Marcus Corp (MCS) 2014 Q3 法說會逐字稿

Good morning, everyone, and welcome to the Marcus Corporation third-quarter earnings conference call. My name is Matthew and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded. Joining us today are Greg Marcus, President and Chief Executive Officer; and Doug Neis, Chief Financial Officer of the Marcus Corporation. At this time, I would 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 2014 third-quarter conference call. As usual I need to begin by stating we plan on making a number of forward-looking statements on our call today. Our forward-looking statements could include but not be limited 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 projects expected to be made available to us in the future; expectations about the future trends in the business group and leisure travel and industry and 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 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 will also post all Regulation G disclosures when applicable on our website, www.MarcusCorp.com.

So with that behind us let's talk about our fiscal 2014 third-quarter and first three quarters results. As you can see, we had a great third quarter thanks primarily to the outstanding results of our theatre division and favorable comparisons 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. Most of the line items below operating income did not have any major variations last year. A small increase in investment income was offset by small increase in interest expense, small decreases in losses on disposition and equity losses from JVs combined attributed about $250,000 additional to our pretax earnings.

The most obvious change versus last year that requires explanation can be found on two lines -- the extinguishment of debt income and earnings and losses attributable to noncontrolling interests.

So, let's start with a brief reminder of how noncontrolling interest or what used to be called minority interest is accounted for. Since we are the majority owner of the Skirvin Hilton in Oklahoma City, we report 100% of the hotel's financial results in net earnings and then back out the earnings or losses attributable to noncontrolling interest at the end, resulting in the final line called net earnings attributable to the Marcus Corporation. We are the majority owner of the Cornhusker Marriott as well, and it received the same accounting treatment.

Last year, we reported $6 million of income from the extinguishment of debt during the third quarter in conjunction with the refinancing of the debt of the Skirvin Hilton. But that amount had no impact on our bottom-line net earnings attributable to the Marcus Corporation, reported during the third quarter last year, due to the fact that our interpretation of the operating agreement with our 40% joint venture partner resulted in the allocation of 100% of this income to the noncontrolling interest.

This estimate was based upon the best information we had available to us at the time including advice from outside counsel who reviewed the agreement. Our partner disagreed with that interpretation and filed a lawsuit. Thus, we were in the unusual position of arguing about whose gain it was, and the accounting guidance is very clear that gain contingencies are not to be recognized unless the contingent issue is resolved.

Late last month, days before the issue was scheduled to be heard in court, a settlement was reached that included, among other provisions, an agreement that the income from the extinguishment of debt should be reallocated according to our respective ownership percentages. 60% to Marcus, 40% to the noncontrolling interest partner. In accounting parlance, this is a change in estimate is reported prospectively. This was done by reducing the earnings previously allocated to the noncontrolling interest, thereby increasing the earnings attributable to the Marcus Corporation.

Now to spell out all this confusion accounting terminology in its most simplistic terms, all we are doing is reporting the reallocation of last year's income from the extinguishment of debt. That's all. As noted in our press release, after accounting for the tax impact this item contributed approximately $0.08 per share to our third-quarter results.

So with that, let me shift gears and move on to a few other general items. Our overall debt to capitalization ratio at the end of the quarter was 42%, the same as last year and down slightly from 44% at our last year-end. Our year-to-date effective income tax rate adjusted for losses from noncontrolling interest was 40.1%, generally right where we expect it to be. And our total capital expenditures during the first three quarters of fiscal 2014 totaled approximately $33 million compared to just under $15 million last year. Approximately $21 million of this amount was incurred in our theatre division, the majority of which related to items noted in our press release that Greg will expand upon.

In addition, we spent approximately $12 million in CapEx in our hotel division during the first three quarters with the renovation at the Cornhusker Marriott and the Pfister accounting for the largest portion of this amount.

With one quarter to go in the fiscal year, we remain on track to have total estimated cash capital expenditures for fiscal 2014 in the $60 million to $70 million range as we previously indicated. And as noted in our releases this week, approximately $50 million of that amount will be spent in our theatre division.

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 remainder of the fiscal year.

So, now, I'd like to provide some financial comments on our operations for the third quarter in the first three quarters beginning with theatres. As you can see in our reported numbers, our box office revenues increased 24% during the third quarter with concession and food and beverage revenues increasing 34.4%. Year-to-date our box office revenues are now up 8.7% compared to last year, and our concession food and beverage revenues from the theatre division are up a very healthy 14.6%.

