Marcus Corp (MCS) 2013 Q2 法說會逐字稿

Good morning, everyone, and welcome to The Marcus Corporation's second-quarter earnings conference call. My name is Kim and I will be your operator for today. (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, and welcome, everybody, to our fiscal 2012 second-quarter conference call.

As usual, I'm going 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 resorts division; expectations about the quality, quantity, and audience appeal of film products 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 the number and type of our properties and facilities; expectations regarding various nonoperating 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 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.

With that behind us, let's talk about our fiscal 2013 second-quarter results. Once again, film product ruled the day as we followed up a challenging quarter for our theater division during the summer with record second-quarter results for that division. I'm going to take you through some of the detail behind the numbers for both divisions, and then turn the call over to Greg for his comments.

First, as you can see, there were significant variations in the other income and expense line items. There were no significant variations in the other income and expense line items below operating income. Our interest expense was down approximately $250,000 during our fiscal 2013 first half, compared to the prior year, but we expect that to change in the remaining quarters of the fiscal year. Our debt level rose slightly in the second quarter, due to the addition of the Cornhusker Hotel, and it will obviously increase later this month when we pay the recently announced special dividend.

Even with these changes, our overall debt to capitalization ratio at the end of the quarter was still a very low 40.6%, up slightly from 37% at our recent May year-end, and we'll still be in the low to mid 40%s after our special dividend.

One non-operating item that didn't impact our reported second-quarter results was a decrease in our effective income tax rate for the quarter, due primarily to a favorable resolution to a recent state tax audit. Our year-to-date effective rate of 40.1% is right where I expect it to be, and I currently would expect our rate to remain in that vicinity for the remainder of the fiscal year.

I'll also point out that now that we have two hotel joint ventures that are consolidated in our financial statements, the 60%-owned Skirvin Hilton and the 73%-owned Cornhusker Marriott, we've adopted new guidance regarding presentation of non-controlling interest in our financial statements, and you'll see more of that in our upcoming 10-Q filing.

Shifting gears, our total capital expenditures during the first half of fiscal 2013 totaled approximately $10.5 million, compared to $17.4 million last year. Approximately $6 million of this amount was incurred in our theater division, of which the completion of our newest Zaffiro's Pizzeria and Bar at our New Berlin, Wisconsin, theater; our renovation of our Crosswoods theater in Columbus, Ohio; completion of our newest UltraScreen in Duluth, Minnesota; and the installation of a handful of additional digital cinema systems represented the largest components.

The largest expansion in our hotel division during the first half of the year was the renovation of the Monarch Lounge at our Hilton Milwaukee property.

Now I should point out that the Cornhusker acquisition was primarily a non-cash transaction and thus is not included in the capital expenditure totals that I just shared with you because at this point, all we've done is assume a $25.7 million mortgage, an existing mortgage, and recognize an approximately $4 million noncontrolling interest from our partner. We will begin our extensive renovation of this property soon, at which point we'll put the majority of our equity into this consolidated joint venture.

So at the halfway point of our fiscal year, I'm now estimating that our total cash capital expenditures for fiscal 2013 will be in the $35 million to $50 million range, again excluding the approximately $30 million non-cash Cornhusker transaction. 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, some of which may carry over into the next fiscal year. The actual timing of the various projects currently underway or proposed will certainly impact our final capital expenditure number, as will any currently unidentified products that could develop during our fiscal year.

So now, what I'd like to do is provide some additional financial comments on our operations for the second quarter and first half, beginning with theaters.

As you can see in our reported numbers, our box office revenues increased 21% during the second quarter, with concession and food and beverage revenues from the theater division up 24.9%. Year to date, box office revenues are now down only 0.5%, compared to last year, and our concession food and beverage revenues are now up 3.9%.

These second-quarter increases are attributable to an increase in attendance at our comparable theaters of 16.9% for the second quarter. Year to date, our comparable-theater attendance is still down 2.6%, due to the challenging first quarter and the previously described lack of a Memorial Day weekend during this year's first-quarter results, compared to last year.

Now, conversely, helping our fiscal 2013 second-quarter results was the fact that this year's results included the week after Thanksgiving, including a very busy Black Friday. Last year's comparable week was included in our fiscal 2012 third quarter.

