Marcus Corp (MCS) 2014 Q2 法說會逐字稿

Good morning everyone, and welcome to the Marcus Corporation second-quarter earnings conference call. My name is Clint, 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. If it any time during the call you require assistance (Operator Instructions). As a reminder, this conference is being recorded.

Joining us today are Greg Marcus, President and Chief Executive Officer; and Doug Neis, Chief Financial Officer of The Marcus Corporation.

At this time, I would like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you, and welcome, everybody, to our fiscal 2014 second-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 revenues and earnings expectations; our future RevPAR; occupancy rates and room rate expectations for our Hotels & Resorts division; our 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 in leisure travel industry and in our markets; expectations and plans regarding growth and the number and type of our properties and facilities; expectations regarding various non-operating line items in 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 our Regulation G disclosures when applicable on our website at the www.marcuscorp.com.

So with that behind us, let's talk about our fiscal 2014 second-quarter and first-half results. As you can see, despite a historically very good quarter for our Theatre division, comparisons to last year's record second-quarter for our largest division were too much to overcome, despite what turned out to be a record quarter for our Hotels and Resorts division.

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.

Before I dig into each division, let me start with some of the general numbers. There are only two line items before operating -- below operating income that are worth mentioning. First is interest expense, which was up nearly $300,000 during our fiscal 2014 second quarter and nearly $600,000 for the first half of the year compared to the prior-year, due in part to increased borrowings primarily as a result of the assumed Cornhusker hotel mortgage during last year's second quarter and new borrowings necessary to fund the special dividends we paid during the third quarter of fiscal 2013.

Our average interest rate also increased slightly during the second quarter due to our August closing on the $50 million of 4.02% senior notes that we've previously talked about.

I've gone through the math before, but based on the assumption that the $50 million in long-term money replaced prior short-term borrowings under our revolving credit facility, the simple math would suggest that if everything else was equal, our interest expense would increase by about $300,000 in each of our remaining fiscal 2014 quarters, compared to the prior year just due to the change in rate.

Of course, changes in our borrowing levels due to variations in our operating results, capital expenditures, share repurchases, asset sales, among other items may impact our actual reported interest expense in future periods.

The second line item of note is the gain or loss on disposition of assets line. Approximately $750,000 of the loss noted in this line item during our fiscal 2014 second quarter related to our recent sale of our minority 15% joint venture interest in the Columbus Westin Hotel in Columbus, Ohio. We sold that to the majority partner in that venture. They recently approached us about buying out our interest in the hotel and, while we were under no obligation to do so, after much discussion we agreed that a buyout would be in everyone's best interest at this time. The losses reflected in some of the challenges this particular hotel has had in recent years and its resulting impact in valuation upon sale.

Our overall debt to capitalization ratio at the end of the quarter was 42%, the same as last quarter and down slightly from 44% at our last May year end. And our year to date effective income tax rate, adjusted for losses from noncontrolling interest, was 39.9%, generally right where we'd expect it to be.

Shifting gears, our total capital expenditures during the first half of fiscal 2014 totaled approximately $21 million, compared to $10.5 million last year. Approximately $12.6 million of this amount was incurred in our Theatre division, the majority of which related to the items noted in our press release including the renovation of the renamed Majestic of Omaha Theatre; the addition of a Take Five Lounge in a Madison theatre; the new UltraScreen in Gurnee, Illinois; the expansion of our Dream Lounger Recliner Seating program; and general theatre renovations and upgrades in decor and things like that.

We're laser-focused right now on CapEx that we believe will produce additional attendance, revenues, and ultimately EBITDA. In addition, we spent approximately $8.3 million in CapEx in our hotel division during the first half, with the renovation at the Cornhusker Marriott accounting for the largest portion of this amount.

At the halfway point of our fiscal year, I'm now estimating that our total cash capital expenditures for fiscal 2014 will be in the $60 million to $70 million range. We're still finalizing the scope and timing of many of the various requested products by our two divisions, and we anticipate proceeding with many of the projects as the year unfolds, with a particularly ambitious plan for our Theatre division that Greg will discuss in his remarks.

Some of these projects could carry over to 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 projects that could develop during the fiscal year.

