Marcus Corp (MCS) 2013 Q1 法說會逐字稿

Good morning, everyone, and welcome to the Marcus Corporation first-quarter earnings conference call. My name is Lisa, 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'd like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you very much. Welcome, everybody, to our fiscal 2013 first-quarter conference call.

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

Of course, our actual results could differ materially from those projected or suggested by our forward-looking statements. Factors, risks, and uncertainties which could impact our ability to achieve our expectations are included in the Risk Factors section of our 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 2013 first-quarter results. As you can see, this was a challenging quarter for our Theatre division, particularly as compared to the record fourth-quarter results we just reported to you less than two months ago. I'm going to take use you through some of the details 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 line items below operating income, other than another reduction in interest expense compared to the prior year. Our interest expense was down nearly $300,000 during fiscal 2013 first quarter compared to the prior year, due to both reduced borrowings and a lower average interest rate. As you know, during the summer we're at our peak of our cash flow inflows. And so, 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 debt will also increase once we close on our recently announced Cornhusker Hotel transaction, due to the fact that we will be assuming an existing mortgage on that hotel. More about that hotel in a minute.

Now, our overall debt-to-capitalization ratio at the end of the quarter was 36%, down slightly from 37% at our recent May year-end, due to the aforementioned strong cash flow summer for us. One non-operating item that did impact our reported first-quarter results was an increase in our effective income tax rate for the quarter. Our effective rate of 41.9% this quarter was the result of an increase in our liability for unrecognized tax benefits. This arose due to our receipt of a preliminary proposed state tax audit adjustment from one of our taxing authorities during our fiscal 2013 first quarter. We're challenging this particular adjustment, so a final disposition of this item is yet to be determined. I currently expect our effective income tax rate for the remaining three quarters of fiscal 2013 to be closer to our historical 40% average rate.

Shifting gears, our total capital expenditures during the first quarter of fiscal 2013 totaled approximately $5.3 million, compared to $3.7 million last year. Approximately $3.6 million of this amount was incurred in our Theatre division, of which the completion of our newest Zaffiro's Pizzeria and Bar in our New Berlin, Wisconsin theater, and a renovation at our Crosswoods theater in Columbus, Ohio, and the completion of our newest ultra screen in Duluth, Minnesota represented the largest components. 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, I have no reason to adjust our previous estimate for capital expenditures for fiscal 2013 of an amount in the $65 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 are still just estimates at this time. We're still finalizing the scope and timing of many of 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 CapEx number, as will any currently unidentified projects that could develop during our fiscal year.

And now I'd like to provide some additional financial comments on our operations for the first quarter, beginning with Theatres. As you can see in the reported numbers, our box office revenues decreased 12.9% during the first quarter, with concession, and food and beverage revenues, down 8.3%. These decreases are attributable to a decrease in attendance at our comparable theaters of 13.7% for the first quarter. Now, as our press release points out, the vast majority of the decrease in our attendance and revenues occurred as a result of the lack of a Memorial Day weekend during this year's results compared to last year, and reduced results during the nearly three-week period during the Olympics. In fact, approximately 88% of our total box office decline this quarter compared to the prior year occurred during these four applicable weeks.

Our average admission price for these theaters decreased by 0.1% for the quarter, due primarily to the fact that last year's top two films, sequels to the popular Harry Potter and Transformers series, both were available in 3-D, driving up our average admission price compared to this year's number. Our average concession, and food and beverage, revenues per person increased by 4.7% compared to the same quarter last year, partially offsetting the impact of the reduced attendance on our concession revenues. Our new Zaffiro's in New Berlin opened on August 3, so it did not have a significant impact on our reported results for our fiscal 2013 first quarter.

Shifting to our Hotel and Resort division, as we note in our release, our overall hotel revenues were up 2.9% and our total RevPAR was up 3.7% 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, and all but one of our eight company-owned properties reported increased RevPAR again this quarter, with the only very small decrease the result of a difficult group room comparison. Our fiscal 2013 first quarter overall RevPAR increase was a result of an overall occupancy rate increase of 0.7 percentage points, and an average daily rate increase of 2.9%.

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

Thanks, Doug. I'll begin my remarks today with our Theatre division. Forgive me if you've heard this before, but what a difference a few weeks can make. It was just eight weeks ago during our year-end conference call that I was commenting on our recently completed record fourth-quarter and fiscal-year results for this division. We even gave you a fiscal 2013 first quarter to-date update indicating that other than the decrease in our box office due to the Memorial Day weekend comparison, our first quarter box office revenues up to that point were essentially even with the prior year. Well, no sooner had I said that when we proceeded to end the quarter with five consecutive weeks of year-over-year box office declines. And if you shake your head a little when you see this happen, so do we.

