Marcus Corp (MCS) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to The Marcus Corporation second-quarter earnings conference call. My name is Ian, 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 would like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you very much. Welcome, everybody, to our fiscal 2015 second-quarter conference call. As usual, you know I need to begin by stating that we plan on making a number of forward-looking statements on our call today. Forward-looking statements could include, but not be limited to, statements about our future revenues and earnings expectations; our future RevPAR, occupancy rates and room rate expectations for our hotels and resorts division; expectations about the quality, quantity and audience appeal of film product expected to be made available to us in the future; expectations about the future trends in the business group and leisure travel industry and in our markets; expectations and plans regarding growth in the number and type of our properties and facilities; expectations regarding the various non-operating line items on our earnings statement; and our expectations regarding future capital expenditures.

Of course, our actual results could differ materially from those projected or suggested by our forward-looking statements. Factors, risks and uncertainties which could impact our ability to achieve our expectations are included in the Risk Factors section of our 10-K and 10-Q filings, which can be obtained from the SEC or the Company. We will 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 2015 second-quarter and first-half results. As you would guess, we are obviously very excited to share these outstanding results with you. It was a great quarter for us, led by record operating results from our theatre division. What makes this a special quarter for us is that we produced these results during a 13-week period when the national box office numbers were essentially flat, so it wasn't as if we had an unusually great film slate to work with.

For the fourth straight quarter, our theatre division significantly outperformed the industry. And continued RevPAR improvement from our hotels and resorts division contributed to record revenues for the Company this quarter.

I'm going to take you through some of the detail behind the numbers, both on a consolidated basis and for each division, and then turn the call over to Greg for his comments.

Now I'm going to start by pointing out an accounting change, and how we report certain revenues that some of my analyst friends on the call may have noticed right away when they saw our numbers. The American Hotel & Lodging Educational Institute published a uniform system of accounts for the lodging industry. They published this, and they recently came out with their 11th edition. An item that has received particular attention that has been handled differently by various hotel operators was the issue of mandatory service charges, primarily related to banquets and events.

Our past accounting treatment for this item was to net these charges against the related expenses incurred in providing service at these events, a treatment that's not uncommon in the industry, and certainly is acceptable for GAAP. The latest guidelines suggest these charges be grossed up in revenues and expenses in the future, with a goal of getting all hotel reporting on the same page.

With a recommended implementation date of 1/1/15 for the latest edition of the hotel accounting guidelines, we did choose to change the presentation of these charges prospectively beginning in this fiscal year. As such, our second-quarter food and beverage revenues, and food and beverage costs, were increased by approximately $3.9 million to reflect fiscal 2015 service charges to date.

On an annualized basis, these charges represent approximately $6.5 million on a historical basis. Now I must emphasize, this had no impact on operating income. It just increased revenues and expenses by the same amount. Now it does, by definition, have a slight negative effect on our operating margin percentage for that division.

Before I dig into each division, a brief look at the line items below operating income would show that our interest expense continues to run slightly below last year, due to a lower average interest rate. In addition, losses on disposition of property and equipment totaled $495,000 during the second quarter, and related primarily to old seats and items disposed of in conjunction with our continued theatre renovations.

This amount was still less than last year's loss in dispositions. Our first-half effective income tax rate, adjusted for losses from non-controlling interest, was 39.2% compared to 39.9% last year; slightly lower, but generally right in our historical range of 39% to 40%.

Shifting gears away from the earnings statement for a moment, our total capital expenditures during the first half of fiscal 2015 totaled approximately $27 million compared to approximately $21 million last year. Just under $16 million of this amount was incurred in our theatre division, related to the completion of projects that were part of last year's $50 million investment in our existing theatres, and spending on new projects that we have recently announced.

We spent approximately $10 million in our hotel division, with the majority related to prior renovations at the Pfister and the Cornhusker and the start of construction at our Chicago hotel.

At the halfway point of our fiscal year, I am currently estimating that we are still on pace to have total fiscal 2015 capital expenditures probably near the lower end of our original range, which would be around that $70 million range. We are still finalizing the scope and timing of many of the various requested projects by our two divisions, and we anticipate proceeding with many of the projects as the year unfolds.

Some of these projects, of course, could carry over to the next fiscal year, just like this past 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.

Now I would like to provide some financial comments on our operations for the second quarter and first half, beginning with theatres. As you can see in our reported numbers, our box office revenues increased 17.2% during the second quarter, wiping out the summer box office declines and putting us 5.8% ahead of last year through the first half of the year.

Our concessions and food and beverage revenues, combined, increased a substantial 29% during the second quarter, and are now up 14.8% year-to-date. Now, once again, 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 only increased 0.4% during the comparable 13 weeks of our fiscal 2015 second quarter. So we outperformed the nation by nearly 17 percentage points, our highest outperformance yet.

The second-quarter increases are attributable to an increase in attendance of an amazing 25.6%, despite what the national numbers would suggest was really a no-better, no-worse film slate. Year-to-date, our attendance is now up 16.2% despite a well-documented weaker summer film slate.

Once again, we believe the majority of this attendance increase and overall industry outperformance can be attributed to the new investments we are making our theatres, and the innovative marketing strategies and pricing strategies that we've initiated.

Our average admission price for our comparable theatres decreased by 6.6% for the quarter, and 8.9% for the first half of fiscal 2015, due entirely to our $5 Tuesday program for all movies. Of course, as you would surmise, that also contributed to our attendance gains.

Our average concession and food and beverage revenues per person increased by 2.7% for the second quarter; but remains down slightly, down 1.2%, for the first half of the fiscal year due to promotions related to our $5 Tuesday program and the fact that this summer's film slate was noticeably lacking in family films, a genre that typically produces higher concession per capitas compared to other genres.

Of course, with higher attendance, these changes in our per capita numbers don't tell the whole story, as evidenced by our significant increase in total concession and food and beverage revenues.

