THE MARCUS CORPORATION Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") 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 adverse effects of the
COVID-19 pandemic on our theatre and hotels and resorts businesses, results of
operations, liquidity, cash flows, financial condition, access to credit markets
and ability to service our existing and future indebtedness; (2) the duration of
the COVID-19 pandemic and related government restrictions and social distancing
requirements and the level of customer demand following the relaxation of such
requirements; (3) the availability, in terms of both quantity and audience
appeal, of motion pictures for our theatre division (particularly following the
COVID-19 pandemic, during which the production of new movie content temporarily
ceased and release dates for motion pictures have been postponed), 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; (4) the effects of adverse economic
conditions in our markets, including but not limited to, those caused by the
COVID-19 pandemic; (5) the effects of adverse economic conditions, including but
not limited to, those caused by the COVID-19 pandemic, on our ability to obtain
financing on reasonable and acceptable terms, if at all; (6) the effects on our
occupancy and room rates caused by the COVID-19 pandemic and the effects on our
occupancy and room rates of the relative industry supply of available rooms at
comparable lodging facilities in our markets once hotels and resorts have more
fully reopened; (7) the effects of competitive conditions in our markets; (8)
our ability to achieve expected benefits and performance from our strategic
initiatives and acquisitions; (9) 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 business; (10) the effects of weather conditions,
particularly during the winter in the Midwest and in our other markets; (11) our
ability to identify properties to acquire, develop and/or manage and the
continuing availability of funds for such development; (12) the adverse impact
on business and consumer spending on travel, leisure and entertainment resulting
from terrorist attacks in the United States , other incidents of violence in
public venues such as hotels and movie theatres or epidemics (such as the
COVID-19 pandemic); and (13) a disruption in our business and reputational and
economic risks associated with civil securities claims brought by shareholders.
These statements are not guarantees of future performance and are subject to
risks, uncertainties and other factors, including developments related to the
COVID-19 pandemic, some of which are beyond our control and difficult to predict
and could cause actual results to differ materially from those expressed or
forecasted in the forward-looking statements. Our forward-looking statements are
based upon our assumptions, which are based upon currently available
information, including assumptions about our ability to manage difficulties
associated with or related to the COVID-19 pandemic; the assumption that our
theatre closures, hotel closures and restaurant closures are not expected to be
permanent or to re-occur; the continued availability of our workforce; and the
temporary and long-term effects of the COVID-19 pandemic on our business.
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 2021 is a 52-week year beginning onJanuary 1, 2021 and ending onDecember 30, 2021 . Fiscal 2020 was a 53-week year that began onDecember 27, 2019 and ended on
December 31, 2020 . 23 Table of Contents We divide our fiscal year into three 13-week quarters and a final quarter consisting of 13 or 14 weeks. The third quarter of fiscal 2021 consisted of the 13-week period beginning onJuly 2, 2021 and ended onSeptember 30, 2021 . The third quarter of fiscal 2020 consisted of the 13-week period beginningJune 26, 2020 and ended onSeptember 24, 2020 . The first three quarters of fiscal 2021 consisted of the 39-week period beginning onJanuary 1, 2021 and ended onSeptember 30, 2021 . The first three quarters of fiscal 2020 consisted of the 39-week period beginningDecember 27, 2019 and ended onSeptember 24, 2020 . Our primary operations are reported in the following two business segments: movie theatres and hotels and resorts. For discussion regarding the impact of COVID-19 and related economic conditions on our results for the year endedDecember 31, 2020 , see "Part II-Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2020 Annual Report. For further discussion regarding the impacts of COVID-19 and related economic conditions on our results for the first three quarters of fiscal 2021 and potential future impacts, see immediately below, and also refer to the discussion of our operational risks and financial risks found in "Part II-Item 1A-Risk Factors" below, and "Part I-Item 1A-Risk Factors" in our 2020 Annual Report.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic has had an unprecedented impact on the world and both of our business segments. The situation continues to be volatile and the social and economic effects are widespread. As an operator of movie theatres, hotels and resorts, restaurants and bars, each of which consists of spaces where customers and guests gather in close proximity, our businesses are significantly impacted by protective actions that federal, state and local governments have taken to control the spread of the pandemic, and our customers' reactions or responses to such actions. These actions have included, among other things, declaring national and state emergencies, encouraging social distancing, restricting freedom of movement and congregation, mandating non-essential business closures, issuing curfews, limiting business capacity, mandating mask-wearing and issuing shelter-in-place, quarantine and stay-at-home orders. We began fiscal 2021 with approximately 52% of our theatres open. As state and local governments eased restrictions in several of our markets and movie studios released several new films, we gradually reopened theatres during fiscal 2021. We ended the fiscal 2021 third quarter with approximately 97% of our theatres open (including two theatres inLouisiana that have temporarily reclosed due to hurricane damage). The majority of our reopened theatres operated with reduced operating days (Fridays, Saturdays, Sundays and Tuesdays) and reduced operating hours during the fiscal 2021 first quarter. By the end ofMay 2021 , we had returned the vast majority of our theatres to normal operating days (seven days per week) and operating hours. During the first three quarters of fiscal 2021, all of our reopened theatres operated at significantly reduced attendance levels compared to prior pre-COVID-19 pandemic years due to customer concerns related to the COVID-19 pandemic and a reduction in the number of new films released. While still below pre-COVID-19 levels, attendance has gradually improved beginning inJune 2021 as the number of vaccinated individuals increased, more films were released, and customer willingness to return to movie theatres increased. We began fiscal 2021 with all eight of our company-owned hotels and all but one of our managed hotels open. The majority of our restaurants and bars in our hotels and resorts were open during the first three quarters of fiscal 2021, operating under applicable state and local restrictions and guidelines, and in some cases, reduced operating hours. The majority of our hotels and restaurants are generating reduced revenues as compared to prior pre-COVID-19 pandemic years, although hotel occupancy has been increasing throughout the fiscal 2021 year. We reopened one of our two SafeHouse® restaurants and bars inJune 2021 . Maintaining and protecting a strong balance sheet has always been a core philosophy ofThe Marcus Corporation during our 86-year history, and, despite the COVID-19 pandemic, our financial position remains strong. As ofSeptember 30, 2021 , we had a cash balance of approximately$9 million ,$188 million of availability under our$225 million revolving credit facility, and our debt-to-capitalization ratio (including short-term borrowings) was 0.40. With our strong liquidity position, combined with the expected receipt of additional state grants, income tax refunds and proceeds from the sale of surplus real estate (discussed below), we believe we are positioned to meet our obligations as they come due and continue to sustain our operations throughout fiscal 2021 and fiscal 2022, even if our properties continue to generate reduced revenues during these periods. We will continue to work to preserve cash and maintain strong liquidity to endure the impacts of the global pandemic, even if it continues for a prolonged period of time. Early in the third quarter of fiscal 2021, in conjunction with an amendment to our revolving credit agreement (described in detail in the Liquidity section below), we paid down a portion of our term loan facility using borrowings from our revolving credit facility, reducing the balance of our short-term borrowings from approximately$83.5 million to$50.0 million . In conjunction with the amendment, we extended the maturity date of the term loan facility toSeptember 22, 2022 . 24 Table of Contents Early in our first quarter of fiscal 2021, we received the remaining$5.9 million of requested tax refunds from our fiscal 2019 tax return. During the first quarter of fiscal 2021, we filed income tax refund claims of$24.2 million related to our fiscal 2020 tax return, with the primary benefit derived from net operating loss carrybacks to prior years. We received approximately$1.8 million of this refund inJuly 2021 . Significant delays in processing refunds by the Internal Revenue Service have delayed receipt of our remaining expected income tax refund. We anticipate receiving the remaining refund during the fourth quarter of fiscal 2021. We expect to generate additional income tax loss carryforwards during fiscal 2021 that will benefit future years. During the fourth quarter of fiscal 2020 and continuing into fiscal 2021, a number of states elected to provide grants to certain businesses most impacted by the COVID-19 pandemic, utilizing funds received by the applicable state under provisions of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act") or subsequent federal relief programs. We received$4.9 million of these prior year grants inJanuary 2021 . We were awarded and received an additional$1.3 million in theatre grants during the first quarter of fiscal 2021 and were awarded and received an additional$1.9 million in hotel grants during the third quarter of fiscal 2021, further contributing to our strong liquidity position as ofSeptember 30, 2021 . We have recently applied for additional state grants totaling approximately$4.6 million for theatres in two states that, if approved, would benefit our fiscal 2021fourth quarter. We also continue to pursue sales of surplus real estate and other non-core real estate to further enhance our liquidity. During the first quarter of fiscal 2021, we sold an equity interest in a joint venture, generating net proceeds of approximately$4.2 million . During the third quarter of fiscal 2021, we sold several land parcels, generating additional net proceeds of approximately$4.8 million . As ofSeptember 30, 2021 , we had letters of intent or contracts to sell several pieces of real estate with a total carrying value of$12.8 million , a significant portion of which we currently anticipate closing during the fiscal 2021 fourth quarter. We believe we may receive total sales proceeds from real estate sales during the next 12-15 months totaling approximately$15-30 million , depending upon demand for the real estate in question. We remain optimistic that the theatre industry is in the process of rebounding and will continue to benefit from pent-up social demand now that a greater percentage of the population is vaccinated, the majority of state and local restrictions