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

As you can see in the reported numbers, our box office revenues decreased 8.7% during the second quarter, with concession and food and beverage revenues down 4%. Year to date, however, box office revenues are still up 1.4% compared to last year, and our concession food and beverage revenues are up by a very healthy 5.4%.

The second-quarter decreases are attributable to a decrease in attendance at our comparable theatres of 7.1% for the second quarter. Year to date, however, our comparable theatre attendance is actually still up 1.3% due to our record first-quarter results.

I also want to point out that our fiscal 2014 second-quarter results were negatively impacted by the fact that Thanksgiving was very late this year. Last year's Thanksgiving weekend, which historically is a strong moviegoing weekend, was included in our fiscal 2013 second quarter. This year, that same weekend will be included in our fiscal 2014 third-quarter results.

As pointed out in our press release, this year's slate of movies just could not match up to the slate that produced record results for this division last year. September started the quarter off actually stronger than last year, but once we hit October we experienced decreased box office results for seven straight weeks until the Hunger Games sequel during the last week of the quarter finally turned the box office trend around.

Our average admission price for our comparable theatres actually decreased by 1.2% for the quarter, due primarily to our recent introduction of a $5 Tuesday program for all movies. Greg will talk more about this program in his remarks.

Year to date, our average admission price is still up 0.8% compared to the prior year.

Our average concession of food and beverage revenues per person increased by 3.9% for the second quarter and 4.8% for the first half of fiscal 2014 compared to the same period last year.

Our continued focus on additional food and beverage concepts certainly contributed to this increase, but we also continue to experience increases in our core concession per capitas as well.

Shifting to our Hotel and Resort division, as we note in our release, our overall hotel revenues were up 6.5% for the second quarter and 7.2% for the first half of the year. Our total RevPAR for comparable properties was up 3.8% during the quarter and 4.2% for the first half 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 two of our eight comparable Company-owned properties reported increased RevPAR again this quarter.

Our fiscal 2014 second-quarter overall RevPAR increase was entirely due to a 3.8% increase in our average daily rates.

Our fiscal 2014 first-half overall RevPAR increase was a result of an overall occupancy rate increase of 0.6 percentage points and an average daily rate increase of 3.5%. And finally, I do want to point out that our comparisons to last year in this division benefit from the fact that last year's second-quarter results included continuing legal expenses related to our Las Vegas property, including a specific $750,000 settlement reached on a number of the related lawsuits.

We'll see a similar benefit in our comparisons during our upcoming fiscal 2014 third quarter, as we reported another $1.4 million of legal and settlement costs related to this property during last year's third quarter.

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

Thanks, Doug. I'll begin my remarks today with our Theatre division. I know we mentioned this in the press release and Doug referenced it as well, but I do think it is important to put this quarter's reported results from this division in a little historical perspective. At first blush, it would easy to conclude that we didn't have a very good quarter in our Theatre division, but that is just not the case. As we noted, we've only reported higher second-quarter theatre revenues once before in our history. It just happened to be last year.

And from an operating income perspective, we have only exceeded our reported second-quarter theatre operating income of $5.3 million twice in the last nine years in this division, with once again the record, by a longshot, being last year.

It was just a really great second-quarter film slate last year that went well beyond the top three to five movies. The fact that the Hunger Games Catching Fire was our top movie for this year's second-quarter, even though it only played one week during the fiscal quarter, gives you an idea that this year's fall movies prior to this blockbuster may have been good but not great compared to last year.

We had seven films produced box office receipts greater than $1 million for us this quarter compared to $9 million last year, another indicator that last year's film slate was just deeper. Of course, we talk about this almost every quarter. It is obviously no secret the most important factor impacting attendance has been and always will be the quality and quantity of the films released during the period.

There will be quarters when the strength and depth of film product is not as strong as what we had the year before, and there will be quarters like our first quarter this year, when we reported record results; it goes with the territory. So while it certainly is too early to tell what our fiscal 2014 third quarter will be like, I will tell you that we are off to a good start. As we mentioned in our press release, the calendar provided a little variation in the makeup of our quarters this year, as the busy Thanksgiving weekend fell in the beginning of our third quarter this year.

