Marcus Corp (MCS) 2017 Q2 法說會逐字稿

Good morning, everyone, and welcome to The Marcus Corporation second quarter earnings conference call. My name is Amanda, 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, Amanda, and welcome everybody to our Fiscal 2017 Second Quarter Conference Call. As usual, I need to begin by stating that we plan on making a number of forward-looking statements on our call today. 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, our expectations about the future trends in the business group and leisure travel industry and -- in our markets, expectations and plans regarding growth in the number and type of our properties and facilities, expectations regarding various 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 could be obtained from the SEC or the company. We'll also post all Regulation G disclosures when applicable on our website at www.marcuscorp.com. So with that behind us, let's talk about our fiscal 2017 second quarter and first half. We're pleased to be reporting another quarter of increased operating results, despite what has been well-documented as a challenging quarter for movies. And thanks to an outstanding first quarter. We're sitting at the halfway mark of fiscal 2017 with consolidated revenues up 19.3%, consolidated operating income up 24.2% and consolidated net earnings up a significant 32.4%. And while this is only our second year of officially reporting on a calendar year cycle, we didn't hesitate using the word record several times in our press release. Our theatre division once again outperformed the industry, as did our hotels and resorts division despite some calendar comparison challenges in that business this quarter. And as we referenced in the release, just as onetime preopening cost impacted our first quarter results for our hotels and resorts division. The fact that we have recently opened 2 new theaters resulted in significant onetime preopening cost in that division during the second quarter. If not for nearly $600,000 of preopening cost incurred in our second quarter related to the new theaters. Our reported results would have been even better. 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 before I dig in these divisions, I will spend a couple -- a few minutes on a couple of the line items below operating income starting with interest expense. As I shared with you in our last call, the majority of the increase in interest expense this quarter and for the first half is due to the fact that we assumed several capital leases in conjunction with the Wehrenberg acquisition last December. The vast majority of the increase in interest expense -- is the interest expense portion of the rent payments that we made on those assumed leases. And we did have increased borrowings compared to last year due to our capital expenditure program that's also contributed slightly to the increased interest expense. But our overall average interest rate decreased compared to last year, due primarily to a change in the mix of our debt portfolio, offsetting most of the impact of the increased debt. You will also note that we reported gains on disposition of property and equipment this quarter compared to losses last year, due to the fact that we sold 2 theaters during the quarter. One of which we had closed several years ago and one of which was operating as a budget theater until mid-May at which point it was closed and subsequently sold. In addition, a hotel that we managed and held the minority interest in was sold early in our second quarter, also generating a small gain. Offsetting a portion of these gains was the continued write-off of some theater equipment as we continue our extensive renovation program at several of our theaters. Our first half effective income tax rate adjusted for losses from noncontrolling interest was 37.3%, slightly lower than last year's first half effective rate of 39.2%. We would expect our effective rate for the remaining quarters of fiscal [2017] to be close to our past historical kind of 38% to 40% range. Shifting gears away from the earnings statement for a moment. Our total capital expenditures during the first half of fiscal 2017 totaled approximately $55 million compared to approximately $42 million last year at this time. Nearly $43 million of our total spend during the first half of the year was incurred in our theater division. Almost one half of which related to the 2 new theaters referenced in our press release. With the remaining portion related to -- related to continuing DreamLounger seating projects, premium large format conversions, and new food and beverage outlets that we've been discussing for some time now. The approximately $12 million of capital expenditures in our hotels and resorts division during the first half of fiscal 2017 were primarily related to the new SafeHouse Chicago, the new villas at the Grand Geneva and assorted other renovation and maintenance capital at our owned hotels. Halfway through our fiscal year, we're not adjusting our previous estimate for capital expenditures for fiscal 2017. I mean, amount in the [$100 million to $120 million] range, recognizing that the timing of several of our planned expenditures are still just estimates at this time. The actual timing of the various projects currently underway of proposal certainly impacts our final CapEx number, as will as any currently unidentified projects or acquisitions that could develop during our year. Now I'd like to provide some financial comments on our operations for the second quarter and first half, beginning with theaters.

