Marcus Corp (MCS) 2009 Q4 法說會逐字稿

Good morning everyone, and welcome to the Marcus Corporation fourth quarter earnings conference call. My name is Janeda and I will be your operator for today. At this time, all participants are in listen only mode. We will conduct a question and answer session toward the end of this conference. (Operator Instructions) As a reminder, this conference is being recorded. Joining us today are Greg Marcus, President and Chief Executive Officer; and Doug Neis, Chief Financial Officer of the Marcus Corporation. At this time I would like to turn the program over to Mr. Neis for his opening remarks. Please go ahead sir.

Thank you very much, and welcome everybody to our fiscal 2009 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. 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 product expected to be made available to us in the future; expectations about the future trends in the business group and leisure travel industry and in our markets; expectations and plans regarding growth in the number and type of our properties and facilities; our expectations regarding various non-operating 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 factors" section of our 10K and 10Q filings, which can be obtained from the SEC or the Company. We'll also post all Regulation G disclosures, when applicable, on our website at wwww.marcuscorp.com.

With that behind us, lets talk about our fiscal 2009 fourth quarter and year end results. As is obvious when you look at our numbers, we continue to benefit from having two distinct businesses; the lodging environment continues to be very challenging, negatively impacting our results compared to last year. But thanks to another good quarter for the theater division, in fact we're reporting record revenues in operating income from this business during fiscal 2009, the impact has been lessened; so much so that we're pleased to be reporting year end results above the estimates that were out there for us today.

But before I get into the operating results, let me first briefly address my variations in the line items below operating income versus last year, because a significant portion of our year end decrease in net earnings can be traced to these line items and several one time charges. Our investment income was up slightly during our fourth quarter, but for fiscal 2009 I want to remind you that we reported investment losses totaling approximately $2 million pre-tax earlier in the year, related to the declines in values of securities held by the Company, and declines in values of investment in, and loans to, our former Baymont joint venture that currently owns a piece of raw land. As we indicated previously, we believe our exposure to additional losses of this type is not significant.

In addition, although we reported a small gain on disposition of property, equipment, and other assets during our fourth quarter, I'll once again remind you that for the full fiscal 2009 annual results we do have a significant variation on this line related to a second quarter $1.1 million pre-tax adjustment of the prior gains on the sale of condominium units at our Platinum Hotel and Spa in Las Vegas. As we described in earlier calls, due to the currently stressed real estate market in Las Vegas, we felt it was prudent to lower our estimate of expected proceeds that we'll ultimately receive when we sell the remaining 16 units that we are still carrying on our balance sheet. Lowering our expected proceeds resulted in adjustment to previous gains that we had reported under the percentage of completion method.

Now as we note in our release, these aforementioned items which negatively impacted our year-to-date pre-tax earnings by approximately $3.1 million, represent approximately $0.06 a share, accounting for the majority of our fiscal 2009 decrease in net earnings per share compared to the prior year.

Now looking ahead to next year, we certainly would expect both of these line items to return to more normal levels. The timing of our periodic sales of property, equipment, and other assets, can of course, vary from quarter to quarter and year to year, and as in the past we do have potential to report gains during fiscal 2010, but this is always a very difficult number to forecast.

Meanwhile our interest expense was down nicely during the fourth quarter and fiscal 2009, due to reduced borrowings and lower short-term interest rates. We were able to fund our fiscal 2009 capital expenditures out of operating cash flow, eliminating the need for additional incremental debt during the year. Barring an event that would require significantly more borrowings during fiscal 2010 than currently planned, such as an acquisition or significant share repurchase, we currently believe our interest expense may decrease again in fiscal 2010, possibly by as much as $1 million, assuming short-term interest rates remain at, or near, the current lower levels for the majority of the year.

Our overall debt to capitalization ratio at the end of the quarter was a very strong 44%, down from 47% at our last May year end. With limited senior debt maturities over the next three years, strong covenant ratios, and nearly $113 million in available credit lines as of today, we also remain in an enviable liquidity position as well.

Our equity losses from unconsolidated joint ventures were slightly lower than last year this quarter, but up slightly for the full year, as these joint ventures are related to hotels, that, as you'd expect, are not performing as well during this current environment.