Shifting to our hotels and resorts division, our overall reported hotel revenues were up 11% for the second quarter, and 7.4% for the first half. But if you eliminate the new policy of grossing up service fees that I described previously, our revenues were up 3.8% and 3.9%, respectively, during the two reported periods.

Our total RevPAR for nine comparable properties was up 4.3% during the quarter and 5.5% year-to-date compared to the same periods last year. As we have noted in the past, our RevPAR performance did vary by market and type of property. And all but three of our nine comparable Company-owned properties reported increased RevPAR again this quarter.

According to data received from Smith Travel Research, compiled by us in order to compare our fiscal year results, comparable upper upscale hotels throughout the United States experienced an increase in RevPAR of 8.5% during the fiscal 2015 second quarter, and 8.1% during the fiscal 2015 first half.

I share that with you in order to be consistent with prior-year disclosures. But there continues to be an interesting dynamic playing out right now, whereby the national numbers don't necessarily reflect what is happening in our more Midwestern-centric markets.

When you further dissect the Smith Travel numbers, and just look at hotels in our specific markets and competitive sets, you will find that we are outperforming our competition, actually. Specifically, RevPAR for our competitive sets during the second quarter and first half of our fiscal year were only up 3.4% and 2.2%, respectively, both lower than our reported numbers.

Breaking out our numbers more specifically, our fiscal 2015 second-quarter overall RevPAR increase was due entirely to an overall occupancy rate increase of 3.6 percentage points, as our average daily rate actually decreased by 0.5% during the quarter. Year-to-date, our occupancy rate has increased by 3.7 percentage points, and our ADR has increased by 0.7%.

Finally, I will point out that over half of our reported decrease in operating income in our hotel division this quarter can be found if you look closely at the depreciation line in our segment data. We had a one-time depreciation adjustment of approximately $700,000 during the second quarter that negatively impacted our reported results.

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

Thanks, Doug. I'll begin my remarks today with our theatre division. We're obviously thrilled to be reporting a record quarter for this division, once again significantly outperforming the industry.

Clearly, the investments we have made in our theatres and our new markets and pricing initiatives are driving customers to our theatres. Not only are we over-indexing the nation as a whole, the numbers we are getting from Rentrak suggest that we are once again the top-performing theatre circuit among the top 10 chains in the United States.

In fact, we have now been the top-performing theatre circuit in the country for a full year, over the last 12 months ending on November 27. The Rentrak numbers we have compiled indicate that the industry has experienced a 0.9% decline in box office revenues. Our theatre division, on the other hand, has reported a box office increase of 10.8% over that same period.

That is 11.7 percentage points better than the industry. While there is no question that our DreamLounger recliner seat locations have been key contributors to the stellar outperformance, I will tell you that during the second quarter, 46 of our 49 Company-owned first-run theatres outperformed the national box office increase of 0.4%.

As Doug indicated earlier, the national numbers would suggest that this film slate was not significantly different in terms of quantity and quality than last year's comparable slate. This year, the stronger-performing movies were in October, compared to November last year.

In addition, the film slate may have been a little deeper this year, with the top 15 films this quarter accounting for approximately 67% of our total box office, versus 72% during the same quarter last year. I would suggest, however, that our $5 Tuesday program may be contributing to a change in that particular dynamic, as our numbers would suggest that we have clearly increased moviegoing frequency among our customers.

An increase in frequency might tend to benefit the next year of movies after the blockbuster films that a customer may have passed on in prior years. But with all this talk about the box office revenues, I must tell you the number I am most proud to share with you today is the 84% increase in operating income from our theatre division.

I think this quarter clearly demonstrates, once again, is that there is a great deal of operating leverage in the theatre business. In our last conference call, following a challenging summer film slate, we needed to highlight increased depreciation expenses and loyalty program costs, and their impact on our reported operating income during a down box office period.

Those costs are still there this quarter, but was just an average film slate this time. Our box office outperformance was converted into an operating margin percentage over 6 points higher than last year; and, in fact, represented the highest second-quarter operating margin we have reported in the last 10 years, despite the added fixed cost associated with our recent investments.

Our entire operating team, from our theatre general managers and district directors to our home office staff, deserves a great deal of credit for producing these outstanding operating results.

There are a couple of other items I would like to highlight during our remarks today on this division. Doug shared our decline in our average admission price during -- again this quarter, but you may have noted that the decline was slightly less than previous quarters. Two reasons for that: the first is that we officially lapped the initial circuit-wide introduction of our $5 Tuesday program during the second week in November. In future quarters, we will have a better apples-to-apples comparison when we talk about our average admission price.

In addition, we did introduce our first selected admission price increase is in 18 months in mid-October. We had six weeks with the new prices in our second quarter, and we will obviously see the full impact beginning next quarter. These were generally pretty modest price increases, as we continue to be very sensitive to the favorable price/value proposition we have established; although we did increased some prices at our DreamLounger locations by anywhere from $0.50 to $0.75.

You also might have noted that we are back to reporting increases in our average concession revenues per person. After several quarters of declines due to our $5 Tuesday free popcorn promotion, the fact that we have now lapped the $5 Tuesday introduction will also put us back to a better comparison beginning next quarter.

We also made some selected concession price increases in mid-October, as well. Last, but maybe most importantly, we are beginning to see the impact of our continued expansion of our newest food and beverage concepts; most specifically, our Take Five Lounges and Zaffiro's Express.

We are very happy with the early results from our newest outlets, and look forward to continued improvement as these locations mature. I would be remiss if I didn't restate what you read in our press release: we now have over 820,000 members in our Magical Movie Rewards loyalty program. We're already having early success targeting communications to this important frequent moviegoer customer segment, and we think we have only scraped the surface of what this program will do for us in the future.

