Marcus Corp (MCS) 2008 Q2 法說會逐字稿

Good morning, and welcome to the The Marcus Corporation second quarter earnings release conference call. My name is Stacy and I will be your operator for today. At this time all participants are in listen-only mode. We'll conduct a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded. Joining us today are: Steve Marcus, Chairman and CEO, and Doug Neis, Financial -- Chief Financial Officer. At this time I'd like to turn the program over to Mr. Neis. Please go ahead, sir.

Well, thank you. And thank everybody. Welcome to our fiscal 2008 second quarter 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, our expectations about the quality, quantity and audience appeal film product 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, and expectations and plans regarding growth in a number and type of our properties and facilities, the expectations regarding various nonoperating line items in 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 factor section of 10K and 10Q filings which can be obtained from the SEC or the company. We'll also post our regulation G disclosures when applicable on our website at www.marcuscorp.com. So with that behind us, let's talk about our fiscal 2008 second quarter and first half results.

First off, I do want to thank you for joining us today at an early time than usual. We had a schedule issue at our normal conference call time later in the day, so we hope this worked out okay for everyone to have the call in the morning. As we look at reported results, it was an interesting quarter for us. There were some very positive things to hang our hat on. But we were also reminded once again why it's important for us to view our theater business through a long-term lens, as the movies were not on our side this particular quarter. At the half-way point this fiscal year, our year-to-date revenues up over 19% and year-to-date operating income is up nearly 8.5%, which isn't bad given the couple of the unusual items we've had in our hotel division results. But the ride at this point has been an uneven one.

Before I get into the operating results, though, let me first address the variations in the line items below operating income versus last year, as they continue to have a significant impact on our results. We once again as expected had unfavorable comparisons to last year on the investment income and interest expense lines. The variations in these two lines can be traced directly to our purchase of the 11 CEC theaters in late April. Prior to that purchase we'd been carrying some excess cash that was originally generated from Baymont sale a couple years ago. And that cash was generating some modest investment income for us. We of course believe the cash is now providing even greater returns in our operating income, but we'll expect to show declines in investment income line all year as a result. Meanwhile as expected our interest expense is up over last year again due to the fact that we added to our borrowings in order to finance the theater acquisition. We would -- for at least the next quarter we would expect to see similar increases in interest expense. Having said that, our overall debt to capitalization ratio at the end of the quarter was still a very strong 43.2%, down from 44.5% at our May year-end.

Continuing down the earnings page, we now come to a very large difference in this year's results compared to last year that we certainly tried to highlight in our press release. While we had relatively little activity this particular quarter this year on our gains from disposition line, last year during the second quarter we reported a large gain in the sale of former theater located on a prime piece of land and we reported the first gains in the sale of the condo units at the Platinum Las Vegas property. During out upcoming third quarter, we'll again have negative comparisons on this line as we reported another $5.5 million in gains during that quarter last year primarily from the Platinum. It's not to say that we won't continue to have periodic gains from the sale of real estate as we move forward. Today as we speak we're expected to close on the sale of one of our two remaining Baymont Inn joint ventures and I would anticipate that our share from the gain of that transaction to contribute to our third quarter pre-tax earnings.

Another line item where we have significant difference compared to prior year, this time favorable, was on the equity losses from unconsolidated joint ventures. Last year the Platinum Hotel was still a joint venture for most of the second quarter, and incurred significant pre-opening expenses that ran through P&L on this line item. Of course as you know, now that we own 100% of the public space of this hotel, all operating profits or losses from this property are included in our reported division operating income. We purchased the controlling interest in the joint venture during the second quarter last year, so we shouldn't see any more significant swings in this line compared to last year as a result of this hotel.

Finally, while most of you know this, for those of you who may have recently starting following our company, our net earnings again declined this quarter compared to last year due to a significantly larger income tax charge. This of course was not unexpected and has everything to do with last year and very little to do with this year. As a reminder, last year's effective income tax rate was significantly reduced by the one-time historic tax credits that were generated by our Skirvin Hilton Hotel project in Oklahoma City. With those credits behind us, our effective rate is now back to normal. Our first half effective rate -- tax rate of just under 40.6% represents our current best estimate of what our full year fiscal 2008 rate might be, based upon our estimate of all the usual factors that go into calculating our effective rate. We will, of course, have to deal with this unfavorable comparison last year in income taxes for the remaining two quarters of our fiscal 2008.