What's most notable about these numbers and particularly box office numbers is that we significantly outperformed the national numbers. According to Rentrak, which is a national box office reporting service for the theatre industry, the US box office increased 15% during the comparable 13 weeks of our fiscal 2014 third quarter. So we outperformed the nation by nine percentage points this quarter.

The third quarter increases are attributable to an increase in attendance at our comparable theatres of a staggering 35.9% for the third quarter. Year-to-date our comparable theatre attendance is now up 12.5%. And while our fiscal 2014 third-quarter results were favorably impacted by the fact that Thanksgiving was very late this year, and thus, the Thanksgiving weekend was included in our fiscal 2014 third-quarter results this year, compared to the second quarter last year, the majority of this attendance increase can be attributed to the new investments we are making in our theatres and the innovative marketing strategies that we've initiated, both of which Greg will expand upon.

Of course, we also had a very strong slate of movies that contributed significantly to the record revenues for this division during this year's third quarter. As noted in our press release, we had 13 straight weeks of box office increases during the quarter, something that frankly I can't remember happening before, and if it did it certainly is rare.

Our average admission price for our comparable theatres actually decreased by 8.5% for the quarter, due primarily to having a full quarter of our $5.00 Tuesday program for all movies. Of course, as you surmise, that also contributed to our tremendous attendance gains. Greg will talk more about this program in his remarks. Year-to-date our average admission price is now down 2.7% compared to the prior year.

Our average concession and food and beverage revenues per person decreased by 0.8% for the third quarter due to promotions related to our $5.00 Tuesday program but has increased 2.5% for the first three quarters of fiscal 2014 compared to the same period last year. Of course, with significantly higher attendance, those smaller changes in our per capita numbers don't tell the whole story as evidenced by a significant increases in total concession food and beverage revenues, due in part of our continued focus on additional food and beverage concepts.

And finally, as great a quarter as it was for this particular division, believe it or not it could have actually been better if not for the harsh winter we had in the Midwest this year. Our snow removal costs were nearly $600,000 higher than last year during the quarter, and our heating costs for over $250,000 higher than last year as well. Is it spring yet?

Shifting over to hotels and resorts division. As we note in our release, our overall hotel revenues were up 4.6% for the third quarter and 6.5% for the first three quarters of the year. Total RevPAR for nine comparable properties was up 2.5% during the quarter. And our average RevPAR for eight comparable properties was up 3.4% for the first three quarters compared to the same period as last year.

We didn't have the Cornhusker for a full year last year so they are excluded from our year-to-date RevPAR comparisons. As we have noted in the past, our RevPAR performance did vary by property and type of property, and all but three and our nine comparable company-owned properties reported increased RevPAR again this quarter.

Our fiscal 2014 third-quarter overall RevPAR increase was due to an overall occupancy rate increase of 1.3 percentage points and a 0.3% increase in our average daily rate. Our fiscal first 2014 first three quarters overall RevPAR increase was a result of an overall occupancy rate increase of 0.5 percentage points and average daily rate increase of 2.8%.

And finally, I do want to point out that our comparisons to last year in this division benefited from the fact that last year's third-quarter results included $1.4 million of final legal and settlement costs related to our Las Vegas property. Conversely, this year's third-quarter results were negatively impacted by over $500,000 of real estate tax adjustments as a result of new assessments that we received at several properties. With that, I will now turn the call over to Greg.

Thanks, Doug. I'll begin my remarks today with our theatre division. As you can guess, we're pretty proud of the results we are announcing today for this division. And yes, it was a very good quarter for the movies. But as Doug shared with you, the national box office was up 15% with those same movies during our fiscal third-quarter, yet we were up 24%. In fact, according to the box office results compiled by Rentrak we were the top performing theatre circuit among the top 10 chains in the US during this time period. We believe that against the backdrop of a smooth leadership transition earlier this fiscal year, this is an indication that our investments and operating strategies are working. And I'll talk more about that in a minute.

