Marcus Corp (MCS) 2012 Q1 法說會逐字稿

Good morning, everyone, and welcome to the Marcus Corporation first-quarter earnings conference call. My name is Jennifer and I will be your operator for today. At this time all participants are in a 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'd like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you and welcome, everybody, to our fiscal 2012 first-quarter conference call. As usual, I need to begin by stating that we plan on making a number of forward-looking statements in our call today.

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 & 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 in our markets; expectations and plans regarding growth in a number and type of our properties and facilities; expectations regarding various non-operating line items on our earnings statement; and 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 can impact our ability to 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 2012 first-quarter results. As you might surmise, we're quite pleased with our reported results; it was nice to have both businesses show substantial improvement at the same time. I'm going to take you through some of the detail behind the numbers and then turn the call over to Greg for his comments.

As you can see, there really weren't any significant variations in most of the other income and expense lines below operating income, other than another reduction in interest expense compared to the prior year. Our interest expense was down over $300,000 during our fiscal 2012 first quarter compared to the prior year due primarily to reduced borrowings.

As you know, during the summer we're at the peak of our cash inflows while at the same time we generally refrain from significant capital spending. As in the past, we'll likely see our debt level rise in future periods now that the summer is behind us.

Our overall debt to capitalization ratio at the end of the quarter was 36%, down from 39% in our recent May year end due to the aforementioned strong cash flow summer for us. And this lower debt to cap ratio is despite the fact that we repurchased over $400,000 of our common shares during the quarter and Greg will speak to that in a moment.

Shifting gears, our total capital expenditures during the first quarter of fiscal 2012 totaled approximately $3.7 million compared to just over $2 million last year during the first quarter. Approximately $2.7 million of this amount was incurred in our Hotel division, of which a renovation at our Hotel Phillips property represented the largest piece.

As I noted earlier, we generally tend to limit our capital spending during our busy summer time period. At this early stage of our fiscal year, despite the low CapEx number during our first quarter, we have no reason to adjust our previous estimate for capital expenditure for fiscal 2012 of an amount in the $50 million to $90 million range, recognizing that, as we pointed out in our recent 10-K filing, the timing of several of our planned expenditures, including those related to the Corners retail project, are still just estimates at this time.

We're still finalizing the scope and timing of that project as well as the various requested projects by our two divisions and we anticipate proceeding with many of these projects as the year unfolds. The actual timing of the various projects currently underway or proposed will certainly impact our final capital expenditure number, as will any currently unidentified projects that could develop during our fiscal year.

So now I'd like to provide some financial comments on our operations for the first quarter beginning with Theatres. Our box office revenues increased 5.3% during the first quarter with concession and food and beverage revenues up a significant 16.4%. These increases are attributable to an increase in attendance at our comparable Theatres of 2.3% for the first quarter and increases in both of our relevant per capita numbers.

This year's Memorial Day weekend line-up of Pirates of the Caribbean 4, Kung Fu Panda 2 and Hangover II significantly outperformed last year's films during that same time period -- Shrek 4, Sex and the City 2 and Prince of Persia. And then mid-July got a boost from the outstanding performance of the final Harry Potter installment.

These and other films contributed to our second straight quarter of increased attendance after a very challenging first three quarters of fiscal 2011. Our average admission price for these Theatres increased by 1% for the quarter and our average concession and food and beverage revenues per person increased by 11.7% compared to the same quarter last year.

Pricing, concession product mix and film product mix are the three primary factors that impacted our concession sales per person. Selected price increases, a change during the second half of our last fiscal year from sales tax inclusive pricing to sales tax added pricing and a change in concession product mix, including increased sales of the higher priced nontraditional food and beverage items in our Theatres, all contributed to our increased concession and food and beverage sales per person during the first quarter.

As a result our operating margins for this division increased to 24.2% compared to 22.5% last year. And I want to point out that our operating income and margin would have been even better this quarter if not for over $600,000 of accelerated depreciation that we reported this quarter related to 35 mm film projection systems that are being replaced in conjunction with our previously announced digital cinema deployment.

We do expect to report an additional $800,000 of this same accelerated depreciation during our upcoming fiscal second quarter related to the conclusion of the digital deployment.

