Marcus Corp (MCS) 2006 Q4 法說會逐字稿

Good day everyone and welcome to The Marcus Fourth Quarter Earnings Call. Today's call is being recorded. Joining us today are Chairman and Chief Executive Officer, Mr. Steve Marcus; and Chief Financial Officer, Mr. Doug Neis. At this time, I would like to turn the call over to Mr. Doug Neis. Please go ahead sir.

Thanks very much and welcome everybody to our fiscal 2006 fourth quarter and year-end conference call. As usual, I need to begin by stating that we plan on making a number of forward-looking statements on our call today. Our forward-looking statements could include, but not be limited, to statements about our future revenue and earnings expectations; our future RevPAR, occupancy rates and room rate expectations for our hotels and resorts division; expectations about the quality, quantity and audience appeal of film products expected to be made available to us in the future; our expectations about the future trends in the business, group and leisure travel industry and in our markets; our expectations and plans regarding growth in the number and type of our properties and facilities; our expectations regarding the various non-operating line items on our earnings statement; and our expectations regarding future capital expenditures.

Of course our actual results could differ materially from those projected or suggested by our forward-looking statements. Factors, risks and uncertainties, which could impact our ability to achieve our expectations, are included in the Risk Factors section of our Form S-3 shelf registration statement dated August 15, 2001, and 10-K and 10-Q filings which can be obtained from the SEC or the company.

We will also post all Regulation G disclosures when applicable on our website at www.marcuscorp.com. So, with that behind us, let's talk about our fiscal 2006 fourth quarter and year-end results.

We're pleased to be reporting our fourth straight quarter with increased earnings from continuing operations and our third straight quarter with an overall increase in operating income, with this quarter being the best yet with a 63% increase in operating income.

Before I get into the operating results though, let me first address the basis for the presentation of the numbers. Several variations in below the line operating income line type items versus last year, as well as the possibilities for some of these items being -- for some of these items during our upcoming fiscal 2007.

Now the first important item to note is the fact that we are once again required to restate our financial statements in order to reflect the recent transaction. As announced in late June and noted again in our today's press release, we recently sold the remaining inventory of our Marcus Vacation Club, vacation ownership development, which is located on the grounds of our Grand Geneva Resort, the Orange Lake Resort & Country Club of Orlando, Florida. The assets sold consisted primarily of real estate and development costs. Orange Lake acquired the remaining 34 units of the 136 unit Marcus Vacation Club property, effectively taking us out of the timeshare sales business. Thus, this business has been reclassified as discontinued operations, and our prior year results have been restated to reflect the current year presentation.

Our hotels and resorts division will continue to provide management services for this property and we will also continue to hold notes receivable [for higher] buyers of timeshare units. With just one vacation ownership development in our portfolio, it made sense for us to affiliate with an industry leader that has extensive experience in marketing and selling the vacation ownership product. It also made sense for us to continue to do what we do best, which is to provide management and hospitality services. The reality is that we've lost money in this component of our business over the last couple of years. This transaction will have a positive overall impact on our bottom line. So with that let's talk about these below the line type items first.

The first item to note is the decrease in investment income, which as expected is the result of the payment of our $7 special dividend on February 24, the first day of our fourth quarter. The total distribution was about $214.6 million and we ended the fiscal year with approximately $35 million of cash on our balance sheet. So, we still have investment income from the remaining cash generally invested in short-term tax-free instruments.

For the fiscal year, we obviously had a significant amount of investment income from this pre-dividend cash, which accounts for our lower than usual effective income tax rate for the quarter and the year. As you expect, our fiscal 2007 investment income will clearly be significantly less than this past year.

Interest expense continues to be down slightly from the prior year as we pay the current maturities of our senior notes, partially offset by interest expense on our Chicago hotel loan. We do not expect our interest expense to change substantially during fiscal 2007, other than as a result of our additional payments of scheduled current maturities of our long-term debt.