And finally our effective income tax rate for fiscal 2009 ended up at a slightly lower 37.1%, with our quarterly rate lower still, due to an adjustment to our full year rate. This was thanks, primarily, to a decrease in our liability for unrecognized tax benefits as a result of a lapse of the applicable statute of limitations during fiscal 2009.

A shift in gears; our total capital expenditures during fiscal 2009 totaled approximately $37 million, compared to just over $24 million last year if you exclude last year's Douglas Theater acquisition. Nearly $22 million of this year's amount occurred in our theatre division, and was primarily the land purchases, construction costs and our latest Ultra Screens in Overland Park Illinois, and Mequon Wisconsin, the purchase of 3D digital projectors, a food and beverage project at a theater in Minnesota, and the renovation recently completed at our North Shore Cinema in Mequon, that included building a Zaffiro's Pizzeria restaurant and bar.

Our hotel and resort division spent approximately $15 million during fiscal 2009, with two significant projects at our Hilton Milwaukee and Grand Geneva Resort properties accounting for the largest portion of their spend.

As we look toward capital expenditures for fiscal 2010, we are currently estimating that we may end up in the $50 million to $70 million range, with approximately $20 million to $35 million estimated for our theater division and up to $30 million to $45 million estimated for our hotels and resorts division. With only about $30 million currently committed in carry over projects and normal annual maintenance capital, a substantial portion of this capital budget is either yet to be approved by our investment committee, or is for unidentified projects. So our actual fiscal 2010 capital expenditures certainly could vary from these preliminary estimates, just as they did this past year.

In addition, both divisions have acquisition strategies that could impact our actual capital expenditures of the right opportunity arose during the year.

Now before I turn the call over to Greg, let me provide a few additional financial comments on our operations for the fourth quarter and fiscal year, beginning with theaters. Our press release highlighted our health increases in revenues and operating income during the quarter and year, but let me break that down a little further for you. Box office revenues were up 13.2% during the fourth quarter, with our fiscal year box office ending up 19.7% ahead compared to last year. Our concession revenues were up 9.8% for the quarter and 19.4% for the year. Of course we acquired the seven Nebraska theaters at the beginning of April last year, so our fourth quarter numbers were partially impacted by these new theaters, and our fiscal year numbers were more significantly impacted by the results of the Douglas Theaters. So if you exclude the seven Douglas Theaters, our box office and concession revenues were actually still up approximately 8.3% and 4.2% respectively during the quarter.

For fiscal 2009, again excluding those same new theaters, our box office revenues were up 5.5% and our concession revenues were up approximately 4.3%. Total attendance increased 5.1% for the fourth quarter and 14.4% for the year, but again that includes the Douglas Theaters. If you exclude the acquired theaters, our same store attendance was actually even for the quarter, and was up 0.1% for the full fiscal year. Box office revenues for these comparable theaters were favorably impacted by an increase in our average admission price for these theaters of 8.3% for the quarter, and 5.4% for the year. Similarly, concession revenues per person for these same theaters increased 4.2% for the quarter and 4.2% for all of fiscal 2009. Premium pricing for our digital 3D attractions and Ultra Screens contributed to our higher average admission prices during fiscal 2009.

So with the strong box office performance, our operating margin for this division during the quarter increased from 15.5% to 16.9%, and for the full fiscal year our margins increased to 20.3% compared to 19.5% last year.

Now shifting to our hotels and resorts division, our overall hotel revenues were down 22.4% during the quarter and 11.4% for the fiscal year. As noted in our release, total RevPAR was down 23% during the quarter compared to the same period last year, and declined by 10.1% for the full fiscal year; with food and beverage revenue declines accounting for most of the remaining decline in our total fiscal 2009 revenues.

As we noted in the past, our RevPAR performance did vary by market and type of property, but seven of our eight company owned properties were down this quarter and fiscal year. In general, owned and managed properties in major destination markets, or with a greater reliance on group business, has seen the largest declines in RevPAR during this recession. According to data received from Smith Travel Research, and compiled by us in order to match our fiscal year, comparable upper up-scale hotels throughout the United States experienced a slightly higher decrease in RevPAR of 12.3% during our fiscal 2009, and its likely the difference between our 10.2 and the 12.3 is likely due to some of the different markets that we operate in.