Looking ahead, we are excited to continue to reinvest in our existing theatres as we further expand the successful concepts and amenities that have contributed to our industry outperformance. Our recent press release has highlighted some of our newest investments underway, so I will save time and not repeat them now.

I will point out that, beginning next quarter, we will have lapped the first full year with our original four DreamLounger locations. One of them opened last summer, and the other three in time for the holiday season last year.

While it's our team's goal to continue to outperform the industry each quarter, regardless of the strength of the movie lineup, the degree of outperformance will certainly vary as the comparisons change each quarter.

Finally, looking ahead, we have listed some of the movies scheduled to be released during the remainder of the holiday season. The first few weeks of the quarter have started off slower than last year. But The Hobbit has opened well, and there are plenty of pictures scheduled to open in the coming days. There doesn't appear to be another Frozen in the lineup this year. That was our top film, by far, last year.

Matching last year's record fiscal third-quarter results may be a challenge. Looking a little further out, the calendar 2015 film slate, particularly starting in spring, looks to be potentially very strong. And if the film performance even comes close to matching the hype, I believe we are poised to once again deliver strong operating results in the coming year.

With that, let's move on to our other division, hotels and resorts. You have seen the segment numbers, and Doug gave you some additional detail. We reported solid increases in RevPAR. And even without the change in how we report service fees, we would have reported record divisional revenues.

From an operating income perspective, while we were not able to match last year's record results, the second-quarter and first-half results were still easily our second-best reported operating income since the 2008 recession.

We had a couple of things that hurt our comparisons this particular quarter. Doug already mentioned a $700,000 one-time depreciation adjustment, accounting for over half our reported increase. This obviously had no impact on our cash flow.

As expected, we also began to see the short-term negative impact on the results from our downtown Chicago hotel, as we removed the Four Points flag from the property and began taking rooms out of service in conjunction with our previously announced conversion to one of the country's first AC by Marriott hotels.

One of the realities that we deal with is that with only nine Company-owned or majority-owned properties, variations in even one or two individual hotels can be noticeable in our reported results.

The other dynamic worth mentioning that impacted our reported results this quarter was the complete lack of citywide group business in Milwaukee during the period compared to a number of citywides last year, including Harley-Davidson's 110th Anniversary Celebration. Our team did an outstanding job of replacing the business, as evidenced by yet another quarter of significantly increased occupancy. But with a lack of citywides that typically drive compression in the marketplace, and result in higher average daily rates, we had to be more aggressive with our rates this quarter.

As evidenced by the Smith Travel numbers Doug shared with you earlier, in the end we were able to outperform our respective competitive markets as result of our efforts, but we were not able to match last year's record results. Looking ahead, we'll continue to have to deal with some negative impact from our Chicago hotel during the next two quarters, but the outlook for other properties continues to generally look good.

Group booking pace for the remainder of fiscal 2015 is slightly ahead of last year. As many of you know, our fiscal third quarter is historically the most challenging quarter for our hotel division, given our preponderance of Midwestern hotels in our owned portfolio. But at this point, other than possibly Chicago, I don't think it is unreasonable to expect us to continue to experience generally favorable trends in our revenues and operating income; or loss, as the case is historically in our third quarter for this division.

Finally, as noted in our release, we were pleased to add the Hotel Zamora to our managed portfolio during the second quarter. And we continue to pursue a number of additional potential growth opportunities, with a particular focus on management contracts, possibly with some sliver equity at times.

As previously discussed by us, we will also consider selling all or a portion of one or more owned hotels, with a goal of retaining management during our fiscal 2015 and beyond, if we determine that such action is in the best interest in our shareholders.

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.

Very interesting numbers. I had a few questions about those. Doug, what was behind the depreciation adjustment? And is it truly one-time, so basically we go back to assuming a run rate that's [$700,000] less?

Yes, absolutely, David. You can go back to more of an assumed run rate. This was really related to -- what we decided to do, ultimately, was reclassify what you have typically seen down in other assets in our condo units at the Platinum that we -- right now, the marketplace is such that those units are -- we don't anticipate selling those in the near future. And, so, we are going to go ahead and depreciate them, which we hadn't been doing. And that's mainly what you're looking at.

So that was basically a catch-up?

Basically.

Okay. The depreciation impact of that ongoing note sounds like it's not terribly --?

You would not notice it on -- for the most part, on an ongoing basis. It's certainly not significant.

Greg, just to keep going on hotels, I certainly hear you about the lack of citywides, the lapping of Harley. About how about the competitive landscape in both Milwaukee and in Chicago, where there's been a lot of new supply, and more coming? Is that having an impact on your ability to raise prices or your ability to keep prices where they are?

I'll take one market at a time. The Milwaukee market, I don't remember if we talked about this last quarter. We have looked at it very carefully. And what I predicted is coming true for the market, unfortunately. What you are seeing is a have and have-nots situation in Milwaukee.

What I said originally was, lookit, we're going to get this new competition. And what's going to happen is, new sells and old smells. That's what happens here. But we are in the new class, because one of the things that we have been very good, we have always talked about this -- is we continue to reinvest in our assets. And we have a very, what I would consider, a solid market position here. We have seen a bifurcation in this market, where the new assets that have come online have performed fine. They are showing decent increases in RevPAR, as they should as they ramp up.

We continued to show increases at our properties commensurate with the market. And everybody else in the downtown market is flat, in a world where the world is all up, right? You follow all these hotel stocks. You see everybody going up. Everyone in this market, except for the new stuff announced, is flat.

That's not a good thing, really, in our market for them. We have maintained our competitive position and I'm comfortable with where we are. But it talks to more global problem we have here in Milwaukee with the strategy for growing the hotel base. Unless they start to grow the demand, which is a whole different equation -- building hotels -- I think what is proving, and what we are seeing, is that building hotels doesn't drive people to come to Milwaukee, no matter how much the people who build them like to tell you that they do; a little bit on the margins. But for the most part, it's being -- we are just dividing the pie up into smaller sizes slices. And they need to work on getting more people to come here to stay in all these new hotels that they like seeing get built.