Our box office revenues increased 18.5% and our concession revenues increased 23.4% during the second quarter, and have now increased approximately 28% and 30% respectively year-to-date. But obviously, those numbers include the Wehrenberg Theatres and the new theater in Country Club Hills, both of which opened up -- were added in our fiscal 2016 fourth quarter, as well as the new theater that we opened in Shakopee, Minnesota early in our fiscal 2017 second quarter. So if you exclude those new theaters, box office receipts actually decreased 4.1% and concession revenues increased 1.6% for comparable theatres during the fiscal 2017 second quarter compared to last year. For the first half of 2017, comparable theaters have now reported a 3.1% increase in box office revenues and a 6.9% increase in concession revenues. Now those comparable theater numbers -- results are the numbers that we can then compare to the rest of the industry. According to data received from Rentrak which is a national box office reporting service for the theatre industry and compiled by us to evaluate fiscal 2017 second quarter and first half results. United States box office receipts decreased 4.8% during the 2017 second quarter after adjusting for new builds for the top 10 theater circuits. Indicating that our box office receipts as comparable theaters during the second quarter of fiscal 2017 outperformed the industry by just just under 1 percentage point. Performing that same calculation for our fiscal 2017 first half, we find that the U.S. box office receipts have increased 0.9% during our comparable 26 weeks. Meaning that we have outperformed the industry by over 2 percentage points on the year -- on a year-to-date basis.

I want to quickly point out that we've outperformed the industry despite the fact that we had nearly 5% of our comparable screens out of service during long portions of fiscal 2017 second quarter and first half, due to renovations underway at multiple theaters. We've now outperformed the industry average during 13 of the last 14 quarters. The second quarter comparable theater decrease in our box office revenues of 4.1% was attributable to a decrease in attendance at our comparable theaters of 3.6% and a decrease in our average admission price of 0.4%. For the first half of fiscal 2017, comparable theater attendance has increased 3% and our average ticket price has increased 0.1% compared to last year. Now despite a modest price increase taken in November and an increased number of premium large format screens with a corresponding price premium. Most important takeaway from the lack of any meaningful change in our average price increase is the -- is a reminder that film mix can and does have an impact on our average price.

During our second quarter and first half of fiscal 2017, the percentage of our box office receipts attributable to 3D films decreased significantly compared to last year's films. As you know, 3D films have a premium added to the ticket price and last year's films led by Captain America Civil War, were just more 3D friendly. In addition, our top film during fiscal 2017 to date was the PG-rated family movie, Beauty and the Beast, which naturally results in a higher percentage of lower priced children's ticket sold. Compared to our top film during the first half of fiscal 2016, which was the R-rated film, Deadpool, which understandably would result in a higher percentage of higher priced adult tickets sold. Now conversely, we're pleased to report an increase in our average concession revenues -- in food and beverage revenues per person of 5.9% for the second quarter and 4% for the first half of fiscal 2017. Our investments in nontraditional food and beverage outlets continue to contribute to higher per capita spending despite the fact that our top film this year, so far was family fare that likely negatively impacted our sales of some of those nontraditional food and beverage items. Lastly, I'll point out that the approximately $2.7 million increase in consolidated other revenues this quarter and a $5.9 million increase in other revenues for the first half of fiscal 2017 was primarily from our theater division. About one half of the increase is related to comparable theaters and was due primarily to an increase in preshow advertising income, Internet surcharge ticketing fees and breakage on presold discounted tickets. The remaining increase in other revenues is attributable to the Wehrenberg Theatres, including preshow advertising income, Internet surcharge, ticketing fees and rental income from the retail center that we acquired in the transaction. Shifting to our hotels and resorts division. Our overall hotel revenues were up 0.6% for the second quarter and 1.9% for the first half of fiscal 2017, with increased food and beverage revenues due to the opening of our new SafeHouse in Chicago in March, contributing those increases. RevPAR at comparable owned hotels decreased 1.5% during the second quarter and has increased 1% during the first half of 2017. And as we've noted in the past, our RevPAR performance did vary by market and type of property. But as our press release notes: our overall results were negatively impacted by the fact that Easter was in April this year compared to the end of March last year contributing to a drop in group business during the quarter. Breaking out our numbers more specifically, our fiscal 2017 second quarter, overall RevPAR decrease was entirely due to an overall occupancy rate decline of approximately 2 percentage points, partially offset by a 1.1% increase in our ADR during the quarter. Year-to-date, our overall 1% increase in RevPAR is attributable to a 0.6 percentage point increase in our occupancy rate and 0.2% increase in our overall average daily rate. Now good news is that despite the challenges we faced, we significantly outperformed our competitive set during this fiscal 2017 periods. According to data received from Smith Travel Research and compiled by us in order to compare our fiscal second quarter and first half results, competitive hotels in our collective markets experienced a decrease in RevPar of 4.3% during the fiscal 2017 second quarter, and a decrease of 3.9% during the fiscal 2017 first half. Thus we have outperformed in these 2 periods by approximately 3 and 5 percentage points. Our decreased operating income during the second quarter, certainly reflects the impact of the reduced room revenues from our owned hotels and year-to-date, onetime preopening cost related to our new SafeHouse Chicago, that have had a negative impact on our reported results. In addition, comparisons to last year's first half results were also negatively impacted by a onetime favorable adjustment last year impacting our management company profits. I'm pleased to tell you that operating income attributable specifically to our 8 owned hotels and resorts has actually increased during the first half of fiscal 2017, compared to the first half of fiscal 2016. Finally, a brief comment on our corporate segment, which includes amounts not allocable to the 2 business segments.