From a movie perspective, our press release listed the top five movies. And while from top to bottom it was a good slate of films, there is no question that this was the quarter dominated by the top movies. As an indication, those same top five movies accounted for nearly 47% of our total box office revenues during the third quarter compared to last year's top five films, which accounted for 37% of the total. And our top three films, Frozen, Hobbit, and Hunger Games, are now three of our top four films for the entire fiscal year so far.

The only downside of this dynamics is that film costs are typically higher for the best performing films. So when the top films represent a higher percentage of our total box office, it does impact our margins a little.

Overall, we had 11 films produce box office receipts greater than $1 million for us this quarter compared to 10 last year. So as I said, there were good performing films beyond the top five.

Looking ahead, we continued our consecutive streak of increased box office revenues into the first three weeks of our fiscal 2014 fourth quarter, and the lineup of movies for the remainder of March and into April looks good. Hopefully, we will be able to build some cushion versus last year during the first two months of this next quarter. Because once we hit May, it is likely that we will face some pretty tough comparisons.

Last year's May film slate included the blockbuster Iron Man 3 as well as four other films that had opening weekends of over $50 million nationally, including Great Gatsby, Star Trek Into Darkness, Fast and Furious 6, and Hangover 3. Maybe there will be a surprise or two in this year's May films, but right now, we don't see this year's May slate matching last year's.

And since our next earnings announcement won't be until late July when we announce our year-end results, our press release also listed some of the upcoming summer films as well. Right now, it is pretty difficult to predict how they might match up to last year summer lineup. But I do know this. We had record box office revenues during our first-quarter last year. So comparisons will not be easy.

Now having said all that, and recognizing that the quality and quantity of movies remain the most important factor impacting attendance, we have also demonstrated the strategies we have implemented and continue to pursue can make a difference, and a big one at that. The movies are going to be whatever they will be, and we know it can be like we are on a roller coaster at times. But our goal is to continue to outperform the industry like we did this past quarter.

As evidenced by the numbers Doug shared with you earlier, Rolando and the team were able to drive attendance and ultimately box office revenues by making strategic investments in our theatres and by implementing innovative operating and marketing strategies. We have mentioned one of these strategies a couple of times now. This was our first full quarter since we rolled out our $5.00 Tuesday promotion to all of our theatres in an effort to go after a midweek value customer who may have reduced their movie going 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 to this program as have our customers. 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 continue to be getting stronger. We believe this program has created another weekend day for us without impacting the movie-going habits of our regular weekend customers. It has increased frequency, added new customers, and ultimately contributed to our industry outperformance. A true win-win-win for our customers, our studio partners, and for us.

We also are making major investments in our theatres that are already paying dividends for us. By now, you've all seen the press release we issued on Tuesday detailing how we are investing $50 million to further enhance customer amenities across our circuit. These investments continue our nearly 80-year tradition as an industry leader in cinematic exhibition with guest comfort and conveniences at the forefront of our efforts.

Our four theatres that have our luxurious state-of-the-art DreamLounger recliners contributed to our industry outperformance this past quarter. And when we double our all DreamLounger locations to eight by the end of May that will mean 15% of our Company-owned theatres and nearly 19% of our Company-owned screens will have this innovative concept, the highest percentages that we are aware of in the industry among the top 10 theatre chains.

We also combined DreamLounger seating with our proprietary premium large-format UltraScreen concept, and the Dolby Atmos immersive sound system to create the premier presentation screen in any of our markets. UltraScreen DLX. By the end of May, we will have 11 UltraScreen DLX screens and 9 traditional UltraScreen auditoriums in operation, meaning that over 35% of our theatres will offer a large-format option to its guests, again, one of the highest percentages in the industry.

When you add one of the broadest ranges of signature dining and cocktail options in the industry into the mix, you can see why we are excited about our future. As our releases noted, by the end of May we will have doubled the number of Take Five lounges and Zaffiro's Express outlets in our circuit each from 6 to 12. We're also adding more Big Screen Bistro auditoriums to select theatres. We believe we have a unique advantage in the industry in this area as the Marcus Corporation has over 50 years of food and beverage experience to draw from.

We are already looking to additional opportunities to further expand all these innovative concepts in our upcoming fiscal 2015 as we continue to invest in our business and customers while building the Marcus Theatres brand.

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 year-over-year improvement, even after adjusting for last year's Las Vegas legal costs.