Yes.

And that's what is going on. I am comfortable with where we are, but I don't like the overall approach to the market that our community has taken.

That makes total sense. And, certainly, I think a lot of people would welcome the increased demand. As you look at the AC rebranding, I guess I want to look -- talk about the InterContinental. That franchise agreement comes up at some time in the near future. What are your thoughts about how you can position that to be newer and exciting, in a market that's got more competition and more branded competition?

We think about that regularly, David.

Doug, or do you have any guidance? (laughter) More to come -- how about that?

Okay.

Trust me, we are thinking about it. Again, you know the asset, David. It's a solid asset. We made a really solid investment in it when we bought it. And it's positioned to be the kind of hotel that it is, which is a very -- I have always described the way we approach the Milwaukee market as one of segmentation, like a Mercedes, right? You've got -- if the Pfister is the S-Class, right? The InterCon, that building, is built to be the more -- what is it, the E-Class -- a little more geared at a younger price point, and more Millennial-oriented, that kind of thing.

The Hilton has got its own segmentation. So we been careful to segment the market that way. And we will just continue to pursue that with however we brand it, or whatever we do with it.

That makes complete sense, as well. On theatres, it's very interesting to hear about your price increases. You are -- I get that you're beginning to lap the discounts, but you're also hitting tougher comparisons. You have had four quarters in a row of outstanding, well-above-market performance in theatres. How do you think that shakes out for the next four quarters? Are you likely to have tougher comparisons relative to the industry? Or do you think your continuing capital spending and price increases will help you actually continue to beat the industry?

I don't know where the business is going to be. We have a goal. And our goal for our management team's goal, in the theatre business, is to continually beat the industry, no matter what the industry does. As you know, as we all know -- quarter-to-quarter, sometimes year-to-year, we don't know where the business is going to be, because it is so product-dependent. But our goal is to continue to beat the industry. And that's what we have said, and that's what we continue to do. And we will keep working on it.

David, I appreciate your -- so you've made the distinction of relative to the industry, because you are right. We are going to ride the roller coaster a little bit regardless -- we have talked about this coming. It's coming third quarter, and the comparisons with Frozen, et cetera.

But having said that, we are just now lapping those first -- those next three locations. It's early weeks, and what have I got to look at it? I've only a got a couple of weeks to look at. But these early weeks, we're still meeting that goal. We're still outperforming, but we're not -- we have never put a number. We have never said we were going to outperform this one by 17%, and I would be foolish to try to say that that is going to -- that we can maintain that forever.

But they do expect, and their goal is to do that. And they're going to do everything they can to try to continue to outperform. I just don't -- we won't see every quarter at 17%, you know that.

Yes, great. On the Corners, there has been some stuff in the press about your progress. It sounds like you are closer to a JV partner. Can you confirm that you're going to make the decision you thought you might make all along, to push this to a fall 2016 opening rather than fall 2015?

That's actually -- that particular there has been confirmed for a little bit now, David, in terms of the fall; that fall 2015 had been off the table for a little while now. So 2016 has been the date that's out there.

What I can confirm for you, you're right, there has been some stuff in the local press. And it's not our practice to be specific about things until things are signed, sealed and delivered. But we have never hid the fact that we have had a goal of bringing on a majority equity partner. We are clearly in the final stages of that. And as soon as we have got something to announce, and I'm hoping that's going to be very, very soon, you'll hear more about us in that regard.

But we are -- I appreciate -- there has been a lot of optimism, as you have seen more recently, and there is reason for that. I feel good about where it's headed. And I hope we have more to say about that soon.

Great, okay, last topic, I promise. Just capital allocation broadly, as you look at the CapEx, the ongoing CapEx in the existing businesses, including things like slivers for St. Pete. As you look at acquisitions within the existing business, like the new theatres our construction or theatre circuits, how do you weigh that against real estate division investments like in The Corners -- it sounds like you're almost done investing there -- versus hotel fund investments, versus increasing the dividend or being more active in the buyback?

It's the same answer we give you, I think, always, which is first of all, we're going to be making -- our first goal is to make investments in our businesses where we operate, where we predominantly are. So we are not looking to make -- we are not opening up a shopping center development business that I know of.

We are looking at making investments in our theatre and our hotel business. Then the question is, okay, where is the best -- where are the best investments, and where can we best put the capital? And then we always compare it to, well, we are buying our stock back, which is investing in ourselves, right? We just bought -- in that case -- combined with a return -- or a return of capital to shareholders, if we don't have -- if none of those alternates play out.

But it's dynamic, and we always look at it.

I think, David -- and I got asked this question a lot, as I did a bunch of investor trips over the last month or two. And it's kind of a nice position to be in, right? The hallmark of this Company over the years has been that we've always been very -- two words I'd think of would be disciplined and opportunistic. That's how we approach those -- when we're faced with those types of decisions.

As we have talked about, our strategy on the hotel side tends to be more capital-light, more of these management contracts and sliver equity. The theatre side, we have been investing in our existing assets. We have openly talked about the fact that, certainly, if there were some acquisition opportunities, we will take a look at it. And so that's always a lever we could pull if the opportunity came up.

But we've also done things with dividend policy and share repurchases. So, boy, we've got a bunch of levers we can pull that are pretty enviable position to be in, from our perspective.

Was there some reason why you didn't buy back stock this quarter? Particularly in the month from, call it, late September to late October, when the stock was below 16? Were you blacked out for (multiple speakers)?

We were there for about the length of a cup of coffee. And so it was not something that we would've had much of an opportunity. As you know, or you may know, unless there are blocks, we are limited in terms of how much we can buy in any given day. It's formula-driven, and our overall trading volume has been relatively low. And so, that mathematical number has been a pretty small number.