Our fiscal 2009 fourth quarter overall RevPAR decrease was the result of an overall occupancy rate decrease of 10.1 percentage points, with our average daily rate decreasing by 9.4% during the period. For fiscal 2009 our overall occupancy rate declined by 5.7 percentage points, and our AVR declined by 1.9%.

Comparison to last years revenues and operating income were negatively impacted by the fact that during fiscal 2008 we received a $900,000 development fee related to a hotel project for another owner to whom we provided assistance. In addition, fiscal 2009 operating results were negatively impacted by reduced management fees and a charged earnings for potential losses on funds advanced to owners of managed properties that have experienced significant financial hardship as a result of the reduced travel.

With that I'll now turn the call over to Greg.

Thanks Doug and good morning everybody. Let me start with out theater division. As you have heard and seen, we have had another very good quarter in this division and I'm very pleased that we were able to report record operating results during fiscal 2009. While I bear the risk of repeating myself, the theme movie theater business has continued its history of being resistant to economic downturns. It's hard to argue with the fact that going to the movies remains an inexpensive form of out of home entertainment that consistently provides an escape from the challenges of daily life. I think that when you add that environment to the collection of solid films, such as those mentioned in our release, you end up with the results we reported this morning from this division.

As Doug shared some of the additional numbers with you, you probably noted that during the past quarter the increases in our comparable theater box office revenues came up from a fairly sizable increase in our average admission price. As Doug noted, comparable attendance was actually even with last year, but our average ticket price increased over 8% during the quarter, and over 5% for the year. Clearly we benefited from a couple of our key strategies that we have shared with you in the past, including an expansion of our digital 3D presence, and a continued expansion of our Ultra Screen concept.

As the press release notes, Monsters vs. Aliens was our number one picture during the fourth quarter, so the impact of 3D premium pricing on our average ticket price was even more pronounced. We also opened up another Ultra Screen during our fourth quarter. We charge a premium for Ultra Screen attractions and an additional premium for reserved seating. Nearly one half of our seats at our new Ultra Screen at our renovated North Shore Cinema in Mequon Wisconsin are reserved. Speaking of the North Shore Cinema, I would certainly encourage those of you that live in the area to visit this newly renovated theater. It's very exciting. I think our management team did a great job incorporating many of our newer strategies and transforming this theater into a true entertainment destination.

Our press release notes some of the highlights of the renovation, including our first full service Zaffiro's Pizza restaurant and bar. This restaurant has a separate outside entrance as well as an entrance off the lobby, and takes dinner and a movie to a new level of convenience for our guests. We even offer our dining and concession guests the opportunity to reserve seats at virtually any movie in the theater so they're not pressed for time between eating and getting a good seat at the show. This is really a revolutionary idea, and is typical of the innovation that we pride ourselves in. We're so pleased with the initial response to this restaurant.

Looking ahead, our capital budget for this division includes plans for up to three more Ultra Screens at existing locations, as well as plans to selectively add additional food and beverage outlets in our theaters. We will also continue to review opportunities for building additional new locations, including recently announced plans to replace our existing East Gate Theater in Madison Wisconsin with a new state of the art theater and entertainment complex nearby. This new complex, as currently contemplated, would include 16 movie screens and many other exciting amenities.

We currently own land in several different communities, that may be used for new theaters at a future date. And we have helped design and will manage a unique upscale theater and entertainment complex in Omaha, Nebraska, scheduled to open in November 2009. We are always looking to acquire potential theater sites to facilitate our long-term growth and we will also continue to consider additional potential acquisitions as opportunities arise.

I will remind you that we purchased the seven Nebraska theaters on April 3rd last year. So, we will once again have a more comparable number of screens that we will be reporting on during fiscal 2010.

The one thing that still remains in the holding pattern is a broader rollout of digitals in the Cinema beyond the three locations our press release refers to. As I think most of you know, the turmoil in the credit markets has been delaying the broader rollout. Having said that, just like our large competitors in the industry, we've been testing systems and preparing for the day that the larger rollout will begin.

And while I think there is still some level of uncertainty surrounding the actual time table for us and the industry as a whole, I think most people believe that the coming year will likely bring more activity on this front.