Shifting gears, our total capital expenditures during the first half of fiscal 2008 totaled approximately $10 million compared to just over $39 million last year. At the half-way mark of our fiscal year, several potential projects that we had budgeted for now appear likely to at least partially carry over into the following year. As a result of that and the fact that the majority of our new property growth to date in hotel division has been focused on management contracts, I now believe that our total fiscal 2008 capital expenditures may end up less than the original range we identified at the beginning of the year. I'm going to lower our expected capital expenditure range for fiscal 2008 to approximately $35 million to $45 million. Of course we still have six months to go, so an acquisition in either of our businesses, or a currently unidentified joint venture hotel opportunity, could arise that would add to that total. The actual timing of the various projects currently underway or proposed will certainly impact our final capital expenditure number as well.

Now before I turn the call over to Steve, let me provide a few additional financial comments on operations for the second quarter and first half, beginning with theaters. Box office revenues were up 17.4% during the second quarter with our year-to-date box office now up 21.4% compared to last year at this time. Concession revenues were up 17.5% for the quarter and are now up 26%. Of course these numbers were impacted significantly by the 11 new acquired theaters. If you exclude the 11 CEC theaters as well as two theaters that were opened last year that were subsequently closed and not replaced, our box office and concession revenues were actually down approximately 4.5% and 2.9% respectively during the quarter.

Year-to-date excluding these same theaters, our box office revenues are essentially even with last year, and concession revenues are up approximately 1%. Our 53-week year last year continues to cause some comparability issues, as this year's second quarter included the Thanksgiving Day weekend. Last year's results did not. Total attendance increased 13.6% for the second quarter and is now up 17.8% year-to-date. But again, that includes the CEC theaters. Excluding those acquired theaters and the two closed theaters, our attendance was actually down 9.3% for the the quarter and 4.7% year-to-date. I remind you that while the current quarter attendance decline can be attributed entire to the film slate, our first quarter and year-to-date attendance was negatively impacted by the lack of Memorial Day weekend. Box office revenues for these comparable theaters were favorably impacted by an increase in our average admission price for these theatres of 5.4% for the quarter and 4.7% year-to-date. Similarly, concession revenues per person for these same theaters increased 7.3% for the quarter and are now up 5.9% for the first half of fiscal 2008.

As I shared with you last quarter, while just one theater in the overall mix, our new Majestic Cinema in Brookfield contributed to these increases due to premium pricing for our popular UltraScreens with VIP seating and our expanded food and beverage offerings. After a tough quarter at the box office and slightly higher fixed costs, our year-to-date operating margins for this division have now declined slightly to 21.6% compared to 22.8% last year.

Shifting to our hotel and resort division, our overall hotel revenues were up 17.8% during the second quarter compared to the same period last year and are now up 16.7% year-to-date. Total revenues benefited from new revenues from the Skirvin Hilton and Platinum Hotel and Spa, neither of which were opened last year during the reported periods. Conversely the Columbus Weston was a company-owned hotel last year at this time, and now it's a joint venture. So its revenues are no longer in our consolidated totals and that's negatively impacted our comparisons.

Our press release noted that our total RevPAR for owned hotels excluding the Skirvin Hilton increased a solid 5.3% for the second quarter and 6.2% year-to-date. While we usually don't like to single out individual hotels, I do want to point out that our results were again helped by strong performance from intercontinental Milwaukee that was just coming out of a significant renovation last year and has really gained traction in the marketplace over the last six months or so. Our fiscal 2008 second quarter and first half RevPAR increases were once again driven primarily by an increase in our average daily rate, or ADR, of 4.4% and 4.8% respectively for the second quarter and for the first half. Although our overall occupancy rate also was up approximately 1% year-to-date -- one percentage point year-to-date for these same properties. Our division operating income increased 11.7% during the quarter and has now essentially pulled even with last year, despite the one-time negative comparisons we referred to last quarter at the Pfister and Platinum hotels and a significant real estate tax adjustments on our Chicago Four Points property this quarter.