have been lifted, and people seek togetherness with a return to normalcy. We still expect a return to "normalcy" to span multiple months driven by a continued increase in vaccinations and a gradual ramp-up of consumer comfort with public gatherings. The increase of the Delta variant of the disease has resulted in changing government guidance on indoor mask wearing in some communities, which has impacted consumer comfort in the near term. We expect that the approval of vaccines for children ages 5-11 may cause parents to feel more comfortable to visit a movie theatre, which would bolster the market for films aimed at children and families, a genre in which we have historically performed very well. We are very encouraged by the recent performance of multiple films released in September and October, including Shang-Chi and the Legend of the Ten Rings, a Marvel film released byDisney exclusively in movie theatres. Following up on the success of Shang-Chi and the Legend of the Ten Rings,Disney recently announced that all of its remaining films for 2021 would receive an exclusive theatrical window. Total theatre division revenues, expressed as a percentage of fiscal 2019 revenues, have increased in fiscal 2021 to date, including an increase from 16% inJanuary 2021 to 48% inJune 2021 , 55% inJuly 2021 , 63% inAugust 2021 and 60% inSeptember 2021 . Our relative performance compared to 2019 has improved further early in the fourth quarter of fiscal 2021. As described further below in the Theatres section, a significant number of films originally scheduled to be released during fiscal 2020 and the first half of fiscal 2021 were delayed until later in fiscal 2021 or fiscal 2022, further increasing the quality and quantity of films that we expect to be available during those future time periods. As we expected, the primary customer for hotels during the first three quarters of fiscal 2021 continued to come from the "drive-to leisure" market. Demand from this customer segment has exceeded our expectations. Most organizations implemented travel bans at the onset of the pandemic, only allowing essential travel. It is likely that business travel will continue to be limited in the near term, although we are beginning to experience some increases in travel from this customer segment. Total hotel division revenues, expressed as a percentage of fiscal 2019 revenues, have also increased throughout fiscal 2021 to date, including an increase from 49% inJanuary 2021 to 71% inJune 2021 , 90% inJuly 2021 , 85% inAugust 2021 and 97% inSeptember 2021 , with the most recent improvement coinciding with busy summer leisure travel and several demand-generating events in certain key markets. As of the date of this report, our group room revenue bookings for fiscal 2022 - commonly referred to in the hotels and resorts industry as "group pace" - is running approximately 20% behind where we were at the same time in fiscal 2019 (pre-pandemic), but that is an improvement from earlier in the fiscal year and we have experienced increased booking activity in recent months for fiscal 2022 and beyond. Banquet and catering revenue pace for fiscal 2022 is also running behind where we would typically be at this same time in prior years, but not as much as group room revenues, due in part to increases in wedding bookings. The future economic environment will also have a significant impact on the pace of our return to "normal" hotel operations. 25 Table of Contents Both of our operating divisions are experiencing challenges related to a labor shortage that has arisen as the country emerges from the pandemic. Difficulties in hiring new associates after significantly reducing staffing during the height of the COVID-19 pandemic may impact our ability to service our increasing customer counts in both theatres and hotels and may also increase labor costs in future periods. We cannot assure that the impact of the COVID-19 pandemic will not continue to have a material adverse effect on both our theatre and hotels and resorts businesses, results of operations, cash flows, financial condition, access to credit markets and ability to service our existing and future indebtedness.
Overall Results
The following table sets forth revenues, operating income (loss), other income
(expense), net earnings (loss) and net earnings (loss) per diluted common share
for the third quarter and first three quarters of fiscal 2021 and fiscal 2020
(in millions, except for per share and variance percentage data):
Third Quarter First Three Quarters
Variance Variance
F2021 F2020 Amt. Pct. F2021 F2020 Amt. Pct.
Revenues $ 145.9 $ 33.6 $ 112.3 334.2 % $ 289.2 $ 201.0 $ 88.2 43.9 %
Operating income (loss) 6.3 (48.0) 54.3 113.1 % (55.5) (123.2) 67.7 55.0 %
Other income (expense) (4.4) (6.0) 1.6 26.8 % (13.2) (13.6) 0.4 3.0 %
Net earnings (loss)
attributable to The Marcus
Corp. $ 1.8 $ (39.4) $ 41.2 104.5 % $ (49.7) $ (85.8) $ 36.1 42.0 %
Net earnings (loss) per common
share - diluted: $ 0.06 $ (1.30) $ 1.36 104.6 % $ (1.66) $ (2.84) $ 1.18 41.5 %
Revenues increased and operating income (loss), net earnings (loss) attributable
to The Marcus Corporation and net earnings (loss) per diluted common share
improved significantly during the third quarter and first three quarters of
fiscal 2021 compared to the third quarter and first three quarters of fiscal
2020. Increased revenues from both our theatre division and hotels and resorts
division contributed to the improvement during the fiscal 2021 periods compared
to the fiscal 2020 periods, during which the majority of our theatres and hotels
were closed for large portions of the second and third quarters due to the
impact of the COVID-19 pandemic. Our theatres and hotels were operating fairly
normally during the first two and one-half months of fiscal 2020 until the onset
of the pandemic in mid-March. Net loss attributable to The Marcus Corporation
and net loss per diluted common share during the first three quarters of fiscal
2020 were favorably impacted by a favorable income tax benefit described below.
Our operating income (loss) during the third quarter and first three quarters of
fiscal 2021 was favorably impacted by state government grants of approximately
$2.0 million and $3.3 million , respectively, or approximately $0.05 and $0.08
per diluted common share, respectively. Our operating loss during the first
three quarters of fiscal 2021 was negatively impacted by impairment charges of
approximately $3.7 million , or approximately $0.09 per diluted common share,
primarily related to surplus real estate that we intend to sell. Our operating
performance during the third quarter of fiscal 2020 was negatively impacted by
nonrecurring expenses totaling approximately $1.6 million , or approximately
$0.04 per diluted common share, including payments to and on behalf of laid off
employees. Nonrecurring expenses during the fiscal 2020 third quarter also
included extensive cleaning costs, supply purchases and employee training, among
other items, related to the reopening of selected theatre and hotel properties
and implementing new operating protocols. In addition, impairment charges
related to several theatre locations negatively impacted our fiscal 2020 third
quarter operating income by approximately $765,000 , or approximately $0.02 per
diluted common share. Our operating performance during the first three quarters
of fiscal 2020 was negatively impacted by nonrecurring expenses totaling
approximately $10.1 million , or approximately $0.23 per diluted common share,
related to the expenses in the third quarter described above and expenses
incurred (primarily payroll continuation payments to employees temporarily laid
off) due to the closing of all of our movie theatres and the majority of our
hotels and resorts during the last two weeks of the first quarter. In addition,
impairment charges related to intangible assets and several theatre locations
negatively impacted our fiscal 2020 first three quarters operating loss by
approximately $9.5 million , or approximately $0.22 per diluted common share.
26
Table of Contents
Operating losses from our corporate items, which include amounts not allocable
to the business segments, increased during the fiscal 2021 periods compared to
the fiscal 2020 periods due primarily to increased non-cash long-term incentive
compensation expenses and the fact that we reduced salaries and bonus accruals
during fiscal 2020 to preserve liquidity at the onset of the pandemic. Net
earnings (loss) attributable to The Marcus Corporation during the fiscal 2021
periods was negatively impacted by increased interest expense compared to the
fiscal 2020 periods, partially offset by gains on disposition of property,
equipment and other assets during the fiscal 2021 periods.
Our interest expense totaled $4.6 million for the third quarter of fiscal 2021
compared to $4.1 million for the third quarter of fiscal 2020, an increase of
approximately $500,000 , or 11.3%. Our interest expense totaled approximately
$14.4 million for the first three quarters of fiscal 2021 compared to
approximately $10.2 million for the first three quarters of fiscal 2020, an
increase of approximately $4.2 million , or 41.0%. The increase in interest
expense during the fiscal 2021 periods was due in part to increased borrowings
and an increase in our average interest rate. In addition, interest expense
increased during the third quarter and first three quarters of fiscal 2021 due
to the fact that we incurred approximately $540,000 and $1.8 million ,
respectively, in noncash amortization of debt issuance costs, compared to
approximately $510,000 and $666,000 of such costs during the third quarter and
first three quarters of fiscal 2020. On January 1, 2021 , we elected to early
adopt ASU No. 2020-06 (described in Note 1 of the condensed notes to our
consolidated financial statements), which resulted in the elimination of noncash
discount on convertible notes beginning with the first quarter of fiscal 2021.
Changes in our borrowing levels due to variations in our operating results,
capital expenditures, acquisition opportunities (or the lack thereof) and asset
sale proceeds, among other items, may impact, either favorably or unfavorably,
our actual reported interest expense in future periods, as may changes in
short-term interest rates.
We did not have any significant variations in investment income or other
expenses during the third quarter and first three quarters of fiscal 2021
compared to the third quarter and first three quarters of fiscal 2020. We
reported net gains on disposition of property, equipment and other assets of
$868,000 and $2.9 million , respectively, during the third quarter and first
three quarters of fiscal 2021, compared to small net losses on disposition of
property, equipment and other assets during the fiscal 2020 periods. The net
gain on disposition of property, equipment and other assets during the third
quarter of fiscal 2021 was due primarily to the sale of surplus land. The net
gain on disposition of property, equipment and other assets during the first
three quarters of fiscal 2021 included the sale of an equity investment in a
joint venture. The timing of periodic sales and disposals of our property,
equipment and other assets varies from quarter to quarter, resulting in
variations in our reported gains or losses on disposition of property, equipment
and other assets. We anticipate additional disposition gains or losses from
periodic sales of property, equipment and other assets during the fourth quarter
of fiscal 2021 and beyond.
Equity losses from unconsolidated joint ventures during the third quarter and
first three quarters of fiscal 2020 included an other-than-temporary impairment
loss of approximately $811,000 in which we determined that the fair value of our
equity method investment in a hotel joint venture was less than its carrying
value as of September 24, 2020 .