Shifting to our Hotel & Resort division, as we noted in our release, our overall hotel revenues were up 9.8% and our total RevPAR was up the same 9.8% during the quarter compared to the same period last year. As we've noted in the past, our RevPAR performance did vary by market and type of property, but all eight company-owned properties reported increased RevPAR this quarter.

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 6% during our fiscal 2012 first quarter. So we've once again outperformed the national average.

Our fiscal 2012 first-quarter RevPAR increase was a result of an overall occupancy rate increase of 2.7 percentage points and an average daily rate increase of 6.4%. So with that I'll turn the call over to Greg.

Thanks, Doug. I'll begin my remarks today with our Theatre division. As we shared with you eight weeks ago during our year-end conference call, our new year appeared to be off to a good start and, as you can see by our reported numbers, the rest of the first quarter held up quite nicely.

In fact, we ended our traditionally strong summer quarter with box office increases in five of our last six weeks. As Doug noted, this was our second straight quarter with an attendance increase over the prior year of 2% or more, a very nice reversal from the negative attendance trend we experienced during each of the first three quarters of last year.

And it is obviously no secret that the most important factor impacting attendance has been and always will be the quality and quantity of the films released during the period. This summer's film slate certainly was highlighted by the performance of the top four pictures noted in our release, all of which happened to be sequels -- Harry Potter, Transformers, the Hangover and Cars.

But there also was a lot more depth to the film slate this time around. Our indication of this is the fact that this year we had 12 films produce at least $1.5 million of box office receipts for our circuit during our first quarter compared to only seven films that reached that mark last year. That second tier of films can make the difference between the record revenues we reported this year during the first quarter and an average to down quarter like we reported last year.

It certainly is too early to tell whether we will continue these positive trends in our current second fiscal quarter. September is always our slowest month of the year and historically nearly 60% of our second-quarter box office receipts are produced during the last six weeks of the quarter as the holiday film season kicks off in earnest.

This year we anticipate a strong performance from a November lineup of films that include Puss 'N Boots and Happy Feet Two, both in 3D, as well as another installment in the Twilight series. As a point of reference, our top films last year during the second quarter were Harry Potter and the Deathly Hallows Part 1, Jackass 3 and Megamind.

And if I was to sneak a peek into December, in the beginning of our fiscal 2012 third-quarter we can look forward to sequels to the popular Alvin and the Chipmunks, Sherlock Holmes and Mission Impossible franchises, as well as new films such as New Year's Eve and The Girl With the Dragon Tattoo, and two films from Steven Spielberg, War Horse and The Adventures of Tintin, Secret of the Unicorn.

Meanwhile, we continue to execute on several of the strategies we highlighted in our recent 10-K and year-end conference call. Since we last spoke our digital cinema deployment began with a very aggressive schedule. Installations began on August 15 and today we are already over halfway done. As our release notes, we should have the vast majority if not all 628 planned digital systems installed by the end of this month.

I can't tell you how proud I am of our digital cinema team and vendor partners. Once we made the decision to move ahead with digital we wanted to deploy it as rapidly as possible in order to begin realizing some of the benefits highlighted in our release. With over 90% of our screens utilizing digital projection systems by October, we will continue to provide our customers with some of the most state-of-the-art theatres in America.

Also contributing to our reputation as a leading innovator in the industry is our continued effort to expand our nontraditional food and beverage offerings in our theaters. In that regard, we are very pleased with the customer response to our two new Big Screen Bistros at our flagship Majestic Cinema in Brookfield, Wisconsin. And we are actively reviewing plans to further expand that concept.

In addition, as our press release notes, we recently approved construction of our second full-service Zaffiro's Pizzeria and Bar this time in conjunction with a major renovation of our Parkwood Cinema in a suburb of St. Cloud, Minnesota. If all goes well we hope to have the restaurant open in time for the busy Christmas is season.

With that let's move on to our other division, Hotels & Resorts. You've seen the segment numbers and Doug gave you some additional detail. Certainly we were very pleased with another quarter of significant year-over-year improvement. And as Doug shared with you, it is also gratifying to see us continue to outperform the industry during this recovery.