One item to note on that topic is that you'll see that our current maturities on our balance sheet total approximately 53 million, which is significantly higher than our normal levels. The reason for that is we have a separate mortgage note on our Chicago hotel that has an initial maturity date that if not extended, would result in the entire $25 million balance being due in our fiscal 2007 second quarter.

We currently anticipate extending the maturity date of this note, which would put that amount back on our long-term debt line. Our overall debt-to-capitalization ratio at the end of the year was approximately 37%, up from where we were prior to the special dividend, of course, but still substantially below our historic levels.

Moving on to our fourth quarter, it was one of those quarters where we have a significant difference between the gain, or in this case loss, on disposition of property and equipment reported this year versus the prior year. And as you've heard me say many times before, with a large amount of real estate and other fixed assets in this company, it's not unusual for us to sell assets, most often for a net gain.

The timing of these periodic sales, however, can vary from quarter to quarter and often result in noticeable swings in this line item. This particular quarter, the swing was $0.03 per share, so it was noticeable and partially offset the significant increases in operating income that we reported during the quarter.

These fourth quarter losses were the result really of two items -- the closing of our basement restaurant in our Pfister Hotel as we prepare for the opening of a brand new signature restaurant that's currently under construction on the first floor, and the replacement of bed linens as a result of a significant upgrade program at four of our hotels. As a result, for the entire fiscal 2006, our reported gains from sales of assets for continuing operations were down approximately $450,000 compared to fiscal 2005.

We are actively attempting to sell additional non-core property and equipment, and we believe that additional gains will likely be recognized during the coming fiscal year. In fact, it is possible that we may be reporting significant gains during fiscal 2007 or beyond from the intended sale of two valuable theatre parcels in conjunction with our building of a nearby replacement theatre in Brookfield, Wisconsin.

A new line item to talk about in our earnings statement is labeled, net equity losses from unconsolidated joint ventures. As you may know, we currently hold investments in several joint ventures that are accounted for under the equity method. Equity gains and losses from unconsolidated joint ventures were previously included elsewhere on our consolidated statement of earnings, but because they have become more significant in total and because we have indicated that it's our intention to add additional joint ventures as we grow our hotels and resorts division, we reported these equity gains and losses as a separate line item on our consolidated statement of earnings during fiscal 2006. Prior year results have been restated to conform to the current year presentation.

During fiscal 2006, we reported net equity losses from unconsolidated joint ventures of $1.9 million compared to net equity losses of $1.1 million during the prior fiscal year. Losses during the fiscal 2006, and we have addressed these in the past, were primarily the result of pre-opening costs from our 50% ownership interest in Platinum Condominium Development, LLC, which is developing a luxury condominium hotel in Las Vegas, Nevada; and operating losses from our minority ownership interest in Cinema Screen Media, which is a cinema advertising company that provides pre-show entertainment on our screens and over 3,000 screens nationwide.

Primarily as a result of our expectation that the Las Vegas Platinum Hotel will open around September 2006, we do not expect to incur the same level of equity losses during fiscal 2007. In fact, upon completion of construction and the expected closing of the condominium unit sales, our hotels and resorts division will share in any development profit on the project.

We currently estimate that our 50% share of the development profit may be recognized during predominantly the first half of fiscal 2007 depending on when all the various units close, and may be up to approximately $5 to $7 million after all units have closed, net of some expected additional pre-opening expenses. The division will then manage the hotel for a fee and share in any joint venture earnings on the commercial areas such as the restaurant, spa and bar.

Our effective income tax rate for continuing operations during 2006 was 31.7%, which is significantly lower than our fiscal 2005 effective rate of 37.5 and our historical 39% to 40% range. This was primarily due to the previously described investments in those tax-exempt short-term financial instruments.

A majority of the cash and cash equivalent funds remaining after our dividend will likely continue to be invested in these types of instruments until they are needed to meet our cash requirements. These types of instruments will continue to favorably impact our effective income tax rate then during fiscal 2007, but not to the same extent obviously as in 2006, because the invested amount will be much lower.