From a film perspective, our release does a good job of describing our summer so far. We were pleased to have so many strong weeks at the beginning of the summer because we knew, no matter how strong Harry Potter performed and it has performed very well, Hollywood would not be able to duplicate the unique success of the Dark Knight last July. Having said that, August was not a particularly strong month last year. So, if Potter has decent legs and the remaining summer films, several of which were noted in our release, perform well, we believe we have a reasonable chance of matching, or even slightly exceeding last year's first quarter performance in this division.

So, as I wrap up my comments on this division, I think that it is pretty clear that this remains an exciting time for the theater industry. Because we can't control our principle product, the movies themselves, we recognize that not every quarter we report will produce record results. But regardless of what Hollywood does, we will continue to maintain our focus on running some of the best and most profitable theaters in the country, in both good times as well as bad.

Transitioning to our second division, Hotels and Resorts, we obviously have a different story to tell here. As evidenced by our reported fourth quarter RevPAR declines, conditions continued to worsen in the spring and our fourth quarter results clearly reflect that.

Just as some of the statistics Doug shared with you, related to our average ticket price for our Theater Division, helped to explain our fourth quarter results for that division, a similar statistic in our Hotel Division that Doug shared also helps to explain the further deterioration in the hotel business.

In this case, I'm referring to the 9% decline in our overall ADR during our fourth quarter. Looking back at the previous three quarters this year, our ADR actually was up over last year, during the first two quarters and was only down 2% during our fiscal third quarter. The fact that our ADR dropped as much as it did during the most recent quarter is actually not surprising as it follows a typical pattern in down cycles in the hotel industry. As demand shrinks, at some point hotels begin dropping their rates as they fight for the remaining business that is out there.

In fact, right now the customer segment that is currently showing the most resiliency is the leisure segment. Pricing plays a major role in driving this thing. In our case, our focus has been on putting together value packages for our leisure guests and we have had some success driving business, particularly this summer, as a result.

Unlike the group customer segment, which has been the weakest segment from our perspective, the leisure customer seems determined to still take their vacations, albeit for maybe a shorter length or closer to home.

So, not surprisingly, as Doug noted, the properties in our portfolio with the largest RevPAR decline as during fiscal 2009, were the ones most reliant on group business or located in major destination markets.

Those of you that follow this industry have probably had their share of gloomy RevPAR news. So, I'd like to spend a couple of minutes on some of the factors we can control during this challenging time. Number one, cost controls become even more critical during a time like this. And I think our management team has performed very admirably on this front. In general, our internal goal is to make sure that no more than 50% of any declines in revenue dropped to our gross operating profit level.

Well, we've been able to do even better than that. Excluding the non-comparable items that Doug mentioned earlier, our cost containment measures resulted in approximately 49% of our overall fiscal year revenue decline flowing through to our operating income, a flow through percentage that generally compares favorably with others in our industry.

Another area of our business that we can control is our investment and reinvestment levels. In this regard, our financial strength becomes a significant competitive advantage. As we describe in some detail in our press release, we've continued to invest in our properties when others can't afford to. I'd like to highlight the fact that we've completed phase one of our Grand Geneva capital expenditure program. And it looks great.

We touched almost all areas of the resort, from the spa to the pool, to the corridors, to the guest rooms. In fact, the guest bathrooms look wonderful. And as we mentioned in the press release, you just have to see the TVs imbedded in the mirrors. Kids, both young and old, think it's magic. Check it out if you're in the area. I think you'll be very impressed.

Also, with an increasing number of hotels across the country experiencing financial difficulties, due to reduced operating results and high debt service costs, we believe the opportunities to acquire high quality hotels, or management contracts at attractive valuations, will likely increase in the future for well capitalized companies, such as ours.

In the meantime, the reality is that it is very difficult to have a lot of visibility into the future right now. Our June results looked a lot like our fourth quarter. But our July results, to date, while still down compared to last year, have shown some relative improvement as we hit the peak of the traditionally busy summer travel season.

Our group business booking pace continues to lag behind last year's pace and our ongoing group business is often resulting in less overall revenues than in the past as group sizes shrink and on-site ancillary spending decreases. Business confidence needs to improve before we are likely to see an improvement in this particular customer segment.

