~~ is ~~a preliminary value of $15,799,000~~$25,648,000 related to these leases, with accumulated amortization of ~~$1,253,000~~$2,706,000 and $2,300,000 as of ~~September~~March 29, 2018 and December 28, ~~2017.~~2017, respectively. Included in furniture, fixtures and equipment as of ~~September~~March 29, 2018 and December 28, 2017 ~~and December 29, 2016~~ is ~~a preliminary value of~~ $1,712,000 related to these leases, with accumulated amortization of ~~$194,000~~$316,000 and $255,000 as of ~~September~~March 29, 2018 and December 28, ~~2017.~~2017, respectively. The assets are being amortized over the shorter of the estimated useful lives or the remaining lease terms. The Company paid ~~$874,000 and $2,424,000~~$808,000 in lease payments on these capital leases during the 13 ~~and 39~~ weeks ended ~~September 28, 2017, respectively.~~March 29, 2018.

3. Income Taxes

The Company’s effective income tax rate, adjusted for losses from noncontrolling interests, for the 13 ~~and 39~~ weeks ended ~~September 28,~~March 29, 2018 and March 30, 2017 was ~~38.6%~~25.8% and ~~37.8%~~37.7%, ~~respectively, and was 37.7% and 38.5% for the 13 and 39 weeks ended September 29, 2016,~~ respectively. The Company does not include the income tax expense or benefit related to the net earnings or loss attributable to noncontrolling interest in its income tax expense as the entities are considered pass-through entities and, as such, the income tax expense or benefit is attributable to its owners.

During the fiscal year ended December 28, 2017, the Company was able to make a reasonable estimate of the impact of the Tax Cuts and Jobs Act of 2017, including the reduction in the corporate tax rate and the provisions related to executive compensation and 100% bonus depreciation on qualifying property. However, given the Act's broad and complex changes, further clarification, interpretation and regulatory guidance could affect the assumptions the Company used in making its reasonable estimate. Following the guidance of the U.S. Securities and Exchange Commission's Staff Accounting Bulletin No. 118, any adjustments to the Company's estimate will be reported as a component of income tax expense and disclosed in the period when any such adjustments have been determined within the one-year measurement period. During the 13 weeks ended March 29, 2018, the Company did not make any adjustment to the estimates recorded in fiscal 2017.

4. Business Segment Information

The Company’s primary operations are reported in the following business segments: Theatres and Hotels/Resorts. Corporate items include amounts not allocable to the business segments. Corporate revenues consist principally of rent and the corporate operating loss includes general corporate expenses. Corporate information technology costs and accounting shared services costs are allocated to the business segments based upon several factors, including actual usage and segment revenues.

16
Following is a summary of business segment information for the 13 ~~and 39~~ weeks ended ~~September 28,~~March 29, 2018 and March 30, 2017 ~~and September 29, 2016~~ (in thousands):

13 Weeks Ended
September 28, 2017
Theatres
Hotels/
Resorts

Corporate
Items
Total
Revenues $ 89,773 $ 63,895 $ 150 $ 153,818
Operating income (loss) 15,830 9,622 (4,017 ) 21,435
Depreciation and amortization 8,399 4,512 82 12,993
13 Weeks Ended
September 29, 2016
Theatres
Hotels/
Resorts

Corporate
Items
Total
Revenues $ 81,921 $ 62,613 $ 161 $ 144,695
Operating income (loss) 18,095 10,614 (4,026 ) 24,683
Depreciation and amortization 6,228 4,158 88 10,474
39 Weeks Ended
September 28, 2017
Theatres
Hotels/
Resorts

Corporate
Items
Total
Revenues $ 294,977 $ 169,138 $ 432 $ 464,547
Operating income (loss) 58,481 12,693 (12,973 ) 58,201
Depreciation and amortization 24,000 13,270 274 37,544
39 Weeks Ended
September 29, 2016
Theatres
Hotels/
Resorts

Corporate
Items
Total
13 Weeks Ended
March 29, 2018 Theatres Hotels/
Resorts Corporate
Items Total
Revenues(1) $ 238,837 $ 165,880 $ 400 $ 405,117 $ 112,935 $ 55,168 $ 88 $ 168,191
Operating income (loss) 51,530 15,073 (12,313 ) 54,290 23,983 (2,649 ) (4,318 ) 17,016
Depreciation and amortization 18,175 12,582 268 31,025 9,228 4,590 86 13,904

13 Weeks Ended
March 30, 2017
Theatres
Hotels/
Resorts

Corporate
Items
Total
Revenues⁽¹⁾ $ 112,006 $ 53,340 $ 110 $ 165,456
Operating income (loss) 24,723 (2,675 ) (3,595 ) 18,453
Depreciation and amortization 7,793 4,357 98 12,248

~~5. Subsequent Event~~ ~~– On October 20,~~(1)       Revenues include cost reimbursements of $7,772 for the 13 weeks ended March 29, 2018 (Theatres - $479, Hotels/Resorts - $7,293) and $7,502 for the 13 weeks ended March 30, 2017 the Company sold its 11% minority interest in The Westin® Atlanta Perimeter North in Atlanta, Georgia and recorded a preliminary pre-tax gain of approximately $4,906,000 during the fiscal 2017 fourth quarter.(Theatres - $618, Hotels/Resorts - $6,884).

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21

THE MARCUS CORPORATION
~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

Certain matters discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Form 10-Q 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; ~~and~~ (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.~~theatres; and (10) a disruption in our business and reputational and economic risks associated with civil securities claims brought by shareholders. 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-Q and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

RESULTS OF OPERATIONS

General

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. Fiscal ~~2017~~2018 is a 52-week year beginning on December ~~30, 2016~~29, 2017 and ending on December ~~28, 2017.~~27, 2018. Fiscal ~~2016~~2017 was a 52-week year beginning ~~on January 1,~~December 30, 2016 and ended on December ~~29, 2016.~~
28, 2017.
18

We divide our fiscal year into three 13-week quarters and a final quarter consisting of 13 or 14 weeks. The ~~third~~first quarter of fiscal 2018 consisted of the 13-week period beginning December 29, 2017 and ended on March 29, 2018. The first quarter of fiscal 2017 consisted of the 13-week period beginning on June 30, 2017 and ended on September 28, 2017. The third quarter of fiscal 2016 consisted of the 13-week period beginning on July 1, 2016 and ended on September 29, 2016. The first three quarters of fiscal 2017 consisted of the 39-week period beginning on December 30, 2016 and ended on ~~September 28,~~March 30, 2017. ~~The first three quarters of fiscal 2016 consisted of the 39-week period beginning on January 1, 2016 and ended on September 29, 2016.~~ Our primary operations are reported in the following two business segments: movie theatres and hotels and resorts.
Implementation of New Accounting Standards
During the first quarter of fiscal 2018, we adopted Accounting Standards Update (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 the first quarter of fiscal 2018 has had the following impact on our financial statements:
h In accordance with the new guidance, the portion of theatre admission revenues, theatre concession revenues and food and beverage revenues attributable to loyalty points earned by customers will be deferred as a reduction of these revenues until reward redemption. Through December 28, 2017, we recorded the estimated incremental cost of redeeming loyalty points at the time they were earned in advertising and marketing expense. Our adoption of the standard will result in an immaterial reduction of theatre admission revenues and a corresponding immaterial increase in theatre concession revenues with an offsetting increase in other long-term liabilities based upon historical customer reward redemption patterns.
h Prior to the adoption of the new standard, we recorded internet ticket fee revenues net of third-party commission or service fees. In accordance with ASU No. 2014-09, we believe that we are the principal (as opposed to agent) in the arrangement with third-party internet ticketing companies in regards to sale of internet tickets to customers, and therefore, we will now recognize ticket fee revenue based on a gross transaction price. This change will have the effect of increasing other revenues and other operating expense but will have no impact on net earnings or cash flows from operations.
We recorded a one-time cumulative effect reduction to retained earnings of $3.5 million during the first quarter of fiscal 2018 related to the adoption of ASU No. 2014-09.

In addition, we adopted ASU No. 2017-07,Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Benefit Cost, during the first quarter of fiscal 2018. The ASU requires the service cost component of net periodic benefit costs to be presented in the same income statement line item as other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit cost are now presented separately in other expense outside of operating income and our prior year results have been updated to conform to the new presentation. As a result of the adoption of this ASU, $496,000 and $428,000, respectively, of other expenses were excluded from operating income during the first quarter of fiscal 2018 and first quarter of fiscal 2017.
Finally, beginning in the fiscal 2018 first quarter, we began appropriately presenting cost reimbursements and reimbursed costs on a gross basis and presented two new line items to the consolidated statements of earnings. These cost reimbursements and reimbursed costs were previously reported on a net basis. Reimbursed costs primarily consist of payroll and related expenses at managed properties where we are the employer and may include certain operational and administrative costs as provided for in our contracts with owners. These costs are reimbursed back to us. As these costs have no added markup, the revenue and related expense have no impact on operating income or net earnings. The vast majority of our cost reimbursements relate to our hotels and resorts division due to the larger number of management contracts in that division. Our prior year results were restated to conform to the new presentation. Cost reimbursements and reimbursed costs totaled $7.8 million for the first quarter of fiscal 2018 and $7.5 million during the first quarter of fiscal 2017. We believe this correction is immaterial to the consolidated financial statements.
Overall Results

The following table sets forth revenues, operating income, other income (expense), net earnings and net earnings per common share for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 and fiscal ~~2016~~2017 (in millions, except for per share and variance percentage data):

Third Quarter First Three Quarters First Quarter
Variance Variance Variance
F2017 F2016 Amt. Pct. F2017 F2016 Amt. Pct. F2018 F2017 Amt. Pct.
Revenues $ 153.8 $ 144.7 $ 9.1 6.3 % $ 464.5 $ 405.1 $ 59.4 14.7 % $ 168.2 $ 165.5 $ 2.7 1.7 %
Operating income 21.4 24.7 (3.3 ) -13.2 % 58.2 54.3 3.9 7.2 % 17.0 18.5 (1.5 ) -7.8 %
Other income (expense) (3.7 ) (1.7 ) (2.0 ) -115.8 % (9.6 ) (7.2 ) (2.4 ) -33.4 % (3.8 ) (3.6 ) (0.2 ) -4.6 %
Net loss attributable to noncontrolling interests (0.2 ) (0.1 ) (0.1 ) -33.3 % (0.5 ) (0.3 ) (0.2 ) -75.5 % - (0.3 ) 0.3 95.5 %
Net earnings attributable to The Marcus Corp. $ 11.0 $ 14.4 $ (3.4 ) -23.6 % $ 30.6 $ 29.2 $ 1.4 4.8 % 9.8 9.5 0.3 3.9 %
Net earnings per common share – diluted: $ 0.39 $ 0.51 $ (0.12 ) -23.5 % $ 1.08 $ 1.05 $ 0.03 2.9 %
Net earnings per common share - diluted $ 0.35 $ 0.33 $ 0.02 6.1 %