That being said, having been in this business for 77 years, we are well aware of the potential for high degrees of variability in performance. So, while disappointed, we are always aware of the potential, and do our best to manage that. The good news in this business is that every Friday optimism reigns, as a new slate of films opens. We don't always go from one extreme to another like we just did this time in consecutive quarters, but it is always exciting to see what happens, I will tell you that. There's 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. Doug shared with you the fact that nearly 90% of our box office decline this quarter occurred during the four weeks that included the Olympics and the lack of a Memorial Day weekend.

I'd like to look at the quarter's box office results slightly differently, highlighting another way of measuring the quality of the film slate this quarter compared to prior year same period. This summer's slate certainly was highlighted by the performance of the top five pictures noted in our release, led by the summer blockbuster, The Dark Knight Rises. And while this film did not perform quite as well as last year's Harry Potter film, and for that matter, our top five films did not perform quite as well as our top five films last year, that is not where our problem was. The challenge this quarter was that there was just not as much depth to the film slate this time around compared to the first quarter last year.

One way to illustrate this is to break our top 15 films into three categories of five films each, and compare our box office results from those films to the results from the same categories last year. When we do that, we find that our top five films were down less than 5% in box office receipts, compared to the top five films last year. Conversely, pictures 6 through 10 were down approximately 8.5%, and pictures 11 through 15 were down a significant 37% compared to pictures 11 through 15 during our first quarter of fiscal 2012. In actual dollars, this equates to the top five films contributing $800,000 less in box office, films 6 through 10 contributing $700,000 less in box office, and films 11 through 15 contributing $2.6 million less in box office.

As has been demonstrated time and time again, while we love the blockbusters, that second tier of films can make the difference between the record revenues we reported last year during the fourth quarter and a disappointing quarter like we reported today. It certainly is too early to tell what our fiscal 2013 second quarter will be like. September is always our slowest month of the year, and historically, approximately 50% to 60% of our second quarter box office receipts are produced during the last five to six weeks of the quarter, as the holiday film season kicks off in earnest.

As always, we have high hopes for the third quarter's box office performance. The November lineup of films include the next James Bond film, Sky Fall; the final installment of the Twilight saga; as well as a couple of 3-D adaptations of the popular books, Life of Pi and Rise of the Guardians. As a point of reference, our top films last year during our second quarter were the Twilight Saga Breaking Dawn Part One, Paranormal Activity Three, and Puss in Boots. And if I was to sneak a peek into December in the beginning of fiscal 2013 third quarter, we can look forward to films such as Les Miserables, Peter Jackson's much anticipated The Hobbit, An Unexpected Journey, and a number of other big budget studio films, including the latest films from Tom Cruise and Leonardo DiCaprio, among others.

Meanwhile, we continue to execute on several of the strategies we highlighted in our recent 10-K and year-end conference call. We opened our 14th ultra screen and a new Take Five lounge in Duluth, Minnesota. And as we have noted already, our newest Zaffiro's Pizzeria and Bar opened in August. It is obviously still early, but we are pleased with the customer response to these new investments of ours. As I reported on our last call, we have several additional projects on the drawing board for fiscal 2013 that we hope to be able to talk about very soon.

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. Certainly, we were pleased with another quarter of year-over-year improvement. The reality is that the quarter could have been even better, if not for the fact that August was not a particularly strong month for this division either. Some difficult group room comparisons to last year and a general lack of Milwaukee city-wide convention business in August this year negatively impacted our results the last month. But it was still a good quarter overall for this division.

We continue to be encouraged by the fact that we reported an overall increase in our average daily rate of nearly 3% this quarter, our seventh straight quarter of increased ADR. Once again, we were actually on a pace to report an even higher average rate increase until we hit August. 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 2013 first-quarter ADR, average daily rate, was approximately 4.9% lower than it was in our pre-recession fiscal 2008 first quarter. That is actually the closest we have gotten so far during the recovery, but an indication that there is still room for improvement.