Last year, that busy weekend was in our fiscal second quarter due to an earlier date for Thanksgiving. So that nuance in the calendar, combined with strong carryover of the earlier-mentioned Hunger Games movie, has given us a head start for our next quarter.

Of course, there are a lot of films to be released yet in the traditionally business Christmas/New Year's window, several of which we listed in our release. And then January and February can make a big difference in how the overall quarter will end up.

Anticipating question about what last year's third quarter was like as a point of comparison, I would characterize our fiscal 2013 third-quarter as average when you look at it over the last three years and slightly below average when compared to last five-year period.

Now, I just mentioned that movies remain the most important factor impacting attendance; that's true. But there are strategies that we can implement that will also drive attendance, and we have put a major emphasis on these strategies this year. Doug alluded to one of those strategies in his remarks. This fall, we began testing a $5 Tuesday promotion for all movies in several markets in an effort to go after a mid-week value customer who may have reduced their moviegoing frequency or stopped going to the movies completely due to price.

We also included a free 44-ounce popcorn for a temporary time period as an added incentive. Needless to say, we have been delighted with the response of this program, and we rolled it out circuitwide on November 12, late in our fiscal 2014 second quarter. We also are testing a $5 Student Thursday program in very limited locations near key colleges and universities. Coupled with an aggressive local marketing campaign in each individual theatre market, we have seen our Tuesday night attendance increase dramatically, and the program seems to be getting stronger every week. We believe this program has created another weekend day for us without impacting the moviegoing habits of our regular weekend customers. It has increased frequency and added new customers, a true win-win for our customers and for us.

As an aside, I will tell you that this year's second-quarter operating results in the Theatre division did have some unusual one-time advertising and marketing costs related to the introduction of this important new pricing promotion that were expenses incurred, even though we expect to reap the benefits of many of these promotional materials in the months to come.

We also had some short-term cost impacts related primarily to wages as we introduced this new business approach, both in terms of operating expenses as well as related to time spent in the local community promoting this exciting new program.

We also continue to execute on several of the strategies noted in our press release that are also designed to increase attendance and improve our bottom line. We opened our fifth and sixth Take Five lounges at theatres in Madison and Omaha during the first quarter, and we also added Zaffiro's Express concepts to each of those theatres.

We are currently reviewing plans for up to four to five more Take Five lounges and three more Zaffiro's Express at select theatres yet this fiscal year. As previously noted, our 15th UltraScreen opened at our Gurnee, Illinois, theatre this November, and we are reviewing additional opportunities for our large-screen format. And we are capitalizing on the outstanding customer response to our addition of premium recliner seating in all auditoriums to our recently renovated Majestic of Omaha Theatre by expanding the program to three more theatres, as noted in our press release. And we don't expect to stop there; we're reviewing plans for as many as five more Dream Lounger locations that we hope to get started on very shortly.

Add to all this the introduction of our UltraScreen DLX concept and the addition of the latest immersive sound technology in several of these theatres, and you can see that we continue to be committed to being at the forefront of innovation in the theatre industry, and I think we have some exciting times ahead of us.

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. It was another quarter of steady year-over-year improvement and, in fact, as noted, resulted in record second-quarter revenues and operating income. Our 12th straight quarter of increased ADR continues to be one of the stories, as rate was again the primary contributor to our RevPAR gains this quarter. And while our average rate still trails our peak average rate prior to the recession, we continue to close the gap. This year's first-half average rate is only 2.4% lower than what we reported during the first half of our fiscal 2008.

You may recall that we ran over 5% lower in rate during our recently completed fiscal 2013 compared to fiscal 2008, and it wasn't that long ago that we were double-digit percentages below 2008 in average rate. At this point, we certainly continue to expect this favorable trend in average rate to continue.

The other key storyline is business travel, which continues to stay at a healthy level. Our nongroup business travel pace is strong and steady, even in Milwaukee with new supply on board. We continue to emphasize the benefits we can package together for this particular group of travelers, whether it is with parking, breakfast, or club rooms like the ones we added this past year to the Pfister and Grand Geneva.