Particularly encouraging in the detail behind our numbers was the fact that we reported an overall increase in our average daily rate of over 6% this quarter, our third straight quarter of increased ADR after two years of year-over-year decline in this metric. We still have a ways to go, but seven of our eight owned properties reported an increase in rate this quarter compared to the same quarter last year.

That is not to say that we aren't still experiencing pressure on our rates in this current environment. Our fiscal 2012 first-quarter ADR was approximately 7.5% lower than it was in our pre-recession fiscal 2008 first quarter. Better than the double-digit percent declines we've seen in prior quarters, but an indication there is still room for improvement.

It is interesting to note, however, that our fiscal 2012 first-quarter RevPAR was only approximately 1% lower than our pre-recession fiscal 2008 first-quarter RevPAR, thanks to nearly 6 additional points of occupancy this year compared to the first quarter of fiscal 2008. In fact, our combined occupancy for our eight owned hotels has never been higher.

Of course the challenge we face with this high occupancy, lower rate environment shows up in our operating margins. It is much harder to drop the revenue increases to the bottom line in this environment.

Our overall operating margins increased this quarter from 15.1% during last year's first quarter to 17.2% this year, a healthy increase. But note that we only converted approximately 40% of our increased division revenue this quarter to our operating income compared to the 50% flow-through that we might see in a more normal rate environment.

We're obviously very happy with the improvements we are experiencing in our Hotels & Resorts' operating results, but as we evaluate our business we still see a need for a shift in our relationship between occupancy and rate in order to get our operating results back to their optimum levels.

I certainly believe that our first-quarter results suggest that we are on the right path. The share shift I've talked about in the past, whereby group business begins to return closer to our historical mix of our business, appears to be underway, albeit at a modest rate. Group business improved during our first quarter and the advanced booking pace for groups continues to be good.

The strength of the quarter continues to be the individual business traveler and our corporate volume business. Those segments have been very strong and have allowed us to reduce our usage to some degree of the various discount Internet channels that negatively impact our ADR so much.

Looking ahead, the second quarter is off to a good start thanks to the same customer segment that drove our first quarter. So at this time we generally expect our favorable revenue trends to continue in future periods, assuming no major disruption or changes in the economic environment.

We remain concerned about the fragility of our current economy as well as the uncertainty that is arising out of our current political environment. I'm sure we'll have our share of unexpected challenges in the future.

Finally, we continue to look for opportunities to grow our hotel business through a variety of different ways. Our hotel division continues to seek additional management contracts and has the ability to make minority investments in projects when the opportunity arises.

Last month we announced that Bill Reynolds, a well-respected industry veteran with extensive hotel acquisition and development experience, has joined the Marcus Corporation as Senior Managing Director of our newly formed investment business. Historically, whether investing on our own behalf or partnering with others, something we've been doing for nearly 50 years already, the development team that runs these activities was housed within Marcus Hotels & Resorts.

With an eye on continuing that activity and potentially expanding into other activities like [fund] sponsorship, we thought it would be best to separate the development activity into a separate entity to give it more attention. While our efforts are just beginning in this new venture, Bill has hit the ground running and is already busy evaluating various strategies and opportunities that could provide long-term value to the Marcus Corporation. We're excited to have someone with Bill's skills and experience join our team.

And as I wrap up our prepared comments, I would be remiss if I didn't note that, as our press release indicated, we repurchased over 400,000 shares during the quarter pursuant to an existing Board authorization. This still leaves us plenty of room to consider growth opportunities in both of our businesses.

With a debt to capitalization ratio well under 40%, over $130 million in revolving credit availability as of the quarter end, and a $150 million universal shelf registration statement on file and effective with the SEC, we have the flexibility to explore and follow through on potential growth and value creation opportunities that may arise during the months and years ahead, while still taking advantage of an opportunity to repurchase shares at a price that we felt significantly undervalued our assets and growth potential.

We will continue to manage our balance sheet very carefully in the future, but we are committed to executing the strategies necessary to provide value to our shareholders over the long-term. With that, 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 have a few, as usual. One on the hotel side, Greg, I appreciate your color about the margins and occupancy versus ADR. It still looked like a decent rate growth this quarter. As you look over the next four quarters is there -- are you getting to a point where your occupancy is getting high enough that you can start pushing rate a little bit more aggressively?