Revenues increased during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2016~~2017 due to increased revenues from both our theatre division and hotels and resorts division. Operating income (earnings before other income/expense and income taxes) ~~and net earnings attributable to The Marcus Corporation~~ decreased during the ~~third~~first quarter of fiscal 2018 compared to the first quarter of fiscal 2017 ~~compared to the third quarter of fiscal 2016~~ due to ~~decreased~~a decrease in theatre division operating income and an increased operating loss from ~~both~~ our ~~theatre and hotels and resorts divisions. Operating income and net~~corporate items. Net earnings attributable to The Marcus Corporation increased during the first ~~three quarters~~quarter of fiscal ~~2017~~2018 compared to the first ~~three quarters of fiscal 2016 due to record operating results from our theatre division, partially offset by a decrease in operating income from our hotels and resorts division.~~
~~New theatres favorably impacted revenues and operating income from our theatre division during the third~~ quarter ~~and first three quarters~~ of fiscal 2017 ~~compared~~due to the third quarter and first three quarters of fiscal 2016. In mid-October 2016, we opened a newly renovated theatre in Country Club Hills, Illinois. In mid-December 2016, our theatre division acquired Wehrenberg Theatres® (which we refer to as Wehrenberg or Marcus Wehrenberg), a Midwestern theatre circuit consisting of 14 theatres with 197 screens, plus an 84,000 square foot retail center. In April 2017, we opened a new theatre in Shakopee, Minnesota. On June 30, 2017, the first day of our fiscal 2017 third quarter, we opened our first stand-alone all in-theatre dining location, branded~~BistroPlex~~^SM ~~and located in Greendale, Wisconsin.~~
decreased income taxes.
19

Operating results from our theatre division were unfavorably impacted by reduced attendance from a weaker slate of movies during the fiscal ~~2017 second and third quarters compared to the second and third quarters of fiscal 2016, but were favorably impacted by a stronger slate of movies during the fiscal 2017~~2018 first quarter compared to the first quarter of fiscal ~~2016. Increased attendance resulting from positive customer response to~~2017, partially offset by an increase in our ~~recent investments and pricing strategies~~average ticket price and increased concession sales per person due to our expanded food and beverage ~~offerings partially offset the negative impact of the weaker slate of movies~~offerings. Two new theatres also favorably impacted revenues and operating income from our theatre division during the ~~third~~first quarter of fiscal ~~2017 and contributed to our improved operating results during the first three quarters of fiscal 2017~~2018 compared to the ~~same periods in~~first quarter of fiscal ~~2016. Increased preopening expenses related to new theatres during the fiscal 2017 periods negatively impacted comparisons to the fiscal 2016 periods.~~2017.

Revenues from our hotels and resorts division were favorably impacted by increased food and beverage revenues, partially offset by a decrease in room revenues for comparable hotels during the ~~third~~first quarter ~~and~~of fiscal 2018 compared to the first ~~three quarters~~quarter of fiscal 2017. Comparisons of our operating loss during the first quarter of fiscal 2018 to the operating loss during the first quarter of fiscal 2017 ~~by revenues~~ from our ~~new~~hotels and resorts division were favorably impacted by the fact that our fiscal 2017 results included preopening expenses and start-up operating losses from ourSafeHouse® restaurant and bar that we opened ~~on March 1, 2017~~ in downtown Chicago, Illinois, adjacent to our AC Chicago Downtown Hotel. Increased room revenues during the fiscal 2017 periods, due in part to new villas that we opened during the second quarter of fiscal 2017 at the Grand Geneva Resort & Spa, also contributed to the increased total revenues during the fiscal 2017 periods, partially offset by slightly reduced food and beverage revenues for comparable hotels during the third quarter and first three quarters of fiscal 2017 compared to the third quarter and first three quarters of fiscal 2016. Operating results from our hotels and resorts division were unfavorably impacted by preopening expenses and start-up operating losses from our new~~SafeHouse~~ ~~restaurant and bar during the fiscal 2017 periods.~~Hotel, on March 1, 2017.

Operating losses from our corporate items, which include amounts not allocable to the business segments, ~~were unchanged~~increased during the ~~third~~first quarter of fiscal 2018 compared to the first quarter of fiscal 2017 ~~compared to the third quarter of fiscal 2016. Operating losses from our corporate items increased during the first three quarters of fiscal 2017 compared to the first three quarters of fiscal 2016~~ due in part to ~~one-time costs associated with the retirement of two directors from our board of directors during the second quarter of fiscal 2017~~increased legal expense and ~~the death of a director during the third quarter of fiscal 2017.~~increased pension and 401(k) expenses. Increased long-term incentive compensation expenses resulting from our improved financial performance and stock performance during the past several years also contributed to increased operating losses from our corporate items during the first ~~three quarters~~quarter of fiscal ~~2017.~~2018, as did an increase in our accrual for contributions to our charitable foundation during the first quarter of fiscal 2018.

We did not have any significant variations in investment income (losses) or net equity earnings ~~(losses)~~ from unconsolidated joint ventures during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 compared to the third quarter and first three quarters of fiscal 2016. We recognized a loss on disposition of property, equipment and other assets of $449,000 and $420,000, respectively, during the third quarter and first three quarters of fiscal 2017 due primarily to our disposal of old theatre seats and other items in conjunction with our significant number of theatre renovations during the periods, as well as our write off of disposed equipment at one of our hotels during the first quarter of fiscal ~~2017, partially offset by our sale of two theatres (one that had previously closed and one that had been operating prior to the sale) and our sale of the minority equity interest we held in a hotel.~~2017. We recognized a small gain of $239,000 on disposition of property, equipment and other assets during the third quarter of fiscal 2016 related primarily to our sale of an unused piece of land. We recognizeddid not have any gains or losses on disposition of property, equipment and other assets during the first ~~three quarters~~quarter of fiscal ~~2016 totaling $478,000 primarily due~~2018 compared to ~~our disposal~~losses on disposition of ~~old theatre seats~~property, equipment and other ~~items in conjunction with prior theatre renovations.~~assets of approximately $400,000 during the first quarter of fiscal 2017, due primarily to a write off of disposed equipment at one of our hotels. The timing of periodic sales and disposals of our property and equipment ~~may vary~~varies from quarter to quarter, resulting in variations in our reported gains or losses on disposition of property and equipment.

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Our interest expense totaled ~~$3.4~~$3.3 million for the ~~third~~first quarter of fiscal 2018 compared to $2.9 million for the first quarter of fiscal 2017, ~~compared to $2.1 million for the third quarter of fiscal 2016,~~ an increase of approximately ~~$1.3 million,~~$400,000, or 58.3%. Our interest expense totaled $9.5 million for the first three quarters of fiscal 2017 compared to $7.0 million for the first three quarters of fiscal 2016, an increase of approximately $2.5 million, or 35.2%13.2%. The increase in interest expense during the fiscal ~~2017 periods~~2018 period was due primarily to payments we made on the approximately $17.5 million of capital lease obligations we assumed in the Wehrenberg acquisition. We also experienced an increase in our total borrowings under long-term debt agreements during the third quarter and first three quarters of fiscal 2017 compared to the comparable periods of fiscal 2016, further contributing to our increased interest expense during the fiscal 2017 periods, partially offset by a ~~lower~~higher average interest rate during fiscal ~~2017,~~2018, as ~~we had~~ a ~~greater percentage~~result of ~~lower-cost~~increases in short-term interest rates on our variable rate ~~debt~~debt. In addition, on March 1, 2018, we entered into two interest rate swap agreements, effectively converting $50.0 million in ~~our debt portfolio during the fiscal 2017 periods compared~~variable rate borrowings to ~~the fiscal 2016 periods.~~a fixed rate. Changes in our borrowing levels due to variations in our operating results, capital expenditures, share repurchases and asset sale proceeds, among other items, may impact our actual reported interest expense in future periods, as would further increases in short-term interest rates and changes in the mix between fixed rate debt and variable rate debt in our debt portfolio.

We reported income tax expense for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 of ~~$6.9~~$3.4 million, ~~and $18.6~~a decrease of approximately $2.3 million, ~~respectively,~~or 40.1%, compared to ~~$8.7~~income tax expense of $5.7 million ~~and $18.2 million, respectively, during~~for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2016.~~2017. The ~~increase~~decrease in income tax expense ~~for the first three quarters of fiscal 2017 compared to the first three quarters of fiscal 2016~~ was the result of ~~increased earnings, partially offset by~~ the ~~fact that our~~reduction in the federal tax rate from 35% to 21% resulting from the December 22, 2017 signing of the Tax Cuts and Jobs Act of 2017. Our fiscal ~~2017~~2018 first ~~three quarters~~quarter effective income tax rate, after adjusting for ~~losses~~a loss from noncontrolling interests that ~~are~~is not tax-effected because the entities involved are tax pass-through entities, was ~~37.8%~~25.8%, compared to our fiscal ~~2016~~2017 first ~~three quarters~~quarter effective income tax rate of ~~38.5%~~37.7%. As of the date of this report, we anticipate that our effective income tax rate for the remaining ~~quarter~~quarters of fiscal ~~2017~~2018 will remain ~~close to our historical 38%-40% average,~~at a similar 25-27% range, excluding any changes in our liability for unrecognized tax benefits or potential further changes in federal and state income tax rates. Our actual fiscal ~~2017~~2018 effective income tax rate may be different from our estimated quarterly rates depending upon actual facts and circumstances.