However, having said that, in 2007 our effective income tax rate will be favorably impacted by federal and state net historic tax credits of over $6 million related to our Oklahoma City project. As a result, assuming that the Hilton Skirvin renovation is completed during fiscal 2007 as planned, we currently anticipate that our fiscal 2007 effective income tax rate may be less than 30%.

Shifting gears, our total CapEx during fiscal 2006, including our $23.5 million acquisition of the Wyndham Milwaukee Center and our $16.3 million acquisition of the Columbus Westin, totaled approximately $75 million, compared to 63 million last year. In addition to the Wyndham and Westin acquisitions, another $26 million of that total was incurred in our hotel division, meaning that that division's total amount spent was approximately 66 million for the year, with the largest non-acquisition amounts related to the completion of our new Chicago Hotel, the start of construction on the Oklahoma City hotel and several projects at our Grand Geneva.

Fiscal 2006 theatre[m1] division capital expenditures totaled approximately 8 million, and included a parking garage at one of our Chicago theatres, some Project 2010 renovation costs and the beginning of construction on new theatres in Green Bay and Racine, Wisconsin. Not included in my $75 million capital expenditure number in fiscal 2006 are additional investments in joint ventures during the year that totaled about just under $4 million, the majority of which relates to our investment in the Las Vegas condo hotel project.

As we look ahead, for capital expenditures in fiscal 2007, we are currently estimating that our fiscal 2007 expenditures may exceed $100 million, with the increased capital spending funded by the remaining proceeds from the sale of our limited service lodging division, as well as additional proceeds from the expected sale of existing assets and specific project related financing.

We currently anticipate fiscal '07 capital expenditures in our theatre division to be about $35 to $40 million with the majority related to the completion of the three new theatres that are currently under construction. Those theatres, again, include a 13-screen theatre in Sturtevant, Wisconsin, Sturtevant/Racine market, which will include our seventh UltraScreen, and that will replace two smaller theatres for the same number of screens in the Racine, Wisconsin, area.

A new 12-screen theatre in Green Bay will eventually replace an existing eight-screen theatre in that same city, and then finally, a flagship 16-screen theatre in Brookfield, Wisconsin, that I have mentioned earlier, will replace two smaller existing theatres that currently have 17 screens.

Our fiscal '07 capital plans for our hotels and resorts division include several projects at our flagship Pfister Hotel and at the Grand Geneva Resort & Spa, as well as major renovations at our newly acquired Wyndham Milwaukee Center and Westin Columbus Hotels. Including the renovation costs related to the Hilton Skirvin, which will be financed primarily by additional contributions from Oklahoma City and separate non-recourse project debt, we could see our fiscal 2007 hotels and resorts CapEx being approximately $60 to $70 million. We will, of course, monitor this closely as we have in the past and we will adjust our plans when we feel necessary in response to current conditions. The actual timing on some of these investments is yet to be finalized, which could alter the final reported CapEx for fiscal 2007 one way or another.

Now, before I turn the call over to Steve, let me give you a couple of additional financial comments on each division, including discontinued operations. In our theatre division, as you saw, our box office revenues were up 3% during the quarter, with concession revenues up 5.3%. The strength of the quarter was a six-week stretch beginning in April when our box office averaged double-digit increases compared to the prior year.

Total attendance increased 4.3% for the quarter, and our average admission price was actually down 1.3% due to selected regional price promotions and film mix. Our average concession revenues per person were up 1% compared to last year, due in large part to the fact that several of this year's fourth quarter top films were a little less kid and family friendly, such as Da Vinci Code and Mission Impossible III.

Pricing and movie mix are the two primary factors that impact our concession per capita numbers. On a year-to-date basis, our attendance ended up down 4.2% compared to last year, thanks to the very disappointing summer last year, with our average admission price up 1.7% and our average concession revenues per person up 4.2%.

Our operating margins were up nicely during the quarter, but remained down versus last year on a year-to-date basis, as would be expected given the reduced overall attendance. Year-to-date our overall operating margin for this division was still a very healthy 22.2%, but that compares to 23.3 the year before, with the impact of our fixed expenses on decreased revenues accounting for the entire change.