With our Company-owned hotels predominantly located in the Midwest, we have never made money in our fiscal third-quarter in this division and this year was no exception, despite the overall improvement in operating trends. Having said that, we had another quarter of revenue improvement, and our operating loss was reduced at these comparable hotels.

While we reported our 13th straight quarter of increased ADR, the increase was admittedly small as a rough Midwestern winter and intentional strategy to trade rate for occupancy with one of our hotels kept our overall rate increase low this quarter. Our fiscal 2014 third-quarter results were also impacted by a difficult year-over-year market in Chicago this winter. Even though our hotel outperformed the market and the fact that we have rooms out of service at our Pfister Hotel as a result of the tower building rooms renovation currently underway.

On the other hand -- on the other end of the spectrum, we saw a nice group occupancy growth this quarter, favorably impacting our more group-oriented hotels. Overall group business continues to be steady. Overall group activity during the quarter, that is group business booked for future dates was equal to the same time last year. We entered the fiscal year behind pace to last year in group activity, but we are booking more group rooms with shorter lead time and that has helped offset the initial pace decline. And with meeting planners are working on such short notice, we believe we have distinct advantages that help us win the business thanks to our strengths and capabilities in the various add-on amenities needed to make a meeting successful, such a special audiovisual needs, restaurant and catering options, club rooms, et cetera.

The stronger group occupancy this quarter also contributed to the very healthy 8.1% increase in food and beverage revenues that we reported this quarter. Looking ahead, our outlook for the future hasn't really changed. I would hope that we would continue to experience favorable trends in our revenues and operating income even if it continues to be slow and steady. We will continue to have rooms out of service at the Pfister this next quarter, so that will have a small impact on our results.

And beginning likely in late summer or early fall, we will begin our extensive renovation of our Chicago hotel converting it to one of the first AC hotels by Marriott in the United States. We are excited to bring this successful brand to Chicago and believe we have an ideal location for this stylish urban lifestyle brand.

And finally, we are still pursuing a number of additional potential growth opportunities and hope to be able to announce some of these soon. As we have said in the past, the form of these opportunities will likely vary. Additional opportunities we are currently pursuing include pure management contracts, management contracts with minority interests, 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.

Before I wrap up our prepared comments, and open the call up for questions, let me touch on two other subjects very briefly. There continues to be positive, behind-the-scenes action on a number of fronts related to the Corners of Brookfield, our Von Maur anchored mixed-use project that we have been advancing for some time now. We are at an important stage with the remaining elements going into place prior to beginning construction. For example, the town of Brookfield recently approved the TIF package, which was an important hurdle that needed to be reached. So we are very pleased with that.

As we have said in prior updates, this is a complicated and finite process. And we plan to have a lot more say about this in the very near future.

And lastly, as noted in our press release, we were able to repurchase another 191,000 shares of our own stock at an average price of $13.19 during our fiscal 2014 third quarter, bringing our total repurchases for fiscal 2014 to 288,000 shares year to date today. We obviously think our share repurchases over the last several years have been a very good investment, and our strong balance sheet continues to give us a great deal of flexibility in the future as we invest in our businesses while still returning capital to shareholders through a variety of different means.

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

(Operator Instructions). Eric Wold, B. Riley.

Thank you, good morning. Two questions. I guess one, first a quick question. On the $5.00 Tuesday promotion, should we assume that's going to be an ongoing continuous program for the foreseeable future? And the second part of that is what was the -- if this hadn't been in place, what would've been a comparable Tuesday average ticket price?

First answer is yes. We are very pleased with how the program has played out, and so we -- you absolutely should plan on that program being in place in the future. A comparable Tuesday -- I mean look, prior to this program I guess maybe the best way I can answer this is prior to this program, our average ticket price was -- it's been generally growing at kind of an inflationary rate. And so a typical Tuesday night adult ticket is -- I don't know that Tuesday (multiple speakers)

We don't break them out day by day.

It would be tough to do that. I'm not sure. What's clear though is we have absolutely -- there is something that we hit on, something in the collective conscious in the country really, in a way. This -- the buzz around this is really interesting. The amount of people that are saying wow, I want to check out a movie, it's $5.00. It's got everybody's attention. We combined it with the free popcorn on a temporary basis as an added incentive.