Our average admission price for these theaters increased by 2.5% for the quarter and has increased by 1.1% year to date, and our average concession and food and beverage revenues per person increased by 5.5%, compared to the same quarter last year, and has increased by 5.3% for the first half of the year, compared to the prior year. Our new Zaffiro's in New Berlin opened in early August, so it did have an impact on our reported results for our fiscal 2013 second quarter.

Lastly, I'll note that our second-quarter results would've been even better if not for an approximately $400,000 impairment charge recognized as a result of closing an eight-screen theater in Milwaukee.

Shifting to our hotel and resort division, as we note in our release, our overall hotel revenues were up 3.4%, due in part to the addition of the Cornhusker, and our total RevPAR for comparable hotels was up 0.8% during the quarter, compared to the same period last year. Year to date, our comparable-hotel RevPAR is now running 2.3% higher than it was last year at this time.

As we've noted in the past, our RevPAR performance did vary by market and type of property, and year to date, all but one of our eight comparable Company-owned properties has reported increased RevPAR, compared to the same period last year.

Our fiscal 2013 second-quarter comparable-hotel RevPAR increase was the result of an overall occupancy rate decrease of 0.3 percentage points and an average daily rate increase of 1.2%. For the first half of fiscal 2013, our occupancy rate is now running approximately 0.2 percentage points ahead of last year and our average daily rate has increased 2.1%.

So with that, I will now turn the call over to Greg.

Thanks, Doug. I'll begin my remarks today with our theater division.

Well, the roller coaster ride continues, and once again highlights why this is not a good business to look at quarter to quarter. You know the story.

We finished fiscal 2012 with a record fourth quarter, only to follow that up with a challenging fiscal 2013 first quarter that put us in a hole early, compared to the prior year. Now today, we are reporting another record quarter for our theater division with an 88% increase in operating income this quarter. We are now slightly ahead of where we were last year at this time in this division.

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. And there is no question that we were the beneficiary of some quality movies during this year's second quarter. If history tells us anything, we know that there will be other quarters in our future where the films will not perform as well. But our state-of-the-art theaters, strong market position, and outstanding associates puts us in a position to perform very well when the films connect with the audience, the way this quarter's films did.

And when you add to that our expertise at the concession business and the added revenues from our innovative new food and beverage concepts, you can get an outstanding quarter like this.

Our press release highlighted the top five pictures for the quarter, and while the Bond film and the final installment of the Twilight series deserve a lot of credit for our strong quarter, the fact is that those movies were only open for three weeks and two weeks, respectively, during our fiscal quarter. This fall's film slate included nine films that produced at least $1 million of box office revenues for us, compared to only seven films last year, and included films for all ages, including several Golden Globe-nominated films such as Flight, Argo, Lincoln, and Life of Pi, as well as two 3-D animated family films.

As has been demonstrated time and again, while we love the blockbusters, that second tier of films can make the difference between the record revenues we reported this year during the second quarter and a disappointing quarter.

It certainly is too early to tell what our fiscal 2013 third quarter will be like. We had a very good third quarter last year with a pretty deep slate of movies, and as Doug noted, the continuing change in the calendar due to last year's 53-week year added a very good week to the fiscal 2013 second quarter and took it away from the third quarter. Of course, it all evens out over the course of the year.

Peter Jackson's much-anticipated first installment of The Hobbit opened this past weekend to very good numbers, and we hope that it proves to have good legs through the upcoming holiday weeks.

With a number of other big budget studio films scheduled to open in the next week, all noted in our press release, we're hoping for good weather, particularly during the busiest moviegoing week of the year, the week between Christmas and New Year's. And it's important to note that we will benefit from the fact that Christmas and New Year's fall on Tuesdays, rather them last year when they fell on Sundays. Historically, when the holidays fall midweek, they effectively extend the weekend.

Our quarter also benefited from several of the strategies we have highlighted in past conference calls. We opened our 14th UltraScreen and a new Take Five Lounge in Duluth, Minnesota, as well as our third Zaffiro's Pizzeria and Bar during our first quarter, and they all contributed to our second-quarter results. We will continue to evaluate additional opportunities to expand these successful concepts.