You know, I hope so. I mean, we're going to have to start actually having people sleep on the roof soon -- in some of the hotels. But it's been a challenge. We are seeing some opportunities, we're into the negotiated rate season, we're seeing some ability to push rate. But it's not going to -- it's not going to be anything huge, but we are moving forward and we're making progress on that.

When we tried to push rate earlier on in the cycle we found that we really cliffed out. Like the minute -- we had a lot of occupancy and then if we dropped the rate -- if we raised the rate then all of a sudden it would go away. Now we were much deeper into the travel, the online travel agents and the discounters who we are moving away from.

And so I suspect that we will have more opportunity. But again, it's -- who knows with the economy, we'll have to just sort of see where things go. But I think we're -- one of the things that's helpful is that it's good -- we're seeing significant business from our corporate accounts and we know that corporate America has got a lot of money on the balance sheet. They may not be hiring, may not be investing, but maybe their investments are in their hotel business.

And this is the way I would follow up on what Greg just said, David, is that the 6.4% we did this quarter was probably more a reflection of -- versus the term pushing rate, it was more a reflection of that shift where we were filling the rooms with more of that corporate -- volume corporate business and individual business traveler versus that heavily discounted Internet channel customer. So it's not so much that we took any of the rate that we charged each of those channels up significantly, it was more of a channel shift.

Makes perfect sense. And given all the turmoil in the stock market in hotel stocks, to a degree in your stock until today, do you -- are you seeing anything in the business, are you seeing any changes in travel patterns or booking patterns as you look ahead for the next quarter or two?

Not really, David. It's interesting, I have a theory that I'll share with you and I don't know if it's accurate or not. But, you know, one thing -- because I think we're all hearing the same thing that people were cautious, we're seeing people ratchet down their RevPAR expectations but still having growth in them.

The only thing I can think of is that, as I said, it's not the balance sheet -- corporate balance sheets are in much better shape than they were and it could be there's a little bit of reversion of the mean. If you think about the work that you guys do when you analyze our companies and you analyze our performance, you tie a lot to GDP.

And I think that you would be the first to say that in the last part of -- the last cycle when we went down we blew those correlations out of the water, probably somewhat induced by government's negativity toward travel. And it could be that we're just reverting back to the mean in that things may slow down in the economy but we so far overshot the market on the way down that we may be a little protected. I don't know, it's just a guess, but I figured I'd share it.

And then maybe what I would add, David, is I -- expecting a question like that, I talked to our guys and asked them the same question. And the only thing that -- again, I struggle a little bit to have an answer other than saying that, well, maybe just a little bit in the association type business.

The company business seems -- as Greg just said, has been very, very strong. It's been the strength of our business and it appears to be the strength of this upcoming quarter as well.

But some of the association business where now people don't have to go and so maybe we're seeing that the pickup in some of those types of events maybe is being impacted just a little bit where maybe a few less people are going to the things that they don't have to go to. But we actually -- I mean my guys struggled a little bit to try to come up with an answer to that question, because we're not seeing a lot of it.

We're hearing that from a lot of others. One more hotel question then. The [series] with the Brewers in contention this year, do you think that the Milwaukee hotels will have any particular benefit in the next quarter -- I mean in the second quarter from potential playoff-related business in the markets? Or does that go the other way where you have rooms blocked off and if they don't have a game six or seven or whatever that you've not booked other business in?

It depends a lot, David, on -- right now, for those who aren't in this market to know, I mean the Brewers are right now -- they could get a certain game, they could be a hosting a series in the first round, they could not be.

And so that make a difference. If they host I think it's on a weekend, I think that we do have some -- there's something going on, we might have some conflicts. So it might not be that big of a push -- or that big of an addition if that's the case.

On the other hand, if it falls and if the series -- I can't even remember which way it falls, the series falls the other way, then it would be a really good thing. Obviously if it gets to the second round that even becomes better. The first series could only be -- worst case scenario it could only be one game.

But the truth is you know that this is a particularly strong period anyway for us. And so it -- but it's a high-class problem and it beats a poke in the eye with a sharp stick, as they say.

That's right.