We reported income tax expense for the third quarter of fiscal 2021 of $150,000
and an income tax benefit for the first three quarters of fiscal 2021 of $18.9
million , compared to an income tax benefit of $14.5 million and $51.0 million ,
respectively, during the third quarter and first three quarters of fiscal 2020.
The larger income tax benefit during the fiscal 2020 periods was primarily the
result of the significant losses before income taxes incurred as a result of the
closing of the majority of our properties in March 2020 and the subsequent
reduction in our operating performance due to the COVID-19 pandemic. Our fiscal
2020 income tax benefit was also favorably impacted by an adjustment of
approximately $17.4 million , or approximately $0.56 per diluted common share,
resulting from several accounting method changes and the March 27, 2020 signing
of the CARES Act. One of the provisions of the CARES Act allowed our 2019 and
2020 taxable losses to be carried back to prior fiscal years during which the
federal income tax rate was 35% compared to the current statutory federal income
tax rate of 21%. Our fiscal 2021 first three quarters effective income tax rate
was 27.6%. Our fiscal 2020 first three quarters effective income tax rate was
37.3% and benefitted from the $17.6 million adjustment described above.
Excluding this favorable adjustment to income tax benefit, our effective income
tax rate during the first three quarters of fiscal 2020 was 24.5%. We anticipate
that our effective income tax rate for the remaining quarter of fiscal 2021 may
be in the 24-26% range, excluding any potential changes in federal or state
income tax rates or other one-time tax benefits. Our actual fiscal 2021
effective income tax rate may be different from our estimated quarterly rates
depending upon actual facts and circumstances.
The operating results of one majority-owned hotel, The Skirvin Hilton , are
included in the hotels and resorts division revenue and operating income during
the fiscal 2021 and fiscal 2020 periods, and the after-tax net earnings or loss
attributable to noncontrolling interests is deducted from or added to net
earnings on the consolidated statements of earnings. We reported a net loss
attributable to noncontrolling interests of $23,000 during the first three
quarters of fiscal 2020. As a result of the noncontrolling interest balance
reaching zero during fiscal 2020, we do not expect to report additional net
losses attributable to noncontrolling interests in future periods until the
hotel returns to profitability.
27
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Theatres
The following table sets forth revenues, operating loss and operating margin for
our theatre division for the third quarter and first three quarters of fiscal
2021 and fiscal 2020 (in millions, except for variance percentage and operating
margin):
Third Quarter First Three Quarters
Variance Variance
F2021 F2020 Amt. Pct. F2021 F2020 Amt. Pct.
Revenues $ 80.0 $ 7.4 $ 72.6 987.8 % $ 154.9 $ 118.4 $ 36.5 30.8 %
Operating loss (2.6) (37.2) 34.6 93.0 % (46.5) (78.8) 32.3 41.0 %Operating margin (% of revenues) (3.3) % N/A %
(30.0) % (66.5) %
Our theatre division revenues increased and operating loss decreased
significantly during the third quarter and first three quarters of fiscal 2021
compared to the third quarter and first three quarters of fiscal 2020 due
entirely to the fact that we temporary closed all of our theatres on March 17,
2020 in response to the COVID-19 pandemic. Other than six theatres that were
reopened during the last week of the fiscal 2020 second quarter and a phased
reopening of a larger portion of our theatre circuit in late August 2020 , all of
our theatres remained closed during the majority of the third quarter of fiscal
2020. Our theatres were operating fairly normally during the first two and
one-half months of fiscal 2020 until the onset of the pandemic in mid-March. We
began the first quarter of fiscal 2021 with approximately 52% of our theatres
open. As state and local restrictions were eased in several of our markets and
several new films were released by movie studios, we gradually reopened
theatres, ending the fiscal 2021 first quarter with approximately 74% of our
theatres open, ending the fiscal 2021 second quarter with approximately 95% of
our theatres open and ending the fiscal 2021 third quarter with approximately
97% of our theatres open (including two theatres in Louisiana that have
temporarily reclosed due to hurricane damage). The majority of our reopened
theatres operated with reduced operating days (Fridays, Saturdays, Sundays and
Tuesdays) and reduced operating hours during the fiscal 2021 first quarter. By
the end of May 2021 , we had returned the vast majority of our theatres to normal
operating days (seven days per week) and operating hours.
Our operating loss during the first three quarters of fiscal 2021 was negatively
impacted by impairment charges of approximately $3.7 million primarily related
to surplus real estate that we intend to sell. Conversely, a nonrecurring state
government grant of approximately $1.3 million favorably impacted our theatre
division operating loss during the first three quarters of fiscal 2021.
In addition to the impact of reduced attendance due to the theatre closings, our
theatre division operating loss during the third quarter and first three
quarters of fiscal 2020 was negatively impacted by nonrecurring expenses
totaling approximately $1.2 million and $4.6 million , respectively, related to
expenses incurred (primarily payroll continuation payments to employees
temporarily laid off) due to the closing of all of our movie theatres during the
fiscal 2020 periods and subsequent costs incurred in the second and third
quarters of fiscal 2020 for cleaning, supply purchases and employee training,
among other items, related to the reopening of our theatre properties and
implementing new operating protocols. Impairment charges related to intangible
assets and several theatre locations also negatively impacted our theatre
division third quarter and first three quarters of fiscal 2020 operating loss by
approximately $765,000 and $9.5 million , respectively.
The following table provides a further breakdown of the components of revenues for the theatre division for the third quarter and first three quarters of fiscal 2021 and fiscal 2020 (in millions, except for variance percentage):
Third Quarter First Three Quarters
Variance Variance
F2021 F2020 Amt. Pct. F2021 F2020 Amt. Pct.
Admission revenues $ 38.2 $ 3.1 $ 35.1 1,126.7 % $ 73.9 $ 58.7 $ 15.2 25.9 %
Concession revenues 36.0 3.3 32.7 1,008.6 % 68.9 50.3 18.6 37.1 %
Other revenues 5.8 0.9 4.9 520.3 % 12.0 9.1 2.9 30.4 %
80.0 7.3 72.7 996.6 % 154.8 118.1 36.7 31.0 %
Cost reimbursements - 0.1 (0.1) (98.3) % 0.1 0.3 (0.2) (68.1) % Total revenues$ 80.0 $ 7.4 $ 72.6 987.8 %$ 154.9 $ 118.4 $ 36.5 30.8 % 28 Table of Contents As described above, revenues were virtually non-existent during the second and third quarters of fiscal 2020 due to the temporary closing of all of our theatres onMarch 17, 2020 in response to the COVID-19 pandemic. Prior to reopening approximately 80% of our theatres during the final month of our fiscal 2020 third quarter for a very limited number of new films, the only revenues generated during the majority of the second and third quarters of fiscal 2020 were from the six theatres opened in June in order to begin testing our new operating protocols, as well as additional revenues from five parking lot cinemas opened during the quarter, curbside sales of popcorn, pizza and other food items and restaurant takeout sales from our three Zaffiro's restaurants and bars. As a result, we believe it is also beneficial to compare our revenues to pre-pandemic levels. The following table compares the components of revenues for the theatre division for the third quarter and first three quarters of fiscal 2021 to the third quarter and first three quarters of fiscal 2019 (in millions, except for variance percentage): Third Quarter First Three Quarters Variance Variance F2021 F2019 Amt. Pct. F2021 F2019 Amt. Pct. Admission revenues$ 38.2 $ 69.8 $ (31.6) (45.2) %$ 73.9 $ 211.8 $ (137.9) (65.1) % Concession revenues 36.0 57.0 (21.0) (37.0) % 68.9 172.1 (103.2) (60.0) % Other revenues 5.8 9.8 (4.0) (40.8) % 12.0 29.5 (17.5) (59.4) % 80.0 136.6 (56.6) (41.4) % 154.8 413.4 (258.6) (62.6) % Cost reimbursements - 0.2 (0.2) (79.7) % 0.1 0.7 (0.6) (86.5) % Total revenues$ 80.0 $ 136.8 $ (56.8) (41.5) %$ 154.9 $ 414.1 $ (259.2) (62.6) % According to data received from Comscore (a national box office reporting service for the theatre industry) and compiled by us to evaluate our fiscal 2021 third quarter and first three quarters results,U.S. box office receipts decreased 52.8% during our fiscal 2021 third quarter and 71.1% during our fiscal 2021 first three quarters compared to the same comparable weeks in fiscal 2019, indicating that our decrease in admission revenues during the third quarter of fiscal 2021 of 45.2% outperformed the industry by 7.6 percentage points. Our decrease in admission revenues during the first three quarters of fiscal 2021 of 65.1% outperformed the industry by 6.0 percentage points. Based upon this metric, we believe we have been one of the top performing theatre circuits during fiscal 2021 of the top 10 circuits in theU.S. Additional data received and compiled by us from Comscore indicates our admission revenues during the third quarter and first three quarters of fiscal 2021 represented approximately 3.5% and 3.6%, respectively, of the total admission revenues in theU.S. during the periods (commonly referred to as market share in our industry). This represents a notable increase over our reported market share of approximately 3.1% during the comparable fiscal 2019 periods, prior to the pandemic. Closed theatres in other markets in theU.S. partially contributed to our outperformance, particularly during the first quarter of fiscal 2021. Our goal is to continue our past pattern of outperforming the industry, but with the majority of our renovations now completed, our ability to do so in any given quarter will likely be partially dependent upon film mix, weather and the competitive landscape in our markets. Sales attributable to our Marcus Private Cinema ("MPC") program have exceeded expectations, partially offsetting reduced traditional attendance and contributing to our industry outperformance, particularly during the first quarter of fiscal 2021 when more governmental restrictions were in place and the vaccine rollout was in its early stages. Under this program, a guest may purchase an entire auditorium for up to 20 of his or her friends and family for a fixed charge, ranging from$99 to$179 (depending upon the film and number of weeks it has been in theatres). At its peak during the majority of the weeks during our fiscal 2021 first quarter, we averaged over 1,500 MPC events per week, accounting for approximately 21% of our admission revenues during those weeks. 