Operating losses from our corporate items increased during the second quarter and first half of fiscal 2017 compared to the same period last year due in part to increased Board of Directors cost including onetime cost associated with the acceleration of certain long-term incentive compensation related to the retirement of 2 directors from our Board of Directors during the second quarter of fiscal 2017. In addition, the increased short and long-term incentive compensation expenses resulting from our improved financial performance and stock performance has also contributed to increased operating losses from our corporate items during the fiscal 2017 periods. With that, I'll now turn the call over to Greg.

Thanks, Doug. I'll begin my remarks today with our theater division. In preparing for my comments today, I took quick look back at what I had to say last quarter. As you recall, most prognosticators were suggesting that the first quarter might be the most challenging quarter of 2017, particularly compared to the strong first quarter, last year. Instead, the industry had a great quarter and we reported record results, proving once again how difficult our industry is to predict. I specifically noted in my prepared remarks that we need to be prepared to take advantage of times like that, because as we all know, history tells us, that there will be quarters where the film product does not live up to expectations. Well, I must tell you, I would prefer to not be proven correct so quickly. But look, this is the reality of our business. There will be times where the film product connects with the movie going public and exceeded expectations. And there will be times like our recently completed second quarter, where it doesn't. With all due respect to the authors of some of the inevitable articles that have been written recently, once again suggesting the imminent demise of the movie theater business. You will excuse me, if I reuse, a well-worn statement, and note that we have seen this movie before. In fact, extending that analogy even further. One of the common themes I've heard is that the industry is suffering from sequel fatigue. That the customer has seen that movie too many times before. To that, I'd say that I certainly agree that the studios have a tendency to rely too many times on known titles. And that we believe, new original content is always needed, but let's put things in perspective. Well reviewed sequels, such as the recent Spider-Man and Planet of the Apes films have performed well. And I certainly don't hear anyone complaining about another Star Wars film coming out this year. There's nothing wrong with good films -- in an established franchise. But in the end, the movies have to be good and resonate with the customer. And this quarter, unfortunately there were a few too many that didn't. But that's what makes this business interesting. There's always a new set of films scheduled to open each weekend and you never really know for sure when the next unexpected blockbuster will show up, which brings us back to the same comments I made last quarter under entirely different circumstances. When the film [progress] is great, our goal is to outperform the industry and take advantage of the tremendous leverage in our business, due to the high fixed cost component of our business model, by producing above average margins and returns. We did that in our first quarter. And when the film product is lagging, like it was this past quarter, our goal is to still outperform the industry, seek opportunities to manage our costs and drive additional business to our theaters with the tools at our disposal that we can control. And I would submit to you that our outstanding management team led by Rolando Rodriguez and a great group of experienced and savvy executives and operators were successful in doing just that during our fiscal 2017 second quarter. And I will tell you, the film product wasn't our only obstacle this quarter. As Doug noted, we once again had a significant number of screens out of service as we continue to aggressively add our proven successful amenities to more existing theaters. But we're not big fans of excuses around here. Despite all that, we reported record theater operating results during the second quarter and when added to our standing first quarter results, we are in a great place halfway through the year. Clearly, the investments we are making in our theaters are continuing to make a difference. And when you combine those investments whether innovative marketing and pricing initiatives, along with our loyalty program that is now up to 2.3 million members with the integration of the Wehrenberg loyalty program. The result is record-breaking performance for our theaters. Certainly a great deal of our focus during the first half, has been integrating the new -- the 14 new Wehrenberg theaters into our circuit. I feel our integration efforts are going well, but will admit that we had hoped to be further along with our capital investments at these theaters by now. Between negotiation with landlords, fine-tuning the renovation plans and costs, and seeking the necessary municipality approvals, it has taken longer than we had hoped to make meaningful changes to these theaters. I'm pleased to tell you that, we now have multiple renovation projects underway at our Wehrenberg theaters . We will complete our first DreamLounger conversion of all the auditoriums at one key theater in the next few weeks and several other recliner conversions are now underway with food and beverage upgrades to follow.