Yes, okay, great. I have a couple others but I'll come in after some other people have a chance. Thanks.

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

Hey guys, fantastic quarter, congratulations. I wanted to talk a little bit more about the digital rollouts in the theatres and get your sense for the upcoming holiday season and how much of an expansion or how many more theatres will be showing 3-D. Can you comment on the industry's take rate for 3-D films lately? And then to follow that, what you think the pipeline of alternative content looks like for the coming three or six months or whatever your viewpoint is?

It will have no impact on -- let me start with your first question Mike. It has no impact on the amount of 3-D screens we're going to have. We have the ability to have more but we're not making any more investment in 3-D at this point. I think that, as everybody has seen, there's a question mark over what is going to be the actual demand for 3-D.

3-D is here, it's an important part of the mix, but where does it shakeout? I don't think anybody even knows yet where we're going to end up and how much of a contributor 3-D is going to be. Certainly producing a lot of 3-D movies but, as I think you know, the percentage of business going to 3-D has been declining. So I wouldn't tell you that digital is going to have any impact on that.

We continue to see expansion in the alternative content area. I saw a list today of some of the new stuff coming. I posed an interesting question to the guys on the e-mail in the last 24 hours just as it related to alternative content which is how are we promoting.

Because one of the problems with alternative content -- I don't know if you've ever thought about this, but what makes movies work? If you think about it, a movie plays 30 times a week, so if it runs for four weeks it gets 120 runs and if it's on 4,000 screens you have like 500,000 plays across the country, think of the marketing you can throw at that.

If it plays -- alternative content, if it plays on -- if you're lucky 500 screens across the country, 1,000 screens across the country once, twice, how much marketing can you throw at that? So, I said to our guys, so how are we marketing? And that's the problem with alternative content. That's why when people start to say well, isn't that going to be a great big boom for you? Well, maybe, it would be helpful, but it's got its challenges.

One thing digital is going to allow us to do is to be able to more effectively market in the Theatre, to get into the trailer package, to get marketing to tell people what's coming. But again, how much marketing are you going to throw at something when it only plays once or twice compared to something that's playing 120 times on one screen over a four-week period.

So it's -- there's no easy answer, it's nice it's coming, it will be a nice addition and I hope that as the Theatres continue to evolve we're able to use that avenue of alternative content and more and more will come our way. But I can't give you specifics as to what it's going to mean.

Okay, shifting gears, let's talk a little bit about the concession business. You're just knocking it out of the park here with regard to the numbers per patron, which is fantastic. Can you talk more about the Big Screen Bistro and how many Theatres that might wind up in over the rest of the year?

Well, as I think you know and we originally introduced this at our flagship Majestic Theatre in Brookfield, Wisconsin with a single auditorium. Last I guess it was May we opened two more auditoriums there, it was April or May, and we're very happy with how that's worked out. I mean we've gotten better operating efficiencies out of having the three, the customer response to it has been very positive.

Certainly -- it's only one Theatre but certainly they're part of the mix here of why we've reported such nice per capita numbers increase. So we're going to do more of them. This fiscal year I would suspect that probably one other Theatre might get three screens, that's one option that we're looking at right now. Certainly there are a couple others that we're talking about right now. But whether it would happen in time to really impact this year I'm not quite so sure.

If it did it would happen in the spring and it wouldn't have a lot of impact for this year. But we're identifying Theatres right now that can be candidates for that type of a program and we certainly learned that it's important to have more than one. And so I would certainly expect that we're going to be -- we hope to be announcing at least one location.

As you saw, we announced another location just yesterday where we'll be putting in a separate Zaffiro's, taking out an auditorium and doing a Zaffiro's separate restaurant like we did up in our North Shore Theatre in Mequon, Wisconsin. And I suspect that we'll be announcing sometime in this year a least one more location with a Big Screen bistro.

You know I think that -- you were much more delicate than I might have been. And this is (inaudible) -- we're very pleased with what's going on at the Majestic with adding two screens. But one thing you have to remember is that we're pleased because we screwed up, I mean to be honest with you.

(Inaudible) we learned, and we've always said the Majestic was a little bit of our lab. This is a business we have to do some R&D in as we sort of find our way through what works in terms of food in movie theaters and we what we figured -- or what doesn't work.