29 Table of Contents Total theatre attendance increased significantly during the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020, when our theatres were primarily closed. Total theatre attendance increased 18.7% during the first three quarters of fiscal 2021 compared to the first three quarters of fiscal 2020, resulting in increases in both admission revenues and concession revenues. Conversely, a decrease in the number of new films, the lack of awareness of theatres being open (due in part to limited new film advertising), ongoing state and local capacity restrictions and customer concerns regarding visiting indoor businesses, all negatively impacted attendance during the third quarter and first three quarters of fiscal 2021 as compared to the same periods in fiscal 2019. As described above, attendance from MPC events (estimated to average 13 guests per event) partially offset the reduction in traditional movie going attendance, particularly during the fiscal 2021 first quarter. Our highest grossing films during the fiscal 2021 third quarter included Black Widow, Shang-Chi and the Legend of the Ten Rings, Jungle Cruise, Free Guy and Space Jam: A New Legacy. Three of these five films were released "day-and-date" on streaming services. We believe such "day-and-date" releases negatively impact theatrical revenues, particularly in week two and beyond of a films' release. We also believe "day-and-date" releases increase piracy, further impacting potential revenues. We believe our theatre circuit outperformed its historical market share on four of our top five films during the third quarter of fiscal 2021. In addition, we believe our overall admission revenue outperformed the industry due in part to the fact that we believe our theatre circuit outperformed its historical market share on the next tier of films (including all five of the films ranked six thru ten in admissions revenues during the fiscal 2021 third quarter). Due to the impact of two particularly strong blockbusters released during the third quarter of fiscal 2019 (Lion King, Spider-Man: Far From Home), the film slate during the third quarter of fiscal 2021 was weighted less towards our top movies compared to the third quarter of fiscal 2019, as evidenced by the fact that our top five films during our fiscal 2021 third quarter accounted for 49% of our total box office results, compared to 58% for the top five films during the third quarter of fiscal 2019 (prior to the pandemic), both expressed as a percentage of the total admission revenues for the period. A decreased reliance on just a few blockbuster films during a given quarter often has the effect of slightly reducing our film rental costs during the period, as generally the better a particular film performs, the greater the film rental cost tends to be as a percentage of box office receipts. As a result of a more balanced film slate and the fact that films released during the fiscal 2021 periods to date have not performed at pre-pandemic admission revenue levels, our overall film rental cost decreased during the fiscal 2021 periods compared to the same periods in prior years. Our average ticket price increased 6.1% during the first three quarters of fiscal 2021 compared to the first three quarters of fiscal 2020 and increased by 8.4% compared to the first three quarters of fiscal 2019 (comparisons to the third quarter of fiscal 2020 are not applicable because the majority of our theatres were closed during the third quarter of fiscal 2020). A larger proportion of admission revenues from our proprietary premium large format screens (with a higher ticket price) and the increase in MPC events contributed to the increase in our average ticket price during fiscal 2021 periods, partially offset by the fact that we continued to offer older "library" film product for only$5.00 per ticket during portions of the first half of fiscal 2021 when there was limited availability of new films. Our average concession revenues per person increased by 15.7% during the first three quarters of fiscal 2021 compared to the first three quarters of fiscal 2020 and increased by 24.0% compared to the first three quarters of fiscal 2019 (comparisons to the third quarter of fiscal 2020 are not applicable because the majority of our theatres were closed during the third quarter of fiscal 2020). As customers have returned to "normal" activities such as going to the movie theatre, they have demonstrated a propensity to spend at a higher rate than before the pandemic closures. In addition, a portion of the increase in our average concession revenues per person during the first three quarters of fiscal 2021 may be attributed to shorter lines at our concession stand due to reduced attendance (during periods of high attendance, some customers do not purchase concessions because the line is too long). We also believe that an increased percentage of customers buying their concessions in advance using our website, kiosk or our mobile app likely contributed to higher average concession revenues per person, as our experience has shown that customers are more likely to purchase more items when they order and pay electronically. We expect to continue to report increased average concession revenues per person in future periods, but whether our customers will continue to spend at these current significantly higher levels in future periods is currently unknown. Other revenues increased by approximately$2.9 million during the first three quarters of fiscal 2021 compared to the first three quarters of fiscal 2020 (comparisons to the third quarter of fiscal 2020 are not applicable because the majority of our theatres were closed during the majority of the third quarter of fiscal 2020). This increase was primarily due to the impact of increased attendance on internet surcharge ticketing fees and preshow advertising income. 30 Table of Contents The film product release schedule for the remainder of fiscal 2021, which had been changing in response to reduced near-term customer demand and changing state and local restrictions in various key markets in theU.S. and the world as a result of the ongoing COVID-19 pandemic, has solidified in recent months. With strong performances from several recent films, film studios have shown an increased willingness to begin releasing many of the new films that had previously been delayed. Several films that have contributed to our early fiscal 2021 fourth quarter results include Venom: Let There Be Carnage, The Addams Family 2, No Time to Die,Halloween Kills and Dune. New films scheduled to be released during the remainder of our fiscal 2021 fourth quarter include Eternals, Ghostbusters: Afterlife,King Richard , Encanto, West Side Story, Spider-Man: No Way Home, Sing 2, The King's Man and The Matrix Resurrections. We believe that with a greater percentage of the population now vaccinated, and assuming that concerns over the Delta variant or any new variants of COVID-19 do not result in significant new restrictions, demand for out-of-home entertainment will continue to increase during the remainder of fiscal 2021 and into fiscal 2022. The list of films currently scheduled for release during fiscal 2022 includes a significant number of familiar titles and franchises and appears quite strong. 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 appropriate "windows" between the date a film is released in theatres and the date a motion picture is released to other channels, including premium video-on-demand ("PVOD"), video on-demand ("VOD"), streaming services and DVD. These are factors over which we have no control. We currently believe that "day-and-date" film release experiments such as those tested by Warner Brothers andDisney during 2021 will not become the norm as the pandemic fully subsides. Warner Brothers has already indicated that it intends to return to an exclusive 45-day theatrical window with a significant number of its films during fiscal 2022. After the success of the exclusive theatrical release of Shang-Chi and the Legend of the Ten Rings,Disney announced that the remainder of its fiscal 2021 films would receive an exclusive theatrical window as well. We ended the first three quarters of fiscal 2021 with a total of 1,091 company-owned screens in 88 theatres, compared to 1,104 company-owned screens in 90 theatres and six managed screens in one theatre at the end of the first three quarters of fiscal 2020. Early in our fiscal 2021 third quarter, we ceased providing management services to the 6-screen managed theatre noted above. As of the date of this report, 85 of our 88 company-owned theatres have been reopened (including two theatres inLouisiana that have temporarily reclosed due to hurricane damage). Early in our fiscal 2021 fourth quarter, we made the decision to not reopen the remaining three closed theatres, consisting of one former budget-oriented theatre and twoMovie Tavern theatres with leases that will expire within the next year. One of the Marcus Wehrenberg theatres that we reopened inMay 2021 recently completed a renovation that added DreamLounger recliner seating, as well as Reel Sizzle® andTake FiveSM Lounge outlets,
to the theatre.Hotels and Resorts The following table sets forth revenues, operating income (loss) and operating margin for our hotels and resorts division for the third quarter and first three quarters of fiscal 2021 and fiscal 2020 (in millions, except for variance percentage and operating margin): Third Quarter First Three Quarters Variance Variance F2021 F2020 Amt. Pct. F2021 F2020 Amt. Pct. Revenues$ 65.8 $ 26.2 $ 39.6 151.4 %$ 134.1 $ 82.2 $ 51.9 63.0 % Operating income (loss) 13.5 (6.9) 20.4 294.3 % 5.5 (32.5) 38.0 117.0 %
Operating margin (% of revenues) 20.5 % (26.5) % 4.1 % (39.5) %
Our hotels and resorts division returned to profitability during the third quarter and first three quarters of fiscal 2021, reporting operating income compared to significant operating losses during the third quarter and first three quarters of fiscal 2020, due to significantly increased revenues during the fiscal 2021 periods. All of our company-owned hotels and resorts contributed to the improved operating results during the fiscal 2021 periods. Our fiscal 2021 third quarter operating income benefited from a state government grant totaling approximately$1.9 million . Our hotels and resorts division operating loss during the third quarter and first three quarters of fiscal 2020 was negatively impacted by nonrecurring expenses totaling approximately$443,000 and$5.5 million , respectively, related to costs associated with initially closing our hotels (primarily payments to and on behalf of laid off employees) and extensive cleaning costs, supply purchases and employee training, among other items, related to the reopening of selected hotel properties and implementing new operating protocols. 31 Table of Contents
The following table provides a further breakdown of the components of revenues for the hotels and resorts division for the third quarter and first three quarters of fiscal 2021 and fiscal 2020 (in millions, except for variance percentage):
Third Quarter First Three Quarters
Variance Variance
F2021 F2020 Amt. Pct. F2021 F2020 Amt. Pct.