Let me briefly summary each of these -- summarize each of these for you. The impact these items have had on short-term operating results is real, but I do want to make sure that I properly explain the items that may impact a given quarter, but not necessarily future operating results. As we shared with you last quarter, the Pfister hotel was impacted significantly during the summer by complete renovation of our meeting and banquet facilities and parking garage. I'm happy to report that the meeting and banquet space opened early in the second quarter and parking garage just opened within the last week. Operating results were impacted slightly during the second quarter particularly by the lack of the parking garage, but not nearly to the extent that we were impacted in the first quarter. The Platinum Las Vegas hotel has nearly completed its first full year of operations now and first year start-up operating losses did impact our division operating income during both quarters year-to-date.

As I pointed out earlier, this is the last quarter that we have to deal with an apples to oranges comparison in the last year, whereby this year's results are in hotel division operating income and last year's results on this hotel were on the equity loss line which was below operating income. The Platinum, as should be expected, did perform better during the second quarter this year than last year, but it won't appear that way in the division operating income line because of the apples and oranges comparison. Finally, as our press release notes, we incurred a significant real estate tax adjustment in our second quarter when we received our 2006 tax bill for our Chicago Four Points hotel. Unfortunately I didn't misspeak when I said 2006, Chicago real estate tax bills are always received on almost a full year lag. And as a result our cumulative adjustment needed to reflect the new estimated future taxes at this property negatively impacted our second quarter by approximately $0.02 per share after tax.

So to conclude, the numbers are -- they are what they are. I do think it's important to note however that these three particular items have had a fairly significant impact on our short-term operating results. In fact, excluding these two aforementioned properties, the Pfister and Platinum, and as well as excluding the portion of the real estate tax adjustment that relates to prior years, to prior periods, and the Columbus Weston, which as I mentioned earlier was consolidated last year but not this year, division operating income for our remaining properties and management business was up approximately 62% for the second quarter and 31% for the first half of the year. With that, I'll now turn the call over to Steve.

Thanks, Doug. I'll start my remarks where Doug left off, which was discussing our hotels and resorts division. As I hope you gathered from some of the numbers that Doug shared with you, particularly as he peeled back the onion a little bit, we had a pretty good quarter in this division in the midst of a lot of background noise and the speculation about the state of the hotel industry. More about the macro hospitality environment in a minute. But first let me make a few comments about what's going on within our own division.

To start with, let me expand on Doug's closing comments. Through the first half of the year, the only two owned hotels in our portfolio of eight owned hotels that have not reported increased operating income year-to-date are the Pfister and Chicago Four Points. And that's only because of the one-time items that he previously explained to you. RevPAR growth appears to be in the range expected and our newest properties are contributing to our improvement. We're particularly pleased with the way the new Skirvin Hilton and the renovated and rebranded Intercontinental Milwaukee are ramping up. As we've shared with you previously, we expect to have particularly favorable comparisons at these two properties during the remaining two quarters of our fiscal year as well. This division had approximately $3.5 million in pre-opening expenses during the second half of last year and those are likely not to be repeated this year.

Now conversely, I'll tell you that I wished the Platinum Las Vegas property was ramping up as quickly as those two other hotels. Room revenues are actually now pretty close to where we expected them to be, but it's taking us a little while to get our costs under control and in particular to get the ancillary revenue sources such as the restaurant and spa where we need them to be. Having said that, business on the books looks very good at this property as we head into the busiest season. So hopefully we'll be able to report improvement -- continued improvement from this property in the coming quarters. One of the core strengths of our company has always been our focus on maintaining our assets and certainly our hotels and resorts division has plenty of increasing evidence of that. We've made a significant reinvestment in the Pfister hotel in the last 15 months and with the meeting and banquet space and parking structure now completed and our rooms renovation currently underway, we will have completely updated this landmark hotel by the end of the fiscal year. We have long-term assets and we're willing to make long-term investments in these assets in order to enhance and preserve their value for the years ahead as we always have.

