Marcus Corp (MCS) 2011 Q4 法說會逐字稿

Good morning everyone and welcome to the Marcus Corporation fourth-quarter earnings conference call. My name is Gina, 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 towards 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 Mr. Neis for his opening remarks. Please go ahead sir.

Thank you, and welcome to our fiscal 2011 fourth-quarter conference call.

As usual, I do 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 revenues and earnings expectations; our future RevPAR occupancy rates and room rate expectations for our Hotels and Resort 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; our expectations and plans regarding growth in the number and type of our properties and facilities; expectations regarding various nonoperating line items on our earnings statement; and our expectation 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 expect achieve our expectations are included in the Risk Factors section of our 10-K and 10-Q 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 www.marcuscorp.com.

So with that behind us, let's talk about our fiscal 2011 fourth-quarter and year-end results. Certainly pleased with the fourth-quarter results we reported this morning with Marcus Theaters rebounding from a very tough third quarter to lead the way for a solid 15% increase in overall net earnings compared to last year. When we look at our year-end results, while our theaters overall had a difficult year compared to the record results from the prior two years, we were able to partially offset that with very strong year-over-year improvement from our Hotels and Resorts division.

Before I get into the operating results, let me first briefly address any variations in the line items below operating income versus last year, as well as the two unusual items that we referenced in the full-year fiscal 2011 section of our press release.

The first unusual item shows up in that first line below operating income which is our investment income line. While there is no variation on this line during our fourth quarter, I do want to remind you that the reason this line shows a $365,000 loss for the year compared to $607,000 of income last year [results] entirely to an approximately $700,000 adjustment to investment income during our third quarter. This adjustment, if you recall, represented a change in estimate of interest income earned to date on the funds we advanced several years ago in conjunction with the public portion of the Hilton Milwaukee parking garage. We continue to project full repayment of all the funds that were advanced, albeit at -- with interest earned at a lower interest rate than originally anticipated. We do not expect any additional significant revisions to this estimate in the future.

Moving further down the P&L, we reported losses on dispositions of property, equipment, and other assets of approximately $500,000 during our fourth quarter due primarily to the fact that we wrote off the value of selected furniture, fixtures, and equipment that was replaced in conjunction with recent renovations at several of our properties.

I also want to remind you that the largest portion of our full-year fiscal 2011 losses on dispositions relates to another unusual item that occurred and was described during our fiscal 2011 third quarter resulting in a negative comparison on our gains and losses on the disposition line for the year compared to fiscal 2010.

More specifically, as you recall, an adverse legal judgment was rendered against us during the quarter, the last quarter, related architectural services rendered during the construction of the condominium units at our Platinum Hotel and Spa in Las Vegas. The largest portion of that judgment, which totaled approximately $750,000, appears on that gain or loss disposition line because the majority of the construction costs associated with the Platinum project were deducted from proceeds from the sale of the condo units, resulting in gains reported in prior years. The remaining portion of the contingent liability accrued this year as a result of this judgment relates to legal fees and has reduced our Hotel division operating income during the full year of fiscal 2011.

I'll see remind you, however, that although accounting guidance required us to accrue a contingent liability for this judgment, we continue to vigorously appeal this ruling and believe that there is a reasonable possibility that the judgment may eventually be overturned. A motion for a new trial based on potential ex parte communications is currently pending.

Now, as our press release notes, the combined impact of the two unusual items that it described totals approximately $1.8 million on a pretax basis, which negatively impacted our fiscal 2011 full-year results by approximately $0.04. Again, that did not affect our fourth-quarter results but since this is also a press release announcing our full year, I wanted to reiterate those particular adjustments.

Conversely, our interest expense was down $270,000 during our fiscal 2011 fourth quarter and ended the year approximately $870,000 less than fiscal 2010, due primarily to reduced borrowings. We were able to fund our fiscal 2011 capital expenditures and dividends 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 2012 than currently planned, such as an acquisition or a significant share repurchase, we currently believe our interest expense may only increase slightly during fiscal 2012, assuming short-term interest rates don't change dramatically.

Our overall debt-to-capitalization ratio at the end of the year was 39%, down from 41% at our fiscal 2010 year-end. With limited senior debt maturities over the next couple of years, strong covenant ratios and approximately $129 million in available credit lines currently available, we also remain in an enviable liquidity position as well.