Room revenues $ 30.9 $ 9.8 $ 21.1 216.4 % $ 57.3 $ 27.6 $ 29.7 107.4 %
Food/beverage revenues 16.7 5.4 11.3 208.7 % 32.2 19.6 12.6 64.3 %
Other revenues 13.3 7.8 5.5 69.7 % 33.0 21.4 11.6 54.4 %
60.9 23.0 37.9 164.7 % 122.5 68.6 53.9 78.6 %
Cost reimbursements 4.9 3.2 1.7 54.2 % 11.6 13.6 (2.0) (15.4) %
Total revenues $ 65.8 $ 26.2 $ 39.6 151.4 % $ 134.1 $ 82.2 $ 51.9 63.0 %
Division revenues increased significantly during the third quarter of fiscal
2021 compared to the third quarter of fiscal 2020 due to the fact that one of
our eight company-owned hotels and resorts was closed the entire third quarter
of fiscal 2020 (the Saint Kate ), three of our company-owned hotels were only
open for a portion of the prior year quarter (the Hilton Milwaukee City Center
Hotel , the Lincoln Marriott Cornhusker Hotel and the AC Hotel Chicago Downtown )
and all of our reopened hotels (including four hotels opened late in our fiscal
2020 second quarter - The Pfister Hotel , the Grand Geneva Resort & Spa , the
Skirvin Hilton and the Hilton Madison Monona Terrace ) were operating with
reduced occupancy rates due to the impact of the COVID-19 pandemic. In addition
to the increased revenues during the fiscal 2021 third quarter, hotels and
resorts division revenues also increased during the first three quarters of
fiscal 2021 compared to the first three quarters of fiscal 2020 due to the fact
that we closed five of our eight company-owned hotels and resorts on March 24,
2020 , and closed our remaining three company-owned hotels in early April 2020 ,
all as a result of extremely low occupancy rates and significant COVID-19
pandemic related cancellations. All eight of our company-owned hotels and all
but one of our managed hotels were open during our third quarter and first three
quarters of fiscal 2021. The majority of our restaurants and bars in our hotels
and resorts were open during the first three quarters of fiscal 2021, operating
under applicable state and local restrictions and guidelines, and, in some
cases, reduced operating hours. We reopened one of our two SafeHouse restaurants
and bars in June 2021 .
As a result of the significantly reduced revenues during our fiscal 2020
periods, we believe it is also beneficial to compare our revenues to
pre-pandemic levels. The following table compares the components of revenues for
the hotels and resorts division for the third quarter and first three quarters
of fiscal 2021 to the third quarter and first three quarters of fiscal 2019 (in
millions, except for variance percentage):
Third Quarter First Three Quarters
Variance Variance
F2021 F2019 Amt. Pct. F2021 F2019 Amt. Pct.
Room revenues $ 30.9 $ 34.2 $ (3.3) (9.6) % $ 57.3 $ 81.3 $ (24.0) (29.5) %
Food /beverage revenues 16.7 20.2 (3.5) (17.1) % 32.2 54.6 (22.4) (40.9) %
Other revenues 13.3 13.0 0.3 2.1 % 33.0 36.4 (3.4) (9.3) %
60.9 67.4 (6.5) (9.6) % 122.5 172.3 (49.8) (28.9) %
Cost reimbursements 4.9 7.2 (2.3) (32.3) % 11.6 27.3 (15.7) (57.8) %
Total revenues $ 65.8 $ 74.6 $ (8.8) (11.8) % $ 134.1 $ 199.6 $ (65.5) (32.8) %
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A decline in transient and group business contributed significantly to our reduced revenues during the third quarter and first three quarters of fiscal 2021 compared to the same periods of fiscal 2019. A decrease in group business subsequently led to a corresponding decrease in banquet and catering revenues, negatively impacting our reported food and beverage revenues compared to the same periods in fiscal 2019. Other revenues increased during the third quarter of fiscal 2021, with a lesser decrease relative to the decrease in room revenues and food and beverage revenues during the first three quarters of fiscal 2021 compared to the third quarter and first quarter of fiscal 2019, primarily due to increased revenues from one of our condominium hotels and increased ski and golf revenues at the Grand Geneva®Resort & Spa ("Grand Geneva"), partially offset by decreased management fees. Cost reimbursements decreased during the third quarter and first three quarters of fiscal 2021 compared to the third quarter and first three quarters of fiscal 2019 due to reduced revenues and subsequent operating costs at our managed hotels. The following table sets forth certain operating statistics for the third quarter and first three quarters of fiscal 2021 and fiscal 2020, 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) Variance Variance F2021 F2020 Amt. Pct. F2021 F2020 Amt. Pct. Occupancy pct. 64.9 % 36.6 % +28.3 pts 77.3 %
46.9 % 45.8 % 1.1 pts 2.4 % ADR$ 195.08 $ 163.04 $ 32.04 19.7 %$ 165.26 $ 140.23 $ 25.03 17.8 % RevPAR$ 126.54 $ 59.66 $ 66.88 112.1 %$ 77.46 $ 64.28 $ 13.18 20.5 % These operating statistics represent averages of our eight distinct
comparable company-owned hotels and resorts, branded and unbranded, in (1) different geographic markets with a wide range of individual hotel
performance. The statistics are not necessarily representative of any
particular hotel or resort. The statistics exclude days where individual
hotels may have been closed.
RevPAR increased at all eight of our company-owned properties during the third quarter of fiscal 2021 compared to the third quarter of fiscal 2020 and increased at seven of our eight company-owned properties during the first three quarters of fiscal 2021 compared to the first three quarters of fiscal 2020. The "drive-to leisure" travel customer provided the most demand during the fiscal 2021 periods, with weekend business quite strong at the majority of our properties. During the third quarter of fiscal 2021, our non-group business represented approximately 62% of our total rooms revenue, compared to approximately 55% during the third quarter of fiscal 2019 prior to the pandemic - an indication that group business continues to lag. Non-group retail pricing was very strong in the majority of our markets, with large demand drivers in ourMilwaukee market (Milwaukee Bucks playoffs, major league baseball, Summerfest and theRyder Cup ) and significant leisure demand at Grand Geneva contributing to increased occupancy percentages and ADR. As a result of the significantly reduced revenues during our fiscal 2020 periods, we believe it is also beneficial to compare our operating statistics to pre-pandemic levels. The following table sets forth certain operating statistics for the third quarter and first three quarters of fiscal 2021 and fiscal 2019, including our average occupancy percentage, our ADR, and our RevPAR, for company-owned properties: Third Quarter(1) First Three Quarters(1) Variance Variance F2021 F2019 Amt. Pct. F2021 F2019 Amt. Pct. Occupancy pct. 65.9 % 83.0 % (17.1) pts (20.6) % 48.6 % 75.2 % (26.6) pts (35.4) % ADR$ 189.82 $ 172.12 $ 17.70 10.3 %$ 161.49 $ 155.91 $ 5.58 3.6 % RevPAR$ 125.10 $ 142.84 $ (17.74) (12.4) %$ 78.45 $ 117.19 $ (38.74) (33.1) % These operating statistics represent averages of our seven distinct comparable company-owned hotels and resorts, branded and unbranded, in
different geographic markets with a wide range of individual hotel (1) performance. The statistics are not necessarily representative of any
particular hotel or resort. The statistics exclude days where individual
hotels may have been closed. The statistics for both the 2021 and 2019
periods exclude the Saint Kate, which was closed or had only recently
reopened during the majority of the fiscal 2019 periods presented.