For the time period that we were there, you wouldn't notice one way or the other, for the most part, because it just wasn't there that long.

Okay, great. Thanks.

Eric Wold, B. Riley.

Just a few questions. One, obviously great outperformance on the 17% and box office in the quarter. Can you parse out -- obviously, you know how well your Tuesdays were this quarter, versus Tuesdays last quarter. Can you parse out how much of that upside was driven by the Tuesday promotions versus the DreamLoungers, et cetera, and everything else?

Eric, we have refrained from getting specific with the numbers. And, so, while you can bet that we've done lots of analysis internally here, I am not going to give you specific numbers. I will share a couple of things with you.

First of all, there is no question, when you look at the individual locations -- that our now eight DreamLounger locations were all in that upper quadrant. And, certainly, some of them were our top locations in terms of the overall improvement. But I think the stat that Greg mentioned in his prepared remarks was pretty important. Because 46 out of the 49 first-run theatres all also outperformed, maybe not by 17%, but all also outperformed.

Now some of them have other amenities, and things that we have added as well, and besides the DreamLoungers. But the $5 Tuesday certainly would have been, then, a key component of that as well.

We have consistently have said that it's not just one of these factors that is driving it; it has been both. We've lapped the $5 Tuesdays on November 7, give or take something like that, so the last few -- couple of weeks. But I've got to tell you, that program has grown and grown, so that's still providing some lift for us.

We have started to lap locations with the DreamLoungers. That is still providing some -- and our very first location in Omaha is still doing very well and it continues to improve. And, so, it really is a combination of all the factors. I'm not giving a specific answer because we just think, competitively, it is in our best interest not to give the specific numbers.

Have you seen -- in your markets, have you seen any other theatres or theatre chains react comparably to price cuts on specific days, or be more aggressive on certain price promotions?

We are hearing some of it, that there are some other -- that some other people are starting to test it; not so much in our markets. Frankly, for the most part, in most of our markets we tend to be -- we tend to operate the bulk of the properties. But we are hearing others doing it.

We have obviously looked at it very carefully. And one of the things that we are seeing is that this is -- it's bringing back a customer who hasn't been to the movie theatre. So the -- does it cannibalize a little bit of business from the other days? Yes, little bit. But it's far outweighed by the new people coming that had stopped coming to the movie theatres before.

As an industry, it really does make sense to create that opportunity. It is this whole concept of the right customer at the right time at the right price. That's why we have been able to take price increases at other days of the week, because we are delivering a great product. And there is a customer that -- you pay for certain things like being able to shop on a Friday, right? But if you want to come on a Tuesday, then you can do that.

We are seeing other people -- obviously, people are seeing what's going on. And so I think it's -- we are starting to see it. It's a good thing.

That's helpful. On CapEx, you mentioned, Doug, that the CapEx plan for fiscal 2015 is going to be towards the lower end of the range, the $70 million or so. Do you have any sense of what is holding back that from going higher? We know that AMC accelerated some of their planed 2015 CapEx into this quarter and next quarter to get ready for 2015 and 2016. Why not -- what's holding back from accelerating some of the planned theatre CapEx or other areas to get ready ahead of there? Or is that not the factor?

I don't think there is anything holding it back. It's just the ability to put it out fast enough; and to, again -- the one thing that I will say, Eric, is that we are always -- our process is about discipline. And sometimes, it's easy to get caught up in stuff. And trust me, we don't look at the numbers in our -- we aren't bummed when we see the numbers. We are excited.

But that doesn't mean we step away from our discipline. And we continue to take a disciplined approach to everything. And I think I talked about last time on the call, every decision -- now, we may not be the brightest people on the planet earth, but we can find the low-hanging fruit pretty quickly. The decisions get a little tougher as you move along. And yet, we still find opportunities and we have ability to put out capital, but it's going to be with a background of discipline.

Don't sell yourself short. You may be one of the brightest people on the planet.

(laughter) Yes, if the planet is Pluto, maybe. It's not a planet, is it?

Last question, can you maybe give a ballpark range -- maybe as wide as you want to make it -- of what Zamora could contribute on an annual basis?

Eric, well, here's what I will say. I'm not going to single out Zamora. But from a management contract perspective -- and I will tell you, Zamora has got 72 keys, I think, something like that. So it certainly is one of the smaller properties, but with some nice upside. And if we do some nice improvement, there will be a nice -- some incentive fees.

But a typical management contract has a base fee. It tends to be this percentage of revenues, plus an incentive fee that can be tied into some sort of operating performance. And maybe it might be versus a budget, or last year, or something along those lines. A typical, normal-sized property might give us anywhere from $300,000 to 4 -- maybe as high as $500,000 a year in fees. That tends to be the range.

A bigger property, there are some properties that can do more than that. There are some properties that might be a little bit less than that. But that tends to be the dollar amount, in terms -- so that's topline management fees. And then the question, which is always harder to answer is, so what are the incremental costs?

When you add what is one individual contract, maybe there aren't a lot of; but then, at some point in time, you add another accountant and you add somebody else in marketing, and whatever it might be. And so over time, you certainly don't take all of that to the bottom line. I think most management companies would love it if they took half, maybe, right?

Half would be the highest. It's probably (multiple speakers).

That's how it plays out over time.

Perfect. Thank you guys.

Mike Hickey, The Benchmark Company.

Congrats on and optimal quarter. Good job. Obviously, attendance here was pretty spectacular for the period, and that included a price increase. Do you feel there is more upside here? Obviously, you are sensitive to maintaining the value proposition that you've created to your moviegoers. But it feels like maybe there is some more upside, eventually, for price increases.

First of all, the price increases we took -- again, I don't want to over -- it was the first time we have taken something in 18 months, and we have been very sensitive to that. And I don't want to overplay that. As I did indicate, or as Greg indicated, more of the increases -- we did certainly take some increases at the DreamLounger locations, particularly as they have maybe lapped their first year.