Now, there was little change in the last line in our Other Income and Expense section, which was the equity gains and losses on investment joint ventures during our fourth quarter. But for the full fiscal year, we did benefit from the fact that one of the two hotels that we have a 15% interest in reported a sizable gain from recently refinancing its debt during our third quarter, accounting for the increase in that line compared to the prior year.

Finally, our effective income tax rate during fiscal 2011 was 37.8% compared to 36.1% last year, resulting in a small negative comparison of this year's results to the prior year's. At this point, I don't expect our fiscal 2012 effective income tax rate to vary significantly from our historical average, which has been in the 38% to 40% range pending any further lapses of statute of limitations or potential changes in federal or state tax rates.

Shifting gears, our total capital expenditures, including acquisitions, during fiscal 2011 totaled approximately $26 million compared to $25 million last year. Approximately $16 million of this amount occurred in our Theatre division with the largest components being the Appleton, Wisconsin theatre acquisition and a major lobby renovation at our Menomonee Falls, Wisconsin theater. The largest portion of the $9.5 million of capital expenditures we incurred in our Hotels and Resorts division related to the completion of previously described renovations at our Grand Geneva and Hilton Milwaukee properties, and the beginning of a renovation at our Hotel Phillips property in Kansas City.

As we look towards capital expenditures for fiscal 2012, we are currently estimating that our fiscal 2012 capital expenditures may increase significantly and be in the $50 million to $90 million range with approximately $25 million to $%35 million estimated for each of our Theatre and Hotel divisions, and up to $20 million possible for our proposed mixed-use retail development in the town of Brookfield, Wisconsin.

Now, the range of potential capital spending is fairly large at this time because either the timing on several of our planned projects is not finalized yet or because some of the dollars are for several growth opportunities, primarily in our Hotel division, that may or may not come to fruition. As a result, our actual fiscal 2012 capital expenditure certainly could vary from this preliminary estimate just as it did this past year.

In addition, both divisions have acquisition strategies that could impact our actual capital expenditures if the right opportunity arose during the year. Greg will expand on some of our capital expenditure plans during his prepared remarks.

So now, before I turn the call over to Greg, let me provide a couple of additional financial comment on our operations for the fourth quarter and fiscal year. I'll start with the Theatre division. As you saw in our press release, our box office revenues were up 2% during the fourth quarter, and concession revenues were up 11.3%. Box office revenues ended the year, however, down 7.1% while our concession revenues were down 5.3%.

Our fourth quarter got off to a tough start, actually, due to the difficult comparisons to last year's hit Alice in Wonderland, but we ended the quarter with box office increases during five of our last six weeks. That sent us into the all-important summer quarter on a very positive note. Total attendance at our comparable theaters increased 1.9% during the fourth quarter as a result.

Our average admission price actually decreased 1.5% during our fourth quarter, due primarily to the fact that more of our top pictures this quarter were aimed at a younger audience. The overall decrease in fiscal 2011 theatre revenues was entirely attributable to a decrease in attendance at our comparable theatres of 9.6% for the year with the majority of that decrease occurring in our fiscal third quarter when attendance decreased over 23%.

The impact of our overall attendance decrease was partially offset by an increase in our average admission price for those theatres of 1.7% for the year. Now, the fact that last year's top film during the year was Avatar with associated premium pricing for our digital 3-D showings of the film and such a large percentage of our box office for that film coming from 3-D showings, it contributed to a smaller increase in our average ticket price this year than we have been reporting in prior years.

We are also seeing a small decline in the performance of 3-D. While still popular with a significant portion of our customers, the percentage of higher-priced ticket sold per picture has been shrinking as the number of 3-D titles has increased, also contributing to the smaller increase in our average admission price. Conversely, our average concessions in food and beverage revenues per person jumped by 7.5% during the fourth quarter and ended the year up 3.8% compared to last year.

Now, I do want to remind you that comparisons to last year's fiscal year operating income and operating margins in our Theatre division were negatively impacted by the change in estimate in deferred gift card revenues that we reported last year during our third quarter. Our fiscal 2010 Theatre operating income was favorably impacted by approximately $2 million of gift card income that related to prior years. The remainder of the decrease in operating margins this year is due to the aforementioned reduced attendance and its impact on the fixed costs of our business.