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According to data received fromSmith Travel Research and compiled by us in order to evaluate our fiscal 2021 third quarter and first three quarters results, comparable "upper upscale" hotels throughoutthe United States experienced a decrease in RevPAR of 26.1% and 44.5%, respectively, during our fiscal 2021 third quarter and first three quarters compared to the same periods during fiscal 2019. Data received fromSmith 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 19.5% and 41.1%, respectively, during our fiscal 2021 third quarter and first three quarters, again compared to the same periods in fiscal 2019. Thus, we believe we outperformed the industry during the fiscal 2021 third quarter and first three quarters by approximately 14 and 11 percentage points, respectively. We also believe we outperformed our competitive sets during the fiscal 2021 third quarter and first three quarters by approximately 7 and 8 percentage points, respectively. Higher class segments of the hotel industry, such as luxury and upper upscale, continue to experience lower occupancies compared to lower class hotel segments such as economy and midscale. Looking to future periods, overall occupancy in theU.S. has slowly increased since the initial onset of the COVID-19 pandemic inMarch 2020 , reaching its highest level since the start of the pandemic in recent months. In the near term, we expect most demand will continue to come from the drive-to leisure segment. Leisure travel in our markets has a seasonal component to it, peaking in the summer months and slowing down as children return to school and the weather turns colder. Most organizations implemented travel bans at the onset of the pandemic and have generally only allowed essential travel, which will likely limit business travel in the near term, although we are beginning to experience some increases in travel from this customer segment. There also are indications that many of these travel bans are beginning to be lifted gradually. Our company-owned hotels have experienced a material decrease in group bookings compared to pre-pandemic periods. As of the date of this report, our group room revenue bookings for fiscal 2022 - commonly referred to in the hotels and resorts industry as "group pace" - is running approximately 20% behind where we were at the same time in fiscal 2019, but that is an improvement from recent quarters and we are experiencing increased booking activity for fiscal 2022 and beyond. Banquet and catering revenue pace for fiscal 2022 is also running behind where we would typically be at this same time of the year pre-pandemic, but not as much as group room revenues, due in part to increases in wedding bookings. Forecasting what future RevPAR growth or decline will be during the next 18 to 24 months is very difficult at this time. The non-group booking window remains very short, with most bookings occurring within three days of arrival, making even short-term forecasts of future RevPAR growth very difficult. Hotel revenues have historically tracked very closely with traditional macroeconomic statistics such as the Gross Domestic Product, so we will be monitoring the economic environment very closely. After past shocks to the system, such as the terrorist attacks onSeptember 11, 2001 and the 2008 financial crisis, hotel demand took longer to recover than other components of the economy. Conversely, we now anticipate that hotel supply growth will be limited for the foreseeable future, which can be beneficial for our existing hotels. Most industry experts believe the pace of recovery will be steady, but relatively slow. We are encouraged by the demand from drive-to leisure customers during the first three quarters of fiscal 2021, which exceeded our expectations. We will continue to focus on reaching the drive-to leisure market through aggressive campaigns promoting creative packages for our guests. Overall, we generally expect our revenue trends to track or exceed the overall industry trends for our segment of the industry, particularly in our respective markets. During the third quarter of fiscal 2021, we assumed management of theCoralville Hotel & Conference Center inCoralville, Iowa . Owned by theCity of Coralville , this 286-room hotel was recently rebranded under the Hyatt Regency brand asHyatt Regency Coralville Hotel & Conference Center . The property will undergo a phased renovation focusing on the restaurant and all hotel guest rooms. 34 Table of Contents Adjusted EBITDA
We present Adjusted EBITDA as a supplemental measure of our performance. We define Adjusted EBITDA as net earnings (loss) attributable toThe Marcus Corporation before investment income or loss, interest expense, other expense, gain or loss on disposition of property, equipment and other assets, equity earnings or losses from unconsolidated joint ventures, net earnings or losses attributable to noncontrolling interests, income taxes and depreciation and amortization, adjusted to eliminate the impact of certain items that we do not consider indicative of our core operating performance. These further adjustments are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same as or similar to some of the items eliminated in the adjustments made to determine Adjusted EBITDA, such as acquisition expenses, preopening expenses, accelerated depreciation, impairment charges and other adjustments. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. Definitions and calculations of Adjusted EBITDA differ among companies in our industries, and therefore Adjusted EBITDA disclosed by us may not be comparable to the measures disclosed by other companies. The following table sets forth our reconciliation of Adjusted EBITDA (in millions): Third Quarter First Three Quarters F2021 F2020 F2021 F2020 Net earnings (loss) attributable to The Marcus Corporation$ 1.8 $ (39.4) $ (49.7) $ (85.8) Add (deduct): Investment income - (0.1) (0.2) (0.2) Interest expense 4.6 4.1 14.3 10.2 Other expense 0.6 0.6 1.9 1.7 Loss (gain) on disposition of property, equipment and other assets (0.9) 0.2 (2.9) 0.3 Equity losses from unconsolidated joint ventures, net - 1.1 - 1.5 Net (earnings) loss attributable to noncontrolling interests - - - - Income tax expense (benefit) 0.2 (14.5) (18.9) (51.0) Depreciation and amortization 17.7 18.7 54.2 56.6
Share-based compensation expenses (1) 2.5 1.1 6.7 3.3 Property closure/reopening expenses - theatres (2) - 1.2 - 4.6 Property closure/reopening expenses - hotels and resorts (3) - 0.4 - 5.5 Impairment charges (4) - 0.8 3.7 9.5 Government grants (5) (2.0) - (3.3) - Total Adjusted EBITDA$ 24.5 $ (25.8) $ 5.8 $ (43.8) 35 Table of Contents
The following tables sets forth our reconciliation of Adjusted EBITDA by reportable operating segment (in millions):
Third Quarter, F2021 First Three Quarters, F2021
Hotels & Hotels &
Theatres Resorts Corp. Items Total Theatres Resorts Corp. Items Total Operating income (loss)
$ (2.6) $ 13.5 $
(4.6) 6.3
12.6 5.0 0.1 17.7 38.9 15.1 0.2 54.2
Share-based compensation (1) 0.7 0.4
1.4 2.5 1.7 1.3 3.7 6.7
Impairment charges (4) - - - - 3.7 - - 3.7
Government grants (5) (0.1) (1.9) - (2.0) (1.4) (1.9) - (3.3)
Total Adjusted EBITDA $ 10.6 $ 17.0 $ (3.1) 24.5 $ (3.6) $ 20.0 (10.6) 5.8
Third Quarter, F2020 First Three Quarters, F2020
Hotels & Hotels &
Theatres Resorts Corp. Items Total Theatres Resorts Corp. Items Total
Operating loss $ (37.2) $ (6.9) $
(3.9) (48.0)
13.4 5.2 0.1 18.7 40.3 16.0 0.3 56.6
Share-based compensation (1) 0.2 0.2 0.7 1.1 0.8 0.5 2.0 3.3
Property closure/reopening expenses (2) (3) 1.2 0.4
- 1.6 4.6 5.5 - 10.1
Impairment charges (4) 0.8 - - 0.8 9.5 - - 9.5
Total Adjusted EBITDA $ (21.6) $ (1.1) $ (3.1) (25.8) $ (23.6) $ (10.5) (9.7) (43.8)
(1) Non-cash expense related to share-based compensation programs.
Reflects nonrecurring costs related to the required closure of all of our (2) movie theatres due to the COVID-19 pandemic, plus subsequent nonrecurring
costs related to reopening theatres.
Reflects nonrecurring costs related to the closure of our hotels and resorts (3) due to reduced occupancy as a result of the COVID-19 pandemic, plus
subsequent nonrecurring costs related to reopening hotels.
Non-cash impairment charges related to surplus theatre real estate for the (4) fiscal 2021 periods and intangible assets (trade name) and several theatre
locations for the fiscal 2020 periods.
(5) Reflects nonrecurring state government grants awarded to our hotels and
theatres for COVID-19 pandemic relief.
The following table sets forth Adjusted EBITDA by reportable operating segment
for the third quarter and first three quarters of fiscal 2021 and fiscal 2020
(in millions, except for variance percentage):
Third Quarter First Three Quarters
Variance Variance
F2021 F2020 Amt. Pct. F2021 F2020 Amt. Pct.
Theatres $ 10.6 $ (21.6) $ 32.2 149.1 %
17.0 (1.1) 18.1 1,645.5 % 20.0 (10.5) 30.5 290.5 %
Corporate items (3.1) (3.1) - - % (10.6) (9.7) (0.9) (9.3) %
Total Adjusted EBITDA $ 24.5 $ (25.8) $ 50.3 195.0 % $ 5.8 $ (43.8) $ 49.6 113.2 %
Our theatre division returned to positive Adjusted EBITDA for the first time
since the start of the COVID-19 pandemic during the third quarter of fiscal 2021
due to increased attendance, increased revenues per person, and strong cost
controls, as described in the Theatres section above. Our hotels and resorts
division reported its second straight quarter with positive Adjusted EBITDA
during the third quarter of fiscal 2021 due to improved occupancy percentages
and ADR, and strong cost controls, as described in the Hotels and Resorts
section above. As a result, our third quarter of fiscal 2021 represented our
first quarter with consolidated positive Adjusted EBITDA since the start of
the
pandemic.