The operating results of ~~two hotels of which we are the majority owner,~~one majority-owned hotel, The Skirvin Hilton, ~~and The Lincoln Marriott Cornhusker Hotel,~~ are included in the hotels and resorts division revenue and operating income during the first quarters of fiscal 2018 and fiscal 2017, and the after-tax net earnings or loss attributable to noncontrolling interests ~~in these hotels~~ is deducted from or added to net earnings on the consolidated statements of earnings. The operating results of The Lincoln Marriott Cornhusker Hotel were also included in the hotels and resorts division revenue and operating income during the first quarters of fiscal 2018 and fiscal 2017, but because this hotel was not wholly-owned during the first quarter of fiscal 2017, the after-tax net earnings or loss attributable to noncontrolling interests for this property was deducted from or added to net earnings on the consolidated statements of earnings during the fiscal 2017 period. During the fourth quarter of fiscal 2017, we purchased the noncontrolling interest of The Lincoln Marriott Cornhusker Hotel from its former minority owner. We reported a net ~~losses~~loss attributable to noncontrolling interests of ~~$495,000 and $282,000, respectively,~~$15,000 during the first ~~three quarters~~quarter of fiscal ~~2017 and~~2018 compared to a net loss of $336,000 during the first ~~three quarters~~quarter of fiscal ~~2016.~~2017.
21

Theatres

The following table sets forth revenues, operating income and operating margin for our theatre division for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 and fiscal ~~2016~~2017 (in millions, except for variance percentage and operating margin):

Third Quarter First Three Quarters
Variance Variance
F2017 F2016 Amt. Pct. F2017 F2016 Amt. Pct.
Revenues $ 89.8 $ 81.9 $ 7.9 9.6 % $ 295.0 $ 238.8 $ 56.2 23.5 %
Operating income 15.8 18.1 (2.3 ) -12.5 % 58.5 51.5 7.0 13.5 %
Operating margin
(% of revenues) 17.6 % 22.1 % 19.8 % 21.6 %
First Quarter
Variance
F2018 F2017 Amt. Pct.
Revenues $ 112.9 $ 112.0 $ 0.9 0.8 %
Operating income 24.0 24.7 (0.7 ) -3.0 %
Operating margin (% of revenues) 21.2 % 22.1 %

Our theatre division revenues increased during the ~~third~~first quarter ~~and~~of fiscal 2018 compared to the first ~~three quarters~~quarter of fiscal 2017 ~~compared to the third quarter and first three quarters of fiscal 2016~~ due in part to new theatres that we opened ~~or acquired~~ during ~~the fourth quarter of fiscal 2016 and first three quarters of~~ fiscal 2017 ~~as well as~~and an increase in our average ticket price and average concession revenues per person, ~~at comparable~~partially offset by a decrease in attendance. In addition, our adoption of the new revenue recognition accounting standard and our change in the presentation of cost reimbursements for managed theatres ~~resulting~~(described above) resulted in ~~increased box office receipts and concession revenues. Decreased attendance at comparable theatres due to a weaker film slate negatively impacted~~an increase in theatre division revenues ~~and operating income~~of $960,000 during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 compared to the ~~third~~restated first quarter ~~and first three quarters~~ of fiscal ~~2016.~~2017.

Our theatre division operating income ~~increased~~and operating margin decreased slightly during the first ~~three quarters~~quarter of fiscal ~~2017~~2018 compared to the first three quarters of fiscal 2016 due primarily to operating income from the acquired Wehrenberg theatres. Preopening expenses of approximately $800,000 related to the opening of two new theatres negatively impacted our operating income during the first three quarters of fiscal 2017. Our theatre division revenues and operating income during the third quarter of fiscal 2017 ~~were also negatively impacted by the fact that we had up~~due primarily to ~~15% of our Marcus Wehrenberg screens out of service during long portions of the fiscal 2017 period due to renovations underway at multiple theatres.~~
~~The aforementioned preopening expenses, in conjunction with the weaker film slate during the second and third quarters of fiscal 2017 and~~ higher fixed costs, such as depreciation and amortization, ~~rent~~ and ~~property taxes, due~~higher concession expenses, resulting from our increased number of new food and beverage outlets in ~~part~~our theatres. In addition, our operating income and operating margin were negatively impacted during the first quarter of fiscal 2018 by approximately $400,000 of increased snow removal and heating costs compared to the ~~Wehrenberg acquisition, negatively impacted our theatre division operating margins during the third~~first quarter ~~and first three quarters~~ of fiscal 2017 ~~compared~~due to less favorable weather conditions during the ~~third quarter and first three quarters of~~ fiscal ~~2016. Excluding total preopening expenses, our~~2018 period. The increase in theatre division revenues related to our adoption of the new revenue recognition standard described above and our change in the presentation of cost reimbursements for managed theatres, both without a related material change in operating income, contributed to our decreased operating margin during the first ~~three quarters~~quarter of fiscal ~~2017 was 20.2%. Increased other revenues and slightly lower film costs favorably impacted our operating margin during~~2018 compared to the first quarter of fiscal ~~2017 periods, but not enough to offset the impact of decreased attendance during these periods.~~2017.

The following table provides a further breakdown of the components of revenues for the theatre division for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 and fiscal ~~2016~~2017 (in millions, except for variance percentage):
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Third Quarter First Three Quarters First Quarter
Variance Variance Variance
F2017 F2016 Amt.   Pct. F2017 F2016 Amt. Pct. F2018 F2017 Amt. Pct.
Box office receipts $ 50.3 $ 46.9 $ 3.4 7.2 % $ 166.2 $ 137.8 $ 28.4 20.6 % $ 63.0 $ 63.8 $ (0.8 ) -1.3 %
Concession revenues 33.3 30.3 3.0 10.0 % 109.4 88.6 20.8 23.4 % 41.4 40.9 0.5 1.3 %
Other revenues 6.2 4.7 1.5 29.9 % 19.4 12.4 7.0 56.2 % 8.0 6.7 1.3 20.8 %
112.4 111.4 1.0 1.0 %
Cost reimbursements 0.5 0.6 (0.1 ) -22.5 %
Total revenues $ 89.8 $ 81.9 $ 7.9 9.6 % $ 295.0 $ 238.8 $ 56.2 23.5 % $ 112.9 $ 112.0 $ 0.9 0.8 %

~~The majority of the increase~~We opened new theatres in April 2017 and June 2017 that favorably impacted our box office receipts and concession revenues ~~for~~during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal 2016 was due to the impact of the 14 theatres that we acquired from Wehrenberg, the theatre that we opened in Country Club Hills, Illinois during our fiscal 2016 fourth quarter, the theatre that we opened in Shakopee, Minnesota during our fiscal 2017 second quarter and the~~BistroPlex~~ ~~theatre we opened in Greendale, Wisconsin on the first day of our fiscal 2017 third quarter.~~2017. Excluding these two new theatres ~~as well as~~and two theatres that are no longer comparable to last year because their pricing policies were significantly changed as a result of the new theatres we opened nearby, box office receipts ~~decreased 15.6%~~ and concession revenues ~~decreased 13.1%~~ for comparable theatres ~~during the third quarter of fiscal 2017 compared to the third quarter of fiscal 2016~~decreased 3.0% and ~~decreased 3.6% and 0.3%~~1.4%, respectively, during the first ~~three quarters~~quarter of fiscal ~~2017~~2018 compared to the first ~~three quarters~~quarter of fiscal ~~2016.~~2017.

Conversely, the change in how we recognize revenue related to our Magical Movie Rewards customer loyalty program as a result of our adoption of the new revenue recognition accounting standard (discussed above) resulted in a decrease in box office receipts of approximately $600,000 and an increase in concession revenues of approximately $400,000 during the first quarter of fiscal 2018. Excluding the impact of these changes in revenue recognition from the fiscal 2018 first quarter results, box office receipts decreased 0.4% and concession revenues increased 0.1% during the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017.

According to data received from Rentrak (a national box office reporting service for the theatre industry) and compiled by us to evaluate our fiscal ~~2017 third~~2018 first quarter ~~and first three quarters~~ results, United States box office receipts ~~(excluding~~(including new ~~builds for the top ten theatre circuits)~~theatres) decreased ~~13.4% and 4.0%, respectively,~~0.6% during our fiscal ~~2017 third~~2018 first quarter, ~~and first three quarters,~~ indicating that our change in box office receipts ~~at comparable theatres underperformed the industry~~ during the ~~third~~first quarter ~~by 2.2 percentage points and~~of fiscal 2018 of 0.4%, after adjusting for the above described impact of the change in accounting for revenues related to our loyalty program, outperformed the industry ~~during the first three quarters of fiscal 2017~~ by ~~0.4~~0.2 percentage points. We ~~believe we underperformed~~outperformed the industry ~~during the third quarter of fiscal 2017 due primarily to several unfavorable factors in July 2017 compared to July 2016, including film mix,~~despite the fact that we had ~~a number~~approximately 2% of our ~~comparable~~ screens out of service during long portions of the fiscal ~~2017 period~~2018 first quarter due to renovations ~~underway~~ at multiple ~~theatres, and slightly unfavorable weather comparisons to last year.~~
~~July box office revenues represented approximately 50% of our third quarter total box office revenues, so that month has a disproportionate impact on our overall third quarter results.~~theatres. We ~~believe our underperformance during July was an anomaly, as evidenced by the fact that we~~have now outperformed the industry ~~by over nine percentage points in September 2017. Despite the unusual circumstances~~average during ~~the third quarter of fiscal 2017, we have still outperformed the industry during thirteen~~15 of the last ~~fifteen~~17 quarters. We believe our ~~consistent~~continued outperformance toof the industry average is attributable to the investments we have made in new features and amenities in select theatres and our implementation of innovative operating and marketing strategies, including our $5 Tuesday promotion and our customer loyalty program.
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~~Excluding the~~ The performance of our Marcus Wehrenberg theatres, which we acquired in December 2016, many of which have subsequently undergone significant renovations, was particularly strong during the first quarter of fiscal 2018 compared to the prior year, contributing to our outperformance of the industry average.
Our average ticket price increased ~~3.1% and 1.2%, respectively,~~3.5% during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2016.~~2017. The ~~fact that we implemented~~increase was partially attributable to modest price increases we implemented in ~~November 2016 and~~October 2017. In addition, the fact that we have increased our number of premium large format (PLF) screens, along with a corresponding price premium, also contributed to ~~the increase in~~ our increased average ticket price during the first quarter of fiscal ~~2017 periods.~~2018. We also believe that a change in film product mix had a ~~positive~~favorable impact on our average ticket price during the ~~third~~first quarter of fiscal 2018 compared to the first quarter of fiscal 2017. Our top ~~film~~two films during the ~~third~~fiscal 2017 period were the PG-rated family moviesBeauty and the Beast andThe LEGO®Batman Movie (resulting in a higher percentage of lower-priced children’s tickets sold), compared to our top two films during the first quarter of fiscal ~~2017 was~~2018, which included the ~~R-rated film~~PG-13 rated filmsItBlack Panther andJumanji: Welcome to the Jungle (resulting in a higher percentage of higher-priced adult tickets sold)~~, compared~~. The increase in average ticket price contributed approximately $1.8 million to our ~~top film~~comparable theatre box office receipts during the ~~third~~first quarter of fiscal ~~2016, which was the PG-rated family movie~~~~The Secret Life of Pets~~ (resulting in a higher percentage of lower-priced children’s tickets sold). Conversely, the percentage of our total box office receipts attributable to 3D presentations decreased significantly during the third quarter and first three quarters of fiscal 20172018 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal 2016 due primarily to a reduced number of 3D films and weaker 3D performances from our top fiscal 2017 films, contributing to a lesser increase in our average ticket price during the fiscal 2017 periods than we might otherwise expect. We implemented modest price increases in October 2017 that we expect to favorably impact our average ticket price in future periods.2017.