Shifting to our Hotel and Resort division, as we note in our release, our overall hotel revenues were up 3.7% and total RevPAR was up 1% during the quarter comparing to the same period last year. We ended the year with our RevPAR up 10.4% higher than it was last year.

Now, according to data received from Smith Travel Research and compiled by us in order to match our fiscal year, comparable upper upscale hotels throughout the United States experienced an increase in RevPAR of 7.5% during our fiscal 2011 fourth quarter and 7.7% during our full fiscal year 2011. So, as expected, we outperformed the national average for the year.

As we noted in our release and shared with you during our last call, we had an incredible fourth quarter last year, particularly at one of our largest hotels that had significant group business last year that we knew we would not be able to fully replace. To put this in perspective, we reported a RevPAR increase last year during our fourth quarter of over 19% when the rest of the nation was reporting a 7% increase. So it's not surprising to us that we essentially matched last year's results this quarter rather than exceeded them like we did in prior quarters.

Our fiscal 2011 fourth-quarter overall RevPAR increase was the result of an overall occupancy rate decrease of 1.6 percentage points and an average daily rate increase of 3.2%. For fiscal 2011, the full year, our occupancy ended the year 6.1 percentage points ahead of last year and our average daily rate increased 0.7% for the year.

Now, as was noted previously, our comparisons to last year in this division were also unfavorably impacted by approximately $400,000 of gift card income reported last year in conjunction with the previously described change in estimate. They were favorably impacted by the fact that we took a $2.6 million impairment charge last year related our Las Vegas condominium units. Excluding these items from last year's results, our operating income was still up approximately $3.1 million or 87% over last year's results, a very nice increase after two very difficult years in the lodging industry. Our fiscal 2011 and 2010 operating income and operating margins would have in fact been even better than that if not for the legal expenses related our Platinum Hotel.

We continue to incur significant legal expenses related to various Platinum lawsuits. Those costs, including the legal expenses and the adverse judgment that I previously mentioned, totaled approximately $1.8 million during fiscal 2011 and $1.7 million during fiscal 2010.

Finally, I do want to remind you again that fiscal 2012 will be a 53-week year for us ending on May 31, 2012, and that extra week in May is no ordinary week that rather includes the Memorial Day weekend. Since the recent 2011 Memorial Day weekend fell in the first week of our new fiscal year, that means we'll have two of these traditionally strong movie-going weekends during the upcoming fiscal year. To put this in perspective, while the Company certainly has changed since last time we had a 53-week year in fiscal 2007, the extra week that year contributed approximately $9.5 million in revenues and $2.9 million in operating income to our fourth-quarter and fiscal 2007 results. I show those numbers for illustrative purposes only, as any projections of the impact the extra week would have in fiscal 2012 would be purely speculative at this time.

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

I'll begin my remarks today with our Theatre division. When we were last together, I was trying to explain why we had just completed one of the more disappointing fiscal third quarters in recent memory. Clearly the results of that poor holiday and early winter film season had a significant negative impact on our overall fiscal 2011 results that we report today.

But in the business where hope springs eternal every single Friday with the latest Hollywood film release, I am pleased that today we can put those poor third-quarter results behind us and talk to you after a strong fourth quarter and good start to our new fiscal year.

Once again, film product has proven to be the most important driver of our results. The list of fourth-quarter films and early fiscal 2012 first-quarter films that we mentioned in our press release have brought smiles back to our hard-working Theatre division staff. Granted, those are tired smiles right now, as it has been a very busy week for our staff thanks to our record-breaking midnight shows and weekend box office totals from our favorite wizard, Harry Potter, plus plenty of hot weather to encourage our customers to escape the heat in their favorite Marcus theatre. I'm sure the rest of fiscal 2012 will still have its share of highs and lows but it is nice to end last year on a high note and begin the new year with to a strong start. We still have several additional films this summer that could do well for us and we are encouraged by the number of releases currently scheduled for our upcoming fall second quarter.

So since Doug is already gone over all the fourth-quarter and year-end numbers with you, I'd like to spend my time today updating you on our capital plans for this division, as well as giving you a brief update on our upcoming digital cinema rollout. As Doug noted, we are currently estimating that we may incur capital expenditures of $25 million to $35 million during fiscal 2012, excluding any acquisitions that could arise, to support our strategic plans for our Theatre division. The majority of these dollars will likely be spent to enhance our existing theatres, although we are continually looking for land for potential new theaters and we have previously disclosed plans to build selected new theaters during the next several years, including for example in Sun Prairie, Wisconsin. Another portion of these capital dollars will support our plan to further enhance our food and beverage offerings within our existing theatres.