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Adjusted EBITDA is a measure used by management and our board of directors to assess our financial performance and enterprise value. We believe that Adjusted EBITDA is a useful measure for us and investors, as it eliminates certain expenses that are not indicative of our core operating performance and facilitates a comparison of our core operating performance on a consistent basis from period to period. We also use Adjusted EBITDA as a basis to determine certain annual cash bonuses and long-term incentive awards, to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other peer companies using similar measures. Adjusted EBITDA is also used by analysts, investors and other interested parties as a performance measure to evaluate industry competitors. Adjusted EBITDA is a non-GAAP measure of our financial performance and should not be considered as an alternative to net earnings (loss) as a measure of financial performance, or any other performance measure derived in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of liquidity or free cash flow for management's discretionary use. Adjusted EBITDA has its limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our movie theatre and hotels and resorts businesses, when open and operating normally, 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. Under normal circumstances, we believe that these relatively consistent and predictable cash sources, as well as the availability of unused credit lines, would be adequate to support the ongoing operational liquidity needs of our businesses. Maintaining and protecting a strong balance sheet has always been a core value ofThe Marcus Corporation during our 86-year history, and, despite the COVID-19 pandemic, our financial position remains strong. As ofSeptember 30, 2021 , we had a cash balance of approximately$9 million ,$188 million of availability under our$225 million revolving credit facility, and our debt-to-capitalization ratio (including short-term borrowings) was 0.40. With our strong liquidity position, combined with the expected receipt of additional state grants, income tax refunds and proceeds from the sale of surplus real estate (discussed above), we believe we are positioned to meet our obligations as they come due and continue to sustain our operations throughout fiscal 2021 and fiscal 2022, even if our properties continue to generate reduced revenues during these periods. We will continue to work to preserve cash and maintain strong liquidity to endure the impacts of the global pandemic, even if it continues for a prolonged period of time. Credit Agreement
OnJanuary 9, 2020 , we entered into a Credit Agreement with several banks, includingJPMorgan Chase Bank, N.A ., as Administrative Agent, andU.S. Bank National Association , as Syndication Agent. OnApril 29, 2020 , we entered into the First Amendment, onSeptember 15, 2020 we entered into the Second Amendment, and onJuly 13, 2021 , we entered into the Third Amendment (the Credit Agreement, as amended by the First Amendment, the Second Amendment and the Third Amendment, hereinafter referred to as the "Credit Agreement"). The Credit Agreement provides for a revolving credit facility that matures onJanuary 9, 2025 with an initial maximum aggregate amount of availability of$225 million . We may request an increase in the aggregate amount of availability under the Credit Agreement by an aggregate amount of up to$125 million by increasing the revolving credit facility or adding one or more tranches of term loans. Our ability to increase availability under the Credit Agreement is subject to certain conditions, including, among other things, the absence of any default or event of default or material adverse effect under the Credit Agreement. In conjunction with the First Amendment, we also added an initial$90.8 million term loan facility that was scheduled to mature onSeptember 22, 2021 . In conjunction with the Third Amendment entered into early in our fiscal 2021 third quarter, the term loan facility was reduced to$50.0 million and the maturity date was extended toSeptember 22, 2022 . Borrowings under the Credit Agreement generally bear interest at a variable rate equal to: (i) LIBOR, subject to a 1% floor, plus a specified margin based upon our consolidated debt to capitalization ratio as of the most recent determination date; or (ii) the base rate (which is the highest of (a) the prime rate, (b) the greater of the federal funds rate and the overnight bank funding rate plus 0.50% or (c) the sum of 1% plus one-month LIBOR), subject to a 1% floor, plus a specified margin based upon our consolidated debt to capitalization ratio as of the most recent determination date. In addition, the Credit Agreement generally requires us to pay a facility fee equal to 0.125% to 0.25% of the total revolving commitment, depending on our consolidated debt to capitalization ratio, as defined in the Credit Agreement. However, pursuant to the First Amendment and the Second Amendment: (A) in respect of revolving loans, (1) we are charged a facility fee equal to 0.40% of the total revolving credit facility commitment and (2) the specified margin is 2.35% for LIBOR 37
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borrowings and 1.35% for ABR borrowings, which facility fee rate and specified margins will remain in effect until the end of the first fiscal quarter ending after the end of any period in which any portion of the term loan facility remains outstanding or the testing of any financial covenant in the Credit Agreement is suspended (the "specified period"); and (B) in respect of term loans, the specified margin is 2.75% for LIBOR borrowings and 1.75% for ABR borrowings, in each case, at all times. The Credit Agreement contains various restrictions and covenants applicable to us and certain of our subsidiaries. Among other requirements, the Credit Agreement (a) limits the amount of priority debt (as defined in the Credit Agreement) held by our restricted subsidiaries to no more than 20% of our consolidated total capitalization (as defined in the Credit Agreement), (b) limits our permissible consolidated debt to capitalization ratio to a maximum of 0.55 to 1.0, (c) requires us to maintain a consolidated fixed charge coverage ratio of at least 3.0 to 1.0 as of the end of the fiscal quarter endingMarch 30, 2023 and each fiscal quarter thereafter, (d) restricts our ability and certain of our subsidiaries' ability to incur additional indebtedness, pay dividends and other distributions (the restriction on dividends and other distributions does not apply to subsidiaries), and make voluntary prepayments on or defeasance of our 4.02% Senior Notes dueAugust 2025 , 4.32% Senior Notes dueFebruary 2027 , the notes or certain other convertible securities, (e) requires our consolidated EBITDA not to be less than or equal to (i)$10 million as ofDecember 30, 2021 for the two consecutive fiscal quarters then ending, (ii)$25 million as ofMarch 31, 2022 for the three consecutive fiscal quarters then ending, (iii)$50 million as ofJune 30, 2022 for the four consecutive fiscal quarters then ending, (iv)$65 million as ofSeptember 29, 2022 for the four consecutive fiscal quarters then ending, or (v)$70 million as ofDecember 29, 2022 for the four consecutive fiscal quarters then ending, (f) requires our consolidated liquidity not to be less than or equal to (i)$100 million as ofSeptember 30, 2021 , (ii)$100 million as ofDecember 30, 2021 , (iii)$100 million as ofMarch 31, 2022 , (iv)$100 million as ofJune 30, 2022 , or (v)$50 million as of the end of any fiscal quarter thereafter until and including the fiscal quarter endingDecember 29, 2022 ; however, each such required minimum amount of consolidated liquidity would be reduced to$50 million for each such testing date if the initial term loans are paid in full as of such date, and (g) prohibits us and certain of our subsidiaries from incurring or making capital expenditures, in the aggregate for us and such subsidiaries, (i) during fiscal 2021 in excess of the sum of$40.0 million plus certain adjustments, or (ii) during our 2022 fiscal year in excess of$50 million plus certain adjustments. Pursuant to the Credit Agreement, we are required to apply net cash proceeds received from certain events, including certain asset dispositions, casualty losses, condemnations, equity issuances, capital contributions, and the incurrence of certain debt, to prepay outstanding term loans, with the exception that we are allowed to sell certain surplus real estate up to$29 million without prepaying the outstanding term loans. In addition, if, at any time during the specified period, we and certain of our subsidiaries' aggregate unrestricted cash on hand exceeds$75 million , the Credit Agreement requires us to prepay revolving loans under the Credit Agreement by the amount of such excess, without a corresponding reduction in the revolving commitments under the Credit Agreement. In connection with the Credit Agreement: (i) we and certain of our subsidiaries have pledged, subject to certain exceptions, security interests and liens in and on (a) substantially all of their respective personal property assets and (b) certain of their respective real property assets, in each case, to secure the Credit Agreement and related obligations; and (ii) certain of our subsidiaries have guaranteed our obligations under the Credit Agreement. The foregoing security interests, liens and guaranties will remain in effect until the Collateral Release Date (as defined in the Credit Agreement). The Credit Agreement contains customary events of default. If an event of default under the Credit Agreement occurs and is continuing, then, among other things, the lenders may declare any outstanding obligations under the Credit Agreement to be immediately due and payable and exercise rights and remedies against the pledged collateral.
4.02% Senior Notes and 4.32% Senior Notes
OnJune 27, 2013 , we entered into a Note Purchase Agreement (the "4.02% Senior Notes Agreement") with the several purchasers party to the 4.02% Senior Notes Agreement, pursuant to which we issued and sold$50 million in aggregate principal amount of our 4.02% Senior Notes dueAugust 14, 2025 (the "4.02% Notes") in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). We used the net proceeds from the issuance and sale of the 4.02% Notes to reduce existing borrowings under our revolving credit facility and for general corporate purposes. OnDecember 21, 2016 , we entered into a Note Purchase Agreement (the "4.32% Senior Notes Agreement") with the several purchasers party to the 4.32% Senior Notes Agreement, pursuant to which we issued and sold$50 million in aggregate principal amount of our 4.32% Senior Notes dueFebruary 22, 2027 (the "4.32% Notes" and the 4.02% Notes, are together referred to hereafter as the "Notes") in a private placement exempt from the registration requirements of the Securities Act. We used the net proceeds of the sale of the 4.32% Notes to repay outstanding indebtedness and for general corporate purposes. OnJuly 13, 2021 we entered into an amendment to the 4.02% Senior Notes Agreement (the "4.02% Fourth Amendment"). The 4.02% Senior Notes Agreement, as previously amended and as amended by the 4.02% Fourth Amendment, is hereafter referred to as the 38 Table of Contents
"Amended 4.02% Senior Notes Agreement." OnJuly 13, 2021 we entered into an amendment to the 4.32% Senior Notes Agreement (the "4.32% Fourth Amendment"). The 4.32% Senior Notes Agreement, as previously amended and as amended by the 4.32% Fourth Amendment, is hereafter referred to as the "Amended 4.32% Senior Notes Agreement." The Amended 4.02% Senior Notes Agreement and the Amended 4.32% Senior Notes Agreement are together referred to hereafter as the "Amended Senior Notes Agreements." Interest on the 4.02% Notes is payable semi-annually in arrears on the 14th day of February and August in each year and at maturity. Interest on the 4.32% Notes is payable semi-annually in arrears on the 22nd day of February and August in each year and at maturity. Beginning onAugust 14, 2021 and on the 14th day of August each year thereafter to and includingAugust 14, 2024 , we will be required to prepay$10 million of the principal amount of the 4.02% Notes. Additionally, we may make optional prepayments at any time upon prior notice of all or part of the Notes, subject to the payment of a make-whole amount (as defined in the Amended Senior Notes Agreements, as applicable). Furthermore, until the last day of the first fiscal quarter ending after the Collateral Release Date (as defined in the Amended Senior Notes Agreements, as applicable), we are required to pay a fee to each Note holder in an amount equal to 0.975% of the aggregate principal amount of Notes held by such holder. Such fee is payable quarterly (0.24375% of the aggregate principal amount of the Notes per quarter). The entire outstanding principal balance of the 4.32% Notes will be due and payable onFebruary 22, 2027 . The entire unpaid principal balance of the 4.02% Notes will be due and payable onAugust 14, 2025 . The Notes rank pari passu in right of payment with all of our other senior unsecured debt. The Amended Senior Notes Agreements contain various restrictions and covenants applicable to us and certain of our subsidiaries. Among other requirements, the Amended Senior Notes Agreements (a) limit the amount of priority debt held by us or by our restricted subsidiaries to 20% of our consolidated total capitalization, (b) limit our permissible consolidated debt to 65% of our consolidated total capitalization, (c) require us to maintain a consolidated fixed charge coverage ratio of at least 2.5 to 1.0 as of the end of the fiscal quarter endingMarch 30, 2023 and each fiscal quarter thereafter, (d) require our consolidated EBITDA not to be less than or equal to (i)$10 million as ofDecember 30, 2021 for the two consecutive fiscal quarters then ending, (ii)$25 million as ofMarch 31, 2022 for the three consecutive fiscal quarters then ending, (iii)$50 million as ofJune 30, 2022 for the four consecutive fiscal quarters then ending, (iv)$65 million as ofSeptember 29, 2022 for the four consecutive fiscal quarters then ending, or (v)$70 million as ofDecember 29, 2022 for the four consecutive fiscal quarters then ending, (e) require our consolidated liquidity not to be less than or equal to (i)$100 million as ofSeptember 30, 2021 , (ii)$100 million as ofDecember 30, 2021 , (iii)$100 million as ofMarch 31, 2022 , (iv)$100 million as ofJune 30, 2022 , or (v)$50 million as of the end of any fiscal quarter thereafter until and including the fiscal quarter endingDecember 29, 2022 ; however, each such required minimum amount of consolidated liquidity would be reduced to$50 million for each such testing date if the initial term loans under the Credit Agreement are paid in full as of such date, and (f) prohibit us and certain of our subsidiaries from incurring or making capital expenditures, in the aggregate for us and such subsidiaries, (i) during fiscal 2021 in excess of the sum of$40.0 million plus certain adjustments, or (ii) during our 2022 fiscal year in excess of$50 million plus certain adjustments. In connection with the Amended Senior Notes Agreements: (i) we and certain of our subsidiaries have pledged, subject to certain exceptions, security interests and liens in and on (a) substantially all of their respective personal property assets and (b) certain of their respective real property assets, in each case, to secure the Notes and related obligations; and (ii) certain subsidiaries of ours have guaranteed our obligations under the Amended Senior Notes Agreements and the Notes. The foregoing security interests, liens and guaranties will remain in effect until the Collateral Release Date. The Amended Senior Notes Agreements also contain customary events of default. If an event of default under the Amended Senior Notes Agreements occurs and is continuing, then, among other things, the purchasers may declare any outstanding obligations under the Amended Senior Notes Agreements and the Notes to be immediately due and payable and the Note holders may exercise their rights and remedies against the pledged collateral.