Most of these won't help us during the third quarter, as we are once again have a number of screens out of service. But our plan is to have as many screens as possible converted before many of the highly anticipated pictures in November and December start hitting our screens. At the same time, we continue to pay a lot of attention to opportunities to expand our successful amenities to more original Marcus Theatres. As the press release notes, by the first day of the third quarter, we had added DreamLounger recliner seats to 7 more existing theaters, increasing our industry-leading percentage of first-run auditoriums with recliners seating to 64% for our Marcus Theatres and 52% overall, including the Wehrenberg Theatres.

Upgrades are currently underway at 5 more theaters including the Wehrenberg Theatres I just referenced. And finally, our press release highlighted the fact that we opened a new theater with all the latest amenities in Shakopee, Minnesota early in fiscal 2017 second quarter. And our new in-theater new dining concept BistroPlex opened in Greendale, Wisconsin on the first day of our third quarter. This latest new theater as our tagline calls it, a restaurant that serves movies, looks great and the results to date are encouraging. This is definitely a concept that we can see ourselves expanding to additional locations in the future.

As we look ahead, our press release highlighted some of the films scheduled for release during the third quarter. Comparison to last year's third quarter films slate, may be challenging due to the strong performance of films, such as Secret Life of Pets, Suicide Squad and Finding Dory during the third quarter of fiscal 2016. Conversely, film products scheduled to be released during the fourth quarter of fiscal 2017 appears quite promising, including film such as Thor: Ragnarok, Justice League, Coco, Star Wars: The Last Jedi, Pitch Perfect 3 and Jumanji: Welcome to the Jungle.

So coming back to how I started my remarks. It is difficult to predict the box office over the short-term. But over the long-term, steady growth has proven to be very predictable. We hope 2017 still turns out to be another record year at the box office like some are suggesting. And if it does, we'll be prepared to capital like we did in the first quarter. But if the quarter disappoints, we will be prepared for that as well. We're looking at this business like we always do, with a long-term perspective.

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 a challenging quarter for our hotels with the majority of our decrease in operating income occurring in April, coinciding with the drop in group business in the weeks around the Easter this year. While May was a little better at several of our properties, citywide group business in the city of Milwaukee where we operate 3 of our 8 company hotels was also down significantly in May compared to last year, further impacting our reported results during the quarter.

As we've shared with you in the past, our collection of hotels and particularly our largest hotels relies a great deal on group business and its overall customer mix. The really good news is that our RevPAR improved later in the second quarter and we had a particularly strong June due in part to the positive impact of the U.S. Open Golf Tournament in the Milwaukee market, partially offsetting some of the decline in the beginning of the quarter.

As Doug noted earlier, despite the difficult comparison due to the holiday timing, we outperformed our competitive sets during both the second quarter and first half of fiscal 2017, as we have been success replacing some of the decline in group business with an increase in nongroup business. Outperforming our competitive set by nearly 3 and 5 percentage points is no small task and our executive management team led by Joe Khairallah, as well as our sales team and the hard working teams each of our owned and managed hotels deserves a lot of credit for achieving that outperformance under difficult circumstances this quarter.