But, overall, the increase was fairly modest. Of course, what drives that average admission price that we talk about is so many different factors. It's not just that any sort of price increases on any given particular -- the Saturday night price, versus the kids and senior price, or whatever it might be.

The mix of movies can make a big difference. We are also -- one of the things we haven't talked about so far today is our continued expansion of our UltraScreens and our UltraScreen DLX concept. And we've got three more DLXs on the horizon here. Those have an upcharge that certainly can impact that average admission price as well.

There certainly is upside in that regard. And I think as, again, now -- starting with this next quarter, we will have that lapping of the $5 Tuesdays kind of out. So you'll be able to see the impact of all of these different elements, a little more evident as we start going forward.

Okay, thank you, that's good. Then I guess, obviously, you mentioned, and it's been asked; but you are targeting the lower end of your original CapEx guidance. Looking at 2015, as far as the visibility you've given us in terms of your continued theatre amenity refresh effort here, do you feel like that will be optimized across your network at the end of 2015?

Doing refreshes?

Yes.

We're eventually running out of theatres refresh. I am not sure if we are -- by the end -- probably not by the end of 2015; but, then again, we are looking at new projects, too. We see new build projects. There is some of that. So, not finished, but I don't think we're done by the end of 2015. But we have made a lot of headway in it. That's for sure.

I guarantee you, as we speak, (laughter) and even as people are listening to this call, internally, --

10 feet above.

-- Mike, yes, that they are already strategically thinking about additional opportunities that we have in that regard, Mike. Some of the stuff that we are talking about, we really won't see the impact until 2016. And some of this will carry over. We've got our new location, Sun Prairie, that will open up probably -- you won't see that impact until 2016. So there's a lot of additional things. I am sure they will tell you they are not done yet.

I guess a better way to look it, sort of the way we've have had a -- you want to know how we are looking at the strategy. We looked at it and said, because we -- we did this look at our assets, that we took a look at about a year and half ago and said, okay, where are we going? What are we doing? Where do we need to make investments? Let's get our house in order. Let's make that job one.

That's what we've been doing. Okay, then, the next step is, let's see whose house we can get in order next. Not that we are not looking opportunities; but it has certainly been our main focus has been the deal that we have on our plate.

Yes, yes, yes, fair enough. Then assuming you're getting close to optimization, we're two quarters through obviously your fiscal year here, then I would expect that M&A would be maybe a bigger consideration here for the internal growth from your theatre side?

Absolutely, if we can -- if there's something available -- as you know -- you follow this industry, who knows? But if it's available, we will be looking at it. And we will have a pretty good visibility as what we can do with assets, because we know what we have just done with our own.

Do you feel like networks are holding back from putting out the sales sign until we get some maybe stronger box office performance? 2015 and 2016 -- is that the feel for the landscape at the moment?

There may be some of that. It's a mixture. Again, we're in this business where, in a lot of cases, people who own these chains, these circuits -- they tend to have been generational ownership. They like the business. It's a fun business, most of the time.

The last question -- obviously, I think you've have been pretty open about being opportunistic about maybe selling a few of your hotel assets. I am curious if you have had any sort of promising or active discussions to that regard.

We're going to be -- we are actively looking at that possibility. We're not going to talk numbers, though. We're not going to talk about any specifics in terms of number of locations that we might be looking at. But you're right, we have been very open about saying that we think that we are in a nice window here where we certainly should be looking at that.

As I have mentioned in the past, this is an asset-by-asset decision. This is not some sort of portfolio play. This is an asset-by0asset valuation that we are making. And so that process is ongoing as we speak.

Okay, guys, have a great holiday. And best of luck on your current quarter.

Jim Goss, Barrington.

On both the theatre and hotel sides, are you broadening your geographic sites with Zamora? I know you have stretched outside of the Midwest, or even the central part of the country. And is that true in the M&A side for both major activities?

The hotel side, we have always -- we have always looked everywhere, but do I like the idea of having something in Florida as a jumping-off point? Absolutely. It does help establish that, and looking in that whole Southeast part of the country, which is a great growth part of our country. We like that.

On the theatre side, we have always said that we will look at anything, really anywhere. Is it easier to pick up something that is contiguous? Yes, absolutely. But it's not a business that -- where you need to be contiguous. We continue to look beyond the seven states we're in.

Okay. With Zamora, is that a pretty good template for the new style of taking a sliver interest, and then the management fee, and that's the sort of template we would look for you to continue with? In terms of that 10% stake, is that something you wanted or they wanted? Because I think the ownership part of it tends to just be a cost that's -- you only get back if the property is eventually sold. It could be a good thing or a bad thing, operationally, versus capital gains. Is that the approach --?

The first question I would say -- yes, it is a template that we have done -- look at the last two deals we have done. One of them was a pure management contract, and one of them was a management contract with that 10% sliver equity. Yes, those are the types of deals that we are looking for. As far as 10%, we have got 11% at the property in Atlanta. And that's pretty consistent with where -- the owner likes having the management company with some skin in the game. We've got a balance sheet that allows us to do that, gives us a competitive advantage, so we can be part of the capital stack.

In general, yes, we like that model.

Yes, I would tell you, that is our 90% predisposition. If somebody walked in here and said, there is an incredible asset; you could get it at a ridiculous price -- as we have always said, we are opportunistic. We're going to look for the best return for capital, but our disposition and our orientation is more toward the template you're talking about.

With the Chicago hotel repositioning, it sounds like the Marriott version of a W, if that would be fair comparison. And --.

No, I think, Jim, it's actually more -- it's more like an Aloft kind of -- it is more in the select service vein, where a W is more a full-service. But I think if Marriott -- someone from Marriott listened to the call, they would probably say, oh no; it's better than an Aloft. It's got a -- it has a more -- it has -- it's got a very art-based kind of focus. That sophistication is important to it. But it's -- I would call it a high-end select service.