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. Not a great quarter, but not a bad one, either. We were going up against some pretty strong numbers, particularly at our Milwaukee hotels, and for this division, the shift in the calendar actually hurt our comparisons, due to the timing of Thanksgiving.

Overall, we were pleased to report a small increase in revenues and RevPAR, and, as our press release noted, we would've reported another increase in operating income in this division if not for an approximately $750,000 settlement reached on a number of our remaining Las Vegas lawsuits. We still have several open claims that we are vigorously defending, but we believe the settlement reached on a significant number of claims was a positive event in the long run.

From an operations perspective, while the increase was not particularly large this quarter, we continue to be encouraged by the fact that we reported an overall increase in our average daily rate for our eighth straight quarter and our occupancy rates continue to be at record levels. While we will see this number go down in the next two quarters as we head into our slower season for our hotels, year to date our comparable hotels are running a combined occupancy of nearly 81%.

Looking ahead, our outlook for the future hasn't really changed since we last talked. Uncertainty about the election has been replaced with uncertainty regarding the fiscal cliff, and that, no doubt, will continue to cause companies to watch their travel budgets carefully in the short term.

We indicated on our last call that any near-term RevPAR increases were not likely to be as great as they have been in the past two years, and that certainly was the case this past quarter. Locally, one of the new hotels being built in Milwaukee opened during our second quarter, and we remain concerned about an additional increase in room supply in our important Milwaukee market in the coming year. Having said all this, business has picked up in recent weeks, so we remain hopeful that we will continue to see improvements in this division in the months ahead.

Of course, the big news of the quarter for our hotel division was the addition of two new hotels under management. We talked extensively about the Cornhusker Hotel and Office Plaza on our last call, and the most recent news about this property was the reissuance of the Marriott flag last week. We're also preparing for an extensive renovation of this hotel during 2013.

We also became minority owner and manager of the Westin Atlanta Perimeter Hotel in suburban Atlanta during the second quarter, joining forces with two prominent hotel investment groups in the country, Carey Watermark and the Arden Group.

Both of these new hotels were sourced by MCS Capital, our hotel investment business led by Bill Reynolds. Additional opportunities that we are currently pursuing include pure management contracts and management contracts with minority investments and 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. Doug referenced our new beautiful Monarch Lounge at the Hilton Milwaukee that opened late in the first quarter, and we also have plans to add new concierge and club lounges to our Pfister Hotel and Grand Geneva Resort and Spa during 2013.

Before I wrap up our prepared comments and open up the call for questions, I do have a couple of additional items I wanted to mention. The only update I have for you on The Corners, our proposed mixed-use project in the town of Brookfield, is that the project continues to make progress on multiple fronts. We continue to have productive discussions with the town regarding our development agreement and we remain optimistic that an agreement will be reached shortly.

We are also now in active discussions with potential equity partners for the project and leasing momentum is at an all-time high. We have many signed letters of intent that have now gone to lease negotiations, and we have active discussions on a significant portion of the remaining available space. Ultimately, as we have said before, this project will proceed under its own natural pace and we won't begin construction until all of the pieces are put together. We will continue to provide updates as milestones are reached.

Of course, I would be remiss not to mention our decision to pay $1 special dividend and accelerate our remaining fiscal 2013 quarterly dividends prior to the end of the calendar year. Like many other companies, we felt the potential changes in the tax law warranted this added return of capital to our shareholders and reflects our ongoing commitment to enhancing shareholder value for our shareholders.

And in that vein, we also announced today we repurchased approximately 1.6 million shares of our common stock in the second quarter, bringing our total repurchases during fiscal 2013 to date to over 1.7 million shares. We repurchased the second-quarter shares at an average price of just over $11 pre-adjustment for our special dividend. With our strong cash flow and balance sheet, we believe that when timing and market conditions are appropriate, we are able to repurchase shares to enhance shareholder value, while at the same time continuing to invest in our business to facilitate our growth.

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

(Operator Instructions). David Loeb, Baird.

I want to start with just a quick nonoperating housekeeping item. The charge for the Platinum, was that in the hotel segment?

Sorry, David, say that again?

The charge for the Platinum settlement, was that classified under the hotel division?

Yes, that's correct.