And when you step back and look at the big picture halfway through our fiscal 2017, there are some very positive things to hang our head on. First off, as Doug noted, while our reported results for the division have some unusual items impacting us, such as the preopening cost at our new Safehouse Chicago, our operating income at our 8 owned hotels and resorts has increased during the first half of fiscal 2017, compared to the same period last year.

Secondly, our hotels continue to be leaders in the markets in which we operate. So like our theater division. [But we can't] always control what is going on in our respective markets, we can work hard to beat the competition within that environment. Thirdly, we were very encouraged by our June results and looking to future periods, we are encouraged by the fact that at this point in time, our group room revenue bookings for the remaining future periods in fiscal 2017 something commonly referred to in the hotels and resorts industry as group pace is running slightly ahead of our group room revenue bookings for future periods last year at this time.

Banquet and catering revenue pace for the remainder of fiscal 2017 has also increased compared to last year at this time. As a result, we hope to be able to make up some of the shortfall in group room revenue bookings during the second half of fiscal 2017. Our hotels and resorts division operating results should benefit in future periods from 2 current growth initiatives. As our press release notes, we recently introduced 29 new all-season villas at the Grand Geneva Resort & Spa to a positive guest response. They should also help our ADR as these units are expected to rent at a higher rate than a regular room. We are also preparing for the August 2017 opening of the new Omaha Marriott Downtown at the Capitol District in Omaha, Nebraska. A new hotel that we will manage, in which we will hold the minority interest. Also from a gross -- growth perspective, we continue to actively review opportunities to add to our portfolio managed hotels in the coming year and we hope to have one or more of these come to fruition in the coming months.

Lastly, before we open the call for questions, I want to conclude my remarks by saying, thank you to all the hard working associates of The Marcus Corporation. I don't want to ever take for granted the fact that we once again reported increased operating results, despite several headwinds this quarter in both of our businesses. The results we are sharing with you today are the direct result of a lot of hard work in both of our divisions and for that I'm grateful.

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

(Operator Instructions) First question comes from line of Eric Wold of B. Riley.

Couple of questions. So I guess on the hotels, I guess we are all on the hotel side. I guess, give us your take on what you're seeing around kind of the environment for hotel transactions. Obviously, we're past the [180 day] window for a normal [1031] transaction around Wehrenberg, but you might have more time given to reverse 1031 , you haven't had a taxable event yet, but kind of what are you seeing in this environment, is there just a general lack of interest from buyers overall or just a bid-ask spreads that's a little too owners for you? I will start with that one.

Well I will start off. It's been -- for lack of a better word, it has been choppy. There are some deals getting done, but if you actually look at just from a pure quantity perspective, the last time I looked fairly recently the pure number of transactions getting done is down. I think that -- we're getting a sense that maybe the sentiment is maybe changing a little bit here and that things are maybe start looking up a little bit in that regard. I think, it -- just like our business ties to the general kind of economic environment and the sentiment as it relates to what's going to happen in the future, the transactions kind of follow that. And so, I think, there is certainly, at least speaking to the first half of the year, I think there's been a lot of -- lot of people trying to figure out, okay, where are we headed? Are we in a ball game -- using the analogy we used in the past, are we in a ball game where -- we are in the later innings, but guess what, it is going to go extra innings and go for a while or not. And -- so I think people are trying to gauge that . And I think that has resulted in overall transaction volume that's been down. Doesn't -- we haven't closed up shop. We're certainly continuing to monitor that and keep our options open as it relates to that. Best way I could it.