During our fiscal 2011 fourth quarter, we expanded our exclusive recently renamed Big Screen Bistro in-theatre dining concept; that was the restaurant concept, formerly known as CineDine, in two additional auditoriums at our flagship Majestic Theatre. Our fiscal 2012 plans include the conversion of several more auditoriums at a different theatre into the Big Screen Bistro concept as well as a possible addition of two more Zaffiro's Pizzeria and Bars and additional Take Five cocktail lounges into existing theaters.

As always, we will also continue to maintain and enhance the value of our existing theatre assets by regularly upgrading and remodeling our theatres in order to keep them fresh and new. We have dollars in our fiscal 2012 capital budget to renovate several theatres and add the latest state-of-the-art seating in many of our auditoriums.

Finally, we also have dollars set aside for the initial licensing fees required for our major circuit-wide rollout of digital cinema. As we recently announced, we have signed a master license agreement with CineDigm -- not to be confused with CineDine -- this is CineDigm -- to deploy digital cinema systems in approximately 630 of our first-run screens at 47 Company-owned locations, including previously installed systems. When completed, state-of-the-art digital projection technology will be offered at virtually all first-run screens operated by our Theatre division. Installation of the first new systems is expected to begin later this summer with the balance scheduled to be completed by the end of calendar 2011. The cost to deploy this new technology will be covered primarily through the payment of virtual print fees from studios to our implementation company, CineDigm, our implementation of CineDigm. Under the terms of the agreement, CineDigm will purchase the digital projection systems and license them to us under a long-term arrangement.

Our goals for digital cinema include delivering an improved film presentation to our guests, increasing scheduling flexibility, providing a platform for additional 3-D presentations as needed, as well as maximizing the opportunities for alternate programming that may be available with this technology.

As you know, we took our time to evaluate our digital cinema option. We believe our patience was rewarded with a very good off-balance-sheet arrangement that allows us to offer this state-of-the-art technology to our guests while preserving our Company resources for other growth opportunities in this division and beyond. We are excited to get going on digital cinema and we're looking forward to a much improved fiscal 2012 for our Theatre division.

With that, let's move on to our other division, Hotels and Resorts. You've seen the segment numbers and Doug gave you some additional detail. Given the unusual quarter we were up against last year in this division, we were actually pretty happy to essentially breakeven with this last year's operating results.

If you recall, during our last call, we suggested that it was likely that we would report a decrease in operating income this quarter due to the difficult comparisons to last year. As you might suspect, we are certainly pleased with the overall progress we made this year in this division as we recover from one of the worst downturns we've ever experienced in our years in the hotel business.

As Doug shared with you, even after adjusting last year's numbers for a couple of unusual items, we nearly doubled our operating income in fiscal 2011 compared to a year ago.

Particularly encouraging in the detail behind our numbers was the fact that we reported an overall increase in our average daily rate of just over 3% this quarter, our second straight quarter of increased ADR after two years of year-over-year declines in this metric. We still have a long ways to go, but over half of our own properties reported in at least some increase in rate this quarter compared to the same quarter last year. That is not to say that we aren't still experiencing a lot of pressure on our rates in this current environment. Our final fiscal 2011 RevPAR was still approximately 9% lower than our pre-recession fiscal 2008 RevPAR with ADR being the entire reason for the decline. Thus, in order for this current recovery to be complete and in order for operating margins to be maximized, we still need average rates to improve. This continues to be the biggest challenge we are facing right now. As I shared with you last quarter, the fix to this is not as simple as just raising our rates. Rather, the long-term fix is what we refer to as share shift. We would like to return to our historical mix of business whereby group business represented approximately 50% of our overall occupancy versus the 40% that it has represented the past couple of years.

The fact that our occupancy is at or above even our highest level of fiscal 2008 is due to the fact we've had to replace that higher-rated business with occupancy predominately from the price-sensitive leisure market. To the extent we can shift some of the occupancy back to group business or even the individual business traveler, it should provide an opportunity for us to reduce our usage of the various discount Internet channels that the leisure guest relies heavily upon.