Our corporate customers are sending people out on the road, and our hotels are well positioned to benefit from this continuing strong market segment.

Group business has been relatively steady; not great, but not terrible either. We actually came into this fiscal year behind pace a little, but we have seen a lot of bookings in the year for the year. In other words, the bookings still are skewing more short-term. Many smaller meetings book and execute within 90 days. When meeting planners are working on such relatively short notice, we believe we have distinct advantages that help us win the business, thanks to our strength and capabilities and the various add-on amenities needed to make a meeting successful such as special audiovisual needs, restaurant and catering options, club rooms, etcetera.

Looking ahead, our outlook for the future hasn't really changed. As many of you know, our fiscal 2014 third quarter is historically the most challenging quarter for our Hotel division, given our preponderance of Midwestern hotels in our own portfolio. But at this point, I don't think it is unreasonable to expect us to continue to experience favorable trends in our revenues and operating income. Or loss, as is the case historically in our third-quarter for this division.

And based upon business already on the books for our fiscal fourth quarter, we hope our current trends continue into that quarter as well. As Doug mentioned earlier, comparisons to last year during our third and fourth quarters to fiscal year will also definitely benefit from the fact that last year's results were significantly impacted by the settlement of the Las Vegas claims and the startup operating losses from the Cornhusker Marriott.

Speaking of the Cornhusker, while our renovation is taking a little longer than we had originally hoped, I'm happy to tell you that all the guest rooms are nearly completed, and the guest response to our new Miller Time Pub has been wonderful. We still have to complete work in the lobby and public space, and we're probably not going to have all the renovated meeting space available until later in the spring. But when fully completed, I believe we will have returned this hotel to its proper place as the hotel in Lincoln, Nebraska.

During this time of transition in hotel leadership, our focus has clear been our existing portfolio of owned and managed properties, but that doesn't mean we are still pursuing a number of additional potential growth opportunities.

As we have said in the past, the form of these opportunities will likely vary. Additional opportunities that we are currently pursuing include pure management contracts and management contracts and minority interest in joint ventures. Regardless of the form of the transaction, we're looking forward to increasing the number of rooms under management by Marcus Hotels and Resorts.

Before I wrap up our prepared comments and open the call up for questions, let me briefly give you a quick update on the Corners of Brookfield, our proposed mixed-use project that we have been talking about for some time now. As we've told you in the past, there has been a lot of behind-the-scenes action on a number of fronts related to this project, and a couple of significant milestones were reached during our fiscal 2014 second quarter.

The first was the fact that town of Brookfield recently approved the development agreement for the public financing component of this project. While this process took longer than I think any of us had hoped, the town has been supportive of our project throughout the entire effort, and they've been great to work with, and I think a very fair deal for both parties was agreed to.

With the development agreement approved, we quickly followed that up with the announcement of 10 additional tenants in addition to our anchor Von Maur department store. We think we are putting together a great tenant mix that will combine both first in Wisconsin national operators with best-in-class local tenants. And this initial list reflects that. We're currently in active LOI and lease negotiations with more than enough additional tenants to make this project a reality, and that is where our current focus lies.

With the public financing agreement now in place, we have also made progress in our continuing negotiations with our potential equity partners, and we are now negotiating details of the joint venture structure. The final [formal] ownership percentages may still change, but momentum is increasing rapidly. When all is said and done, we continue to expect to retain a minority ownership position in this important project in our hometown.

I know everyone wants to know when we will break ground; and believe me, we are doing everything we can to make that happen as soon as possible. But, as I have said many times before, this is a complicated project, and we are committed to doing this right. So we'll let the dates take care of themselves as each additional milestone is reached.

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 of Baird.

I want to start on the theatres, if you don't mind. 44 ounces seems like an awful lot of popcorn, at least to me. You do seem to be really beefing up your offering. Is there more competition in your markets, or are you just trying to continue to make the moviegoing experience have appeal to your customers?