It is interesting to note, however, that our fiscal 2013 first-quarter RevPAR was 2.8% higher than our pre-recession fiscal 2008 first-quarter RevPAR, thanks to over six additional points of occupancy this year compared to the first quarter of fiscal 2008. And while this does feel good, our enthusiasm is somewhat tempered by the fact that this number is not adjusted for inflation. With an increasing portion of our revenues coming from ADR increases, our fiscal 2013 first-quarter operating margin increased by nearly 1.5 points, to 18.5% compared to 17.2% operating margin last year during the same quarter.

Looking ahead, our outlook for the future hasn't really changed since we last talked eight weeks ago. Whether the current positive trends continue depends in large part on the economic environment. We remain concerned about the fragility of the current economy, as well as the uncertainty surrounding the current employment and political environment. Any near-term RevPAR increases are not likely to be as great as they have been in the past two years. We also are concerned about an expected increase in room supply in our important Milwaukee market, the first of several new hotels being built with subsidies in this market, and they open late in our fiscal 2013 second quarter.

Finally, when we last talked, I suggested that the efforts of Bill Reynolds and MCS Capital to find growth opportunities for our hotel business could be expected to bear fruit in the near future. Well, as we have since reported, we recently announced an agreement to purchase the Cornhusker Hotel and Office Plaza in Lincoln, Nebraska as the majority owner of a joint venture. We are currently managing this hotel, and the transaction is expected to be completed any day now.

We're very excited about several aspects of this transaction. First and foremost, we think this hotel is a great fit for our portfolio. We have 50 years of experience in restoring landmark hotels, and we believe we can make this distinctive hotel an even greater asset to the community, returning it to its former position as the social center of Lincoln, Nebraska. The Cornhusker Hotel renovation is very similar to several other premiere downtown hotel restorations we have successfully completed, including the Pfister Hotel in Milwaukee, the Skirvin Hilton in Oklahoma City, and the Hotel Phillips in Kansas City. The hotel also aligns well geographically for us, as we've been a part of the Lincoln community since 2008, when our Theatre division entered the market through the acquisition of Douglas Theaters. In addition, we are very familiar with university and state capital markets like Lincoln, having two hotels in Madison, Wisconsin in our current portfolio.

We're also excited about the new relationships forged as a result of this acquisition. We are partnering with a fund affiliate of LEM Capital of Philadelphia, a manager of a series of private equity funds with over $500 million of capital commitments under management. And this will be our first hotel affiliated with Marriott International, giving us existing relationships with all four leading full-service hotel brands. Once the transaction is completed, the hotel operating results, less the minority interest, will be included in the Hotels and Resorts division revenues and operating income during the remainder of fiscal 2013 and beyond.

We do not expect the property to have a significant impact on fiscal 2013 operating income. However, as the property will be undergoing a multi-million dollar renovation that will begin later during the fiscal year. We plan to renovate the hotel lobby, all guestrooms and suites, meeting space, restaurants and bars. We are particularly pleased with plans to bring one of our successful restaurant and bar concepts, the Miller Time Pub and Grill, developed in association with Miller Coors, to this hotel. We are also pleased to utilize our extensive real estate experience in conjunction with the acquisition of the adjoining Cornhusker Office Plaza.

We have a number of additional potential growth opportunities in the pipeline, and hope to announce more details in the near future. As we have said in the past, the form of these opportunities will likely vary. The Cornhusker transaction presented itself as a majority ownership of a joint venture; and with our balance sheet, we were easily able to accommodate it. Additional opportunities that we are currently pursuing include pure management contracts and management contracts with minority interest in joint ventures. Regardless of the form of the transaction, we are looking forward to increasing the number of rooms under management by Marcus Hotels and Resorts.

And while a lot of our focus is on growth, it is just as important that we take care of our existing hotels as well, so we have plans for several new programs and amenities during the upcoming year. Our press release referenced our new beautiful Monarch Lounge at the Hilton Milwaukee that opened last month. We also have plans to add new concierge and club lounges to our Pfister Hotel and Grand Geneva Resort and Spa during fiscal 2013. We will also build on the success of our dining rewards program, Marcus Rewards, by expanding the program to include points for room nights, beginning with the Pfister Hotel this fall. These programs and amenities are part of our strategy to create a greater value proposition for our guests, a hallmark of our Company for the last 77 years.

Before I wrap up our prepared comments and open the call for questions, I do want to note that we repurchased another 97,000 shares of our common stock in the fourth quarter, the majority of which occurred after our year-end earnings announcement in late July. With our strong cash flow and our under-levered balance sheet, we believe that when timing and market conditions are appropriate, we are able to purchase shares to enhance shareholder value while at the same time continuing to invest in our businesses to facilitate our growth. We do not view these as conflicting strategies, but rather as complementary.