As a result, we expect to report reduced operating income from this division during at least the first and, likely, second quarters of fiscal 2010, compared to the prior year. But after that, I am hopeful that we will start to see some of these declines moderate, as we head into calendar 2010. Once we start overlapping these poor results, beginning in fiscal 2010's third and fourth quarters, I would like to think that the macro economic conditions we are currently facing will also begin improving as well.

I think right now, most in our industry are hopeful that the next year will be a transition year that will ultimately lead us back to the next up cycle in this historically cyclical business.

Before we turn the call over to your questions, I want to thank you, our shareholders and other interested parties for your continued interest in support of the Marcus Corporation. When potential investors ask us why they should invest in our company, we often cite the benefits of our business diversity, the significant underlying assets within the company, our defined growth strategies and our strong balance sheet.

I think you can make a pretty good case for fiscal 2009 being the poster child for those four defining strengths, likely explaining why our stock has performed better over the last five years than both the Russell 2000 and the industry peer group index described in our annual report. Our foundation remains solid and we remain committed to creating value for our shareholders, customers and associates over the long-term.

With that, at this time, we'd be happy to open the call up for any questions you may have.

(OPERATOR INSTRUCTIONS)

We'll go first to David Loeb, with Robert W. Baird. Please proceed.

Good morning, gentlemen. I appreciate the thoroughness of your prepared remarks and I have a couple of follow-ups on that.

Doug, you mentioned acquisition strategies in both divisions. I wonder if you or Greg could comment on the market conditions for acquisitions. I'm guessing that, with the theater business going well, you're seeing somewhat fewer opportunities. Would you agree with that?

I would generally agree with that, yes. Obviously, if you look back, you know, the thing about the theater business you have to remember, David, and look at the two acquisitions that we did the preceding two years, those were not driven by distress and/or things going really well. They were driven by situations in the particular ownership of those particular chains, those circuits, where they were looking to exit; next generation might not be interested in maintaining whatever it might be.

So, it's a business that, when the opportunities come, you can't necessarily point to the macro economic conditions and say that's what's going to drive it. So, it's fairly unpredictable but, in general, I would agree with your statement.

I guess thinking that if you're in the older generation and you're hanging on, it's a good time to hang on. I suppose it's also a good time to sell, if that's where the values are better.

You know, David, I guess what I would say is, we continue to look at opportunities in the marketplace. We are not, in the theater business, a trailing 12-month purchaser in any instance. This is historically a business that has fluctuations, as you follow us you know. And when we evaluate opportunities, we will not buy on the trailing 12 months, frankly, in any instance.

So, we look at how the business has performed over time and how we expect it to perform over time. And we take a long-term outlook. If the opportunity presents itself and it makes sense and the capital is available, we'll take advantage of it.

Okay; that certainly makes sense. How about on the hotel side? There's a lot more distress there that must be creating a lot of opportunities. What do you think are the prospects for you in that environment?

Well, we sure would like for us to take advantage of some of those opportunities, David. I think that, right now, our general sense, if I had to categorize it is that we think patience is a virtue here, right now. There certainly are an increasing number of opportunities starting to present themselves. But I think the general consensus is that there probably will be more. So, we're watching that very closely.

Certainly, as we've indicated in the past, we'd like to be able to pick up some additional properties. Now, they could be in a variety of different forms, management contracts, equity investments. But, certainly there is going to be some distress, some distress now. And I think there'll be some more distress in the future. So, we'll be watching that very closely.

I want to just follow up on that and ask abut distress in management contracts. Particularly, we saw a report that Whitehall lost the former resort suites, which you had managed for them. Did that end your management contract there? And, do you see net opportunities as opposed to net losses threatening as your owners are under some financial stress?

We're still managing the property for Whitehall. I'm not sure what the report that you saw said.

I think it was a default. It may not have been a foreclosure yet but I thought that we actually saw a report -- in fact, I know we saw a report that said that that hotel, under its new name, formerly the resort suites in Scottsdale had defaulted.

I think that's correct. I think I saw that same report, but at this point, they still continue to control the resort and we are running it for them.

Okay. So your prospects for management contracts in distress are probably greater as opposed to more risky, given the state of the owners. That's fair.

I think all I would add to that would be to say, look, with the turmoil, there should be opportunities in management contracts. I think it will be our focus to look for management contracts. We think we have a long-term focus.