It's the latter, David. It's the realization the -- that, frankly, this is something that with our new leadership there that there's and he -- and Rolando has had experience with this, but there is a customer who -- there is a valued customer that we have that we think that we're able to go out and capture now. And we create some excitement around doing it only once a week, and it's -- and we're seeing it, that it is resonating with movie audiences. And yet, we don't seem to be cannibalizing in the fact that it seems to be additive to our business. Because, you know, the Friday and Saturday night customers are different customers than the mid-week customer. And we're seeing new people in the movie theatres, which is really interesting.

And you didn't mention the Alvin and the Chipmunks movie. What was that called?

Alvin and the Chipmunks movie?

That was last year (multiple speakers).

Yes, that could've been last year, yes. Not this year, no.

I was trying to get you to say the title again, Greg, that's all.

(laughter) Oh boy.

On a more serious note, you gave us a good update on the Corners, and that's great. I guess as you look more broadly, how does the likelihood of proceeding with the Corners impact your capital allocation decision in other areas?

You know, David, it really doesn't because we've -- you know, as the developer, we've been making the investments. So, again, as we are currently envisioning the final structure in our minority interest, I think certainly being close enough for government work here, I think we basically have most of our dollars in already.

And of course, part of our contribution is going to be a piece of land that we already own. And so, from that perspective, I don't see it having a major impact on our -- the rest of our capital deliberations.

Okay, that's great. Will you get fees from the joint venture for the ongoing development process?

That's what's being contemplated.

Okay, great. And on MCS Capital, you alluded to the fact that you're not resting on your laurels; you've got other stuff going. Can you give us any update on the kind of stuff you're looking at or structure or timing -- potential timing of when you might have more to announce?

You know, David, it seems to be the same stuff we keep looking at with sliver equity deals. There's one we recently were looking at (inaudible) [western] city. I mean, there's a whole slew of things, and there's no one thing I could tell you there's a potential. But there is a theme out there; I would tell you it tends to be more sliver equity stuff then we're seeing right now than whole acquisitions, but you never know what might come our way.

Recently, somebody -- there was a bigger project that came. So it will be opportunistic.

And would the slivers be MCS Capital, or would that be more about getting a management contract for the Hotel division itself?

You know, it's kind of a yes answer, meaning that today MCS Capital is, as you know David, is just part of The Marcus Corporation. As we've talked about the past, one of the things that we are exploring is potentially creating a separate fund. And so that's -- I'll set that issue kind of aside. That something that we are actively exploring and taking a look at. And so, if ultimately that would come to fruition, then it could be investments kind of funneled through that. And MCS would seed the fund, and we'd go from there. But certainly, a goal is to increase our rooms under management as well for the Hotel division. So we would anticipate, regardless of whether it's just us making a sliver equity or whether it's a fund, we'd anticipate that we'd be managing all or most of those properties.

Okay. And then onto the hotels themselves. Particularly in Milwaukee, we've talked about Milwaukee supply. As we get into the colder months, are your competitors beginning to discount a bid to fill their rooms?

You know, we're not able to see it just yet. I think that we're just -- I think you've got to wait for the holiday season to end.

You know, I mean, I think that -- I think we outlook it. I think if you look at the Milwaukee market, the Milwaukee market is not -- it is not robust. It has been flattish; it's about the best way I can describe it. When you're seeing other markets stronger in our portfolio and in portfolios across the country. So we are already seeing a flat market.

And if you look at what competitors are charging, you can start to see where rates are dropping. I think there was an article in the paper recently that talked about the Courtyard dropping its rates because the Marriott is impacting that. And you can see it when you look at what's going on in our market. So, I think that the -- it's going to be interesting as we look into the next few months and see -- as we get into, as we talked about, our weakest quarter.

You know, I think our sample size is still pretty small, David. We -- at our last quarter, we did indicate that our Milwaukee -- three Milwaukee hotel RevPAR for that quarter was slightly below our overall average. This particular quarter, it actually was not. This particular quarter, Milwaukee was -- it was the strength of our properties that our RevPAR actually in Milwaukee was a little better than the Company average; but year to date, we're still trailing little bit. So I think the sample size is still pretty small.

Okay. Interesting. It sounds like -- it seems like you are getting a little more aggressive on group as well, just trying to keep group in the hotels where you can. Is that a fair assessment?