I think, Eric, you nailed it on the head. I think, there is a bid-ask spread. And then to add to that to exacerbate that, so as Doug pointed out and you will see, if you see -- if you look at the industry literature, transactions are down this year. But the other piece of that is that the debt markets have been pretty active. And so what you will read is transactions are down and potential sellers are just choosing to refinance. And that's -- and so that -- the overall attractiveness of the debt markets combined with the spread in the bid-ask is leading for transactions to be down along with the dynamics that Doug talked about, but -- which leads to a good point though about, where we say ,'17, I was just talking to our salespeople. And while '17 paces up a little bit, no one is predicting like old huge RevPAR increases for the industry, neither we. But there is '18, business travel is starting to look, okay. And so that may be leading to the second point Doug made which is well you know, we are starting to see things firm up little bit more. So I think, it's, all those things are sort of weighing into the mix and that what we're seeing.

Okay, that's fair. And I guess, have you done anymore kind of work or looked into the possibility of reverse 1031 being beyond 180 days. I know it's -- I guess you -- I'd assume you want some comfort there that you'd be able to get it done and through the [IRS] before going it -- going through with the transaction?

I would say, Eric that I always look at every potential opportunity to defer taxes. So I don't have a direct answer to give you on that, but I'm always looking at those different strategies.

And then, on the hotel division, last question, you've always been outperforming the peer group for a little bit and assume that continues. Has there been a time in the past where you have and to this degree and what has been kind of the reaction from the local kind of peers and competitive set. Just trying to get a sense if you're seeing reaction from area operators or there's kind of enough to go around sort to speak where everyone's doing okay, you're just doing little bit better.

I would start, and I'd say there's a couple of dynamics at play here. During the first half of the year and doesn't always play out this way in the second quarter, but certainly has this year. Our markets -- the Midwestern markets et cetera tend to not perform as well as the national markets. And so the upper -- upscale segment did better than those competitive sets that I shared with you. Well, and you actually think about it, it kind of make some sense, right. Our first quarter in our markets is the winter. And so that kind of make some sense that our markets -- perform as well as the national number. And then in this particular situation, the second quarter, we had some, kind of also make some sense when you think about the Easter element, because given our markets and our preponderance towards group business, we're (technical difficulty).

Ladies and gentlemen, please standby, your conference call continue momentarily. You are back in the main room. I do apologize for the inconvenience.

So Eric, are you still there?

(Operator Instructions) And Mr. Wold's line is now open.

So Eric, where did we cut off there? Did I finish answering the question or did I not?

I think you're pretty close. One last in -- one last real quick. If you end up not getting something done around Wehrenberg specifically, does the retail center that you acquired along with that fit in kind of your long-term plans?

It's certainly not an asset that -- we haven't made any decisions on it yet, but it -- obviously it's not an asset that we have that ties to what we're doing. But we do think there's some opportunities there to increase its value. So we're looking at those right now.

Thank you. Our next question is from the line of Brian Rafn of Morgan Dempsey Capital Market.

You talked a little bit about stronger theater concessions and I'm wondering was that source, because I think last year and correct me if I'm wrong 2016 was a little weaker in the movie slate for children's pictures, 3D, some of the G&PG where you bring the family and they -- they load up on concessions. What really kind of drove that gain do you think, or was it really spread across the entire movie slate?

Well, Brian, you're certainly right that film mix can make a difference there. And so, particularly given that what's primarily driving our increases in our per capitas are the expanded enhanced food and beverage outlets that we've been adding to our theaters. And that certainly was the reason why we are -- is the primary reason. Our core concession business was up for the quarter, but the primary reason for the 5.9% increase in this quarter was because of the food and beverage outlets, the expanded food and beverage outlets. And -- so when our pictures that are more kid pictures, family type pictures, we -- that can sometimes help the popcorn, soda, but it will not necessarily be a major enhancer of the added food and beverage, because they don't drive -- buy many beers, and things along those lines. But -- so this particular quarter, look it was a fairly average group of films overall and in terms of the mix. And so I don't think that we had a particularly -- I think that's why the 5.9% kind of came through is that our -- we had family pictures, but we also had a mix of other types of pictures. Last year, during the quarter, to your point, our top 2 -- 2 of our top 3 pictures were kids' pictures. And so that certainly -- on a comparative basis, maybe that helped us just a smidge on a comparative basis.

On that thought, Doug, does the add of Reel Sizzle and Take Five Lounge, does that get a draw from family or is that primarily driven by adult pictures?