And what doesn't work is just building one screen. And then we realized, boy, if we had two more screens we could leverage that kitchen and that labor that was servicing that one screen much more effectively. And it did, it's been very effective there.

Now what does that mean going forward? It means, boy, that model looks interesting; we want to continue to work at it. But we still have more work to do to figure out exactly what the right mix is. And once you build the kitchen do you have a freestanding restaurant and Big Screen Bistros? How do you mix that out?

So we're going to continue to play with it and work at it and noodle at it. And we're seeing -- again, we're seeing nice progress at Zaffiro's in the North Shore in Mequon. Started off at a level, we've increased the business by adding different things like delivery and -- what's it called -- focusing on our business and dessert -- working other segments.

One of the things we learned [very on] is it's very easy to fill the restaurant from 6 o'clock to 8 o'clock. The food moves fast, we can turn it very quickly. So our trick to get the investment to be a good return is to build those shoulder periods and we're doing it. But it's just taking us some time to learn how to do it. So we'll move forward with it and as soon as we understand exactly what we're doing then we'll roll them out faster.

Okay, great, thanks. Good luck.

Gregory Macosko, Lord Abbett.

Yes, thank you. Nice quarter. With regard to the Theatres just so I understand, you say that you'll have 90% of the screens on digital and that's -- by the end of October and that's where you'll stand, you won't go 100%?

Yes, we'll be at -- I think the actual number is like 93% or something like that, Gregory, and what's left are things like -- we still have I think three Theatres, I think it's three of them that have -- are budget operated Theatres and so we're not converting those. And a couple of other ones where there's maybe a lease or something like that where we're not -- we didn't make the commitment yet to convert those to digital. So we may not ever be 100%, but this is -- effectively from a first-run perspective this is effectively 100%.

And with regard to the 3-D screens, is the idea that obviously you want to have a 3-D movie in there and have the right 3-D movie, but those screens can also play a normal movie as well, is that correct?

Yes, that's correct.

Okay, so the utilization is fine, obviously a better payoff with a 3-D hopefully, but --.

Yes, I mean so as Greg was saying earlier, it really comes down to once you have digital, adding 3-D is not that much more. There's a cost associated with it, don't get me wrong, but the bigger cost is associated with getting digital first. And so we'll have to kind of watch and monitor how the 3-D plays out and decide -- ultimately decide whether we have the right number of 3-D screens right now or whether we need to add to that or not, that will be something we'll have to evaluate.

Can you talk about the concession per person? That 11.7% was a pretty big number. How much of that would relate to the big screen and the pizza, the Zaffiro's or whatever relates to that versus kind of in the Theatre?

I don't have a number that I can just break down that 11.7%. I rattled off the fact that there really were a bunch of factors, that was one of them. As Greg said, not just the Big Screen Bistro, but just the other places where we have additional food and beverage -- the Zaffiro's up in North Shore and we've got some other locations as well where we expanded the offerings. They're all contributing.

As I also mentioned, last year or our fiscal year in the second half of the year we changed our pricing to be sales tax added instead of sales tax inclusive, that has some impact. And then just the films quarter to quarter can make a difference. And I mean, we had -- Harry Potter certainly was a good popcorn movie and so we had a bunch of pictures that might have contributed to that as well. It's hard to kind of break it down and say one factor had this much impact.

And then with regard to the hotels, the ADR was certainly nice to see, if we look forward, your comment about the corporate being strong and continuing to look good into the quarter. And the other comment was that we're putting them on the roof. So is the point being as we look into the second quarter, there in effect will be kind of a continued mix improvement, kind of a trade-off corporate for sort of weak Internet and the lower price rooms?

Yes, I mean so far -- I mean, look, it's only September 15, but we haven't -- what we were seeing in the first quarter, the same thing is happening right now. And so, the bookings -- the lead-time on this corporate business, different from the group business, is still short, Gregory, and so it's really hard to go too far out ahead and kind of forecast that.

But yes, we are still seeing strong individual business travel and corporate volume business at our hotels. That by definition helps us wean ourselves a little bit off of the other Internet channel stuff.

But the occupancy -- in other words, the occupancy is high and probably going to likely stay there or should stay that level. And the point being again shift in mix going forward would be the idea.