You know, I think that we are -- I don't think that we're being any -- you said aggressive with group. You know, I mean, we are maintaining the business relationships that we have, and it's been -- I'm not sure I'd qualify to say that we are many more aggressive than we are.

As we put in the script, David, that's the biggest dynamic that we're seeing is just the short lead time. I mean, it's just -- I'm assuming you're kind of hearing this from some of your other hotel clients as well is that -- as we said, we actually came into the year a little bit behind the pace of where we wanted to be, but we've been able to generally make it up with a lot of this, as we refer to it as is in-the-year, for-the-year kind of business. So it's just having to be nimble, having to be able to react quickly. So again, I'm not sure aggressive is the term, but I think we're really good, though, at reacting quickly, and we have the resources at our disposal to be able to try to win the day when that short-term stuff comes up.

Okay. Last question. Just back on the Corners. What -- how much have you spent already? What's your basis today in that?

You know, David, we haven't disclosed the numbers, so I'm not going to put it out there. It certainly in the -- and we've also been -- I will tell you we've been fairly conservative in terms of what we've put on the balance sheet versus what we've expensed. So we have expensed well over a number that has seven digits and it over the course of this time period, and we have a number with seven digits in it on our balance sheet, but we haven't given the exact number.

Okay, great. Thanks.

Eric Wold, B. Riley.

Doug, just a quick question real quick for you first. I'm not sure if I missed it. I got the CapEx for the year at $60 million to $70 million. What was it in Q2?

Well, year to date, we're at $21 million, and so I'm trying to remember where we were in the first quarter. So I think we were in the $10 million range or something like that. So it's kind of equal. And I will tell you of that $60 million to $70 million, it could be as much as $50 million, but it could be occurring in our Theatre division. We're still working through the numbers, but that's -- as I've built up to the $60 million or $70 million, on the high-end, we could end up as high as that kind of neighborhood for the theatres.

Okay. And (inaudible) on the theatre side, I know that it was a tough comp versus last year. But looking at the industry was down about 2.5% to 3% on a comparable period versus last year, and with markets down about $8 million and change. What do you think caused that delta? Was it the mix of product in your markets versus other, or is it something else that maybe we're not seeing there?

Did you match the weeks up exactly, Eric, on that? Because I'm not so sure that that's -- again, because of that nuance with the Thanksgiving and everything else, I don't know if you've got the exact match in the weeks or not. Because I don't think our indication is that we missed the national numbers quite that much.

But what I will tell you is that one dynamic we did have for a circuit our size is that we had auditoriums out of commission during this particular time period that probably impacted us a little bit more than -- given our size compared to what you might notice for somebody else, given the -- we had three more locations and pretty key locations that we went to the all-Dream Lounger Recliner Seating. And so that was going on during this time period. So there was a little bit of that dynamic going on as well.

Okay. And then kind of a larger picture, I know you're making some investments or planning to make some investments improvements in Theatre division. It seems like a lot of the opportunities you talk about in terms of new investments, new growth, tend to focus around the hotel/resort division and mixed-use property and Brookfield. Is there ever an opportunity that you think about to monetize the exhibition space to grow faster or more fully into the hotel/resort segment? Would you consider selling the exhibition space at some point, given the opportunities that are out there and the activity in the space? Or is that something you feel you need to kind of be a part of this Company?

You should see the look on Greg's face right now, Eric. (laughter)

I think I have to go get my General Counsel to come down to the room.

I'll go first and then -- I don't have the same last name as he does, so I'll go first and say that, look, we've been in it for 78 years, so that's my starting point. And we think we're pretty doggone good at it, and we certainly think that, well, size can matter as it relates to this -- there's a few costs that you could argue size matters. We still have a pretty strong position in the markets that we are in -- a very strong position in the markets that we're in. So we think we can compete very well. So we certainly don't think that we have any sort of gun to our heads that would make us do something like that. And so I'll, you know --

I mean, I think that the standard answer is we don't comment on strategies about stuff like that for divisions. That being said, I certainly would just echo Doug's comments, which is we don't have any plans to put the division up for sale, if that's what you're asking.

That helps. Appreciate it, guys.

(Operator Instructions) Brian Rafn, Morgan Dempsey Capital Management.