Our concession revenues ~~at comparable theatres decreased~~increased during the ~~third~~first quarter ~~and~~of fiscal 2018 compared to the first ~~three quarters~~quarter of fiscal 2017 ~~compared~~due to the ~~third quarter and first three quarters~~addition of ~~fiscal 2016 due to decreased attendance during the fiscal 2017 periods, partially offset by~~new theatres, an increase ~~of 6.7% and 4.3%, respectively,~~ in our average concession revenues per ~~person.~~person and the above-described increase related to the change in accounting for loyalty program revenues, partially offset by decreased attendance at comparable theatres. Our average concession revenues per person increased by 6.4% during our first quarter of fiscal 2018 compared to the first quarter of fiscal 2017. The increase in our average concession revenues per person contributed approximately ~~$1.6~~$1.8 million ~~and $3.6 million, respectively,~~ to our comparable theatre concession revenues during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2016.~~2017.

A change in concession product mix, including increased sales of non-traditional food and beverage items from our increased number ofTake Five Lounge^SMSM,~~Zaffiro’s®~~ Zaffiro’s®Express, ~~and~~Reel Sizzle® and in-theatre dining outlets, as well as modest selected price increases ~~that~~ we introduced in ~~November 2016,~~October 2017, were the primary reasons for our increased average concession sales per person during the fiscal ~~2017 periods. We implemented modest price increases~~2018 period. In addition, we believe that the above described change in ~~October 2017 that are expected to favorably impact~~film product mix during the first quarter of fiscal 2018 likely enhanced the growth of our overall average concession ~~revenues~~sales per person ~~in future periods,~~during the fiscal 2018 period, as ~~will~~family-oriented films such as the ~~anticipated opening~~top two films during the first quarter of ~~additional~~fiscal 2017 described above tend not to contribute to sales of non-traditional food and beverage ~~outlets in future periods.~~items as much as adult-oriented films.

Other revenues increased by ~~$1.5~~approximately $1.3 million ~~and $7.0 million, respectively,~~ during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2016.~~2017. Approximately ~~$1.4~~$1.2 million ~~and $3.9 million, respectively,~~ of this increase related to the ~~Marcus Wehrenberg theatres, including preshow advertising income,~~change in how we now report internet surcharge ticketing fees. Prior to the new revenue recognition standard, we recorded these fees net of third-party commission or service fees. Under the new guidance that we adopted in the first quarter of fiscal 2018, we are recognizing ticket fee revenues based on a gross transaction price. This change had the effect of increasing other revenues and ~~rental~~increasing other operating expense, but had no impact on operating income ~~from the retail center described above.~~or net earnings. The remaining ~~increases~~increase in other revenues ~~during the first three quarters of fiscal 2017 was~~is attributable ~~to comparable theatres and was due~~ primarily to ~~an increase in~~increased preshow advertising ~~income, internet surcharge ticketing fees and breakage on presold discounted tickets.~~income.

Total theatre attendance ~~increased 4.6% and 19.7%, respectively,~~decreased 4.8% during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2016.~~2017. Excluding the ~~Marcus Wehrenberg~~two new theatres ~~the new Country Club Hills, Illinois theatre, the new Shakopee, Minnesota theatre, the new~~~~BistroPlex~~and two ~~legacy~~ theatres that are no longer comparable to last year because their pricing policies were significantly changed as a result of the new theatres we opened nearby, comparable theatre attendance decreased ~~17.4% and 4.4%, respectively,~~5.9% during the ~~third~~ quarter, ~~and first three quarters of fiscal 2017 compared to the fiscal 2016 periods,~~ due ~~primarily~~ to a weaker film slate in the current year ~~periods.~~
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period. We believe a combination of several additional factors partially offset this decrease in attendance and contributed to our above-described ~~outperformance of the~~ industry ~~during the first three quarters of fiscal 2017.~~average outperformance. In addition to the $5 Tuesday promotion that continued to perform well, we believe our fiscal ~~2017~~2018 first ~~three quarters~~quarter attendance was favorably impacted by increased attendance at theatres that have added our spacious new DreamLounger^SMSM electric all-recliner seating, our proprietaryUltraScreen DLX® andSuperScreen DLX^SMSM PLF screens and our unique food and beverage outlets described above. We also believe that we ~~are recognizing~~continue to recognize the benefits of our customer loyalty program, introduced in March 2014 and which now has approximately ~~2.4~~2.7 million members.

~~The third~~Attendance and box office receipts decreased during seven of the 13 weeks of the first quarter of fiscal 2018 compared to the comparable weeks during the first quarter of fiscal 2017, ~~started very poorly,~~ with ~~ten straight weeks~~the largest decrease occurring in March. The reduction in March box office receipts was due to the fact that our second highest grossing film of ~~decreased~~fiscal 2017,Beauty and the Beast, was released during March 2017. Conversely, our largest increase in attendance and box office receipts ~~in July and August, before ending with three strong weeks in September. We were encouraged by the fact that our highest grossing film~~ during the first quarter of fiscal 2018 occurred in February and was ~~released during September, which has historically been one~~the result of the ~~weakest periods for movie-going, as students return~~blockbuster performance ofBlack Panther. We believe that film mix this quarter compared to ~~school and the quality of films released tends to weaken. However, that fact also highlights~~last year likely had a negative impact on our comparative performance versus the overall ~~weaker quality of the films released during the preceding two months.~~industry numbers. We ~~also~~ believe ~~that the particular mix of films during July 2017 was not as favorable to~~ our Midwestern circuit ~~as compared to~~outperformed our normal share of the ~~films released during July 2016. The top film during July 2016 was~~total box office with~~The Secret Life of Pets~~Beauty and the Beast ~~and this family-oriented film~~last year. Conversely, althoughBlack Panther performed ~~particularly~~very well in our theatres, ~~compared to the rest~~an analysis of the ~~nation, contributing to our comparative underperformance to the industry in July 2017 versus July 2016. In addition, historically in our Midwestern~~top 100 markets ~~rain on the weekends or very warm weather often has a favorable impact on theatre attendance. During July 2017, weekend weather~~ in the ~~markets in which we operate was, on average, not quite as warm as July 2016, nor did it have as many weekend days with rain as it did last year. Our past experience has been~~United States shows that ~~people in~~ the Midwest ~~tend to enjoy outdoor activities when it’s dry~~trailed the eastern and southern portions of the United States in box office performance on this film. As a result, while we still outperformed the ~~weekend and not overly hot.~~nation overall during the first quarter of fiscal 2018, the differential was smaller than in prior quarters.

Our highest grossing films during the ~~third~~fiscal 2018 first quarter ~~of fiscal 2017~~ includedItBlack Panther, Jumanji: Welcome to the Jungle,~~Spider-Man: Homecoming~~Star Wars: The Last Jedi,~~Despicable Me 3~~,~~Dunkirk~~The Greatest Showman and~~War for the Planet of the Apes~~Fifty Shades Freed. The film slate during the ~~third~~first quarter of fiscal ~~2017~~2018 was particularly weighted ~~more~~ towards strong blockbuster movies, as evidenced by the fact that our top five films during our fiscal ~~2017 third~~2018 first quarter accounted for ~~48%~~46% of our total box office results, compared to ~~42%~~37% for the top five films during the ~~third~~first quarter of fiscal ~~2016,~~2017, both expressed as a percentage of ~~our~~the total box office receipts for the period. ~~We believe this increase in~~This increased reliance on blockbuster ~~films was more an indication of the lesser quality of the other~~ films during the ~~quarter than~~fiscal 2018 period had the ~~quality~~effect of ~~the top five films. Our~~slightly increasing our film rental costs ~~decreased~~ during the ~~third quarter of fiscal 2017 compared to the third quarter of fiscal 2016,~~period, as generally the ~~worse~~better a particular film performs, the ~~lesser~~greater the film rental cost tends to be as a percentage of box office receipts.

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Film product for the ~~fourth~~second quarter of fiscal ~~2017~~2018 has, through the date of this report, produced box office results greater than the same period of fiscal ~~2016, and we believe we have returned to outperforming the industry during this period.~~2017. Top performing films during this period have includedItBlack Panther,~~Blade Runner 2049~~A Quiet Place,~~Happy Death Day~~,~~Thor: Ragnarok~~Rampage and~~A Bad Moms Christmas~~Avengers: Infinity War. ~~Film product~~Other films scheduled to be released during the ~~traditionally busy November and December time period appears quite promising, including films such as~~second quarter that may generate substantial box office interest include~~Murder on the Orient Express~~,~~Daddy’s Home~~Deadpool 2,~~Justice League~~Solo: A Star Wars Story,~~Coco~~Ocean’s 8,~~Star Wars: The Last Jedi~~,~~Pitch Perfect 3~~Incredibles 2 and~~Jumanji: Welcome~~Jurassic World: Fallen Kingdom. Compared to films released during the ~~Jungle~~.second quarter of fiscal 2017, we believe there is a strong likelihood that the fiscal 2018 second quarter films will outperform the 2017 films. 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 the current “windows” between the date a film is released in theatres and the date a motion picture is released to other channels, including video on-demand and DVD. These are factors over which we have no control.