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

Thank you.

(Operator Instructions)

Eric Loeb, Baird.

I think that must be me, David Loeb.

Could we call you Eric in the future, David?

If you'd like. (laughter) So, I'm still stuck in the concierge lounge at the Pfister. What do we have to do to get in? (laughter)

Seriously though, this is basically designed to compete for frequent travelers that may be tempted into a kind of a Marriott or Hilton asset nearby that might appeal to guest loyalty kinds of things? Is that basically the idea?

David, I think it's actually -- it's two-fold. Obviously, we're responding to potential competition coming in. But the truth also is that we think that there's opportunity in the market to get a little more rate and get paid for the service, because people want it. We're not going to be able to have -- we have some ideas for how to deal with some of the frequency questions that may come up that we don't want to talk about right this minute. We believe that because -- one of the ways you can stay and one of the ways you can have access to concierge lounge is you can buy rooms that have that attached to it. And there's a premium in the price. So, we think actually it will be a double win.

And by the way, it will be the -- just so you know where it is, we're going to be doing it up on the 23rd floor. So, as concierge lounges go, it will be the nicest one in the city, really by a mile. We're using what's -- what we call the 23rd -- the meeting room on the 23rd floor right now. We're going to move that over and take that over for the concierge lounge. It will be adjacent to Blue, so it will be able to overflow into Blue. So, it should be really wonderful.

Let me come back to the movies, and then I'll ask you a question about MCS Capital. Did you say Frankenweenie on the call yet? Did I miss that?

(laughter) Now, someone did.

We put it in our press release, but we weren't comfortable saying that out loud, David.

I was trying to think of a way to get Greg to say Frankenweenie on the call.

But The Life of Pi sounds like a real quality movie, because it was a good book. None of this really sounds like it's going to be competitive with some of the blockbusters that you had in fiscal 2012. Should we be thinking about 2013 as being flat at best, on a same-store basis?

My comment to that, David, is -- our top couple of pictures were actually in the fourth quarter last year. So, I think it's a little early to say that yet. Obviously, The Avengers and Hunger Games were pretty -- they may have been -- I'm trying to remember on the list -- they may have been one, two last year. And certainly they were both in the top three.

So, we kind of take it a quarter at a time. When we look at the second quarter, we told you what the top three pictures were last year. You can draw your own conclusions. It's hard -- on paper, there's nothing special about those last year. But on the other hand, we just never know about the pictures this year. The Hobbit, obviously, should be a big deal. But it's really hard to tell about the rest of the pictures. It's no different from the position we're in every year at this time when we start talking about the Christmas season. We haven't seen them yet and we just don't know.

Clearly, we goofed in our modeling for the Memorial Day timing, and we're just trying to avoid that whenever we can. It does sound like the concession growth is still kind of going in the right direction. Are there more locations where Zaffiro's can go in, and are there other things like that, that you'd be looking at over the course of the next year?

There are certainly other locations where we can do it. I don't know where we're going to do it. We wanted to see how this one went. I will tell you that this one has -- so far, is great. It really turned out beautifully. It's our best design of the restaurant. The product is great. The performance has been very nice. So, I wanted to get through this one before I started thinking about where the next one was going to go. But I'm actually thinking about where the next one might go.

That makes sense. So, on the Lincoln purchase, it looks like a really interesting purchase on the surface, and clearly will help you establish a track record and prove out a joint venture structure, for example. But what's your thought? Is this really kind of a pilot, or will you look to do other transactions if you can find them over the next, call it, six months?

I think that it's exactly what we said in the call in the prepared remarks. There are other things going on. Some take different formats. And I can't tell you what they may look like. It could be joint ventures, could be more sliver equity kind of stuff, but we just keep plugging away to build the portfolio.

What about the office building? Is that something you expect you will liquidate to lower your basis? Or will you keep that, do you think?

I think we want to finish the deal before we start figuring out what we're going to do with the different pieces of it.

Okay. Fair enough. Totally, totally fair enough. All right. And did I miss an update on the development in Brookfield, the Corners?

No, you didn't miss it, mainly because there really isn't an update to give you at this point in time. As we've said in the past, David, this project is very complicated, a very complicated puzzle that requires multiple pieces to come together, including the public financing component, the pre-leasing, the appropriate equity and debt financing, just to name a few. There's been a lot of activity, a lot of activity surrounding every one of those elements. And as a result, everything is very fluid right now. I guess what I would do is reiterate what I've said previously, which is, the project will not proceed if any one of those elements does not reach an acceptable conclusion. And if they do come together, we would still be looking to begin construction on this project early in calendar 2013, with the whole project opening up in 2014. So, as soon as we have something more substantive to report, I assure you we will.