As I look ahead, we'll be evaluating additional major capital projects and renovations at both our Grand Geneva Resort and Milwaukee Hilton in the coming calendar year. We're also beginning to see some of the benefits of our increase in managed properties through increased outside management fees. As you know, we've added six new management contracts during fiscal 2007, and as noted in our release, several more have been announced in recent months. We continue to seek additional opportunities to expand this portion of our business.

Finally, let me briefly comment on what we're seeing for the future, based upon the limited visibility that we have through advanced bookings. We're certainly are watching the trends very closely and will continue to do so, but right now the overall booking pace has been largely unchanged. Group business was a little slow at a couple of our properties this past quarter and the Milwaukee city-wide convention line-up for calendar 2008 doesn't look very strong. So that segment of the business will be something that we'll be keeping an eye on. But overall we're satisfied where our properties appear to be headed in the coming months. As you've heard me say before, overall supply growth has been fairly limited, which certainly has been beneficial to everyone in this segment of the industry. In the near term, we'll be watching the opening of our water park resort in a community between -- located between Lake Geneva and Chicago, and whether it will have any impact on our two Lake Geneva hotels remains to be seen.

With that I'd like to make a couple comments about theater business before we open the call for questions. Last quarter I made the statement that there's a portion of this business that we can control and a portion we can't. At the time I made that statement, we were coming out of a summer quarter where we were pretty happy with the quantity and quality of the movies that were made available to us. After hearing some of the detail that Doug shared with you earlier, that statement becomes even more important now, because clearly this wasn't a very good quarter for the movies. I know I said this before, but this is a business that will drive you crazy if you focus too much on any given quarter or film content. Don't get me wrong, I look at all of our daily grosses as close, or closer than anybody, but while it can be difficult at times, I also keep an eye on the big picture as well, if you pardon the pun. The big picture is that calendar 2007 is still shaping up to be a good year in the movie business.

As Doug noted in the numbers he shared with you, fiscal year-to-date, comparable box office revenues, are even with last year, despite not having a Memorial Day weekend. Our concession revenues are up and our operating income is up nearly 16%. We like those results to be even better and for every quarter to beat last year, sure we would, but overall not too bad. Predicting how future films will perform is a daunting task, so while we've listed several of the upcoming films in our press release, time will tell whether they'll perform better than last year's films. Through the first three weeks of our fiscal 2008 third quarter comparable box office revenues we're down the first week, even the second, and up the past week with the opening of 'I Am Legend' and 'Alvin and the Chipmunks'. The next two weeks are traditionally two of the biggest weeks of the year and several pictures will be opening during this time period, so let's hope the weather cooperates and lots of people get out to see a movie. Regardless, we'll also continue to focus on the areas that we can control, including the addition of new UltraScreens, alternate programming, new technologies and enhanced food and beverage offerings.

We continue to make progress in all those areas and we spent some time in our press release addressing some of the recent developments. I'm a particular believer in digital 3D and what it might do for the business in the future. So it's exciting to start to see some product utilizing this technology coming to market. It'll take some time, but keep an eye on that. It's also early in evaluating the success of alternate programming, such as concerts and opera that we've shown in the past month.

Incremental revenues from alternate product like this could also prove to be very important in the future. I certainly would be happy to address any of these areas as well when we get to the question-and-answer portion of the call. As you can see with all of its ups and downs, it's been a very busy and interesting period for both our theater division and our hotels and resorts divisions. And we look forward to the opportunities and the challenges that lie ahead. One other note relating to our movie theater business, and that is that today we are announcing an agreement to purchase a portion of Silk Film Buying Company in Minneapolis. And under that agreement Marcus Theatres will provide film buying, booking and other related services for 15 theater locations owned by five exhibitors representing 152 screens in Minnesota.

So including the screens that were previously booked by Silk, Marcus theaters will provide film-buying services for 747 motion picture screens in six states. This acquisition is part of our strategy to expand our revenue sources and to leverage our strong operations infrastructure. That transaction is expected to close January 14th of 2008. With that, at this time, Doug and I'd be happy to -- I'm sorry. I missed a paragraph here.