We ended the first ~~three quarters~~quarter of fiscal 2017 with a total of 884 company-owned screens in 67 theatres and 11 managed screens in two theatres, compared to ~~659~~874 company-owned screens in 5166 theatres and 11 managed screens in two theatres at the end of the first three quarters of fiscal 2016. In addition to the previously described new theatres opened and acquired during 2016, in April 2017, we opened our new 10-screen Southbridge Crossing Cinema in Shakopee, Minnesota. This state-of-the-art theatre includes DreamLounger recliner seating in all auditoriums, two~~UltraScreen DLX auditoriums, as well as a~~~~Take Five Lounge~~ ~~and~~~~Zaffiro’s Express~~ ~~outlet. On June 30, 2017, the first day of our fiscal 2017 third quarter, we opened our first stand-alone all in-theatre dining location, branded~~~~BistroPlex~~ ~~and located in Greendale, Wisconsin. This new theatre features eight in-theatre dining auditoriums with DreamLounger recliners, including two~~~~Super~~~~Screen DLX auditoriums, plus a separate full-service~~~~Take Five Lounge~~~~. We have announced plans to further expand this concept, including a new location in Brookfield, Wisconsin. Construction is expected to begin on this new location in 2018.~~
During the first three quarters of fiscal 2017, we completed the addition of DreamLounger recliner seating at nine more existing theatres, including two theatres (one of which was a Marcus Wehrenberg theatre) completed late in our fiscal 2017 third quarter, increasing our industry-leading percentage of first-run auditoriums with recliner seating to 66% for legacy Marcus theatres and 56% when including the theatres we acquired in the Wehrenberg acquisition. In late October 2017, we completed the addition of DreamLounger recliner seating to four more existing theatres (including three Marcus Wehrenberg theatres) and we are currently in the process of converting two additional Marcus Wehrenberg theatres to all-DreamLounger recliner seating, with expected completion late in the fourth quarter of fiscal 2017 or early in the first quarter of fiscal 2018.
~~We opened one new~~~~Zaffiro’s Express~~~~outlet during the third quarter of fiscal 2017 and expect to open two new~~~~Zaffiro’s Express~~~~outlets, three new~~~~Take Five Lounge~~ ~~outlets and two~~~~Reel Sizzle~~ ~~outlets during the fourth~~ quarter of fiscal 2017. We ~~also converted one existing traditional~~~~Ultra~~~~Screen to an~~~~Ultra~~~~Screen DLX auditorium and three existing screens to~~~~Super~~~~Screen DLX auditoriums during the third quarter of fiscal~~opened a new 10-screen theatre in Shakopee, Minnesota in April 2017 and ~~converted one additional existing traditional~~a new eight-screen all in-theatre dining theatre, branded~~Ultra~~BistroPlex~~Screen to an~~~~Ultra~~~~Screen DLX auditorium and two existing screens to~~~~Super~~~~Screen DLX auditoriums early~~^SM, in ~~the fourth quarter of fiscal 2017. We expect to convert one existing Wehrenberg-branded PLF screen to an~~~~Ultra~~~~Screen DLX and up to six additional existing screens to~~~~Super~~~~Screen DLX auditoriums during the fourth quarter of fiscal~~Greendale, Wisconsin in late June 2017. We closed and sold one eight-screen budget-oriented theatre during the fiscal 2017 second quarter. OnWe converted one Marcus Wehrenberg theatre to all-DreamLounger recliner seating during the first ~~day~~quarter of fiscal 2018 and we are currently in the process of converting five more theatres to all-DreamLounger recliner seating, including one Marcus Wehrenberg theatre, with expected completion dates during the second and third quarters of fiscal 2018. We expect to open two newZaffiro’s Express outlets and one newTake Five Lounge outlet during the second quarter of fiscal 2018 and convert three existing screens toUltraScreen andSuperScreen DLX auditoriums during the second quarter of fiscal 2018 as well. We also expect to begin construction on our secondBistroPlex, to be located in Brookfield, Wisconsin, during fiscal ~~2017 third quarter, we converted an existing 12-screen first-run theatre to a budget-oriented theatre.~~2018.
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Hotels and Resorts

The following table sets forth revenues, operating ~~income~~loss and operating margin for our hotels and resorts division for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 and fiscal ~~2016~~2017 (in millions, except for variance percentage and operating margin):

Third Quarter First Three Quarters First Quarter
Variance Variance Variance
F2017 F2016 Amt. Pct. F2017 F2016 Amt. Pct. F2018 F2017 Amt. Pct.
Revenues $ 63.9 $ 62.6 $ 1.3 2.0 % $ 169.1 $ 165.9 $ 3.2 2.0 % $ 55.2 $ 53.3 $ 1.9 3.4 %
Operating income 9.6 10.6 (1.0 ) -9.3 % 12.7 15.1 (2.4 ) -15.8 %
Operating loss (2.6 ) (2.7 ) 0.1 1.0 %
Operating margin
(% of revenues) 15.1 % 17.0 % 7.5 % 9.1 % -4.8 % -5.0 %

~~Hotels~~The following table provides a further breakdown of the components of revenues for the hotels and resorts division ~~revenues increased 2.0% during~~for the ~~third~~first quarter of fiscal 2018 and fiscal 2017 ~~compared~~(in millions, except for variance percentage):
First Quarter
Variance
F2018 F2017 Amt. Pct.
Room Revenues $ 20.7 $ 20.9 $ (0.2 ) -1.3 %
Food and beverage revenues 15.8 15.0 0.8 5.1 %
Other revenues 11.4 10.5 0.9 8.8 %
47.9 46.4 1.5 3.1 %
Cost reimbursements 7.3 6.9 (0.4 ) 5.9 %
Total revenues $ 55.2 $ 53.3 $ 1.9 3.4 %
Our first quarter is typically the weakest quarter of our fiscal year for our hotels and resorts division due to the ~~third~~traditionally reduced level of travel at our predominantly Midwestern portfolio of owned properties. Division revenues increased during the first quarter of fiscal ~~2016 due primarily to increased food and beverage revenues from our new~~~~SafeHouse~~ restaurant and bar in Chicago, Illinois that we opened on March 1, 2017, and a small increase in room revenues at our existing company-owned hotels due to our addition of 29 new all-season villas at the Grand Geneva Resort & Spa in May 2017. Hotels and resorts division revenues increased 2.0% during the first three quarters of fiscal 20172018 compared to the first ~~three quarters~~quarter of fiscal ~~2016~~2017 due to increased food and beverage revenues ~~from the~~~~SafeHouse~~ ~~Chicago, increased room~~and other revenues at our ~~existing company-owned~~owned hotels and resorts and increased ~~other~~cost reimbursements from our managed hotels. Room revenues decreased during the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017 due to decreased revenue per available room, or RevPAR, partially offset by revenues from new villas opened during the second quarter of fiscal 2017 at the Grand Geneva Resort & Spa. Food and beverage revenues increased primarily due to ourSafeHouse® restaurant and bar in Chicago, Illinois, which opened relatively late in the first quarter of fiscal 2017 on March 1, 2017. Other revenues increased due in part to increases in ski revenues from our ~~EscapeHouse Chicago~~Grand Geneva Resort & Spa, as well as increased management fees and ~~our in-house web design and laundry businesses, partially offset by a small decrease~~rental income. Cost reimbursements, described above, also increased during the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017 due to an increase in the number of management ~~fee revenues.~~contracts in this division.

~~Hotels~~Our hotels and resorts division operating ~~income~~loss decreased ~~by 9.3%~~slightly and operating margin improved slightly during our fiscal 2018 first quarter compared to the ~~third~~first quarter of fiscal 2017 ~~compared~~due to the ~~third quarter of fiscal 2016 due primarily to~~increased revenues and the ~~impact of a small decrease in revenue per available room (RevPAR) at our existing company-owned hotels and start-up operating losses at our new~~~~SafeHouse~~ ~~Chicago. Hotels and resorts division operating income decreased by 15.8% during~~fact that the ~~first three quarters of fiscal 2017 compared to the first three quarters of fiscal 2016 due entirely to~~prior year results included preopening expenses and startup operating losses related to the newSafeHouse ~~Chicago and a reduction in profits from~~Chicago. Operating losses attributable specifically to our ~~management business, due in part to a small one-time favorable adjustment during the prior year period. Excluding these two items, operating income for our~~eight owned hotels and resorts ~~division~~increased slightly during the first ~~three quarters~~quarter of fiscal ~~2017 was essentially equal to operating income during the first three quarters of fiscal 2016.~~
Our operating margin during the third quarter and first three quarters of fiscal 2017 was 15.1% and 7.5%, respectively, compared to an operating margin of 17.0% and 9.1%, respectively, during the third quarter and first three quarters of fiscal 2016. Excluding the~~SafeHouse~~ Chicago and management business profits from both years, our comparable hotels and resorts division operating income decreased 5.5% and 0.8%, respectively, during the third quarter and first three quarters of fiscal 20172018 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal 2016. Excluding these same items, our operating margin during the third quarter and first three quarters of fiscal 2017 was 14.7% and 7.4%, respectively, compared to an operating margin of 15.6% and 7.6%, respectively, during the third quarter and first three quarters of fiscal 2016.
2017.
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The following table sets forth certain operating statistics for the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 and fiscal ~~2016,~~2017, including our average occupancy percentage (number of occupied rooms as a percentage of available rooms), our average daily room rate, or ADR, and our total revenue per available room, or RevPAR, for company-owned properties:

Third Quarter⁽¹⁾ First Three Quarters⁽¹⁾ First Quarter⁽¹⁾
Variance Variance Variance
F2017 F2016 Amt. Pct. F2017 F2016 Amt. Pct. F2018 F2017 Amt. Pct.
Occupancy pct. 82.0 % 82.1 % -0.1 pts -0.1 % 76.2 % 75.8 %       0.4 pts 0.5 %
Occupancy percentage 66.5 % 68.9 % -2.4 pts -3.5 %
ADR $ 164.47 $ 165.05 $ (0.58 ) -0.4 % $ 149.75 $ 149.80 $ (0.05 )       - % $ 127.47 $ 125.92 $ 1.55 1.2 %
RevPAR $ 134.85 $ 135.45 $ (0.60 ) -0.4 % $ 114.05 $ 113.53 $ 0.52 0.5 % $ 84.74 $ 86.80 $ (2.06 ) -2.4 %

(1) These operating statistics represent averages of our eight distinct ~~comparable~~ company-owned hotels and resorts, branded and unbranded, in different geographic markets with a wide range of individual hotel performance. The statistics are not necessarily representative of any particular hotel or resort.

RevPAR increased at ~~three~~four of our eight company-owned properties during the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2017~~2018 compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2016.~~2017. According to data received from Smith Travel Research and compiled by us in order to evaluate our ~~results for the third~~fiscal 2018 first quarter ~~and first three quarters of fiscal 2017,~~results, comparable “upper upscale” hotels throughout the United States experienced ~~a decrease~~an increase in RevPAR ~~of 0.4% during our fiscal 2017 third quarter and an increase~~ of 1.0% during our fiscal ~~2017~~2018 first ~~three quarters~~quarter compared to ~~our fiscal 2016 first three quarters.~~the same weeks last year. 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 a decrease in RevPAR of ~~4.8% and 4.2%, respectively,~~3.2% during our fiscal ~~2017 third quarter and~~2018 first ~~three quarters compared to our fiscal 2016 third quarter and first three quarters.~~quarter.