Give me a sense -- you guys talked about your Tuesday night value rollout. Is that -- does that have a geographic or demographic profile to it, or are you rolling that out all across the chain?

That's now circuitwide, Brian. We started off in a few -- we tested it in a few markets initially, but on November 12, I think with the first Tuesday being Thor, it became a circuitwide promotion.

Okay. And what -- when you look at the snack food concession, even the beverage component of that value guide, how does that compare to, say, your weekend tender?

It will be less than the value customer will spend less on per capita basis at the concession stand.

Okay, okay. When you guys (multiple speakers) --

Brian?

Go ahead.

Brian, I'm going to jump in here for a second, it's just to say that right now the difficulty is that it gives us part of the promotion, and it's part of our partnership with our studio partners as well. We've been giving away some free popcorn as well at this point in order to get the initial awareness and get this program going. So, we're going to have to kind of watch this as it proceeds.

But I would tell that, look, we know from what we've heard from anecdotal experience from others is that at the end of the day, this customer will spend less on a per capita basis. But the idea is that to make it a win-win for us and for the studios is that we're going to bring in so much more box office revenue and by having much more attendance. And even though, on a per capita basis, the customer will spend less in aggregate, we should all do better.

Yes, sure. Across the circuit is that Tuesday night attendance, I'm just asking out of ignorance, is that for all of the cinema screens in the theatres, or are you selectively picking movies for that Tuesday night?

All movies, Brian.

Okay, okay. And when the guide, as anyone with kids would have, if you go up for your free 44-ounce popcorn, anyone with kids -- once you get in the vicinity of that, that snack food thing, usually should get some [add-on]. Are you seeing some additive food and beverage stuff with that 44-ounce free popcorn?

Too early to tell.

Okay, okay, okay. I noticed last year, you guys are certainly experts on this, you had Die Hard, I think 5, come out in the January or February period. I think they co-branded with a Super Bowl. The January-February -- correct me if I'm wrong, I mean, is -- are you seeing the studios put a little more emphasis on quality or quantity rollouts? Because you get a little bit of a dead zone, you're kind of coming out of the holidays, long winters north of the Mason-Dixon line. How do you guys kind of look at that period, and what you see, I think, for 2014?

You know, it's a good question, Brian. It's been -- it's not been consistent over the years. And, in fact, I will tell you that in general, while we love -- I mean, this time period that we're in right now is one of the biggest time periods of the year, and that week between Christmas and New Year's is going to be the biggest week of the year, literally. But what often makes or breaks the third quarter is the January and February product. And so certainly our message to the studios is exact as you're saying is that -- don't forget about that time period.

And so I'm looking at the list right now, and you know, I mean, there's -- they've actually pushed the Jack Ryan picture, which is the reboot of the Tom Clancy franchise -- they pushed that back into January, so that's coming out in January. There's another picture that's going to be a full rollout that's already been getting some nominations called Her. iFrankenstein. There's something called the Lego Movie coming out in early February that's in 3-D that has some buzz about it. A Robocop reboot is occurring in February. Another big-budget picture called Pompeii comes out in February. On paper, you know, it looks like -- from a quantity perspective, it looks fairly close to what it was the last couple -- last year, and we'll have to see how they do.

Another determining factor will be how films play, really, over the next week or two. There's a lot of product about to hit the screens. If it's all good, you just can't see it all and just given a limited timeframe. And then that will bleed off into January and really -- basically January as people catch up. It will just depend on how those films resonate with the audiences, and we'll know shortly.

Yes, sure. As we see in retail, guys, the whole gift card thing has been a real driver where the Christmas season now adds a lot to the 26 and kind of that week flowing past Christmas into New Year's with people being off. How does that gift card for you guys -- free movie [take], how does that spill into that January/February period for you? Is that pretty steady, or is that hit-or-miss?

I mean that's I think that's the key time when people started using those. Our gift card business has become an important part of our business. We have seen increases pretty much every year in that, and we have a major push going on right now, and that has benefits that certainly carry into those early months, no question about it.