Before we turn the call over to your questions, I'd be remiss if I didn't point out the fact that we continued to repurchase some of our shares during the quarter. We repurchased the majority of the shares noted in the press release during the last month of the quarter. So it did not have a notable impact on our earnings per share this quarter. Including shares purchased during our first quarter and shares purchased early in our third quarter, prior to entering a quiet period, we repurchased over 500,000 shares in the open market so far in fiscal 2008. The most in any one year since fiscal 2000. Any additional repurchases would be expected to be executed on the open market or in privately negotiated transactions, depending upon a number of factors, including prevailing market conditions. And with that, at this time, Doug and I would be happy to entertain any questions you may have.

(OPERATOR INSTRUCTIONS) Questions will be taken in the order received. (OPERATOR INSTRUCTIONS) Your first question comes from the line of David Loeb with Baird. Please proceed.

Hi. Doug I want to start with the property tax hit. You said $0.02 a share. The property tax line was up about $1.25 million sequentially or $1.5 million year-over-year, how much of that is this charge? Is it just approximately $600,000? Is that all of it? And if so, what's the rest of the property tax increase?

No, the impact to this particular quarter, was just over $1 million, Dave, pre-tax. You've be looking at that line. After tax it works out to be again, just over $0.02 a share. But the pretax impact to this quarter was just over $1 million.

Okay, so the other $250,000 or $200,000 sequentially was just increases in all the other properties?

That's just having more properties. With the additional theaters and just other normal increases that we might have.

And, I guess this is for Steve, I'm a little confused about the language. In reading the Paul Silk press release, you're agreeing to buy a portion of Paul Silk Film. Are you buying 100% of a piece of that business?

Well --

The press release talks about things being structured as a separate company. And I wasn't sure if this was a joint venture or if you're actually just buying all or part of it.

Yes. A part of his business consisted of movie theaters that, I guess the best way to describe it, look more like most of ours. They tended to be larger. If you look at the averages, it's about 10 or 11 screens per average location. The rest of his -- the theaters he was buying for are one, two, three, four screen complexes by and large, and we didn't feel that we were as well positioned to do as good a job with those as we were with larger ones.

So you're buying all of the business that is the 10 to 11 kind of screen business.

Yes. But Paul will join us as Vice President, David, and bring that portion of the business with him.

Well, that was kind of my next question, is this more than you're buying him, you're hiring him and paying him something up front for his business that he's folding in?

Well certainly that's an element of it, sure. It's -- I think there's multiple facets to it. That's one element to it. We will be picking up -- there's some incremental revenues. It's almost like another hotel management contract, a small hotel management contract, if you want to think of it that way, and it gives us, as Steve pointed out, over 750 screens that we'll now be buying film for. And we certainly think that helps as well.

And I wanted to tie that back to 'Sweeney Todd', if I I could, not that I want to spill too much blood about this, but --

I'm there.

I couldn't resist. Is there -- is the thinking here that being a buyer of 750 screens as opposed to 600 screens gives you that much more leverage. And is this then a platform that you want to continue to grow to get more leverage?

No, I don't think necessarily that it is. Movies are bought on a movie by movie basis and on a location by location basis, and the 'Sweeney Todd' thing is -- was unfortunate, we've had a long and wonderful relationship with Paramount going back over 70 years, and been a regular customer of theres. This was a particular -- and each film is negotiated individually. This was one where we just weren't able to come to terms with them on any of our locations, and the reason that we even put out a notice on it was because, when we don't play a picture that's being widely promoted by the studios, our customers keep asking our staff why. And it's a tremendous distraction and so our sense was that we'd be best served by putting a release out on it. It takes away an awful lot of the questions that our staff gets all the time about why we're not playing a particular picture. And so that's about what that was about.

What do you think that cost you in terms of attendance, given that that's expected to be a pretty big attraction?

Oh, I -- we don't really know. We don't think it's terribly much because it comes at a time of the year when there's a lot of pictures opening, and we think by making our screens available to other pictures that we'll -- that are going to be very productive, and we think will be very productive on more competitive terms and allow us to bring something down, positive for our shareholders, and that'll -- that that would more than offset it.