Greg, just a follow-up on The Corners. What does the opening of Nordstrom or the announcement, rather, of the signing of Nordstrom at the nearby regional mall, do to your view of that project? Does it change anything? Does it change any of your tenants' views on things or potential tenants?

You know, David, it's too early to tell. I mean, you can look at it a couple of different ways. I mean, it's -- it clearly makes the market more competitive. But on the other hand, it validates Milwaukee as a very solid retail market and as an attractive retail market.

I will say, we've talked about now they are committed to the project. They think that -- they are not concerned about this. They think we have a great project and still are -- they're absolutely resolute. So as I said, it could be one of those things where they're just adding credibility to the market and will help attract even more tenants to our market, which should be good for everybody.

Great. And on the Lincoln, Nebraska, on the Cornhusker project, there's an office building there. What are your thoughts about the future or potential disposition of that office building?

I think that we're going to -- we have not made any decision about the future of the office building.

Obviously, we aren't in the office building business, but I think the first thing we're going to do is get focused on the hotel and getting the hotel in good shape. That should be good for the office building. To be attached to the premier hotel in town should be a good thing for the office building, and then we'll go from there. Currently, the way the financial structure is set up, you can't see -- they're not separated at this point, relating to the base loan on the property.

I see. Okay, and now on the theater business, the concession income, clearly up 5.5% per person is very interesting. What's driving that? Is this the continued opening of additional outlets or is it just the kind of movies that people were buying more popcorn and sodas?

It's really kind of all of the above, David. I mean, there's no question that we've got the effect of two additional Zaffiro's that are in there versus last year because we opened up the one in St. Cloud during this past winter and then we opened up the one in New Berlin in August, so there's no question that that has some impact. It's just still two theaters out of 53 that we own, that we have. But those are sizable dollars.

Obviously, we've added a couple of Take Five Lounges as well, in Duluth and in -- that was the most recent one, but we've got some additional liquor sales that are going on. And just in general then, too, these were pretty good popcorn movies that were playing, as well. So it really was all the above.

And you know our popcorn is delicious, David.

(Laughter). So I've heard. I have that on good authority. And then, just kind of more broadly in the theater division, margins were very strong. Is some of that the film pricing and does it relate to that second tier of movies? Or I guess, kind of more broadly, can you talk about the changes you're making in film buying and what effect you think that may have on margins going forward?

I'll let Greg answer the second half of that. The first half of that is just, you know, there's just a lot of leverage in this business and when you have a 17% increase in attendance, the fact is that that does pretty good things for the margins.

I mean, you add the 5.5% concession per person to that mix, and then you can only get so many people behind the concession stands and the box office stands as far as employees are concerned, so there's a fair amount of leverage when you get that big an increase in attendance, David.

As it relates to the film costs, Greg, I'll let you do that one.

Thanks, Doug.

You're welcome.

(Laughter). I would say that there is -- the film pricing hasn't changed. And in fact, when you get these bigger films, the film pricing tends to go up. So I would say there's no meaningful change in film pricing.

I could point to, again, once again, because what would have a call be without a discussion of windows, something I saw just recently that does get my attention is that Fox is releasing -- what are they releasing? There was a movie that just came out -- I just saw this yesterday.

Taken 2?

Yes, Taken 2. Thank you, Doug. Taken 2 is coming out in 72 days on high-def -- video -- high-def digital video download. 72 days for a $100 million-plus film, that's a little early and it's got our attention. They did that with Prometheus as well.

They seem to be the only ones doing this. I don't see this everywhere. I haven't seen people -- because, again, it comes down to the studios have to make this decision, you know. The closer they close that window, they stop losing multiple purchases. You know, someone doesn't go to the movie and rent it or download it, and the one nice thing is they're starting to see the digital download markets for rental or for purchase are growing. That is starting to become a growing piece of the pie by significant portions. I mean, you're working off a low base and the percentages can increase quickly, but you're starting to see adoption of that method of viewing movies.

So they have to move carefully, but it's got our attention. So since you brought up the relationship with the studios, I thought I'd address that right there.

But you also had a hire in an LA office and you also acquired a business that buys films for more theaters. Do you think in the long run those are things that will have a material effect on margins or is it more kind of around the edges?

What do you define as material? (Laughter). Obviously, we're doing things -- we want our margins to get better.