Fortunately, demand from the individual business traveler has increased and we are seeing the benefits of that so far this summer. Our group booking pace, while not back to where we were, also continues to improve. The rate on these booked rooms is up slightly over the prior year as well.

In the near term, we still don't expect significant increases in the group business ADR, but as we have pointed out in the past, the group business customer tends to provide more opportunities for ancillary spending once they are on site, making the group customer a very desirable customer. Over time, with supply growth in our market segment limited in the short run, it should be reasonable to expect that we will continue to gain pricing power as the economy improves.

Looking ahead, as I mentioned, our very important summer first quarter is off to a good start and we generally expect our favorable revenue trends to continue in future periods, assuming the economic environment continues to improve.

Shifting gears for a moment, let me expand on Doug's comment regarding our planned capital spending for this division during fiscal 2012. As he noted earlier, we are currently estimating that we might incur capital expenditures of $25 million to $35 million in this division this year, which would represent an increase over the past couple of years. This is always our hardest number to estimate, as a significant portion of our potential spending in this division relates to growth opportunities that are very difficult to predict.

As you note, we are continuing to look for opportunities to grow our hotels under management through a variety of different ways. A significant portion of our $25 million to $35 million estimated capital spending represents dollars set aside for those growth opportunities. We are currently in various stages of discussion on many such opportunities and with a strong balance sheet and credit availability, it is possible that several of these potential growth opportunities will come to fruition in the months ahead.

Our plans for our Hotels and Resorts division also include continued reinvestment in our existing properties in order to maintain and increase their value. During the last two years, we completed a major guest room renovation at the Hilton Milwaukee City Center as well as a guest room renovation in pool and spa (inaudible) our Grand Geneva resort. Guests response to these renovations has been very positive and both properties have contributed to our improved operating results during fiscal 2011. We have several small to midsize property renovations planned for fiscal 2012 as well, including renovation currently underway at our Hotel Phillips property in Kansas City.

Lastly, unlike feeder assets whereby the majority of the return on investment comes from the annual cash flow generated by operations, a portion of the return on a hotel investment is derived by effective portfolio management, which includes determining the proper branding strategy for a given asset and the proper level of investment in upgrades necessary, as well as identifying an effective divestiture strategy for the asset when appropriate.

Our past hotel investments have been very opportunistic as we have acquired assets at favorable terms and then improved the properties and operations in order to create value. Depending upon marketing conditions, we will periodically evaluate existing or future individual hotel assets in order to determine whether a divestiture strategy may be appropriate for that asset. We do not currently anticipate divesting any particular hotel assets during fiscal 2012, but if an opportunity to sell a particular hotel would arise that we determined was in the best interest of shareholders, we would consider it.

Now, before we take questions, let me quickly update you on the other piece of our potential capital spending Doug alluded to earlier. In addition to growth strategies in our operating divisions, we are also leveraging our real estate experience by pursuing an opportunity to be the developer of a mixed-use retail project currently proposed on the site of one our former theatres in the town of Brookfield, Wisconsin. We have previously reported our intention to sell this valuable land parcel, but an opportunity surfaced to acquire an adjacent parcel and develop a high-quality town center anchored by a Von Maur department store. The project named The Corners of Brookfield is seeking local government financial support for certain infrastructure costs and we are currently completing the design specifications and construction cost estimates, as well as assessing leasing interest in the project. I will tell you that we are very encouraged by the initial response we have had from potential tenants to this exciting project. Our portion of the total cost of the project may exceed $100 million and we are currently hoping for construction to begin in spring 2012 with an opening planned for the second half of calendar 2013. The actual timing and extent of our capital expenditures for this project could change, of course. It is possible that we may incur capital expenditures during our fiscal 2012 of up to $20 million on this project related to the acquisition of the adjacent land and initial construction costs.

With that, I will conclude my prepared remarks by once again thanking you for your continued support as we have navigated through unprecedented times in the lodging industry and a challenging year of film product. We believe we are poised to benefit from operating improvements in both of our businesses during fiscal 2012. With an outstanding balance sheet, we have pretty of room to capitalize on the many growth opportunities that may be available to us in future periods. We are committed to executing the strategies necessary to provide value to our shareholders over the long term.

At this time, Doug and I would be happy to open the call for any questions you may have.