Summary
We believe that the actions we have taken over the past 19 months will allow us to have sufficient liquidity to meet our obligations as they come due and to comply with our debt covenants for at least 12 months from the issuance date of the consolidated financial statements. However, future compliance with our debt covenants could be impacted if we are unable to resume operations as currently expected, which could be impacted by matters that are not entirely in our control, such as the continuation of protective actions that federal, state and local governments have taken and the timing of new movie releases (as described in the Impact of the COVID-19 Pandemic section of this MD&A and in our Annual Report for the year endedDecember 31, 2020 ). Future compliance with our debt covenants could also be impacted if the speed of recovery of our theatres and hotels and resorts businesses is slower than currently expected. For example, our current expectations are that our theatre division will continue to improve during the fourth quarter of fiscal 2021 and into early fiscal 2022 (but still report results below comparable periods in fiscal 2019), before beginning to progressively return to closer-to-normal performance as fiscal 2022 progresses. Our current expectations for our hotels and resorts division are that we will continue to show improvement in each succeeding quarter compared to the prior year, but continue to underperform compared 39
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to pre-COVID-19 pandemic years. We do not expect to return to pre-COVID-19 occupancy levels during fiscal 2021, nor is it likely that we will fully return to those levels in fiscal 2022 due to an expected lag in business and group travel. It is possible that the impact of COVID-19 may be greater than currently expected across one or both of our divisions such that we may be unable to comply with our debt covenants in future periods. In such an event, we would either seek covenant waivers or attempt to amend our covenants, though there is no certainty that we would be successful in such efforts.
Financial Condition
Net cash provided by operating activities totaled$2.1 million during the first three quarters of fiscal 2021, compared to net cash used in operating activities of$80.6 million during the first three quarters of fiscal 2020. The$82.7 million increase in net cash provided by operating activities was due primarily to a reduced net loss and the favorable timing in the collection of government grant receivables, receipt of refundable income taxes and payment of accounts payable, accrued compensation and other accrued liabilities, partially offset by the unfavorable timing in the collection of accounts receivable during the first three quarters of fiscal 2021. Net cash provided by investing activities during the first three quarters of fiscal 2021 totaled$9.2 million , compared to net cash used in investing activities of$11.7 million during the first three quarters of fiscal 2020. The increase in net cash provided by investing activities of$20.9 million was primarily the result of a decrease in capital expenditures, the receipt of$9.2 million in proceeds from disposals of property, equipment and other assets during the first three quarters of fiscal 2021 and the receipt of$11.4 million in conjunction with payment of a split dollar life insurance policy receivable. Total cash capital expenditures (including normal continuing capital maintenance and renovation projects) totaled$9.1 million during the first three quarters of fiscal 2021 compared to$18.7 million during the first three quarters of fiscal 2020. Fiscal 2021 first three quarters cash capital expenditures included approximately$5.3 million incurred in our theatre division, including costs associated with the renovation of a theatre. We also incurred capital expenditures in our hotels and resorts division during the first three quarters of fiscal 2021 of approximately$3.8 million , including costs related to a lobby renovation at the Grand Geneva. Fiscal 2020 first three quarters cash capital expenditures included approximately$14.2 million incurred in our theatre division, including costs associated with the addition of four new screens, DreamLounger recliner seating and a SuperScreen DLX® auditorium at an existingMovie Tavern theatre and the addition of DreamLounger recliner seating to another existingMovie Tavern theatre. Also during the first three quarters of fiscal 2020, we began projects to add DreamLounger recliner seating, as well asReel Sizzle and Take Five Lounge outlets, to an existingMarcus Wehrenberg theatre. We also incurred capital expenditures in our hotels and resorts division during the first three quarters of fiscal 2020 of approximately$3.6 million , consisting primarily of normal maintenance capital projects. Net cash used in financing activities during the first three quarters of fiscal 2021 totaled$10.4 million compared to net cash provided by financing activities of$83.5 million during the first three quarters of fiscal 2020. During the first three quarters of fiscal 2021, we increased our borrowings under our revolving credit facility as needed to fund our cash needs and used excess cash to reduce our borrowings under our revolving credit facility. As short-term revolving credit facility borrowings became due, we replaced them as necessary with new short-term revolving credit facility borrowings. As a result, we added$128.5 million of new short-term revolving credit facility borrowings, and we made$95.5 million of repayments on short-term revolving credit facility borrowings during the first three quarters of fiscal 2021 (net increase in borrowings on our credit facility of$33.0 million ). The net increase in borrowings during the first three quarters of fiscal 2021 was used to repay$37.8 million of short-term borrowings, including the early repayment of a portion of our term loan facility, as described above. During the first quarter of fiscal 2020, at the onset of the pandemic, we drew down on the full amount available under our revolving credit facility (after taking into consideration outstanding letters of credit that reduce revolver availability). We also incurred$90.8 million of new short-term borrowings early in our fiscal 2020 second quarter and issued$100.05 million in convertible notes in our fiscal 2020 third quarter, the majority of which was used to repay existing borrowings under our revolving credit facility. Net cash provided by financing activities during the first three quarters of fiscal 2020 was reduced by$16.9 million of capped call transactions. As a result, we added$209.0 million of new short-term revolving credit facility borrowings, and we made$280.0 million of repayments on short-term revolving credit facility borrowings during the first three quarters of fiscal 2020 (net decrease in borrowings on our credit facility of$71.0 million ). We received$6.7 million in proceeds from borrowings against the cash surrender value of a life insurance policy during the first three quarters of fiscal 2021. We received Payroll Protection Program ("PPP") loan proceeds during the second quarter of fiscal 2020, the majority of which were used for qualifying expenses during such quarter that we believed would result in forgiveness of the loan under provisions of the CARES Act. During the third quarter of fiscal 2021, we received notification that qualifying expenses for all of our PPP loans were forgiven. The portion of the PPP loan proceeds that were not used for qualifying expenses totaling approximately$3.1 million contributed to the increase in net cash provided by financing activities during the first three quarters of fiscal 2020. Principal payments on long-term debt were approximately$10.3 million during the first three quarters of fiscal 2021, including a$10.0 million installment payment on senior notes, compared to payments of$9.4 million during the first three quarters of fiscal 2020, which included 40
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a$9.0 million final payment on senior notes that matured inApril 2020 . Our debt-to-capitalization ratio (including short-term borrowings but excluding our finance and operating lease obligations) was 0.40 atSeptember 30, 2021 , compared to 0.37 atDecember 31, 2020 . A change in the accounting for our convertible senior notes (described in Note 1 of the condensed notes to our consolidated financial statements included in this quarterly report on Form 10Q above) contributed to the increase in our debt-to-capitalization ratio. We repurchased approximately 62,000 shares of our common stock for approximately$1.3 million in conjunction with the exercise of stock options and the payment of income taxes on vested restricted stock during the first three quarters of fiscal 2021, compared to approximately 38,000 shares of our common stock for approximately$696,000 in conjunction with the payment of income taxes on vested restricted stock during the first three quarters of fiscal 2020. As ofSeptember 30, 2021 , approximately 2.7 million shares remained available for repurchase under prior Board of Directors repurchase authorizations. Under these authorizations, we may repurchase shares of our common stock from time to time in the open market, pursuant to privately-negotiated transactions or otherwise, depending upon a number of factors, including prevailing market conditions. We did not make any dividend payments during the first three quarters of fiscal 2021. Dividend payments during the first three quarters of fiscal 2020 totaled$5.1 million . Our Credit Agreement, as recently amended, requires us to temporarily suspend our quarterly dividend payments and prohibits us from repurchasing shares of our common stock in the open market for the remainder of fiscal 2021. The Credit Agreement also limits the total amount of quarterly dividend payments or share repurchases during the four subsequent quarters beginning with the first quarter of fiscal 2022 to no more than$1.55 million per quarter, unless we are in compliance with prior financial covenants under the Credit Agreement (specifically, the consolidated fixed charge coverage ratio), at which point we have the ability to declare quarterly dividend payments and/or repurchase shares of our common stock in the open market as we deem appropriate.
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