It's been really interesting, and we've been looking at it to making sure we are not cannibalizing. And (inaudible) -- look, if you're going to cannibalize, it looks like we are cannibalizing really mostly some other midweek customers. But when you look at the net add on top of it, it's clear that it's been a victory for everybody. It doesn't seem to be impacting our weekend, and we think over the long-term just idea of reintroducing the habit of movie going to people should be a positive for non-discount days as well.

Perfect. And then the bigger question on the $50 million capital investment in the theatre side, what are your kind of baseline goals in terms of -- I don't know how you want to measure ROIC increase in attendance per cap, what are you looking for to get out of that $50 million investment in the theatre side?

Well, Eric, we've put all of our investments through in many of our businesses through kind of the same screens, and so we absolutely believe that these investments that we are making will provide a -- if you want to talk about an economic profit, it's is going to be a positive economic profit. We look at that; we view it from an IRR perspective. We are typically looking for in all of our investments after-tax returns assuming a 50% leverage of 18% to 20%. And we think that based on our experience thus far we are having no problem meeting those types of hurdles with those particular types of investments.

I do think it's important to make sure we distinguish, though. That $50 million, and you can sort of break into three tranches, I would say. One of the tranches would hopefully would be a more immediate return. If we put a Take Five lounge into the theatre, that really should produce relatively promptly.

A chunk of it, a smaller chunk a really relatively small chunk of it was for example for our theatre in Sun Prairie just outside of Madison. So that's going to take a little while because we haven't even started the construction of that. That should start this year.

The third piece of it is simple. CapEx spend that we have to put into our theatres, and a chunk of that is you can't pin a specific ROI to, but other than the fact that if you don't invest that you can start to yield -- you'll have a negative ROI because your business is going to go backwards. So it's a little bit of a blend of all those. We are heavily skewed toward the first category I mentioned, but there's lots of pieces to it. As Doug said, we are looking at every piece with a high degree of rigor.

That helps a lot, thanks.

David Loeb, Baird.

Greg, just to go a little further on the theatres, have you guys tried to break out how much of the performance this quarter was due to your initiatives versus national box office trends? In other words, if you look for example at how you usually perform relative to the national, and how much better it was this quarter to your own initiatives?

You know, yes. We absolutely have. And it's been -- we actually -- I haven't looked back. I'm waiting to see some history on it. But all I have right now in front of me -- I know off the top of my head is the prior year we had trailed the national box office a little bit. But so just to use national box office as your baseline, you can see we exceeded it. So again, the numbers I shared, David, were that for this -- we actually took these exact same 13 weeks based on the numbers that are available to us on Rentrak and determined that the national numbers were 15%. We were at 24% increase in box office. And we typically matched, or even like Greg said, last year we were actually under the national numbers.

And so, I would suggest that all of that variance is due to these initiatives. Not any one initiative, it's not just the DreamLoungers. It's not just the $5.00 Tuesday. It's not just the fact that we've made it more of an entertainment destination with Take Five and Zaffiro's Express, we think it's a combination of all those elements.

One of the thing, if you remember, with national box offices, we do have some local mix issues depending on -- if you have more family films, we are going to tend to outperform. If you got films that are more urban oriented, we probably will not outperform. So at least on a relative basis. I hope we will outperform anyway, but it will be modulated by the mix of films, by the weather. We have -- those things impact us when you're looking at the business week to week.

We are just trying to figure out for modeling purposes, is that 9% something that's likely to recur over the next three quarters, presumably there will be a tail on it as well, because one, you are not done with these initiatives, and two, it's probably going to continue to have growth beyond just the first year. But I guess the other piece of that then is the weather. Do you think your weather was slightly less bad than the national average, there were a lot of markets that had even worse weather. Hard to imagine but true.

Weather -- Doug and I were discussing weather being a help this quarter. Weather probably was a push for us. There some days when you can't get out, you can't get out. There some days when you -- when you -- like when you they called off school for cold, that -- kids don't wait on buses, so now parents are sitting around wondering what to do with their kids. But I will say, what our team did which was really brilliant, they reacted very quickly. Our ops guys just said you know what, let's do frozen -- free frozen hot chocolate for anybody that comes to theatre on a Monday.

So now here is for a long time the people around this Company that saying luck is one opportunity meets preparation. So, we got a little lucky that we have the right people at the right places who moved quickly, and we took advantage. At the same time we had -- as Doug pointed out, $600,000 of additional snow removal costs. We weren't without snow around here. Our heating bills were much higher. So -- that was probably a little push.