There were not any significant variations in our various customer segments during this traditionally slow time of year for us. Group business was up slightly overall, but the Milwaukee market saw a decrease due to the fact that last year the city had two major basketball tournaments in town in March – a men’s NCAA first and second round bracket and the women’s Big East tournament. We believe our RevPAR ~~decrease~~outperformance of our competitive sets during the ~~third~~first quarter of fiscal 2018 compared to the first quarter of fiscal 2017 was ~~due in large part to reduced group business compared to~~primarily the ~~third quarter~~result of fiscal 2016. A particular challenge during the fiscal 2017 third quarter was a decrease in group sales productivity in which an unusually high number of groups contributed less actual rooms sold than were originally booked. The reduction in group business during the fiscal 2017 periods also resulted in small decreases in our food and beverage revenues at comparable hotels compared the same periods in fiscal 2016. As noted above, despite these challenges in group business, our change in RevPAR outperformed our competitive sets during both the third quarter and first three quarters of fiscal 2017 by 4.4 and 4.7 percentage points, respectively, as we had success replacing some of the decline in group business with an increase in non-group business.
Looking to future periods, as of the date of this report, we are encouraged by the fact that our group room revenue bookings for the remaining period in fiscal 2017 and for fiscal 2018 - something commonly referred to in the hotels and resorts industry as “group pace” - is running ahead of our group room revenue bookings for future periods last year at this time. Banquet and catering revenue pace for the remainder of fiscal 2017 has also increased compared to last year at this time.
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Our ADR decreased during the third quarter of fiscal 2017 compared to the third quarter of fiscal 2016, despite our addition in May 2017 of 29 new all-season villas at the Grand Geneva Resort & Spa. These new higher-priced units contributed to an increase in our ADR ~~at that property. Due to the challenges in group productivity~~ during the fiscal 2017 third quarter, we elected to accept a lower ADR in some situations to obtain additional non-group business. Our very small decrease in ADR during the first three quarters of fiscal 2017 compared to the first three quarters of fiscal 2016 was due in part to2018 period, despite the fact that ~~during our fiscal 2017 first quarter, our focus was on increasing occupancy, often at the expense of ADR (it~~it is generally more difficult to increase ADR during our slower winter season, as overall occupancy is at its ~~lowest). Three~~lowest. Four of our eight company-owned hotels reported increased ADR during the ~~third~~fiscal 2018 first quarter ~~and first three quarters of fiscal 2017~~ compared to the ~~third~~first quarter ~~and first three quarters~~ of fiscal ~~2016.~~2017.
Looking to future periods, our company-owned hotels had a slightly above-average group booking period during the first quarter of fiscal 2018 and as of the date of this report, our group room revenue bookings for future periods in fiscal 2018 - commonly referred to in the hotels and resorts industry as “group pace” - is running slightly ahead of our group room revenue bookings for future periods last year at this time.

We generally expect our favorable revenue trends to continue ~~to expect to report changes~~ in ~~RevPAR that generally~~future periods and to track or exceed the overall industry ~~and local market~~ trends, particularly in ~~future periods. As we noted in prior~~our respective markets. Many published reports the pace of the lodging industry’s growth slowed during the second half of fiscal 2016. Group business remains one of the most important segments for several of our hotels and 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. Many reports published by those who closely follow the hotel industry, including Smith Travel Research, suggest that the United States lodging industry will continue to achieve ~~slightly slower~~slow but steady growth in RevPAR during the ~~remainder~~remaining periods of ~~calendar 2017~~2018. There also appears to be some improvement in sentiment regarding the positive impact that recent regulatory and ~~into calendar 2018.~~tax reforms are having on our business customers, which may result in increased business travel in the future. Whether the ~~current~~relatively positive trends in the ~~hotel~~lodging industry ~~as a whole~~over the last several years will continue depends in large part on the economic environment, ~~in which we operate,~~ 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 believe that our hotels and resorts division operating results will continue to benefit in future periods from the new villas at the Grand Geneva Resort & Spa.~~ In addition to the fact that we began managing the new Omaha Marriott Downtown at The Capitol District hotel in Omaha, Nebraska ~~a new hotel that we manage~~ and ~~in which we hold a minority interest, opened on August 8, 2017, and initial guest response to this hotel has been favorable. In addition, in September 2017, we assumed management of~~ the Sheraton Chapel Hill Hotel in Chapel Hill, North Carolina ~~which will favorably impact our revenues derived from management fees. Conversely, it is possible that our new~~~~SafeHouse~~ ~~Chicago restaurant may continue to have some negative impact on~~during the second half of fiscal 2017, our hotels and resorts division operating results ~~during~~should benefit in future periods from three new management contracts that we have recently obtained. In January 2018, we began management of the ~~next two quarters~~newly-opened Murieta Inn and Spa in Rancho Murieta, California. This 83-room boutique hotel is situated southeast of Sacramento among the foothills of the Sierra Nevada Range, and establishes a presence for the company in Northern California. In April 2018, we also announced that we began management of the DoubleTree by Hilton Hotel El Paso Downtown in El Paso, Texas, as ~~that new property continues~~well as the newly constructed Courtyard by Marriott El Paso Downtown/Convention Center, which we expect will open in June 2018. This will increase our portfolio to ~~increase patronage~~21 owned and ~~ramp up operating efficiencies.~~managed properties across the country.

~~Early in the second quarter of~~Conversely, during fiscal 2017, we ceased management of the Sheraton Madison Hotel in Madison, Wisconsin and sold our 15% minority ownership interest in the property for a small gain. We do not expect this transaction to significantly impact our fiscal 2017 operating results. Early in the fourth quarter of fiscal 2017, we ceased management of The Westin® Atlanta Perimeter North in Atlanta, Georgia ~~and sold our 11% minority interest in~~due to the ~~property for a substantial gain. Although the~~fact that each of these hotels was sold. The loss of these management ~~fees~~contracts will partially offset the benefits of the new management contracts described above. The timing and possible disruption of business from ~~this~~our planned renovations at the InterContinental Milwaukee hotel ~~will~~and the Hilton Madison at Monona Terrace may also have a slight negative impact on ~~future~~our operating results ~~we expect the gain from this transaction to positively impact pre-tax earnings by over $4.5 million~~of those two hotels during ~~the fourth quarter of~~ fiscal ~~2017.~~2018.
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We continue to explore opportunities to monetize ~~other~~ selected existing owned hotels in the future. We will consider many factors as we actively review opportunities to execute this strategy, including income tax considerations, the ability to retain management, pricing and individual market considerations. ~~Our execution~~Execution of this strategy is also dependent upon a favorable hotel transactional ~~market, over which we have limited control.~~market. In addition, we ~~have a number of~~continue to explore potential growth ~~opportunities that we are currently evaluating.~~opportunities. The timing and nature of the opportunities may vary and include pure management contracts, management contracts with equity, and joint venture investments.
In October 2017, Joe Khairallah submitted his resignation as division President and Chief Operating Officer of Marcus Hotels and Resorts to pursue global opportunities. We are grateful for his contributions to our company during the past four years. Greg Marcus will assume operational oversight of this division as we evaluate our future leadership needs, supported by a strong and experienced senior leadership team.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our movie theatre and hotels and resorts businesses each generate significant and consistent daily amounts of cash, subject to previously-noted seasonality, 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 approximately ~~$64~~$90 million of unused credit lines as of the end of our fiscal ~~2017 third~~2018 first quarter, will be adequate to support the ongoing operational liquidity needs of our businesses during the remainder of fiscal ~~2017.~~2018.

Financial Condition

Net cash provided by operating activities totaled ~~$50.9~~$12.0 million during the first ~~three quarters~~quarter of fiscal ~~2017,~~2018, compared to ~~$44.8~~$25.9 million during the first ~~three quarters~~quarter of the fiscal ~~2016.~~2017. The ~~increase of $6.1~~$13.9 million decrease in ~~net~~ cash provided by operating activities was due primarily to ~~increased net earnings and depreciation and amortization and~~ the ~~favorable~~unfavorable timing in the payment of accounts payable, ~~and~~ taxes other than income taxes and other accrued liabilities during the first quarter of fiscal 2018, partially offset by ~~the change in deferred taxes~~increased net earnings and the ~~unfavorable~~favorable timing in the collection of accounts and notes receivable and ~~in the~~ payment of accrued ~~compensation during the first three quarters of fiscal 2017.~~compensation.

Net cash used in investing activities during the first ~~three quarters~~quarter of fiscal ~~2017~~2018 totaled ~~$84.6~~$16.1 million, compared to ~~$40.3~~$21.8 million during the first ~~three quarters~~quarter of fiscal ~~2016. A significant contributor to the increase~~2017. The decrease in net cash used in investing activities was ~~a $12.5 million decrease in restricted cash~~primarily the result of decreased capital expenditures during the first ~~three quarters~~quarter of fiscal 2016. When we sold the Hotel Phillips in October 2015, the majority of the cash proceeds were held by an intermediary in conjunction with an anticipated Internal Revenue Code §1031 like-kind exchange whereby we planned2018 compared to ~~subsequently purchase other real estate in order to defer the related tax gain on sale of the hotel. During~~ the first ~~three quarters~~quarter of fiscal ~~2016, we successfully reinvested the proceeds in additional real estate within the prescribed time period and we received the cash held by the intermediary, thereby reducing restricted cash.~~
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The increase in net cash used in investing activities was also the result of an increase in capital expenditures, partially offset by an increase in net proceeds from disposals of property, equipment and other assets.2017. Total cash capital expenditures (including normal continuing capital maintenance and renovation projects) totaled ~~$87.3~~$16.0 million during the first ~~three quarters~~quarter of fiscal ~~2017~~2018 compared to ~~$58.1~~$22.2 million during the first ~~three quarters~~quarter of fiscal ~~2016.~~2017. Approximately ~~$23.5~~$8.5 million ~~and $17.1 million, respectively,~~ of our capital expenditures during the first ~~three quarters~~quarter of fiscal 2017 ~~and fiscal 2016~~ were related to ~~real estate purchases and~~the development of previously-described new ~~theatre development costs described above.~~theatres. We did not incur any acquisition-related capital expenditures during the first ~~three quarters~~quarter of fiscal ~~2017~~2018 or the first ~~three quarters~~quarter of fiscal ~~2016.~~2017.