Okay, okay. When you guys talked about putting in the Zaffiro's and the Take Five, do you notice when you add on that incremental food and beverage restaurant that that actually is additive to driving movie attendance traffic?

I'm not sure if we could make that statement, but our goal is to get more of a share of wallet of the customer.

Okay, okay. Haven't seen it, the Dream Lounger, I assume these electric reclining recliners, is that a -- how sophisticated is that chair? Obviously it sounds nice, very expensive, but I'm thinking of kids spilling popcorn and soda and standing on it. Is that a maintenance issue, or is that a pretty bulletproof mechanism?

It's a very new dynamic, Brian, so I guess time is going to tell -- I mean, frankly, our -- just from a pure accounting perspective, we're signing of this charter life to them than we would a traditional chairs because of the electronics and everything else. But it's still very early in the process here. It's a very well-made chair with a very good fabric, and customers are loving it (multiple speakers).

Okay, is that something size-wise, Doug, that you can install all across the circuit, or does it have to have more size, or is it specifically just for Ultra? Where does that get installed across the circuit?

We're kind of evaluating that right now. It's not something you do everywhere. One of the reasons is that you lose a fair number of the actual seat count because of the size of the chair. But the interesting dynamic is you lose seat count, and overall attendance goes up. In other words, your occupancy increases significantly. And so, again, it's a very -- there's certainly an art and a science to this in terms of determining what locations might be candidates for this, and we're going to that right now. But it's not something you do everywhere.

Yes, sure. Does that -- given with the UltraScreens and the Dolby Atmos and all of the immersive technologies on the sound side, all the things that you guys do, is that incremental seat installation -- do think that there's some pricing inflation and being able to raise ticket prices a little in that as you guys get the consumer and doctrinated to this new experience?

Too new in the process to even know yet. I mean, right now, we have -- for the Dream Loungers themselves, we have not changed the pricing. But, as you mentioned, there are all these different elements and amenities, and so it is still too early to see how -- ultimately how the final pricing might shake out in terms of which elements are present and -- but right now, as we've put it out we've put it out into the -- we've gotten four locations with just the Dream Loungers. And I'm not counting the UltraScreens, but the regular auditoriums is the same pricing.

Okay, okay. Doug, anything on cost pressures -- inflation, food and beverage, anything across the circuit? I'm just looking for kind of cost pressure.

Not specifically to that end. Again, we as we've indicated in this particular quarter, as we've we had some increased expenses in our theatre business that are tied to rolling out this promotion and advertising marketing and things along those lines. But no, nothing from an inflation perspective that's outside of what is kind of generally happening in the world.

Yes, okay. With kind of your forward vision into 2014 as you look at the Hollywood, the cinema productions, the portfolio of movies, I guess would be the best way, your thoughts 2014 -- I know it's hard to pick blockbusters before they happen. What is your kind of early sense for 2014?

You know what, it is very hard, Brian. I mean you know there's a lot of pictures on paper and there's some of them recognizable franchise films and sequels that you see. What I will actually tell you -- it's not your question, but there's a lot of buzz about 2015. A ton of buzz about 2015 because it's just the way pictures are lining up right now. I don't know if anyone is saying 2014 is good, bad, or indifferent, I think there is -- but what I'm hearing is more talk about, interestingly enough, 2015.

Okay, okay. All right. And then just one more on the -- kind of your thoughts on CapEx going forward on the hotel side, any major projects? How do you see 2014 shaking out?

Well, again, the -- we're going to complete the renovation at the Cornhusker. We did indicate that we've begun the renovation of the Tower building and the Pfister, and so that will be several million dollars. The -- we've also indicated, and that probably not a fiscal 2014 issue, but we are taking a hard look at our Chicago property, and that one is going to be due for some capital dollars as well. But that will be a fiscal 2015 issue probably.

All right guys. I wish you guys Merry Christmas. Thanks.

Thank you, Brian.

Thank you. At this time, there appears to be no other questions. I'd like to hand the call back to Mr. Neis for any additional or closing comments.

Well certainly, I want to thank you all for joining us again today. We look forward to talking to you once again in March, when we release our third-quarter fiscal 2014 results. So thanks, and we wish you all a very Merry Christmas and a happy new year.

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