Okay. And I guess, well, we'll let the 'Sweeney Todd' situation go. It does -- it seems, it certainly got a lot of press. I guess one clarification, I think I asked this last quarter, the way you buy films today, it's a flat percentage for the entire run of the film, is that correct?

The best thing to say is it's probably different for every film company and different -- in some cases different for every film.

Because there were a couple press analyses of what you wrote that -- of the 'Sweeney Todd' situation that seem to suggest that the old system, where you made less money at the early part of the run and more on the later. That the rent went down as it went on. I understood that was mostly a thing of the past.

It is mostly a thing of the past. But I keep seeing it described in the press, and I've -- and sometimes I want to scream sometimes that the information out there about what's going on is either -- is quite old and not particularly accurate.

Okay. One final quick question, Doug, on the buy back, can you give us an idea about the average price that you paid this quarter?

This quarter, again, most of the buy back occurred in November, and we were trading in the [17s] and [18s] at that point in time.

Okay, great, thanks very much.

Your next question comes from the line of Herb Buchbinder with Wachovia Securities. Please proceed.

Buchbinder, but thank you. Wanted to expand on the buy back, with the price down a couple of points, do you think you get more aggressive and do you have some kind of maximum number of shares that you looked at doing?

Herb, right now as we speak, we've always report what authorization is, as we speak, we have just over 600,000 shares under a prior authorization.

Yes.

So that's what I have to work with today, December 20th. Certainly, we'll have to discuss that further, and I -- as we always do. So, we have in prior years certainly added to our authorization. We'll have to take a look at that.

Okay. Going back to these alternate-type programs you're going through the theaters, can you give us an idea of what percentage of your revenues realistically you could get from this over the next couple of years? Did you show the Celine Dion concert by the way? I think that was showing this week. I just wanted to see what kind of impact that had if you showed it.

We did, we showed it Monday night. Which was a great piece of Monday night business. Steve talked about how he's looking daily at that gross sheet. Well, it -- that jumped out. Because Monday's are a pretty slow day otherwise as it relates to most films, and if I remember right, correctly, as I look at that gross sheet for that Monday, besides 'I Am Legend', maybe 'Chipmunks', it probably was the number three thing that we showed, second or third thing we showed on that Monday night. So, again, it was one show on a Monday night, I don't have a number for you to say that -- who knows where it will be two years from now, but it's incremental dollars, and we're not prepared to say that it could be X percent of our business yet. We've been doing this for about a month, month and a half, but it was nice to see and we've had some good success with a -- we had a St. Olaf concert and we've had of course Garth Brooks and we had our first Metropolitan Opera. So stay tuned. But we're excited about it.

When you show these concerts, what percentage of the -- do you get the entire ticket revenue, or do you have to rebate some of it back? How's that work?

Well we essentially share it with the people -- with the providers. And the formulas are a little bit all over the lot depending upon whether they do the marketing, we do the marketing. It's sort of a nascent industry and everybody's experimenting. I talk experimenting, I think the producers are experimenting as much as we are with it.

Realistically could this account for 5% to 10% of your business for the next couple years, or does that sound way too high, or is it possible?

It sounds very high, it depends on how much product is brought to market. How many -- so far, Doug has described everything that seems to be out there which is the opera, which is the concerts like the Garth Brooks, and Celine Dion.

Hannah Montana.

The Hannah Montana could be very significant.

It should be very good. It should be very good. Hannah Montana has the longer run.

It's a week.

It's a week. It'll be interesting to see if something could sustain for a week. -- becomes more and more seats available.

Going back to 'Sweeney Todd', is this the first time you've been unable to negotiate a picture of any significant nature? And when's the last time this happened?

Oh gosh, I don't know because it's probably the first time that we haven't played a particular picture in any of our locations. There are times, though, when you'll negotiate terms around a picture and the film company might want you to play 10 locations and you can only agree on terms of three, or four or five.

So even the previews of this movie that is being shown, you wouldn't be able to do that either, right?

I'm not sure I understand --

No. It so happens I'm seeing 'Sweeney Todd' preview tonight in a theater in Kansas City, but you obviously couldn't participate in previous shows before the movie actually opens. Okay. In terms of the box office outlook for this quarter, I don't see anything earth shaking. Could you refresh my memory? What are you comparing against in this current quarter? And it looks to me like you're going to be challenged again in this quarter from a comparison standpoint.