Film costs as a percentage of box-office and concession costs as a percentage of concession revenues continue to be down compared to the prior year. I will say that our fiscal 2006 operating income and margin were negatively impacted by a one-time charge of about $500,000 related to a minor restructuring of our admin and theatre supervision organization and a one-time impairment charge of approximately $500,000 recorded during our fourth quarter, related to theatres scheduled to close during fiscal 2007.

In our hotel and resort division, our overall hotel revenues from continuing operations were up 23.7% during the quarter and 21.8% for the year compared to the same period last year; of course, these increases do include our three newest hotels, the Wyndham, the Four Points and the Westin Columbus, and exclude of course the now sold Miramonte Resort and Marcus Vacation Club.

As our press release noted, our RevPAR for comparable properties increased a solid 6.8% for the year, including 0.8% during our fourth quarter, which was hampered by some difficult comparisons in a couple of our hotels. Our fiscal year RevPAR increases have come from both increased occupancy, which was up 1.7% overall for the year -- 1.7 percentage points overall for the year; and increased average daily rate, or ADR, which was up 4.1% for the year. For the quarter, our ADR was up 6%.

The increased overall revenues during the quarter translated into significantly increased fourth quarter operating income due to the impact of our new hotels and very strong cost controls. Our Chicago hotel in particular have contributed significantly to the year-over-year improvement this quarter due to the fact that last year during the fourth quarter we were incurring sizeable pre-opening costs.

Our fiscal year operating income and margin improved in spite of over $500,000 of pre-opening expenses this year related to our Oklahoma City project, and this project will continue to negatively impact our operating results during fiscal 2007 prior to its planned opening for the final quarter. But once completed, we expect this hotel to contribute very positively to fiscal 2008 and beyond operating results.

Then finally, in discontinued operations just for one second, in addition to the -- now including the results from our timesharing operations in discontinued operations, we did report another gain on sale during the quarter, this time primarily related to adjusting our effective income tax rate on the sale of the limited-service lodging division as we prepared and filed our final tax returns for that transaction.

So, with that I will now turn the call over to Steve for additional comments.

Thanks very much, Doug. I will start my comments by -- my remarks by commenting on our theatre division. After all the negative press related to this business, it's certainly encouraging to be reporting increased operating income for a second straight quarter after a well documented five straight quarters of decreased results.

In fact, as our press release noted, we actually reported increased overall operating income for the last three quarters of our fiscal year after dealing with a very difficult first quarter last year that saw attendance decrease nearly 14% compared to the summer before. And those last three quarters' results include the approximately $1 million of one-time charges recorded during the last half of the year that Doug referenced earlier.

So, clearly these results plus the results from our current fiscal 2007 first quarter to date mentioned in our press release certainly seem to indicate that -- once again that when offered a good variety of quality movies, the customer will respond. While the industry continues to face many old and new challenges, the likes of which we have discussed in previous calls, there is a sense of cautious optimism once again prevailing in the industry.

It's amazing what a talking car, a man flying around in tights and a cape and a couple of pirates can do. Recognizing that we can't control the movies that Hollywood produces, we continue to focus on the things we can control, which include providing the best out-of-home entertainment experience that we can for the best possible value. Our current plans include a modest number of screen additions and new builds with a current emphasis on replacing and enhancing existing theatres.

Doug addressed our stepped-up capital spending earlier with the majority of the dollars related to the three new theatres currently under construction. While each of these theatres should provide enhanced long-term earnings opportunities in their respective markets compared to the theatres that they are replacing, I want to spend a moment focusing on one of those three theatres, the new flagship theatre we are building in Brookfield, Wisconsin.

Our earnings release touched on some of the key features of this facility, and an earlier press release described the theatre in even more detail. We've been in this business for over 70 years now, and if we have learned one thing, it's that it's constantly changing and evolving, and that you never can stand still. The business has evolved from single-screen theatres and outdoors, to multiplexes and then megaplexes with stadium seating.