Film cost is a lot higher than it used to be. Let's talk very macro without getting too specific. Film costs are a lot higher. And I believe that we have the ability to monetize assets a little better inside the theater, keep monetizing those eyeballs, right?

We've got close to 20 million eyeballs that come in the door every year, and how do we monetize those, whether it's taking advantage of the fact they're going to eat and putting in broader F&B or finding ways to advertise to them, yet not be too over the top so that we don't push them away. It's all those things. And studios can participate in that because they can -- they've got other things they want to market. They're marketing into their ancillary markets as well, and our customers are natural customers for that.

So there are lots of opportunities and reasons why we've done what we've done. Also, it just helps to be closer and have relationships with people in Hollywood.

Yes, that makes total sense. Okay, I promise, the last one. You alluded to the supply increase in the recent opening of the Hilton Garden Inn. Can you talk a little bit more in depth about the impact that's had, and particularly for the longer period from opening to now, as opposed to just the last part of the quarter?

Yes, there is just too much noise. It just opened. It literally -- it's been a few weeks, so it's too hard to tell where they are -- where this is going just yet, but we're concerned.

And what is the timing of the Marriott opening?

Supposedly next summer. You know, I drive past it a little too regularly. It's probably not too far off.

Okay, great. Thank you for that.

(Operator Instructions). Jim Goss, Barrington Research.

Thanks. I have a few questions, but before the ones I was thinking of, going into the prior discussion with digital downloads and some of the other means that people are accessing movies or simply playing Blu-ray discs, I'm wondering if you have determined a way where you can partner with the studios to sort of pre-sell some of those and get a piece of it, or develop some sort of relationship that might advance both of your interests and make you partners more than the rivals that you sometimes can be.

Yes, it's an interesting relationship, isn't it, Jim?

It is.

(Laughter). We're partners. There's no doubt about that. But we're partners that sit at the same table and have to share food, so --

That's a good description.

There's constantly discussions about how to do that, and that's where this is evolving, and how to -- the question -- I always look at it the same way and say, guys, let's -- if we're just going to have a fight over how much pie we get, that's a zero sum game. We've got to figure out how to make that pie larger so that what percentage of the pie is not the issue. It's can we just get more pie in our stomachs?

So we always are looking at ideas for how to do that and how to get those ancillary markets and how to get people to download. We haven't had much success just yet, but we'll continue to be looking at it because the idea is if you come to the movies, do you get a discount on a download? There are some obvious things. As I said, nobody's been able to crack that code yet, but that doesn't mean we're not thinking about it and trying.

This will also have a direct impact on the windows discussion because if you figure out a way to slide it to the correct time where you do expand the pie, as you say, that could be material.

M&A in the theatrical business, would you be a buyer or a seller? And maybe discuss the advantages of each scenario.

Look, I don't think I can get into whether -- any kind of -- whether I'm a buyer or a seller, that kind of level of specificity. I think I can talk about sort of the dynamics.

We are always looking for opportunities to grow. We have a unique status ourselves with our theater business because we have the real estate. Most of the guys we look at don't have the real estate, so it changes the profile of the company as we look at potential acquisitions and whether they have real estate or not.

We've made acquisitions over the last few years, as you know. We continue to look for them. We look for ones that tend -- we could go anywhere. It tends to be easier when they are tighter to our markets, although, as you've seen from many of the operators, you don't have to be contiguous. So we don't just restrict ourselves to looking at contiguous markets.

There will continue to be consolidation. It's -- because just the smaller operators will consolidate up. I don't think there is the momentum there that people thought there would be on the digital -- converting to digital because most of the bigger operators are, and it's mostly going to be tuck-in acquisitions for these big guys, and I think some of this was motivated by year-end stuff. People wanted to get out, given the tax law -- potential tax law changes, so I think that motivated some of it to happen. Some of it is just the natural life of the private equity investors who had things in their funds for the time they've had them, and they're ready to make their moves.

So I don't think there's any grand scheme to why people are making their acquisitions at this point, other than some of the macro reasons.

So do you think we're sort of early stage or fairly well through some of the M&A that will take place, given what you just said, in that most of the bigger theatrical exhibitors have made some announcements, but not necessarily earth shattering, totally change the situation type announcements? Is it because it takes a while for deals to develop and a number of others are in the works? And whether you want to talk about yourself or general sort of with implications for yourself.