(Operator Instructions). David Loeb, Robert W. Baird.

Good morning gentlemen. I just have a couple of -- [typical] couple. Greg, I appreciate your candor about looking for investment opportunities and how uncertain that is. It's something that was mentioned a couple of times in the press release, particularly in the Hotel division and also in the summary. Are you looking to acquire whole ownership, or are you looking to invest slivers to broaden the management platform? How would you describe that acquisition hunt and what are you seeing out there as opportunities? (inaudible)

Yes. I say that jokingly, but yes, David, we can acquire properties. We have the balance sheet capacity to do that. We could put sliver equity to work. The way I view it is our job is to maximize [3X] in the Hotel division. We've got to maximize the cash flow coming in, we've got to maximize the assets that we have, and we need to maximize the intellectual property that comes from being an owner and developer and operator that we've accumulated through our 50 years in the business. So to that end, if we're going to buy something with sliver equity, we can do that or buy it to own it or buy it with other investors. There's multiple opportunities that we are pursuing. My goal is to just maximize all three of those paths.

It's a pretty competitive market for acquisitions, particularly in perhaps the top 10 markets. Is your focus more on markets 10 through 50?

I would say so. We look at stuff in the top 10 markets. We see them, but you're right; they are competitive. I'm not sure always -- either the prices are quite strong, or priced for not making many mistakes, or the asset quality isn't great. I think you're seeing it; we all see it. There's been a lot of holding on. Frankly, I can't in a way fault the lenders for holding on. I think they probably had the right strategy for themselves. I prefer that they didn't (inaudible) to buy, but I've seen the stats, and you know them. I think I read it in your research that the percentage of the high-quality assets that are being bought by -- that have been bought by the REITs with their currency has been pretty significant.

For sure. For sure. As you look in the Theatre division for acquisition opportunities, would you say that this is a time in the cycle that is good for those kind of opportunistic acquisitions, or is this really a time when owners are more likely to hold on and ride out what could be good times for at least the next several months?

Until this last week with Harry Potter, I might've said yes -- more people. But you get a barnburner like Harry Potter and it makes people a lot more comfortable. I think we're -- this is one -- the cycles in the theatre business, if you can explain them to me, I would love to know. They're very tough to predict because it's so product-driven. There is a macro environment that I think we see when and we've talked about that it's interesting. As we've seen leisure business pick up and people are traveling for leisure, theatre gains haven't been as robust as they were when the economy was going the way it was. So it is a little countercyclical from a macro perspective.

But we look (inaudible) for other things. It's for transitions, businesses in transition. It's for -- there may be potential opportunities where people don't have the ability to finance a digital deployment. That is -- it's coming; it's coming fast. We were the last major operator to put it out there. There's probably one other significant one. But otherwise everybody in the top probably 10 is done.

So it's -- and make no mistake about it. You need to have financial capacity to do it. It's not just on the backs of the studios. So there potentially could be opportunities there as we look to it, but I can't give you any predictions. We just keep hanging around the rim is about the best I can say.

Eventually, they'll come to you. As you look at those investment opportunities and the return potential for them, how does that compare to looking at investing in your stock at the current level?

That -- I expected that question and it's a heckuva question that we've been wrestling with ourselves in the recent time term period we've been dealing with. We I think have -- we take a pretty conservative approach in terms of once we have a pretty good idea of how our quarter is shaping up, how our yield is shaping up, I'd stay out of the market. So we've had to kind of watch as our stock has performed certainly at levels that we think are attractive.

On the other hand, we've just shared with you some pretty ambitious capital goals and some capital plans, including the Corners project in Brookfield that, when all is said and done, is $100 million. So we've -- we feel good about the opportunities that are in front of us in both those divisions plus with that project. So we think we have some very attractive ways to invest our funds. I guarantee you we'll constantly have that internal discussion with -- among ourselves and with our Board and watch where our stock price is. But right now we just -- as we look at all of the capital plans ahead of us, we are excited about those.

Given that context, Doug, how do you look at the dividend? Are you considering dividend increases and other opportunity to reward shareholders, or do you see more benefit from continuing this investment?