A few years ago we introduced our UltraScreen concept, providing a movie-going experience that can't be duplicated, making those screens the place to see the major event motion pictures. We think the new Majestic Theatre currently under construction, takes movie theatres to yet another level, combining not one, but two UltraScreens with 13 other state-of-the-art theatres, a multi-use auditorium that provides the opportunity to offer other forms of entertainment, enhanced food and beverage options, and other features and amenities typically not associated with movie theatres in this area at least. We certainly believe that we are introducing an entertainment destination that will further define and enhance the customer value proposition for movie-going in the future.

Another area where you can't stand still is in technology. Over the years, we've seen the advent of digital sound in our theatres and the expansion of the use of the Internet as a means to deliver both information and ticketing to our customers. Now, as you know, the industry is in the early stages of introducing digital projection systems to our theatres.

Since we last talked, we recently began testing digital cinema hardware and software in some of our theatres. We're learning a lot, including the fact there's still a lot of work to be done before a major rollout of this equipment can occur. There are still many details to be decided related to the best financial model for a rollout as well, but progress is being made slowly but surely. We would expect testing to continue through the good portion of our current fiscal year 2007.

Ultimately, the potential goal is to deliver an improved film presentation to our customers, as well as the potential development of additional strategies to maximize the opportunities for alternate programming that may be available to us with this technology. We will proceed cautiously, and as you have heard us correctly predict in the past, the industry rollout will inevitably take longer than some may have you believe; but make no mistake about it, digital cinema is on its way.

So as I said earlier, we will continue to focus on the things we can control, but as always our future improved performance requires consistent quantity and quality of film product. It is always difficult to look ahead as inevitably some of the pictures you think will do well disappoint, and other pictures seem to come out of nowhere and do very well. So far, thanks in large part to Pirates of the Caribbean, we are ahead of last year at the box office. The press release lists a couple of upcoming late summer films. Hopefully, one or more of those will perform better than last year's films, or maybe other August pictures such as World Trade Center, Accepted or Invincible will do well.

September will be the slowest month of the year, like it always is. And then we will head into the fall and the pre-Thanksgiving releases, where there is typically a good quantity of films that will be released. We'll undoubtedly have some strong comparisons when we go up against the release of Harry Potter and The Chronicles of Narnia in November and December, seeing that those two pictures were our top performing films last year. But who knows, holiday pictures such as Casino Royale, a James Bond picture; Mel Gibson's Apocalypto, Eragon, A Night at the Museum might do well.

I really would look further ahead than that, but I do have to mention that we will likely end fiscal 2007 on a high note for a couple of reasons. First of all, our fiscal 2007 will be a 53-week year for us. As you know, every six years, we have an extra week in our fourth quarter, and fiscal 2007 will definitely benefit pro ratably as a result.

Our theatre division will particularly benefit, however, because this extra weekend will be Memorial Day weekend, which is typically a very strong movie-going weekend. Then on top of that, Pirates of the Caribbean 3 is currently scheduled to be released that weekend. When you combine that development with the fact that Spider-Man 3 and Shrek the Third are also currently scheduled to be released during May 2007, you can see why I would say that we may have a pretty strong year end to our fiscal year in 2007.

But let's not get ahead of ourselves. We will continue to take a long term focused approach to our business, and deal with the challenges and opportunities that lie ahead both tomorrow and in the months and years ahead. With that let's turn our attention to the hotels and resorts division.

Our hotel division and the hotel industry in general continues to experience solid improvement, resulting in our increased overall results for both the fourth quarter and the year. As Doug noted, given our relatively small hotel portfolio, startup and pre-opening costs of new properties can and will negatively impact us from time to time. In fiscal 2007 we'll see this happen with the Hilton Skirvin in Oklahoma City. Over the long term, we continue to make the investments necessary to provide long-term growth to this division.