Yes.

We're not looking to just come in and manage while somebody's in receivership, to be turned over to the next company.

That makes sense; great. That's what I have for now; thanks.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Andrew Whitman, with Robert W. Baird. Please proceed.

Hi guys. Greg, I just wanted to drill in a little bit more on your outlook for the hotels. You mentioned that you're optimistic for the third quarter, fourth quarter '10 that things might turn around a little bit. Can you just talk a little bit about what gives you some confidence to maybe believe that, or sense that? Maybe, in terms of looking at your group bookings, or other things that you might have to look at?

It is more just a feeling about what's going on with the economy, in general. And that, with all the stimulus that's being applied and that these things are cyclical and eventually we're going to come to -- and I can't point to any specific data point that says 2010, calendar 2010 is going to get to be a lot better.

I know that if the data points that were going to [last], 2009 is absolutely going to happen. But there's a lot of stimulus being applied to our economy and we should start to see some of that. But that's what I'm basing, I think, on that.

Okay. Is part of that maybe, your comps too? I mean, is that a factor here?

Certainly and you'll notice, and you know, we choose our words very close and careful, as you know, Andy. I mean, we're not suggesting, we're not projecting that we think RevPAR is going to be up or anything like that. I think no one really knows. All the so-called industry experts aren't suggesting that right now. Most of the industry experts are suggesting that RevPAR will still be down in 2010, but on a much smaller scale. But, again, I don't think anyone really knows.

Certainly, the comps will be better. Everyone is using terms -- you've listened in. You've listened to another call today and I suspect that everyone is using terms like less bad and things like that. That's generally what's happening right now, is that things have somewhat stabilized. And here in the summer, as we mentioned, our July is certainly less bad but it's still down. So does that give us some confidence that we've seen the worst? We hope that's the case.

Hopeful, looking at the words in our script today, I'm hopeful it will get better, and I am hopeful.

Okay, that makes sense. I guess I just wanted to go one other direction here and just talk a little bit about Las Vegas. Clearly that's been a very challenged market, a lot of new supply, demand has been weak. I wanted to understand if you could give us any color on what's your options for I guess managing and owning the common spaces of the Platinum is at this point, and what you think a potential outcome could be there.

That's a tough one Andy. Right now as you said, the market is in tough shape. As we've already addressed previously, from the ownership of the units perspective, there we're just going to show some patience. We're not distress sellers, we don't feel any need to force the market on the 16 that we have, so we've already addressed that. As it relates to the management itself, certainly it's not a profitable venture for us right now, and so we continue to look at, operationally, things that we can do, and then of course we'll continue to look at other options if there are options out there that could make that a better, profitable proposition for us.

Any partners or anything that you think could be interested in teaming up with you there? Other capital sources that might want to take you out?

I wouldn't want to go there Andy. We'll look at options, and if options do present themselves we will absolutely take a look at them. But right now we're riding this thing out, as is everyone else, and if something does come along that provides us with something that we'd want to consider, we'd look at it. But here we are today, and we're just doing the best we can.

Okay. On the other side of that coin, you mentioned that one hotel was up for fiscal '09, just out of curiosity can I ask which one that was.

For fiscal '09 it was, we've mentioned it previously, the Oklahoma City property had a, overall for the year they were actually up slightly. Interestingly enough, we don't normally get into naming the individual properties, so I'm not going to name it, but one of those, it was actually not the property that was up in our fourth quarter, but another property just had a better quarter comparatively. But overall Oklahoma City has held up the best of our properties.

And part of that's a function of not only being a lower beta market, but also the fact that there's some ramp in that hotel since its opening still?

Well that property, I've got to tell you, it ramped up very, very quickly. It is a new property; it is one of the best properties, if not the best property, in town. That market in general, if you just look at the market dynamics as well, certainly has performed better than others.

Is there still some ramp in that, do you think? Into a tough 2010 maybe?

I'm sorry Andy, what did you say?

I was just wondering if you thought there was some more ramp in the Oklahoma City asset that just could continue to have that one out perform.

Do you know what oil is going to do? That's what's driving that market. It wasn't a question of, as Doug pointed out, it's not a question of ramp, that property ramped up very well. This is not one that's ramping up, it's really been driven by the state of the oil market down there.