So for the next three quarters, do you think that 9% plus or minus is a pretty good estimate of your potential outperformance of the national numbers?

It's really tough to put a number on that, David. The fact is that we do -- we are doing this because we expect and hope to be continuing to outperform those national numbers. But after having one quarter of this, I couldn't sit here and tell you that we can count on that kind of a variation.

We will also be (multiple speakers) larger denominator --

That's true. So it's just we expect to outperform, but I'm not ready to put a number and say we can count on that.

David, so what you're telling me is -- we are taking a business that we can't even begin to know what we're going to do in any given period because we don't know what the product is going to be. Now they add to that whole new paradigm -- I admit, it's a bit of challenge for us.

Well, fair enough. I have actually no questions on Brookfield, you guys have been pretty forthcoming on that. We certainly have been following the town's actions. It sounds like you're close to making more announcements. I guess one sort of question, if things keep going your way, are you likely to break ground in the near term like in the next several months?

We are working on that very timetable as we speak, David. And so, we expect to be able to be making some announcements about the entire timetable in the near future.

Okay. And on the hotel side affecting [zeroing in on] Milwaukee with all of the supply changes, your results were pretty good in the off-season. Clearly, you guys have responded with product improvements, and it sounds like you've really been aggressive in trying to court groups. It doesn't look like that's hurt your ADR. Any thoughts on where we are in that supply cycle, and what kind of impact you are seeing?

Supply is impacting the Milwaukee market. You can see it. Look at -- we can see it. It is -- we don't break out the specifics obviously, but I can tell you that it is impacting. I think that what's -- as it continues to we continue to see it, we -- what I originally -- what I originally said, probably we will see it less than some of our competitors because we've always invested in our assets. But we can see it. We can feel it. And we had to get aggressive on rate. One of our hotels, there is an incredible hotel in Milwaukee that's quite a value, I would tell you that right now. Because we had no choice. And -- but it's worked. We have a $5.00 Tuesdays at one of those hotels regularly. (laughter)

Maybe $5.00 Monday, Tuesday and Wednesday.

Can I at least get $50 please?

$50 Monday, Tuesday, Wednesday then.

Any update on the casino hotel tower, is that still looking likely or what's the timetable there?

Doug is looking out the window right now. (multiple speakers)

I think you're talking late summer, early fall. Isn't that the current timetable, Greg?

I think so, yes.

Okay. We will be watching for that too. Great, that's all I had for now. Thanks.

Brian Rafn, Morgan Dempsey capital management.

Good morning, guys. Give me a sense. You guys always talk about the quality mix of pictures. It seems to me just a novice moviegoer that kind of January to March has always been kind of a dead zone graveyard for pictures. But it seems the last couple of years there have been more -- I don't know if you call them blockbusters, but there seems to be more higher quality content, the actors, the plots, that type of thing.

Is that a trend that you are seeing? Is it just my observation? And if that's the case, do you see Hollywood redistributing pictures more evenly throughout the year, or do you see them just bringing up the first quarter to more equal -- some of the -- obviously it's never going to be summer or Christmas, but I'm just adding a sense of what your observations are.

Well, Brian, it's a mixture of things. First of all, last year it wasn't as strong. I'm not sure -- by [Doug's] looking at exactly what was release but I seem to remember it being weaker. We do a constant drumbeat to Hollywood to please distributor product more evenly throughout the year. People will show up if you do. And I think this quarter proves it. The other piece of it, too, is how much they release -- another good tell us how much they are releasing on Christmas and New Year's. If it's very busy and there's a lot of good product, which there was this year and the year before last -- we had a very similar dynamic. There's a lot of people who -- I've still got to see this. That pushes a bunch of demand into January, which is helpful for us obviously in the quarter.

Okay. Your $2.00 -- $5.00 Tuesday night. Is that also for your UltraScreen with the Dolby Atmos? Or every screen in your theatre chain?

It is. Yes.

In that value customer that you guys talk about, and again you are obviously not doing scientific studies, what is your sense anecdotally the demographic mix of that Tuesday guy? Or girl?