Doug went over some of the key numbers on our comparable hotels for you. Our fourth quarter RevPAR was impacted a little by a couple of tough group business comparisons at two of our hotels, and another hotel was impacted slightly by new competition that opened during the quarter. And we said that overall we are very pleased with our fiscal 2007 RevPAR performance and for the time being overall supply growth remains minimal allowing for some reasonable expansion in ADR, which is generally a positive development for our overall operating margins.

Business travel continues to be the primary driver of the improved overall results. While the convention group business hasn't been particularly robust in our particular markets, corporate group business and [transient] business has been very healthy. June was a solid month for us and our advanced bookings would suggest that overall same hotel results should continue to improve in the near term.

Our new properties are also contributing nicely to our improved results. Just as startup and pre-opening costs of a new project can hinder our results for the first year, we stand to show marked year-over-year improvement in new properties as we enter the second and third years of those projects. We're seeing that right now with our Chicago Four Points Hotel, which is performing very well, and is now -- both during the fourth quarter, past fourth quarter and the current first quarter going up against these same startup costs, contributing to our overall operating improvement.

As Doug noted earlier, we have several capital projects underway at our existing hotels that should enhance the long term value of these properties. We've just begun our renovation of the Milwaukee Wyndham and have great expectations for the future of that property. The public space renovations should be completed by October. We are adding approximately 12,000 square feet of meeting space to the Grand Geneva, with that space scheduled to come online this October as well. And our new restaurant will open at The Pfister in November, as well as a new spa. A current room renovation will also occur at The Pfister during fiscal 2007.

As our press release notes, good progress continues at our two newest hotels under development, the Las Vegas Platinum Hotel and the Oklahoma City Hilton Skirvin. When these hotels open, it will bring our total rooms under management up to about 4,000, meaning that our goal of reaching 6,000 under management within the next three to four years remains possible. Our pipeline of other potential new hotel projects remains quite active. Each one of these potential projects has its own story and timeline, but we are prepared for the possibility of one or more of these opportunities to come to fruition during fiscal 2007.

The vast majority of the projects that we are currently working on involve either management only or management plus some small equity investment. In fact, as we mentioned before, if the opportunity arose to add an equity partner to an existing hotel while maintaining management, we would consider it. We previously indicated that this is an option for our recently acquired Columbus Westin. All in all, the outlook for our hotels and resorts division appears very promising.

Before I open the call for questions, I would be remiss if I didn't briefly address the fact that we can of course also seek opportunities to enhance shareholder value with corporate strategies, including strategies related to dividend policy, share repurchases and asset divestitures. At the same time that we announced our decision to return a substantial portion of the proceeds from the sale of our limited-service lodging division to our shareholders in the form of a $7 special dividend, we also increased our regular quarterly dividend by 36% to $0.075 per share of common stock.

Beginning in May 2006 and continuing into the first quarter of fiscal 2007, we have repurchased nearly 400,000 shares of our common stock in the open market under an existing Board authorization.

As mentioned earlier, in our fiscal 2007 first quarter, we sold the remaining inventory, real estate and development costs associated with our vacation ownership development adjacent to the Grand Geneva Resort, at a small gain, exiting a business that we had -- that had contributed operating losses during each of the last two years. We will also continue to evaluate opportunities to sell real estate when appropriate, benefiting from the underlying value of our real estate assets.

In addition to the previously mentioned potential sale of two valuable theatre parcels in Brookfield, Wisconsin, we have the opportunity to sell outparcels at our new theatre developments in Green Bay and in Sturtevant, Wisconsin, in addition to other non-operating, non-performing real estate in our portfolio.

Our balance sheet remains in outstanding condition giving us a great deal of flexibility as we refine and execute our various strategies. As always we appreciate the continued support of our shareholders during this past fiscal year, and look forward to the many challenges and opportunities that lie ahead.

Now with that, at this time, Doug and I would be happy to entertain any questions you may have.

Moderator?

[OPERATOR INSTRUCTIONS]. We will go to Rob Damron with Midwest Investments.