Top pictures last year in this quarter, would have been, well, 'Pursuit of Happyness' came out in December 15th, last year. You had 'Charlotte's Web', you had 'Rocky Balboa'. Nothing special there. 'Night at the Museum' was probably the big picture. And so that came out around Christmas. 'Dreamgirls' did a little bit --

That did alright. 'National Treasure', and 'I Am Legend' -- you'll have 'I Am Legend' carrying over here. And that should do well. So is there a realistic chance you could be flattish in attendance this quarter or you think that looking for too much?

Boy, it's tough to say. If you can tell me what the weather's going to be like next week, and if you can tell me how some of these pictures carry over into January. We still have to deal with January and February, and so there's a picture like 'The Bucket List' coming out narrow in time for the awards of December. We get it in January

Yes.

And has some decent word of mouth, so pictures like that could make or break our quarter.

Okay. Alright. I appreciate your comments, thanks a lot.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Andrew Wittmann with Baird. Please proceed.

Good morning, gentlemen.

Hey, Andy. Good morning.

Just wanted to touch base on the acquisition market of hotels and for theaters. The financing world continues to be challenged in some circles, although in the past you alluded to your life insurance companies giving you a little bit different perspective on that. Can you just talk about what you're seeing in the market today and how pricing is or opportunities present themselves?

Well, go ahead. I'll take the first stab at it and then let Steve. What I'm being told, talking hotel side, first of all, is that, yes, there's a little less deal activity. We get involved in a variety of different types of projects. Some of them have fairly long lead times, and so we're involved with a couple of them now, and so some of those are -- some are already geared up and have got their capital and they're all set. I think that certainly I'm -- the guys that were going out and getting 90% leverage on deals, that's not happening. We weren't too involved in that type of thing, so -- but there's, there's stuff going on, activity, I talked to our hotel development guy and he -- he's got a decent list of things he's working on, again, a lot of them, management contract type things. Some, a few development type deals. So, but to see a little less action right now in the industry in general? Yes, that's probably true, but we -- we're -- we've got a decent little pipeline that we're still working on.

Any comments on pricing on the hotel side from him?

What I'm being told is that maybe the reason why there's a little less activity is that the sellers aren't really overly motivated to reduce pricing right now. They're not in a lot of pain, and so, so that's probably accounting for why there'd maybe be a little less activity, because pricing isn't necessarily being impacted yet.

Okay, and then on theaters?

Theaters is -- the story's going to be there the same as it's been for years there. It's a fragmented business. Lots of -- once you get past the -- we're number seven with our 600 screens. And once you get past that you've got lots of multigenerational type folks and they'll drive that timing. If there's any opportunity -- if there's opportunity to come up it's because, again, various folks, decide it's time to get out, it might be again -- it might be like what happened with CEC, so hard to control that. Hard to control that timing, and so, no real sense otherwise.

Okay. I guess just the follow-up question to that would then be, just in terms of your overall appetite for your own shares versus acquisition pipeline, is it fair to ask that you have a priority of one of those over another?

It's fair to ask, Andy. That's the kind of thing that we're -- it's a very fair, strategic question that we've got to wrestle with, because as you saw, we are more than happy to buy some shares in the market as we saw in November, and we think that obviously we thought enough of that to think that was a good investment. So we've got a good balance sheet. We're at 43% debt cap. We've got the -- we have availability to capital, so I don't know that one particular strategy precludes another, but we'll certainly be very balance sheet focused, and you're not going to wake up one day and look at Marcus and all of a sudden see us with a 70% debt cap ratio. But I think there are multiple strategies that can be followed.

Okay, great thanks.

At this time it appears there are no further questions. I'd like to turn the call back to Mr. Doug Neis for any additional or closing comments.

Well listen, we'd like to thank you once again for joining us today. Please join us in March when we release our third quarter fiscal 2008 results. And in the meantime, treat yourself to a movie and some popcorn. Thank you, and have a good day

That concludes today's call. You may disconnect your line at any time.