Yes, well, certainly that's another topic that literally every quarter we have a discussion about that with our Board. We've kept this dividend as we've gone through these last couple of tough years in the hotel business, we've held the dividend firm. It's yielding in the 3%-plus range right now. As you know, there have been times when we looked -- we've done -- we did a special dividend a handful of years ago, and so yes. We do view dividend policy as another way of potentially providing value to our shareholders. It's in that exact same discussion that we have when we're talking about the share repurchases and the capital. We basically put all three of them into the pot and we've talked about it every quarter.

That makes perfect sense. I'll come back in the queue to ask some division questions (inaudible). Thanks.

(Operator Instructions). Mike Rindos, Rodman & Renshaw.

Hey guys. Greg, you made an interesting comment (inaudible) about the theatre owners and their upgrade to digital cinema and that it does take some financial resources on the part of the theatre owners to make that happen. It's not just on the back of the studios. Do you think we're coming into period here where smaller theatre chains who may not be able to fund this upgrade might be looking to sell some theatres and might that be part of your acquisition strategy to capitalize on that trend?

Yes, that's what I was implying. We'll have to see. We don't know yet. The heat has not been turned up yet because there's still film. But I just was reading, there was -- I can't even tell you the details of it but (inaudible) and Technicolor had something just happen this week where there was a big signal that film is really going by the wayside. It's not going to happen tomorrow. We are not going to wake up and have film be gone tomorrow. There are still a lot of screens out there that still use film, but it's going away. And so people are going to have to make the change. Some won't even warrant an investment in it and some theaters are going to probably go way. It's not our situation. We've always been very good about maintaining the quality of our circuit and calling out the stuff that doesn't -- that's obsolete.

Interestingly, we had a conversation -- I was having a conversation the other day with -- it was my wife and we were talking about the first -- we still own the first theatre that my grandfather ever developed in Ripon, Wisconsin. She said what about the next one? I said I couldn't tell you 2 through probably 20. We don't have those. We have the original because it's important and it makes a statement about us as a company. But the business is -- we don't -- we continue to make sure that we are on the right place with our assets.

Additionally, could you give us some further color on booking trends for the hotels through the summer?

Summer is looking very good to us right now. As we mentioned in the prepared remarks, advanced booking pace and I think I mentioned this actually last quarter. We are ahead. When I last checked, we were ahead for every month in this coming fiscal year that we are in, fiscal '12, except for one. It's possible we've overtaken that one now too. I haven't asked. And so that's -- so the pace itself we're encouraged by. It's all relative in that it's still not back to where it was in kind of pre-recession times. That's evident by a couple of the numbers that Greg shared with you. But yes, overall, the pace is continuing to improve.

One of the things that we are still noticing on the group business is that when that conference occurs or that event happens -- and Greg used to send three of us to it, now two of us go. That's being repeated with lots of companies, I mean, where they are making those kind of decisions. So certainly the size -- there was a time when we might fill up Grand Geneva with four groups. Today, you go there, you might see 10, 12 names on the board. And so that's how we get there, and so we are just dealing with a different environment. But overall, the pace is improving. Summer is a prime time for us, certainly in our markets, and we're pretty encouraged by how it's going so far.

Okay, great. Thanks guys.

David Loeb, R. W. Baird.

On the Hotel side, could you talk a little bit about where you see great growth potential? Do you have more group in the mix other than the fourth-quarter comparison of course? Do you have more group in the mix that allows you to raise transient rates a bit? Is it more likely to be just less discount business in the mix? How do you see that going forward over the next couple of quarters?

A little of both, David. The individual business traveler, so if you try to divide business into the two groups of group business and then the individual business traveler, that particular segment has been particularly strong in the summer here. So all of our corporate business, a lot of it has been quite strong.

Now, those tend to be -- a lot of those tend to be at negotiated rates, contractual rates, and so those don't -- those rates don't just change overnight. We do one-year deals, two-year deals. Every one of them is different. Some of them are dollar amounts; some of them are -- might be a percentage tied to what our [bar] might happen to be. So while it's not an easy answer, the fact is that the trend in the individual business traveler has actually been maybe the strongest right now.

In order to get us the rest of the way, the rest is primarily what Greg alluded to in terms of that share shift where we just -- the leisure customer is still very strong, but very price-sensitive. Yes, by getting the compression, by getting more of the group business booked into the property, and then supplementing with this individual business traveler, it just allows us to provide less rooms and we don't have to -- we can be more picky and not have to offer as many rooms to the discount channels. That's how we see one of the major ways of getting it up.