Yes, I don't know what others are doing. You know, if one of the three majors was talking to one of the other ones, they didn't call me to discuss that, so (laughter) I don't have any idea if that's going on or not.

Okay, how about this? With plans -- do you have plans to utilize your theatrical capacity -- are you a Screenvision partner?

Yes.

Or NCM? Screenvision, I thought. Are there special digital events you think you might include as a greater way to use unutilized capacity during the weeks, or is that still such a minor part of it that let's not worry about it?

Yes and yes. We continue to keep looking for new things to do; we keep looking at it. The challenge always is it's hard to market for a one-time event. That simple.

Okay. Now with the hotel acquisitions you've just announced, do those tilt the balance such that hotel and food operations will now be a bigger share, if you factor those in than the theatrical side of the Company?

No, Jim. The two hotels that we just took on, one of them is consolidated on our books. That's the 73% Cornhusker Marriott, and there will be a food and beverage component. In fact, we've announced that we're going to put in a Miller Time Pub, but by no means is that one property going to tilt the current balance.

And the other property that we took isn't even consolidated on our balance sheet. And that's probably more likely -- deals like that are the more likely scenario that you're going to see where we have an equity interest and a management contract. And so, no. Those types of deals would not tilt the balance at all.

So management contracts are the primary focus for growth in the hotel side of the business then?

As we've shared before, we're looking at management contracts. We're looking at deals where maybe there's some minority interests required. We'll be opportunistic. I mean, we weren't -- we didn't shy away from the Cornhusker deal and that one was 73%, but, as we've shared with you, kind of a unique deal where we were able to step in and assume the existing mortgage and take down a minority partner and really our only cash out the door is going to be the renovation. So even that one is a little different.

It's less likely that you'll see us tomorrow just going -- our sales on our balance sheet go and buy a $40 million hotel. On the other hand, we've even mentioned the possibility of creating a fund and things along those lines, as well. So we're looking at multiple different ways of potentially trying to grow that business.

All right. Thanks very much.

Thank you, Jim.

Greg Macosko, Lord Abbett.

Yes, thank you, good. Okay, just with regard to discussions regarding the joint venture, et cetera, with the hotels, my sense is, then, you have a three-pronged approach to go about the hotel business, either through a majority/minority interest or management of the hotels, and I assume that's to enhance your long-term goal of increasing the number of rooms under management?

Yes. That's the short answer of a yes; that really is the goal.

Okay, and how is the -- you've been talking a few quarters about a fund? How is that -- is that developing? Is that continuing in a positive direction?

It is still -- we're still -- we're just getting lined up for it. You know, we did these two acquisitions back to back, so that's really gotten the most of the majority of our focus. And so, we said, okay, let's take a breath and now let's start to get working on trying to get something together there.

Okay, okay, fine. Then, just so I understand the -- with regard to the settlement in Las Vegas, how much of the rooms have been settled and how much are still in discussion or in problematic states, just so I understand?

Yes, I mean, Greg, but we haven't actually publicly disclosed exactly how many there are or anything else.

But I will tell you that this did represent well over 50% -- in fact, quite north of that in terms of the number of individual claims. So this was a big step that occurred.

Now we still have outstanding claims and we're still defending them, as we use the word, vigorously because we feel very strongly in our case, but this was a significant number of claims that came off the table.

And I assume -- then, in other words, the settlement that you made, the $750,000, et cetera, that came directly through the P&L. There's no reserves or anything to cover any of that?

That particular model is directly through the P&L and is impacting on our hotel results.

Okay, fine. No, that's understandable.

All right, and then with regard to The Corners, remind me again. The decision on breaking ground on anything would have to be made this spring, and then if it doesn't happen this spring, then it waits until next spring. Is that the idea?

You know, we've always aimed for that type of a target, and there is some leeway with that. A lot goes into the timing of Von Maur and their preferred opening time period, which typically is in the fall of any given year.

But ultimately, as Greg indicated, this will -- he used the term a natural course. So however this kind of plays out, we will adapt the schedule as necessary. Whether that means that -- that doesn't necessarily mean, then, if we don't make a spring construction in 2013 that we don't get going until spring of 2014, by any means. In fact, it still could very much still get going in 2013 and we would just adjust the overall schedule accordingly.