Well, hi guys and good quarter. I wanted to ask, Steve, maybe you could talk a little bit more about this -- the digital cinema that's coming, and how that business model could change going forward in terms of, who is going to pay for the equipment, and then would there be any change in terms of the percent of the ticket price between the theatres and the movie studios?

Well, that question is the issue that the entire industry is debating right now. We would expect that the film companies will by and large be paying for the conversion to digital cinema. They will undoubtedly do it through what is being referred to as a -- well, if -- Doug, I forget. Help me out. I forgot the --

Virtual print --

Virtual print fee, and so instead of them spending the money on prints, they will pay a print fee toward the cost of the digital cinema every time they use it. And when that -- when the equipment is paid off, at that point the virtual print fee will then go away. The issue then becomes who takes care of the equipment, who makes improvements to it going forward, and I believe that most people don't even know what those costs are going to be.

To some degree, I believe there will wind up to be some leap of faith here, where theatre owners will say, we can do -- engage in lots of alternate programming that will bring more revenue to the theatres in the future than we currently can derive from being able to use film only; things like concerts and sporting events and perhaps others as well, and we haven't explored very much as yet. And that seems to be the form that it's taking. But we don't think that the film terms will change. We'd always like to see them be lower than they are and it could be that there will be some adjustment as a result of it. At the end of the day, as long as the film companies believe that the theatrical outlet for the films is an important outlet, I believe that the terms will settle into an appropriate level so that theatres can make great presentations of the film studios' films.

Okay, that's helpful. And then maybe, Doug, could you just walk us through the potential real estate sales in fiscal '07? It sounds like there could be three parcels in Brookfield, Green Bay and Racine. But, could you just take us through the expected real estate sales?

Well, Rob, the big one are the two parcels in Brookfield; and one of them locally here people have seen that it is under contract, and if that proceeds as planned, would -- one location would close, I think, later in calendar 2006 here. Whether the other one will occur during our fiscal 2007 yet, we don't know. But those are two big numbers. Those are prime corners in Brookfield, Wisconsin, that will fetch a significant level of proceeds, and as I've indicated previously, we would have some pretty unusual and large gains on both those ultimately when they do happen.

Beyond that, Rob, we always have other stuff. Now I -- we mentioned that a while ago that we have some outparcels at those new developments in Green Bay and in Sturtevant. So we are going to actively market those and sell those, we've already begun that process. My point being is that if you look at our history year after year, we just tend to have -- I mean, we've had $2 or $3 million of gains ever year now for the last few years in this miscellaneous type real estate. So, I'm just -- we're just trying to point out the fact that we always have things like that and we tend to always have things like that.

Okay, and then just a last question. You are doing renovation on several of your hotel properties. What kind of impact should we see during that renovation in terms of revenues? Do you anticipate any revenue softness during the renovation?

Well, obviously, we are going to try to work around it as much as we can, and do it during times and take floors out of commission, for example, at the Wyndham at times when we think we can not impact, when we are not going to be selling out necessarily. Will there be some impact? Sure, there always tends to be a little bit of impact, but we are not talking about the -- with the Wyndham and the Columbus property, for example, those are certainly smaller properties overall in our portfolio, so it will be noticeable to us. How noticeable it will be in our overall results, it will probably be small, but it will be there.

Doug, I want to clarify, add one thing to that. Next year, about a year out we are going to be doing some renovation work though at The Pfister parking structure and in conjunction with that we also need to do renovation in our banquet spaces. When we are working in the parking structure, it will create some noise interference with people who are using our banquet spaces, because it's right directly above the parking structure. And so, for about a two-month period of time those banquet facilities will be only marginally in use, but timing it with the parking structure work so that it will keep it down to a minimum. And what we are working to do now is redirect any business that we might be losing at The Pfister to our other downtown Milwaukee hotels.

And that really applies, in fact, same thing with the Wyndham to the point that we are going to try to redirect business there to the other two hotels. So that's certainly an advantage we have with the three hotels in this market.

Okay, that's helpful. Thank you.

[OERATOR INSTRUCTION]. We will go next to David Loeb with Baird Investments.