Fiscal ~~2017~~2018 first ~~three quarters~~quarter cash capital expenditures included approximately ~~$69.5~~$13.8 million incurred in our theatre division, including costs associated with the addition of DreamLounger recliner seating, newUltraScreen andSuperScreen DLX auditoriums and newZaffiro’s Express andTake Five Lounge outlets to existing theatres. We also incurred capital expenditures in our hotels and resorts division during the first quarter of fiscal 2018 of approximately $2.2 million, consisting primarily of normal maintenance capital projects. Fiscal 2017 first quarter cash capital expenditures included approximately $15.8 million incurred in our theatre division, including previously-described new theatre development costs ~~described above~~ and costs associated with ~~our~~the addition of DreamLounger recliner seating,~~Ultra~~~~Screen DLX and~~SuperScreen DLX auditorium conversions and newZaffiro’s Express,~~Take Five Lounge~~ andReel Sizzle outlets to existing theatres. We also incurred capital expenditures in our hotels and resorts division during the first ~~three quarters~~quarter of fiscal 2017 of approximately ~~$17.5~~$6.2 million, including costs associated with the development of our newSafeHouse Chicago location ~~our~~and the development of new villas at the Grand Geneva Resort & ~~Spa described above and various maintenance capital projects at our owned hotels and resorts. Fiscal 2016 first three quarters~~Spa.
Net cash ~~capital expenditures included approximately $49.5 million incurred by our theatre division, including costs associated with our addition of DreamLounger recliner seating, new~~~~Ultra~~~~Screen DLX and~~~~Super~~~~Screen DLX auditoriums and new~~~~Zaffiro’s Express~~,~~Take Five Lounge~~ ~~and~~~~Reel Sizzle~~ ~~outlets to existing theatres, as well as new theatre costs noted above. We also incurred capital expenditures~~used in ~~our hotels and resorts division~~financing activities during the first ~~three quarters~~quarter of fiscal ~~2016 of approximately $8.4~~2018 totaled $3.2 million ~~including costs associated with the renovation of the~~~~SafeHouse~~ ~~Milwaukee and Skirvin Hilton.~~
~~Net~~compared to net cash provided by financing activities ~~during the first three quarters~~ of ~~fiscal 2017 totaled $37.0 million compared to net cash used in financing activities of $5.3~~$2.1 million during the first ~~three quarters~~quarter of fiscal ~~2016.~~2017. We used excess cash during both periods 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 ~~$254.0~~$49.0 million of new short-term borrowings and we made ~~$236.5~~$48.0 million of repayments on short-term borrowings during the first ~~three quarters~~quarter of fiscal ~~2017~~2018 (net increase in borrowings on our credit facility of ~~$17.5~~$1.0 million). In conjunction with the execution of a new credit agreement in June 2016, we also paid all outstanding borrowings under our old revolving credit facility and replaced them with borrowings under our new revolving credit facility during the first three quarters of fiscal 2016. As a result, we added $250.2 compared to $79.0 million of new short-term borrowings and ~~we made $191.2~~$114.0 million of repayments on short-term borrowings made during the first ~~three quarters~~quarter of fiscal ~~2016~~2017 (net ~~increase~~decrease in borrowings on our credit facility of ~~$59.0~~$35.0 million).
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We ~~received~~did not issue any new long-term debt during the first quarter of fiscal 2018. Conversely, proceeds from the issuance of long-term debt ~~totaling~~totaled $65.0 million during the first ~~three quarters~~quarter of fiscal 2017 ~~including~~and included the ~~proceeds from our~~ issuance of $50 million of senior ~~notes in February 2017.~~notes. In addition, we repaid a mortgage note that matured in January 2017 with a balance of $24.2 million as of December 29, 2016 during the first ~~three quarters~~quarter of fiscal 2017 and replaced it with borrowings under our revolving credit facility and the issuance of a $15.0 million mortgage note bearing interest at LIBOR plus 2.75%, requiring monthly principal and interest payments and maturing in fiscal 2020. ~~We made principal~~Principal payments on long-term debt ~~totaling $35.9~~were $24.4 million during the first ~~three quarters~~quarter of fiscal 2017 (including the mortgage note repayment described above) compared to payments of ~~$51.9 million~~only $173,000 during the first ~~three quarters~~quarter of fiscal ~~2016. Fiscal 2016 repayments included our repayment of a $37.2 million term loan from our prior credit agreement.~~2018. Our debt-to-capitalization ratio (excluding our capital lease obligations) was ~~0.44~~0.40 at ~~September~~March 29, 2018 and December 28, ~~2017 and 0.42 at December 29, 2016.~~2017.

We repurchased approximately ~~29,000~~15,000 shares of our common stock for approximately ~~$850,000~~$453,000 in conjunction with the exercise of stock options during the first ~~three quarters~~quarter of fiscal ~~2017,~~2018, compared to ~~331,000~~640 shares repurchased for approximately ~~$6.3 million in the open market or~~$20,000 in conjunction with the exercise of stock options during the first ~~three quarters~~quarter of fiscal ~~2016.~~2017. As of ~~September 28, 2017,~~March 29, 2018, approximately 2.9 million shares remained available for repurchase under prior Board of Directors repurchase authorizations. We expect that we will execute any future repurchases on the open market or in privately-negotiated transactions, depending upon a number of factors, including prevailing market conditions.

~~We made dividend~~Dividend payments during the first ~~three quarters~~quarter of fiscal ~~2017 totaling $10.1~~2018 totaled $4.1 million compared to dividend payments of ~~$9.0~~$3.4 million during the first ~~three quarters~~quarter of fiscal ~~2016.~~2017. The increase in dividend payments was the result of ~~an 11.1%~~a 20.0% increase in our regular quarterly dividend payment initiated in March ~~2017. During the first three quarters of fiscal 2016, we made distributions to noncontrolling interests of $448,000, compared to none during the first three quarters of fiscal 2017.~~2018.

We ~~believe~~previously indicated that we expected our ~~total~~full-year fiscal 2018 capital expenditures, ~~for fiscal 2017 will approximate $105-$115 million, barring our pursuance~~including potential purchases of interests in joint ventures (but excluding any ~~growth opportunities that could arise~~significant unidentified acquisitions), to be in the ~~remaining months~~$65-$80 million range. We are still finalizing the scope and ~~depending upon the~~ timing ~~of our payments on several~~ of the various projects ~~incurred~~requested by our two ~~divisions.~~divisions, but at this time, we are not adjusting this estimate. Some of ~~our payments on~~these projects ~~undertaken during fiscal 2017~~ may carry over to the next fiscal ~~2018.~~year. The actual timing and extent of the implementation of all of our current expansion plans will depend in large part on industry and general economic conditions, our financial performance and available capital, the competitive environment, evolving customer needs and trends, and the availability of attractive opportunities. It is likely that our plans will continue to evolve and change in response to these and other factors.

32
35

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have not experienced any material changes in our market risk exposures since December ~~29, 2016.~~28, 2017.

Item 4. Controls and Procedures

a. Evaluation of disclosure controls and procedures

Based on their evaluations and the evaluation of management, as of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

b. Changes in internal control over financial reporting

There were no significant changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15 of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1A. Risk Factors

Risk factors relating to us are contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December ~~29, 2016.~~28, 2017. No material change to such risk factors has occurred during the 3913 weeks ended ~~September 28, 2017.~~
March 29, 2018.
33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to purchases made by us or on our behalf of our Common Stock during the periods indicated. All of these repurchases were made in conjunction with the exercise of stock options ~~and/or~~and the purchase of shares in the open market and pursuant to the publicly announced repurchase authorization described below.

Period Total Number of
Shares
Purchased Average Price
Paid per Share Total Number of
Shares
Purchased as
Part of Publicly
Announced
Programs (1) Maximum
Number of
Shares that May
Yet be Purchased
Under the Plans
or Programs (1)
June 30 – July 27 1,532 $ 29.55 1,532 2,888,094
July 28 – August 31 — — — 2,888,094
September 1 – September 28 18,672 27.64 18,672 2,869,422
Total 20,204 $ 27.78 20,204 2,869,422
Period Total Number of
Shares
Purchased Average Price
Paid per Share Total Number of
Shares
Purchased as
Part of Publicly
Announced
Programs (1) Maximum
Number of
Shares that May
Yet be Purchased
Under the Plans
or Programs (1)
December 29 – January 25 — $ — — 2,869,422
January 26 – February 22 — — — 2,869,422
February 23 – March 29 15,018 30.14 15,018 2,854,404
Total 15,018 $ 30.14 15,018 2,854,404
(1) Through ~~September 28, 2017,~~March 29, 2018, our Board of Directors had authorized the repurchase of up to approximately 11.7 million shares of our outstanding Common Stock. 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. As of ~~September 28, 2017,~~March 29, 2018, we had repurchased approximately 8.8million shares of our Common Stock under these authorizations. The repurchased shares are held in our treasury pending potential future issuance in connection with employee benefit, option or stock ownership plans or other general corporate purposes. These authorizations do not have an expiration date.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 6. Exhibits

31.1 Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 Written Statement of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350.

101 The following materials from The Marcus Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September 28, 2017~~March 29, 2018 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Condensed Notes to Consolidated Financial Statements.
35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE MARCUS CORPORATION

DATE:  ~~November 7, 2017~~May 8, 2018 By: ~~/s/~~ /s/ Gregory S. Marcus
Gregory S. Marcus

President and Chief Executive Officer

DATE:  ~~November 7, 2017~~May 8, 2018 By: /s/ Douglas A. Neis
Douglas A. Neis

Chief Financial Officer and Treasurer

S-1

	Available for Sale Investments			Pension Obligation			Accumulated Other Comprehensive Loss

	(in thousands)
Balance at December 29, 2016	$	3		$	(5,069	)	$	(5,066	)
Change in unrealized gain on available for sale investments		(14	)		-			(14	)
Amortization of the net actuarial loss and prior service credit		-			161			161
Net other comprehensive income (loss)		(14	)		161			147
Balance at September 28, 2017	$	(11	)	$	(4,908	)	$	(4,919	)

	Swap Agreements			Available for Sale Investments			Pension Obligation			Accumulated Other Comprehensive Loss

	(in thousands)
Balance at December 31, 2015	$	9		$	(11	)	$	(5,219	)	$	(5,221	)
Amortization of the net actuarial loss and prior service credit		-			-			163			163
Other comprehensive loss before reclassifications		(143	)		-			-			(143	)
Amounts reclassified from accumulated other comprehensive loss⁽¹⁾		134			-			-			134
Net other comprehensive income (loss)		(9	)		-			163			154
Balance at September 29, 2016	$	-		$	(11	)	$	(5,056	)	$	(5,067	)

	Interest Rate Swaps			Available for Sale Investments			Pension Obligation			Accumulated Other Comprehensive Loss
	(in thousands)
Balance at December 28, 2017	$	-		$	(11	)	$	(7,414	)	$	(7,425	)
Amortization of the net actuarial loss and prior service credit		-			-			114			114
Other comprehensive loss before reclassifications		(170	)		-			-			(170	)
Amounts reclassified from accumulated other comprehensive loss		26	⁽¹⁾		11	⁽²⁾		-			37
Net other comprehensive income (loss)		(144	)		11			114			(19	)
Balance at March 29, 2018	$	(144	)	$	-		$	(7,300	)	$	(7,444	)

⁽¹⁾ Amount is included in interest expense in the consolidated statement of earnings.
⁽²⁾ Amount was reclassified to retained earnings on December 29, 2017 in connection with the Company’s adoption of ASU No. 2016-01.