Yes. But remember as we move into the -- we're moving out of our strongest season, so I don't do what the occupancy rates are going to be going forward, but we will -- as the year progresses it gets to be more challenging.

As we indicated -- again, I couldn't go back any farther than the years I had. And of course we haven't always had these eight properties. We never had higher occupancy and what we just had in the first quarter at these eight properties if we add them all up.

So again, kind of looking into the crystal ball farther into the future, it could be that the ultimate mix is a little higher rate and a little less occupancy in order to get that optimum margin that we want to get as well. But right now we're taking the hand that we're being dealt.

Right, of course. Okay, and then the wide range in the CapEx, is that $40 million range basically dependent upon the Corners retailing project?

That was about $20 million of it. And so certainly that is a big part of that range, no question about it. When we broke down the $50 million to $90 million we kind of broke it down as $25 million to $35 million in each of the two divisions and then another $20 million potentially for the Corners depending on the timing. So it is the single biggest reason for that wide range.

And the rest really comes down to timing on the projects, some of the growth things that we're trying to pursue. If we hit on a couple of these things where it might involve a minority equity investment, things like that, those are all the kinds of things that would get us to the higher end of the range within the divisions.

And give us some kind of an update or your sense of how the Corners thing is going?

The Corners is moving along very nicely, we're seeing really good interest in the tenants, potential tenants. But that being said, it is a complicated project, it has got a lot of moving parts to it -- getting everybody -- the point being (inaudible) I feel confident in the project, but the specific timing is really hard to pin down.

You've got a lot of players trying to coordinate together in terms of getting all the -- we've got the involvement of municipalities, we've got the public finance piece of it, we've got to put the tenants together, we've got our anchor to get to work with them, the design of the center, the value engineering component that always comes on. So it's a big one. So it's going to take some time.

But you're committed to this and this is going to happen?

You put a conjunction in there, [you said if we're committed that this is going to happen]. We're committed to this, it's our intention to do it, but we have to have -- but everything has to happen. We've got a lot of pieces that have to finish -- this is -- it needs to get done.

Okay. But the pieces are still coming together and, just upfront, it could still not go to -- come together because if you don't get all the players to agree, etc., it could still not happen?

Yes, absolutely.

Okay, good. All right, and then finally, I don't have the press release in front of me --.

Greg, one thing I'm not going to do is build a spec shopping center.

Good, glad to hear that.

Don't have to worry about that.

All right. Just last question, and I don't have the press release in front of me, but what did you pay on the buyback per share?

You know, it averaged about $8.50, Greg. So it was about $8.50 give or take in the average.

Well, that's the thing I can congratulate you most on. Good timing. Thank you.

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

Just one last, Greg hit one of mine. Congratulations on the Bill Reynolds hire. Obviously that's a really high-class individual that you've added to your team. Greg, can you just give a little bit of color on what you think the magnitude of your investments over the next two, three, five years might be? What kind of impact do you think this could have and what kind of return potentials are you hoping for?

Well, David, it's -- the return potential is what -- for us should be what our hurdle rates have always been, and I don't see that changing. So I expect that we aren't going to make investments unless they get there. And so that's what we're going to target to do.

You know us, we're not going to try and shoot for crazy returns and take undue risk. But we're going to try and get nice returns with a reasonable amount of risk. The magnitude of what it can be, it's going to be up to what -- part of it is going to be dependent on what happens in the markets. If things start to loosen up a little bit, we're seeing the REITs seem to be off and payable right now, that can create opportunity.

I do think that marrying a guy with Bill's experience and time in the industry with our balance sheet and our intellectual capital and our experience is probably a pretty good marriage. And as I said, we may be able to -- our hope is that we're able to lever and bring in outside capital as well.

That's great. Very helpful. Thank you.

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 comments.

Well, thank you, everybody, for joining us today. We really appreciate it. We hope we see some of you at our annual meeting on Tuesday, October 11 at the InterContinental Hotel in Milwaukee, Wisconsin. For those of you who cannot attend, we'll be webcasting the meeting. We also look forward to talking to you once again in December when we release our second-quarter fiscal 2012 results. Thank you and have a great day.

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