Okay. We'll just be patient and wait for that update. Thanks. That's all I had.

(Operator Instructions)

Gregory Macosko, Lord Abbett.

Yes, good. Hello. Just a couple questions. With regard -- you mentioned the Pfister being part of that rewards program. Wasn't it part of it before? Give me some color on that program, and what you mentioned there.

The Pfister was only part of it from the food and beverage side from the Mason Street Grill. We're going to extend it into the room side as well, for points per stay.

I see. Okay. And all your other hotels are on that program as well?

We're starting with the Pfister. All it would really reflect would be just the independents at this point, because the brandeds have their own frequency programs.

Okay. Okay. And what did you pay on those 97,000 shares?

You know what, Greg, I think it was just a shade under $13.

Okay. All right. And you have plenty of authorization left? I haven't looked that up.

If you'll recall, at our July Board meeting, the Board authorized an additional 2 million shares on top of what we had left from the prior one, so we have plenty left.

Okay. Good. And you mentioned, did I hear Marriott? That's the first time you're working with Marriott? I didn't quite understand that with regard to the Cornhusker or something here.

Yes. Exactly.

Okay. So, that's a first time? You have all the major brands, then, under your umbrella?

Yes.

That's good. Okay. That's good to hear. And then, talk about the 11 to 15, that second tier that you talked about. Was there anything relative to that -- that was a big drop, I hear you, 37% relative to the others. And we always look at the top 10, but that was an interesting point. Was there anything you could say about that relative to the current environment and other things? Or -- ?

Well, I think that probably where you saw the drop was August. And it coincided with the Olympics, and frankly, Colorado. But we don't know what the -- the Olympics, obviously, they always have a negative impact on theatre performance. And so, on top of it, what we don't have any sense for is what kind of product the studios, knowing that they're going to have to go up against the Olympics, put into that period.

I see. And perhaps the Olympics kind of looked ahead and said -- hey, wait a minute, we're not going to bring any hits out here. We'll just put our second tier in there. And of course, those second tier got hit, particularly because of the Olympics. Maybe that was their thinking, I don't know.

That's what we're hoping.

Okay. Okay. And of course, we can't expect you to look forward and understand what a hit is or not. But certainly that's part of the issue. Okay.

And then finally, is there anything with regard to Brookfield? Is there some kind of a public hearing going on, or something that the public is going to get involved in it as well? Or is that -- ?

Yes. The town has put forth -- the town of Brookfield has put forth a project plan, and the first public hearing is scheduled for next week.

And so, you are rehearsing for that, Doug? Or -- ?

We would be prepared to -- yes, we'd be prepared to present at that public hearing, yes.

Okay. And that's just one of the many elements. And as you say, it will all have to come together by -- to begin in 2013?

That's correct.

And was there anything -- I'm embarrassed to say, I don't remember the name of the lead tenant, but was there any more commitment on their part as part of what's going on? Are they just committed and they can make the final decision as to when to start, depending on these elements? Is that it or -- ?

I'm not sure if I understood the question, Greg.

Your anchor tenant.

The anchor tenant?

I'm embarrassed. The -- ?

Von Maur.

Von Maur. Have they made any more -- is there anything more with regard to them? I'm sorry, I couldn't remember the name.

The Von Maur deal is locked up and has been locked up for some time. So, they are on board. And as we've said previously, all this timing is driven a lot by the fact that they will only open new stores in that October, November time period prior to Christmas.

Right.

So, they're just on the sidelines now waiting to see what happens with the rest of the project.

I see. And it's kind of a joint effort as deciding as to whether to go ahead or not on -- in the next year?

They're ready -- they'll be ready to go and start construction this spring, if everything else comes together. And that comes right back to what we said before. You have all these balls in the air, and they've all -- if they all come together, then they'll be ready to go with us in the spring.

Okay. Thanks very much. Good to talk.

Brian Rafn, Morgan Dempsey Capital Management.

Good morning, guys.

Good morning, Brian.

Give me a sense -- I missed your opening comments -- I had the theater music for about 10 minutes. Relative to traffic in the Marcus Theaters, does a weather pattern of hot weather at all -- does that -- even if you have a weak movie schedule, does that at all influence traffic into a cinema? People wanting to get out of the heat like they would go, say, to the mall?