We have not -- at some point we will be doing better, we'll be doing more detailed survey work. And we may be able to answer that question more specifically. But it is -- we are seeing people who are openly telling us I haven't been to the movies for a long time. It is a value-oriented customer, and look it, it's not just -- it's a lot of people. Everybody likes a bargain especially in this neck of the woods. But it's -- it is -- we are clearly seeing people who haven't been to the theatre in a while.

And it's also becoming a repetition thing, too, Brian. Where -- overall, I think the national numbers have shown that movie-going frequency has decreased over the last X number of years. Attendance. And we are, again, anecdotally hearing about people who go every Tuesday now. So, some of these people maybe they want to a handful of movies a year, now all of a sudden their frequency is increased as well and they are seeing -- they are not just seeing Frozen. They're also going to see that next picture that maybe they might've passed on otherwise. And so it's increasing the repetition as well. And that's a really good thing for everybody involved.

Okay. You guys also had in the past talked about not just your top 5 pictures, but some of your 6 through 10, six through 15. How did that kind of second tranche or tier compare year over year?

They were good, Brian. As I indicated, this particular top five skewed a little heavier in terms of the overall mix. I think we have indicated it was about 47% versus 37% of our total -- just for the top five pictures. But I mean looking at my next five movies, there's some very well recognized films here, including American Hustle and Wolf of Wall Street and Saving Mr. Banks and Lone Survivor, and there's some pictures that -- those are all good pictures that did some nice business nationally. And I think we did mention overall we had 11 pictures that were a bit over $1 million for us versus 10 last year. So there was depth to the market as well. It was nice to see.

Your $5.00 Tuesday guy, what do you guys -- and again it's early and I understand it. What are you guys seeing on that customer's food and concession demand?

That looks a little masked right now with the free popcorn. But we expect that's going to be at a lower level than our current food and beverage per cap, when we look at it. That's going to go down. But we are -- we are seeing a good uptake in our restaurant and other food and beverage parts of the operation with the nontraditional food and beverage operations. That's been very beneficial to that, and we are also seeing -- again, we are seeing more volumes. So while we are seeing a decline in what we are getting in per person, we are making up for it in volume.

You guys talked as you did a good job in some of your cost issues with the polar vortex winter. Is there any differentiation that you guys foresee? You mentioned -- I think it was kind of a push -- in the difference between heavy snow versus really cold temperature?

I think we talked about it. It's harder to get out with the snow.

Absolutely. So given the choice in a movie theatre business, we will take the cold. Because at least then people can still get out and drive. But we have to kind of both this year. We didn't have a record amount of snowfall, but we have plenty of it. And so -- as evidenced by our snow removal totals. So, neither one of them is great.

I got you. When you guys look at your very high-end, the UltraScreen, the Dolby, the DreamLounger. As you expand that, are you guys directing or shoveling your specific pictures in those areas? Because it's a beautiful set up. I'm thinking of the young kid with the Slurpee or the sucker, and you've got some pretty nice chairs. Or is that -- I guess I'm guessing kind of your sensitivity to the type of picture the might put in that venue.

You're talking about in the -- I was a little confused by the question. You're talking about in the DreamLounger locations? (multiple speakers)

Yes, DreamLounger, right. Exactly. I mean that's a pretty nice set up. I'm just (multiple speakers) does that just get all of the standard movies --

The kids loved that set up as well and they've got good sight line, so we are playing a normal lineup of pictures. We do have another individual waiting on the questions. Do you have one more?

Yes, just one more from the standpoint of if you guys look competitively what you guys have done with the amenities and the restaurants, the entertainment destination, how would you look at Marcus versus competition? Across the US.

We've always viewed ourselves is one of the premier -- theatre circuits in the country. My grandfather had a very simple saying. I don't need to be the biggest; I need to be the best. And that's the mantra we've always applied. And we are just building on that history, what we are doing right now. We were one of the -- we had one of the greatest percentages of stadium seating when that came along as quickly as we could. We continued own our real estate. We take care of our assets, and then we make future investments and we -- what you're seeing right now is the application of many years of hard work.

We didn't just come up with a Big Screen Bistro last week. That's been in the works for a long time. We didn't just come up with a Take Five lounge, Bruce Olson, when he was here, he built that, he started that ball rolling. Rolando has come in and taken it now to the next level. It's been a great experience. So, we are taking what we did and we are continuing to move forward working on the same precepts we've had for generations.