Well, the Reel Sizzle, does appear as the food will benefit from families and the benefits from having just a attendance. Obviously the bars do much better when there's adult films. We can't sell enough cosmopolitans when we have a Sex and the City movie going.

And then trends on the value Tuesday still continues traffic wise do very well?

Yes. Comparable basis for the first half of the year, our Tuesdays are up.

Okay. The Wehrenberg Theaters, when you guys talked, you talked a little bit about landlord issues, you talked about the municipal permits and that type of things. Without having seen the physical brick-and-mortar, I'm assuming they have stadium seating, I'm assuming they had digital cinema. You guys have the ultra screens, the 70/ 36 feet, you've got the Dolby Atmos which up to 64 speakers. How much does some of that hi-tech does the Wehrenberg Theatres either have or are missing from the standpoint of audio, phonics and screen size and that type of thing.

They have all -- they have stadium seating, they have a large large format. They have -- they don't have as much, they don't have like the Dolby Atmos, like where we run with it as much. But those are not new, that's not -- so those are not the most new -- those aren't really new. The theaters need investment, and that's what we're doing right now.

Okay. So what would you say, corners and carpeting and bathroom fixtures, that type of thing, a little tired. Is that what you are kind of alluding to?

Yes.

Yes, absolutely. And just to clarify or add-on to Greg's comment. Yes, they have some large format, they just don't have as much as we do. They have 3 IMAX and 1 proprietary screening -- large format screening. Obviously it's -- so they don't have our core circuit, I think it's now up to 65% or so of our theaters have at least 1 large format screen. They don't have that same penetration right now. We're certainly going to work hard to try to do some additional conversions of -- and add the Dolby Atmos and some additional large format conversions in order to expand that

But Brian, what you call, tired, we call opportunity.

Yes, that's good. That's awesome. It gives us some opportunity. I have not been down to the BistroPlex in Greendale, you've had about 1 almost 3 weeks or so. What's kind of been your traffic and how is that priced on a ticket basis?

We get [$1] more for the ticket. The -- it's -- I think its turned out fantastic and people are really very excited about it. We hit some some bumps. We're certain -- we are trying to figure out, it is a new business model for us, but it's not brand new. We are in the food and beverage -- we are in the in-theater dining experience department already with our BSBs. And so we come to the table with some experience, but this is a new concept for us and we have some growing pains. But I think overall, very well received and it looks fantastic, the food is great. And I think it's going to be some that's going to be wonderful for us.

I mean, if you think about it, Brian, it's 800 or 900 seat restaurant. And so there aren't many of those out there. And so from that perspective, the nuances of staggering showtimes and just getting -- getting the kitchen to deal with the onslaught of people anything else. It's -- we've come light years from where we were on day 1, and I'm sure, Greg will say, we still have ways to go, but we're pleased with the result so far.

Yes, with the food cleanup and all like that, does that stagger the movie -- movies -- pictures a little more, so little more gap between showings?

I don't. Right now, I don't know that we can take. I can't tell you the exact gap. I know the issue. For us, it's beyond just cleanup, it's making sure that we don't slam the kitchen. Right. I mean, imagine if you put your 2 biggest houses and have what little under 500 seats of your 900 seat restaurant, all piling on to your kitchen at one time, you can really make a nightmare for everybody working there. So it's a mixture of cleanup and getting people out and how we get their checks closed out and how do we not, how do we not schedule a nightmare for the kitchen. So we're working through all those things right now.

Okay. Okay, and this BistroPlex idea if it goes well, this could be something we could see other units potentially?

Absolutely.

Okay, all right. And then, Doug, just one. Top 10, 15 movies, what of the film slate being a little weaker, what percentage of the mix dollars?

Not a dramatic change, slightly less percentage towards blockbusters for the quarter. The top 5 pictures were 47% of our overall box office versus 49% last year in the second quarter. So a small modest change there, that prove that tends to help our film cost a little bit, because the more reliance you are on the blockbusters that tends to drive up film cost, so conversely, you can work the other way a little bit. So it was slightly less.

(Operator Instructions) Our next question is from the line of Jim Goss with Barrington Research.

So in -- in the Wehrenberg Theaters, where you have an IMAX, are you looking to do a companion UltraScreen and or have you done any of those to this point?