Interesting. Okay. Thanks, I think that's all for me.

We have a follow up question from the line of David Loeb with Robert W. Baird, please proceed.

We're doing the tag team approach, I hope you don't mind. I just wanted to come back to theaters. I'm very impressed with the average ticket pricing gains, particularly in the fourth quarter, and I'm just curious about, given the CapEx budget that you laid out, if there are, aside from continuing to roll out the digital 3D, are there other Ultra Screen construction projects or other retrofit projects in existing theaters? Or additions of theaters that you see where you can continue that trend toward premium offerings at your locations?

We may have mentioned there are three locations identified currently in that budget for new Ultra Screens. None of them have officially come to the investment committee yet, but yes, there are dollars potentially set aside for three more Ultra Screens, which certainly are a driver in that. Greg touched on the reserve seating which then can be an added premium, and we've got an interesting experiment going on with that at the North Shore Cinema that expands on that a little farther than we've ever gone in the past as well. So time will tell whether that translates into additional, because we do have some additional food and beverage concepts and some things that we hope to continue selectively in fiscal 2010 as well. But clearly the 3D and the Ultra Screen pricing, the reserved seating pricing, those were the three main drivers.

Are you adding reserved seating only in Ultra Screens or in traditional screens as well?

The experiment at North Shore, and let me be clear about how that works, because it's different than 3D. 3D, which gets a premium price, that is a pure premium added to the ticket. What we're doing in the Ultra Screen, and we do it in the North Shore in most of the other screens where we offer a select portion of reserved seating, is that we essentially make the reserve seating complimentary. But to get a reserved seat you have to pay an additional $3.00, that $3.00 is a food and beverage voucher. So if you're eating in our restaurant, for example, at Zaffiro's, you're probably spending more than $3.00 a ticket. In that instance you have paid nothing more for a reserved seat, but you get it, because you can use your voucher.

If you buy concessions at our concession stand you can use your vouchers for your concessions and get a reserved seat, which is great, you don't have to wait in line, you show up at the last minute, you get a very good seat, and you've picked your seat obviously, but at no additional cost. The only time there's really additional cost is if you don't eat or drink anything at the theater, but you want a reserved seat, that would be the only time you see an additional cost as a consumer. Otherwise it's a service to be provided for our customers that participate in our food and beverage programs.

That is very clever Greg, I have to say. If that succeeds at North Shore you're going to roll that out more broadly?

We'd like to have it be successful and roll it out, yes.

There are operational challenges, that's why we're doing it at one location, we've got to work our way through. Obviously not every place has a separate Zaffiro's restaurant but they all have concession stands. So there are ways to do this.

That's what Doug was talking about, that was the Genesis of the idea, which was the Zaffiro's, which said okay, aside from having absolutely incredible pizza, which it has, how do we differentiate ourselves and how can we take advantage of our restaurant to make it a choice over any other restaurant on the North Shore? And one of the things was "Wow we can give somebody who eats with us a reserved seat". And so it works to benefit the restaurant, and it's good for the theater, we think, as well.

That's great. And one final follow up on that, what would the timing be assuming the three Ultra Screens get through the committee process and you decide to move ahead with them? How long would that take to construct or retrofit.

Well realistically they wouldn't have a lot of impact in fiscal 2010 because with our Midwestern locations, and none of them are in the ground today, so the big push is typically to get screens open either in time for the holiday season or in time for the May kick off of the new pictures. So realistically you're probably looking at, more than likely that these screens would come out in the second half of the year than the first half.

Okay so they're likely to be opened, assuming you go ahead with them, to be opened near the end of the next fiscal year, but in time for next summer.

That would be the most likely scenario. If they are prepared and we fast track one of these and we get it in the ground quickly, I suppose it's possible that something could happen sooner than that, but I don't know the answer to that yet.

That's great. Thanks very much.

Thank you. At this time, it appears there are no other questions. I'd like to turn the call back to Mr. Neis for any additional or closing remarks.

Well listen, we certainly would like to thank you once again for joining us today. We look forward to talking to you again, actually, very shortly in September when we release our fiscal 2010 first quarter results.

Until then, have a great day. Thanks again.

That concludes today's call. You may disconnect your line at any time. Have a good day.