As Greg noted in his prepared remarks, Brian, we think we have a unique advantage. Because of the fact that we've been in the food and beverage business for as long as we have been with our hotels, and we had a large restaurant division, we understand that part of the business. And we think that gives us unique advantage as well going forward. Appreciate your questions.

(Operator Instructions). Jim Goss, Barrington Research.

Thanks. That was a great quarter.

Thank you, Jim.

And I know you did have a couple of months easier comps, but one in December that wasn't necessarily so easy. And it seems like you've raised everything up several notches. And I assume that would at least going back to the discussion you had earlier, give you enough to bias you results upward even when the tougher comps come. Because I think as there are clearly some issues that are different from the way you had operated them earlier.

That's our goal, Jim. As we said, you've been following this business long enough to know that there are going to be quarters where the box office is stronger than others. And -- but our goal is to continue to outperform whatever those numbers are. You are alluding to the fact that -- correct. In general, to the degree that anyone can look ahead and project what's going to happen in the box office with their crystal ball, most people are suggesting that 2014 is going to be -- have some tough comparisons and everyone is talking about 2015. We view it through a longer-term lens. 2015 looks great on paper, and -- but our goal as each quarter comes along is just to continue to try to outperform, and I think if we do that, we will do quite well.

Now, one of the sticking points in doing, say, a $5.00 Tuesday is the studio has to agree to that too, I assume, if they are willing to cut the price and take a split of the smaller amount. Do you have to negotiate that with every movie then that this is your policy now and demonstrate why they should buy into that?

We obviously work with Hollywood; they are our partners. I just have to correct one thing you said, which was, they're taking a percentage of a smaller number. They are not. There's more coming in the door. So they are really getting a percentage of a larger number, which is good for them. (multiple speakers) If that wasn't happening, if we weren't moving the total pie wasn't getting any bigger, then you're right. Then they would sit there and say guys, what are you doing? But in fact as we have demonstrated, we outperform the industry. And it wasn't just the $5.00 Tuesdays, but our track record is demonstrating that it truly is a win for them as well.

Okay. So they are willing to take that leap to overall box office, not just whatever ticket price you're having. Atmos is one of the other issues I was interested in. One of the pushbacks that seems to come up in a lot of these conference calls is the economic model issue, that it's hard to find a way to pay for better sound. I'm just wondering what your take is on that particular technology. How do you factor it in? How do you think you do get paid for it?

You know, it's -- this is like akin to the classic line of 50% of my advertising works, you just don't know which 50%. It's -- we are not just putting in immersive sound in an auditorium when we are doing it. What we are doing is we're putting a number of these UltraScreen DLX's. We're putting in DreamLounger seating on an UltraScreen large-format experience. And then adding this to it. And it's another talking point. It's another talking point for someone to talk about, and in isolation probably -- I don't know. But when we look at it, we are looking at it with the whole thing. And it allows us to get premium pricing as well when we do that experience. Because that's where we are charging a premium for the UltraScreen DLX experience, as we should. It's -- it is an incredible way to see a movie. There is no better way.

(multiple speakers) okay. Then the last question, more broadly in terms of tone of acquisitions going forward, now that we have sort of cycled through the digital upgrade phase, do you think the overall business looks like it still conducive to sort of an industry roll up stage? And what is your interest in participating in that phase?

You know, it's -- as we look at it, the way we have looked at it, we think -- there was a certain push for a little while, but I don't think it was as much as everybody expected. As you know, as we all know, it's a very fragmented business once you move below the larger circuits very quickly. But it's a business owned by, in a lot of cases, by families, smaller firms, people who like being in the business, and so their economic motivation may be a little bit different than others. And so it's hit or miss when something comes available.

We've been around long enough. We like to be in the stream. We want to make good acquisitions if they are available, where we think it makes sense, where we can add value, and where it complements the quality of our circuit. But -- and will continue to look at those as they become available. But it's not very predictable I don't think.

Okay. Thanks very much.

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

Thank you. We want to thank all of you for joining us today, and we look forward to talking to you again in July when we release our fourth quarter and year-end fiscal 2014 results. Until then, thank you and have a great day.

Thank you. Ladies and gentlemen, that concludes today's call. You may disconnect your line at any time.