Okay, where I was headed -- I wondered if it was the trendy, upscale, significant shift in your ADRs expectations and that sort of thing. Maybe it's not as an extreme case as I was considering, because given the location, it seems like it's in the middle of a lot of the high-end hotels too.

It's definitely going to -- we believe it's going to be positioning the property up a notch from where it was.

Yes.

Okay? So relative to where it was, and the flag that it had, we see this as taking it up a notch.

Okay. That a couple of things in the theatre side -- AMC was outlining its approach with the receipting in its conference call -- whenever it was, a month or two ago -- and talking about, after it gets established, perhaps being able to increase the price a little bit; and I think maybe having some build in the demand, and then be able to take advantage of some pricing opportunities.

I gather you're thinking along similar lines, with some of the receipting initiatives for yourself as well.

Yes.

Okay. And given what you have talked about with the initiatives, some of which are lapping, and maybe -- there are a lot of moving parts right now. And this is a softer quarter, comparatively speaking, as you pointed out. So I would gather whatever outperformance you get in the current quarter might be more muted relative to what you might be able to expect later in the year, as some new initiatives come along and the box office everybody seems to be expecting for 2015 comes into place. So the current quarter will be a little -- the balance would be much smaller, in terms of the expected gain than the last couple of quarters.

Yes, I think that's very fair, Jim. I don't want to even double-back to your last question, I just -- too. I don't want to -- we talked about the price increases. And I think that's -- it is significant that we haven't done that in 18 months. But, again, I don't want to oversell those either, in terms of our approach has been muted related to that as well. It's been fairly modest. In our Midwestern markets, and in general, we truly believe that our current strategy from a value proposition has been very important to our success and how it's driven attendance and what it's done for us.

I don't want this to be a story just about price increases; because, in fact, it's not. It's really more -- it's much more of a holistic approach, and we think that's what's been driving this.

All right, thanks very much. It seems like there are a lot of good things going on there. Congratulations.

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

You talked a little bit, Greg, about what you see for coming up movie-wise, the slate of pictures. Any comments on the portfolio 2015 coming out from Hollywood, versus what we have seen in 2014? Obviously, summer was a little weak.

Brian, my comment is the same comment I would always make. I have no idea. I just don't know. It looks great. It looks great on paper. But, you know, so does every baseball team at spring training. There is a lot of dynamics that do seem to bode well: the number of films, the number of releases look good.

But I promise you, there is no studio that is calling us up and saying, you know, that 2015 film that we have got looks so good -- well, it may not look so good. That's not happening.

Yes, okay.

I'd tell you that it looks good, but I (multiple speakers).

What has people excited, Brian, is -- and, again, as Greg said, we will see what happens. What has people excited is that just the number of known titles, and the ones that have done extremely well in the past. The ones that are getting the most attention include, for example -- I don't think anyone -- it really starts maybe in March/April with another Fast and Furious. And then everyone is pretty excited about the next Avengers picture. And that comes out, I think, May 1, give or take, and so that's coming.

Then there is a Jurassic Park, and there is another -- it's called Jurassic World. Then there's another Pixar movie coming out in the summer. And there is another Marvel picture called Ant-Man. And then heading into the fall, you've got another Bond picture; and you have the next Hunger Games, the final for Hunger Games.

And then everyone is pretty giddy about the Star Wars reboot, or episode 7, if you will, that will come out next Christmas. I think it's in December. On paper, that's what everyone is talking about is these very strong, known titles. And certainly we are hoping that will then be filled in by some things that are going to surprise, and which really what helps make the year is that, okay, here's a title that no one was pointing towards; it's not a sequel, and that does extremely well. And, so, -- but on paper, that's what everyone has been talking about.

Okay, on --.

(multiple speakers) looks good.

Okay, on that point -- and I have asked this in the past -- historically, the January/February/March has kind of been a graveyard of releases. And yet it looks like Hollywood over the last couple of years has tried to sequentially broaden out some of the pictures. Do you see a little of that when you look at the slate of the pictures coming out? You mentioned it looks like the first big one is in March. Does that mean that you think that January/February might be a little weak?

By no means. It's just, again, from a comparative standpoint, and when you're looking at those known titles, that's when you are seeing some of those titles. But they have -- the best I have seen, the quantity of pictures coming out is going to be just as -- pretty much -- pretty comparable to what it's been. So, as Greg said earlier, so, who knows? There is --

But I think a relevant point is the -- who knows? It is harder in the spring, you can get some surprises. There is some stuff that looks interesting. They have -- I would tell you, from a more broader intention, yes, Hollywood has started to spread stuff out over the year better.

Okay.

Which is helping --.

Okay, I think that's fair. The success you have had in packaging the DreamLounger with the UltraScreen DLX, the Atmos sound systems -- has that success caused you at all to audible on maybe the newer installations, newer conversions, build out? Or are you still pretty much on the same CapEx program to install that new technology into your auditoriums?

I'm not sure I follow -- what would we do differently? I am a little confused.

I am just saying, given the success of the DreamLounger, the UltraScreen, the Atmos, has that at all accelerated your thoughts, your internal CapEx plan that, hey, this is really good; let's get this into more auditoriums than maybe we had planned in the past, or are you still pretty much on plan?

Brian, I think Eric had asked that -- a similar version of that question earlier too in terms of that, look, we are continuing to look at all of our locations, and where these various amenities and things might be applicable. The low-hanging fruit was easy. Now as each decision goes on, it becomes a little harder. We are very disciplined about that, so we are not going to put any numbers as it relates to -- we're going to X number more locations at this point in time. We are evaluating that.

Our guys are looking at every location. We are seeing how the results occur in this latest wave of ones. We are watching the market lift. And, so, it really -- there are so many factors that come into play, and we will continue to be disciplined about it. But as you have seen, we have not hesitated to jump in. And we spent some significant money these last two years, and if we see more opportunities we will follow that.