We haven't yet, but.

Yes. Go ahead, Doug.

Yes, I mean, look, we have, we've got several SuperScreens that are already on the docket. I don't believe we have any UltraScreens planned at locations that would have IMAX at this stage of the game. The team is still looking at their overall plan, but we've got, I think at least 3 SuperScreens that are currently either approved or pending and even under construction, so we're working our way through that. I think, in fact, there is also another, there is actually 1 UltraScreen DLX at our Wehrenberg location that's scheduled to open up in the fourth quarter. It does not have -- that location does not have an IMAX.

Jim, that's a conversion of their existing large format in Chesterfield.

Right. So they have an -- I mentioned earlier, they have an existing, they call the MegaScreen. We're going to convert that one to a UltraScreen DLX. And that will -- that conversion should be completed some time in the fourth quarter, but we're also doing 3 additional SuperScreen DLX conversions in the coming months as well.

And we do have the ability, where we have IMAXes to add to our own premium -- our proprietary premium large format.

We just don't have anything currently scheduled.

It will be interesting to see if you could be a bit of a test kitchen in terms of the economics to you of 1 format versus the other. How they compare?

Yes, actually, [we take it back] . We do actually and we are doing is where I said, we have the ability to do it, we did -- we are adding one at Ronnies where there is an IMAX.

That's right.

IMAX mentioned that they were going to focus more on 2D than 3D. I know, you mentioned 3D a little bit earlier. Are you seeing any difference in the reception to 3D lately as something that can add to your premium prices?

[Well we still] -- less of them, so has driven down our APP level, has muted our APP.

And the type of film can make a difference as well. And so -- and it was in the second quarter, it was pretty significant out. Captain America Civil War did a lot of 3D business last year and Finding Dory which was our #2 picture in the quarter last year, did a fair amount as well. So whether that was just because there are the types of movies, there certainly were -- there can be less of them as well or whether that's the customer changing the behavior. I don't know if can quite say that yet, but it was down.

You mentioned earlier, to then separately, in your negotiations with landlords with Wehrenberg Theatres, and I know you've focused a lot on owning properties. Is this influencing the type of M&A targets you might be having and looking for? Or would you prefer to get more of the ones that are similar to your traditional ownership bent versus ones that are mostly leased, which is the majority of the industry?

I would -- the answer to your questions are no and yes. No, it has not changed our focus on M&A, and where we're looking, but if you ask me, do I prefer to own them? Absolutely, this just shows how -- in a way, you know, how fortunate we've been to own our real estate. It highlights that how much easier it is to make nimble decisions when you own your real estate. They are just 1 less party to deal with. And when you have to deal with the landlord, it just take some more time to negotiate through that to -- working with that negotiation.

And maybe last question I have is. With the new Country Club Hills location, which isn't that far away from your Orland Park location? But the nature of the area is maybe a little bit less advantageous in terms of the demographics of the income levels. I'm wondering, what sort of experience you've had with that new location relative to say Orland Park or some of the other existing locations? Are you getting the same type of performance and uptake?

Well, look, I think to trying to compare them is apples and oranges. I will tell you that that Country Club Hills theater is spectacular. The team did a fantastic job with it. The whole south side of Chicago seen a lot of investment, a lot of it by us. There's a new competitor there. In Frankfurt, just south of Orland Park and AMC had a -- they added recliners too. We put recliners in Orland Park. We've got -- we just re-did Country Club Hills. You've got Chicago Heights where we put a big investment in there, which is our theater, our legacy theater. So there is -- I guess the answer to the question is there is just so much noise in the numbers that it's hard to give you an exact answer is to well to compare -- try and compare Country Club Hills to Orland. But I would tell you that we're very pleased with what we have on the south side there.

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

Well, thank you everybody for joining us today. I apologize, I did -- see an email that apparently we had some sort of -- all of our outbound calls were disconnected briefly in our whole office. So I -- that we were able to reconnect quickly enough to keep the call going. So appreciate you joining us. We look forward to talking to you again, once again in October when we release our fiscal 2017 third quarter results. Till then, thanks and have a great day.

Ladies and gentlemen, this concludes today's call. You may now disconnect your line at any time.