Well, let me answer the first more broad question. Yes, hot weather does help us. And I think we were seeing more of that at the beginning of the summer, when we did our last call. But if the product isn't any good -- we like to use the old Yogi Berra-ism, which is -- to paraphrase, which is -- if they ain't coming, there's nothing you can do to stop them.

And I would just add on the weather side, Brian, that hot weather can help. Rain helps more. And that we didn't have a lot of.

Got you on that. Okay. Okay. Given the fact -- the effects of the rainfall, the drought situation, you guys anticipating any -- with corn and that high fructose corn syrup obviously a main ingredient in candy and that, any sense or any premonitions, tremors of pricing inflation coming through on some of the concession costs?

Sure.

Yes. There is some expectation that we might see some raw material price increase on corn.

Okay. Is there flexibility there to raise prices, or is it an absorption thing, or what's kind of the strategy?

We'll have to deal with it when we get there. Fortunately, if you think about it, that is our more higher -- our margins are pretty high in that area. So, I don't think it's going to be something that's going to impact us too significantly.

Okay. Let me just ask -- with a little more of a strategic question -- the Obama administration's been trying to -- I don't know if it's the First Lady trying to ram broccoli down everybody's mouth. Is there any sense today -- we've certainly seen the whole issue with the big Slurpee and high salt foods and all that type of thing. Do you get any sense of encroachment into the theater, cinema business from dietary or pressure -- we certainly have seen it in the school systems. Is that an issue, or is that really a non-issue in the entertainment business?

I think it's an issue, and it's something that we continue to monitor.

Okay. If you look at -- you guys talked about certainly the supply of new rooms coming in into Milwaukee. If you have an economy that's weakening, decelerating, what is your sense -- is it better to defend your ground from an existing hotel franchise, or is it weaker -- does the new guy come in and suddenly he's a rapid discounter? What's the dynamic of new supply coming into a weakening economy?

Well, I don't think it's going to be very good. That's what we've been talking about. The market was not over-supplied to begin with, so this is product that's being developed simply because -- not for economic reasons, but simply because developers are trying to make a fee. There wasn't a huge demand for this product. So, now adding -- this is simple economics. If your demand is going down and your supply is going up, I don't think that's a good thing.

Okay. And again, I missed your opening comments, do you guys have a CapEx budget for 2013? And then, did you put a number on the renovation costs for the Cornhusker?

To answer your first question, Brian, is that, yes, we've put out there a $65 million to $90 million range for the year. Obviously, a lot of variables associated with that. A lot of projects that are being talked about, but haven't started yet, so that number could vary.

And no, we have not put a number. Again, we haven't closed on the transaction yet. I do expect that closing to happen, as we've said, any day now, but we have not put a number on the renovation. It will be multi-million, and that's all that we have said so far.

How does that -- Doug, how does that $65 million to $90 million split between cinema and hotel?

It's actually reported in our 10-K, Brian. Roughly, we have said that the -- let me just pull it up right now as we're speaking here -- the largest piece of it would be in our hotel side. We've given a range of $50 million to $60 million on the hotel side, and on the theater side we said $15 million to $30 million. And so, that's the rough -- best guess that we can provide right now. And obviously, again, each of the divisions has respective projects that are on the drawing board, and the timing is still the question.

Okay. You guys mentioned certainly in the Lincoln area with the Douglas theater chain purchase, is there much cross-selling ability between hotel properties and being able to tie that in with theater tickets or whatever, cinema, or is that really kind of unrelated?

They are unrelated. It helps for us to have been in the community and being a part of the community, but there's not direct business.

We have a theater three blocks away from this hotel, so certainly, from that perspective, it's nice. But two separate businesses, operate them separately.

Anything else, Brian?

Okay. This is (multiple speakers) you talked about Milwaukee oversupply. How would you quantify or give us a sense of what the Lincoln, Nebraska market looks like? For hotel supply and demand?

Stable market. There is a little new supply coming in, but looks nothing like Milwaukee. Milwaukee has got a lot of issues coming.

Okay. All right, guys. Thanks.

Thank you, Brian.

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

Thank you, everybody, for joining us today. We hope to see some of you at our annual meeting on Wednesday, October 17 at the Majestic Cinema in Brookfield, Wisconsin. For those of you who cannot attend, we will be webcasting the meeting. We also look forward to talking to you once again in December, when we release our second quarter fiscal-2013 results. Thank you and have a great day.

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