Okay, okay. Now as you guys are launching -- and I'm just going to call it a new flagship, new prototype, with Sun Prairie. You had Majestic, in the past, over in Waukesha. Is that something that you guys are constantly building in to your five-year plan, to always have a new prototype going in? Or is it just based upon geography and when it comes out, it comes up, but that's not something that you are always trying to build?

No, I don't think we're trying to build a flagship every certain number of years. Based on what -- it was really a confluence of activity. In a way, it's a continuum; it's a continuum of things.

When we did the Majestic out on the west side of Milwaukee, we tried -- we put a whole bunch of new -- really, really new stuff, in a way that we really hadn't done. Sun Prairie has got a lot -- if you think about it, a lot of what's in the Majestic, but it refined; and just where we know what we think we have a better idea what's working, what's not working, a little less R&D, but still a high -- a market-appropriate theatre.

The issue -- it probably stand out more. Because, frankly, the opportunities to build a lot of new theatres just aren't there. And it's not a world that needs a ton of new theatre products. It will seem to stand out more when we do it.

Okay, yes, I think that's fair. As you look at $5 Tuesday now as you look at your traffic volume and attendance, without maybe talking numbers or percentages, are you still seeing a positive delta change and increased attendance as you anniversary $5 Tuesdays? Is it still growing, or have you reached a little bit of a plateau saturation?

It is still growing, Brian. There's no question about it. I alluded to that earlier. It's not -- we saw this thing, just by word of mouth, continue to expand. One of the things we were very proud of when we rolled this thing out was -- we refer to it as guerrilla marketing, where we really made a conscious effort to get the word out about this, and it has just steamrolled from there, and each month tended to get better.

I think there is still some upside opportunity, no question about it. But is it as extreme? No, it's not as extreme. But for example, the great thing that we've got -- one of the great things about $5 Tuesdays that we've seen is really been able to have a high positive impact on that -- the Magical Rewards, our frequency program, our loyalty program. That really has been a huge contributor to that, and the growth of that. And it's put numbers in place that we never have -- we honestly just didn't imagine.

We are going to get to 1 million members in that club way faster than we ever thought we were going to. The Tuesday program has been a big contributor to that. Now that means that we should be able to then lever that to ultimately more frequency, and help the Tuesday program. Now, again, is it going to be what it has been? That would seem unlikely. But, as Doug's point, growth -- still growth opportunities left.

Brian, we have another questioner waiting too. One last question, please.

One last question, okay. You guys got hit with Ice Station Zebra last year, and polar snow and cold. If we have a more tempered winter in the Midwest, will that be -- will that buttress somewhat in less expenses or is it a nonevent?

No, no. If we do have a more temperate winter, Brian -- it's is a good question -- we will notice it. We, actually, last year actually pointed out a specific dollar amount last year that had -- that was impacted by the two things combination -- the snow removal costs and the heating costs, the utility cost. And it was not an insignificant number.

I know Doug is looking for that. While you look at it -- I would tell you this, though, Brian. This is why it's going to be really tough to put a finger on this, and what it might mean; because, yes, it will save us money and expenses. The other side of it is, you get a couple of frozen Mondays where there is not snow and it is so cold they call off school, that's really good for our business. (laughter) So, there's nothing else to do.

We had a couple of days where it was like -- and I think we did call an Audible, and offered free hot chocolate, and we drove a lot of people in the door. We haven't done the math to figure out, well, okay, we're better off -- I'm guessing we're better off with less snowplow costs. But it was tempered by the fact we got some people in on days we didn't expect it.

We had combined what I would call additional snow removal costs and additional heating cost of $950,000 last year in that second half of the year.

Got you. All right, guys, have a good holiday. Thank you.

Herb Buchbinder, Wells Fargo Advisors.

I am not sure if this is a good last question. But can you comment on the Sony situation, and if you think a bad precedent has been set for studios and theatres to be held hostage by a threat? I don't think the movie -- was pretty poorly reviewed. But let me know what you think might happen to this film. If it could become a cult film in some way and -- but really just the comment about what's happened. I think it would be interesting to hear what you say.

Herb we came so close; so close. (laughter) Because we didn't even think anybody would ask this question.

I can't believe it -- nobody said anything, but I had to. I think it's important.

Our position on this is as follows: our belief is this was unique and complex situation with circumstances that extended beyond the movie. And, in the end, the choice to play the movie was not ours. Sony pulled it before we came to any conclusions. I can't even begin to guess what -- if you would have asked me two weeks ago, was this going to happen, I would have said I had no -- I would not have expected it, and, so, I can't begin to start prognosticating about what might happen next.

As I said, I will highlight to say I think it was a very unique and complex situation with extenuating circumstances beyond the movie itself.

Do think they did the right thing?

They did what they did; not my choice.

It could be a precedent. You would hate to have this happen to a bunch of films where somebody doesn't want to see a film come out, whether it's Gods and Kings or something or other, and make threats. I am sure the FBI and Homeland Security will probably get a little bit more into this. But people could be -- could be a little bit reluctant to go to the theatres if they feel unsafe. That's the only issue here. And it happened once before when that awful situation in Colorado. I think there was a couple of days after that where movie attendance was down quite a bit.

But I just wanted to get a little bit more comment on -- I guess you're not going to give as much as I wanted, but that's okay.

Since you didn't ask a question there, I will let you end it there. (laughter)

I will now pass back to Doug Neis for closing remarks. Please go ahead.

As I said, we would certainly like to thank all of you once again for joining us today. We will be looking forward to talking to you once again in March when we release our fiscal 2015 third-quarter results. Until then, thank you. We wish you all a very Merry Christmas, Happy Hanukkah and a Happy New Year.

Thank you, ladies and gentlemen. That concludes your conference. You may now disconnect. Do enjoy the rest of your day today.