Hi. I wanted to just get a little more color on the share repurchases. Steve, when did those occur?

They began about in May and continued on into June, and at some point the numbers became more obvious to me and so at that point we just thought, good [hygiene stops], but it basically occurred in May and June.

What is the current authorization and what are your thought about pursuing that in the future?

We still have about 1.5, 1.6 I think rounded million shares available to us under the current authorization, and we will be selective, but I certainly could anticipate that we could repurchase some additional shares during the year. We are not going to commit to any particular number at this time, but it is very possible that we will continue to repurchase some shares in the months ahead.

You do have a great deal of balance sheet capacity and some cash left, and clearly share repurchases is one way to utilize that. You are putting some in things like hotel renovations, and thanks for finally clarifying the purchase price for the Columbus hotel. And where else do you see using that capital as you look to sort of push your balance sheet leverage back to more optimal levels?

Well, I will take the first stab at that, and then if Steve wants to add anything. But again, certainly our capital expenditures will be stepped up this year because there's quite a few of these projects, and so I would expect all things being equal that our capitalization ratio will end up a little higher by the end of the year than where we are now.

I agree with your comment that certainly with this -- with our balance sheet being the way it is, we do believe that share repurchases continue to be a kind of a tool in a toolbox here that we will utilize as we see fit. So, I would certainly agree with that comment that that's something that's available to us as well. Obviously, we like having a strong balance sheet, David, and historically you won't -- you see us maybe in the mid-40s, but not a lot beyond that in terms of a debt-to-capitalization ratio. So, we will continue to watch it closely, but I think we do, as you correctly pointed out, we have a lot of options.

Given the nature of some of your assets, The Pfister, for example, which has been pretty substantially depreciated and had a low basis to begin with, even though you keep putting more capital in. I don't think anybody would quarrel with 50% debt-to-book being -- book capital being pretty low leverage?

We wouldn't disagree with that.

Yeah. In the theatre business, you have stated goals to expand the number of screens pretty substantially over the next several years. How do you expect that to unfold?

Well, actually we've indicated that -- I don't know that our total number of screens will change significantly over the next number of years. We've got these three new locations going up, but we have locations closing as well. We are going to be a stronger -- even stronger circuit at the end of this, because our -- we'll have a higher screen per theatre average. We will have some theatres that are closing in '07, the size of the ones being replaced tend to be smaller leased locations, so that will offset some of the growth that you are referring to. So, in total you won't necessarily see our screen count change substantially, barring some opportunity that we are not contemplating at the moment. Whether it be an acquisition opportunity or something along those lines, that could change it. But otherwise over the next two or three years, I would probably correct you and say, no, I don't think that our current 500, give or take, number of screens, it may go up a little bit, but it's not going to change substantially because of some of the screens that will close.

So, you don't have any plans to go into additional zones or to build out?

I didn't say that, we certainly continue to look at some land possibilities in adjacent markets and areas that might make sense for us. And so in fact we are looking at and pursuing some additional opportunities like that, but the lead time on that certainly takes -- there is a little bit of lead time associated with that too. So, we will continue to look at that.

I see. And one final, just a follow-up on the Brookfield sales. You mentioned that there was a little bit of impairment on a couple of the other ones. But overall, how much of the theatre CapEx do you think will end up being funded by proceeds?

I would just ballpark it and say, of that $35 to $40 million, it would not be unreasonable to say that, by the time we sell both those properties and those outparcels that we could be funding half of that CapEx or more.

Great, thanks very much.

[OPERATOR INSTRUCTIONS]. And it appears we have no further questions at this time. I would like to turn the call back over to our speakers for any additional or closing remarks.

Well, thank you. We certainly want to thank all of you for joining us again today and look forward to talking to you once again in September when we release our first quarter fiscal 2007 results, and then on October 4, I believe it is, we will be having our annual meeting at the Wyndham. Thank you very much, and have a very good day.

That does conclude today's conference call. You may disconnect your lines at this time.