				Available for Sale Investments			Pension Obligation			Accumulated Other Comprehensive Loss
				(in thousands)
Balance at December 29, 2016				$	3		$	(5,069	)	$	(5,066	)
Change in unrealized gain on available for sale investments					(14	)		-			(14	)
Amortization of the net actuarial loss and prior service credit					-			54			54
Net other comprehensive income (loss)					(14	)		54			40
Balance at March 30, 2017				$	(11	)	$	(5,015	)	$	(5,026	)

	13 Weeks Ended September 28, 2017		13 Weeks Ended September 29, 2016		39 Weeks Ended September 28, 2017		39 Weeks Ended September 29, 2016
									13 Weeks Ended March 29, 2018		13 Weeks Ended March 30, 2017
	(in thousands, except per share data)								(in thousands, except per share data)
Numerator:
Net earnings attributable to The Marcus Corporation	$	10,978	$	14,372	$	30,555	$	29,160	$	9,821	$	9,453
Denominator:
Denominator for basic EPS		27,825		27,574		27,773		27,522		27,895		27,708
Effect of dilutive employee stock options		525		427		637		343		539		675
Denominator for diluted EPS		28,350		28,001		28,410		27,865		28,434		28,383
Net earnings per share - basic:
Net earnings per share – basic:
Common Stock	$	0.41	$	0.54	$	1.14	$	1.09	$	0.36	$	0.35
Class B Common Stock	$	0.36	$	0.49	$	1.02	$	0.99	$	0.33	$	0.32
Net earnings per share - diluted:
Net earnings per share – diluted:
Common Stock	$	0.39	$	0.51	$	1.08	$	1.05	$	0.35	$	0.33
Class B Common Stock	$	0.37	$	0.48	$	1.01	$	0.98	$	0.32	$	0.31

	Total Shareholders’ Equity Attributable to The Marcus Corporation			Noncontrolling Interests			Total Shareholders’ Equity Attributable to The Marcus Corporation			Noncontrolling Interests
							(in thousands)
	(in thousands)
Balance at December 29, 2016	$	390,112		$	1,535
Balance at December 28, 2017							$	445,024		$	100
Net earnings attributable to The Marcus Corporation		30,555			–			9,821			-
Net loss attributable to noncontrolling interests		–			(495	)		-			(15	)
Distributions to noncontrolling interests								-			(19	)
Cash dividends		(10,122	)		–			(4,070	)		-
Exercise of stock options		2,083			–			929			-
Savings and profit sharing contribution		1,024			–			1,130			-
Treasury stock transactions, except for stock options		(463	)		–			(404	)		-
Share-based compensation		1,867			–			596			-
Other comprehensive income, net of tax		147			–
Balance at September 28, 2017	$	415,203		$	1,040
Cumulative effect of adopting ASU No. 2014-09								(3,513	)		-
Other comprehensive loss, net of tax								(30	)		-
Balance at March 29, 2018							$	449,483		$	66

	Reportable Segment
	Theatres		Hotels/Resorts		Corporate		Total
Theatre admissions	$	63,006	$	-	$	-	$	63,006
Rooms		-		20,671		-		20,671
Theatre concessions		41,413		-		-		41,413
Food and beverage		-		15,803		-		15,803
Other revenues⁽¹⁾		8,037		11,401		88		19,526
Cost reimbursements		479		7,293		-		7,772
Total revenues	$	112,935	$	55,168	$	88	$	168,191

	Balance at December 28, 2017		Cumulative Adjustment				Balance at December 29, 2017
	(in thousands)
Other accrued liabilities	$	53,291	$	3,296			$	56,587
Deferred compensation and other		56,662		217				56,879
Retained earnings		403,206		(3,513	)	��		399,693

	For the 13 weeks ended March 29, 2018
Statement of Earnings	As Reported		ASU No. 2014-09 Impact			Adjusted (1)
Revenues
Theatre admissions	$	63,006	$	(606	)	$	63,612
Theatre concessions		41,413		418			40,995
Food and beverage		15,803		(21	)		15,824
Other revenues		19,526		1,287			18,239
Total revenues		168,191		1,078			167,113

Costs and expenses
Theatre operations		54,655		154			54,501
Theatre concessions		11,961		139			11,822
Advertising and marketing		5,114		(490	)		5,604
Other operating expenses		8,756		1,202			7,554
Total costs and expenses		151,175		1,005			150,170

Operating income		17,016		73			16,943
Income taxes		3,421		19			3,402
Net earnings attributable to The Marcus Corporation		9,821		54			9,767

Balance Sheet
Other accrued liabilities		49,239		3,369			45,870
Total current liabilities		130,574		3,369			127,205
Deferred compensation and other		56,640		217			56,423
Retained Earnings		405,434		(3,586	)		409,020
Shareholders equity attributable to The Marcus Corporation		449,483		(3,586	)		453,069
Total equity		449,549		(3,586	)		453,135

13 Weeks Ended September 28, 2017	Theatres		Hotels/ Resorts		Corporate Items			Total
Revenues	$	89,773	$	63,895	$	150		$	153,818
Operating income (loss)		15,830		9,622		(4,017	)		21,435
Depreciation and amortization		8,399		4,512		82			12,993

13 Weeks Ended September 29, 2016	Theatres		Hotels/ Resorts		Corporate Items			Total
Revenues	$	81,921	$	62,613	$	161		$	144,695
Operating income (loss)		18,095		10,614		(4,026	)		24,683
Depreciation and amortization		6,228		4,158		88			10,474

39 Weeks Ended September 28, 2017	Theatres		Hotels/ Resorts		Corporate Items			Total
Revenues	$	294,977	$	169,138	$	432		$	464,547
Operating income (loss)		58,481		12,693		(12,973	)		58,201
Depreciation and amortization		24,000		13,270		274			37,544

39 Weeks Ended September 29, 2016	Theatres		Hotels/ Resorts		Corporate Items			Total
13 Weeks Ended March 29, 2018										Theatres		Hotels/ Resorts			Corporate Items			Total
Revenues(1)	$	238,837	$	165,880	$	400		$	405,117	$	112,935	$	55,168		$	88		$	168,191
Operating income (loss)		51,530		15,073		(12,313	)		54,290		23,983		(2,649	)		(4,318	)		17,016
Depreciation and amortization		18,175		12,582		268			31,025		9,228		4,590			86			13,904

13 Weeks Ended March 30, 2017										Theatres		Hotels/ Resorts			Corporate Items			Total
Revenues⁽¹⁾										$	112,006	$	53,340		$	110		$	165,456
Operating income (loss)											24,723		(2,675	)		(3,595	)		18,453
Depreciation and amortization											7,793		4,357			98			12,248

	Third Quarter												First Three Quarters												First Quarter
							Variance												Variance												Variance
	F2017			F2016			Amt.			Pct.			F2017			F2016			Amt.			Pct.			F2018			F2017			Amt.			Pct.
Revenues	$	153.8		$	144.7		$	9.1			6.3	%	$	464.5		$	405.1		$	59.4			14.7	%	$	168.2		$	165.5		$	2.7			1.7	%
Operating income		21.4			24.7			(3.3	)		-13.2	%		58.2			54.3			3.9			7.2	%		17.0			18.5			(1.5	)		-7.8	%
Other income (expense)		(3.7	)		(1.7	)		(2.0	)		-115.8	%		(9.6	)		(7.2	)		(2.4	)		-33.4	%		(3.8	)		(3.6	)		(0.2	)		-4.6	%
Net loss attributable to noncontrolling interests		(0.2	)		(0.1	)		(0.1	)		-33.3	%		(0.5	)		(0.3	)		(0.2	)		-75.5	%		-			(0.3	)		0.3			95.5	%
Net earnings attributable to The Marcus Corp.	$	11.0		$	14.4		$	(3.4	)		-23.6	%	$	30.6		$	29.2		$	1.4			4.8	%		9.8			9.5			0.3			3.9	%
Net earnings per common share – diluted:	$	0.39		$	0.51		$	(0.12	)		-23.5	%	$	1.08		$	1.05		$	0.03			2.9	%
Net earnings per common share - diluted																									$	0.35		$	0.33		$	0.02			6.1	%

	Third Quarter⁽¹⁾												First Three Quarters⁽¹⁾												First Quarter⁽¹⁾
							Variance												Variance												Variance
	F2017			F2016			Amt.			Pct.			F2017			F2016			Amt.			Pct.			F2018			F2017			Amt.			Pct.
Occupancy pct.		82.0	%		82.1	%		-0.1	pts		-0.1	%		76.2	%		75.8	%		0.4	pts		0.5	%
Occupancy percentage																										66.5	%		68.9	%		-2.4 pts			-3.5	%
ADR	$	164.47		$	165.05		$	(0.58	)		-0.4	%	$	149.75		$	149.80		$	(0.05	)		-	%	$	127.47		$	125.92		$	1.55			1.2	%
RevPAR	$	134.85		$	135.45		$	(0.60	)		-0.4	%	$	114.05		$	113.53		$	0.52			0.5	%	$	84.74		$	86.80		$	(2.06	)		-2.4	%

Period	Total Number of Shares Purchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (1)		Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs (1)
June 30 – July 27		1,532	$		29.55		1,532		2,888,094
July 28 – August 31		—			—		—		2,888,094
September 1 – September 28		18,672			27.64		18,672		2,869,422
Total		20,204	$		27.78		20,204		2,869,422

31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	Written Statement of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350.

101	The following materials from The Marcus Corporation’s Quarterly Report on Form 10-Q for the quarter ended ~~September 28, 2017~~March 29, 2018 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Condensed Notes to Consolidated Financial Statements.

DATE: ~~November 7, 2017~~May 8, 2018	By:	~~/s/~~ /s/ Gregory S. Marcus
		Gregory S. Marcus
		President and Chief Executive Officer

DATE: ~~November 7, 2017~~May 8, 2018	By:	/s/ Douglas A. Neis
		Douglas A. Neis
		Chief Financial Officer and Treasurer