The other issue is when you're in -- the consumer has gotten smarter. I haven't asked the guys lately in the last quarter what's going on, but -- in terms of this one point. But one of the things that we all -- we saw happening when things started going sideways was that, as we got into the discount channels, even our group and our negotiated corporate rates, they would say, well, they were just go book around it. They would ignore it because if that was a higher rate and they could see on an Expedia or a Hotels.com, they would just look around and take the lower rate. So when we are in those channels, it has bleed-over in a negative way to the other channels of our business.

That makes a lot of sense. On the Theatre side, you've got some big movies this summer clearly with Harry Potter, Captain America, a few others. What's the trade-off for those kinds of blockbusters on the film cost versus the volume variance that helps your margins? I assume those are pretty high cost films for you?

You know, yes. They tend to be. You know, it's something that we really are vigilant about. It's been a challenge because, you know, Hollywood is the hurt animal in a cage, and they need to try and find -- as the sellthrough DVD market has been disappearing on them, as evidenced by even Netflix's recent move, it sort of sends the signal that the DVD is going the way of the dinosaur, that we -- I'm not saying it's going to happen tomorrow, but it is happening. So their margins have been impacted. They built their model on a DVD sellthrough business that doesn't exist, and so they are looking for ways to get money. So there's that constant pressure.

But the other side of it is this is a very important window for the whole business. It sets the value of the film. It gets people talking about it. As I've said before, on any given weekend, they can get 30 million people off their couches and into a movie theatre. That's something that people like to talk about on Monday morning. They're not going to talk about how many people sat on their couch all weekend and watched something. They're going to talk about how people got up and left. So it makes it a special environment and special window that's very important.

So we need to earn a return on the investment and the studios know that. So there is let's call it a creative tension that constantly pits those numbers. But yes, the film prices go up, but then we have -- but we see other -- we see volume increases coming in the door too (technical difficulty) forever.

No, that's actually really helpful. Finally, on some of the initiatives within the theatres, like the digital, which of course is I guess a small increase in operating costs rather than capital, but also in your investments in the food and beverage options and the like, what kind of consumer reaction are you getting? What kind of return expectations do you have for those cost increases or capital spending?

I think we are getting very good consumer reaction. The truth is we're still a little bit in F&B as we figure it out but there's (inaudible) that we didn't -- theatre really has got -- I mean we do these -- we do some -- we do one of those one-question surveys that says how much would you -- would you refer us to a friend or colleague? And we score off the charts in (inaudible). It really has been very impressive how much people really like the product. The Big Screen Bistros have been very well received. So we want to continue to grow them and simply -- but we've got to put capital in them. We expect the same return on a capital investment that we would in really anything we would do. It needs to meet our hurdle rates. We think it will as we work to and sort of as we flush out the concepts and learn from. We constantly keep learning. (inaudible) taken us time to learn how to maximize that box. We've got a delivery. We've added a dessert program. We've added all sorts of -- we've built a lunch business. It's interesting because they're not traditional restaurant locations. So it's --

for us, the challenge is to go out and get people to come there. But we can do a significant amount of business that's not even necessarily theatre related. So, we have further opportunity to get theatre customers to come and eat there.

And you also, in your question, mentioned the digital. From a digital perspective, we -- first of all, it took us a long time to get this deal done because we were, again, we were very concerned about the economics. We didn't want this to hurt us. We've had -- one of the reasons why we wanted someone else's money making this investment, so we weren't tying up our capital on a project that wouldn't have a traditional return that we could just compare to some of these same F&B things that we were just talking about. We will see improved, some improved operating costs, our labor costs. On the other hand, we'll see increased maintenance costs.

The real wildcard about digital in terms of a return perspective probably is the alternate programming. The 3-D -- certainly you have digital first before you can do more on 3-D, so it certainly gives us a platform to go do some more 3-D. But the alternate programming is probably the real wildcard that you can't pro forma. We don't know exactly where that's headed, but certainly a lot in our industry believe -- or one of them -- that there will be greater content available to us, more content available to us as a result of everyone going digital. And so that could be the return element of that particular relatively small investment on our part, as you know.

Great, thank you.

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

I certainly want to thank everybody once again for joining us today. We look forward to talking to you once again in September, just a couple months from now, when we release our fiscal 2012 first-quarter results. Thank you and have a great day.

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