Okay, but net net, it does sound like you're somewhat more optimistic or positive on the outlook than you were in the last call.

I don't think I would say that, Greg. I think it's -- every element had progress and every element is required in order for us to move forward.

So absolutely that we've -- since the last call, I think that we did say that leasing momentum is at an all-time high and we're very happy with where that's going. You still have to convert those ultimately to signed leases, and that's going to follow its natural course.

As we indicated, we're actually in the market as we speak with seeking the financing on both the equity and the debt financing, and we've had -- continuing to have these conversations with the local community, as well, and progress on all three of these elements. But in the end, all three of them have to get to the finish line and it's not in anyone's interest to artificially set a date or to begin the project until they're all taken care of.

Well, of course. And I know -- but Greg's comment with regard to the decision or something in the near term, I assume that's with regard to the community or the --

He was referring specifically to the development agreement with the community, and we've had some very productive discussions, and it's -- I know that everyone is anxious to hear the final conclusion of that, and then we're still confident we're going to get an acceptable conclusion for both, but it's a very complicated transaction. It was a very complicated deal, and the town has been very diligent, as they should be, in protecting their interests, as we are, and I'm confident that ultimately a solution -- not a solution, a deal, a development agreement is in our near future.

Good.

I guess I can't -- I would just add to that. It's obviously a very interesting project and it could be a very profitable project for us. But in the end, it's got to -- everything has to make sense or we just won't do it.

I mean, I have no desire to build a big shopping center so I can have planted my flag and said I did this so that I could -- for not a good reason. You're stuck with it for a long time. So --

Of course, of course.

We're going to make the most prudent decision, based on everything coming together.

Okay, and with regard to the concessions, the concessions, foods, et cetera, does the addition of the restaurants and the lounges, does that enhance the profitability of the concession revenue or is it the same? Is it a little less? I mean, give us a sense of the profit impact from the adding of the restaurants, et cetera.

Well, certainly, right off the bat, it's certainly not -- the margins aren't as good as popcorn and soda, and we all know that.

But what we're looking to try to do is take more dollars to the bank. And so, we absolutely go into these projects and we wouldn't have built Zaffiro's number three or Take Five number -- I'm not sure if it's four or five -- if we weren't seeing indications that that was ultimately adding profit to the property.

As you know, we've built the first one and even when we look at our in-theater dining, each of the concepts, we did the first one and then waited a little while because we had to get the profit where it needed to be before we'd move on with additional projects. But in the long run, absolutely. That's why we're doing them.

Okay, and then with -- in just looking at where you put the restaurants in the theaters, have -- I'm assuming that it helps sort of the attendance? Has it? Just looking back and the analysis of it, is it a definable positive to the theater attendance in those locations?

You know, the issue for us is that where we have done it -- the first time we've actually -- the first time we've ever done and not done an extensive redo of the theater with it is the one we just did at the Ridge down on the southwest side of town in Milwaukee.

Because if you think about the other ones, they were all in conjunction with a major renovation of the theater, so it's hard to simply isolate that and say, well, we added this and the amenity drove attendance at the theater. It's our feeling that, look at the overall -- it does enhance the overall complex.

I think you're going in right direction, Greg, but what we've done -- the last one we've done will give us that cleanest test of, well, did it enhance the productivity of the theater itself?

Good. How much -- is there an authorization in terms of the buyback? How much is left?

I believe we're right -- at the end of the quarter, we were in the -- just over 1 million shares, I believe (multiple speakers)

So 1 million is left, still?

It was in that neighborhood, I believe. I don't have that number in front of me, but it was -- but yes, I think that was -- because we'd authorized another 2 million shares at the July meeting, and so it's around 1 million at the end of the quarter, end of November.

Okay. Finally, congratulate Bill Reynolds on those nice deals that came through. Thanks a lot.

Thank you, Greg.

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

Well, thank you very much and we want to thank all of you for joining us today. We look forward to talking to you again once again in March when we release our third-quarter fiscal 2013 results. Thanks, and we wish you all a very Merry Christmas, Happy Hanukkah, and Happy New Year.

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