Marcus Corp (MCS) 2017 Q3 法說會逐字稿

Good morning, everyone, and welcome to the Marcus Corporation third quarter earnings conference call. My name is Victor and I will be your operator for today (Operator Instructions). Joining us today are Greg Marcus, President and Chief Executive Officer; and Doug Neis, Chief Financial Officer of The Marcus Corporation. At this time, I'd like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you, Victor, and welcome everybody to our fiscal 2017 third quarter conference call. As usual, I need to begin by stating that we plan on making a number of forward-looking statements on the call today and those 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 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 could impact our ability to achieve our expectations and 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. And 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 third quarter and first three quarters. Probably the worst (inaudible) in the world was that the third quarter was a challenging quarter for movies and it certainly was no different for us. However, despite what has been a tough couple of film quarters in a row, thanks to an outstanding first quarter. We're sitting at the third quarter's mark at fiscal 2017 with consolidated revenues up 14.7%. Consolidated operating income up 7.2% and consolidated net earnings up nearly 5%, with a very promising looking fourth quarter ahead of us. As is our usual practice, I'm going to make -- 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. Before digging these division, let's spend a few minutes on a couple of the line items below operating income starting with interest expense. Talked about this before, so I'll go through it quickly, but the majority of the increase in interest expense this quarter and for the first three quarters is due to the fact that we assume several capital leases in conjunction with the Wehrenberg acquisition last December. So the majority of the increase of the interest expense portion of those rent payments that we make and those assume leases. We also did have increased borrowings compared to last year due to our capital expenditure program that has also contributed to the slightly increased interest expense, but I will tell you that our overall average interest rate decreased compared to last year, and that's due primarily to a change in the mix of our debt portfolio, offsetting some of the impact of the increased debt. You also note that we reported a loss of disposition of property and equipment this quarter, it's really a small loss compared to a gain last year, and that's due to the fact that we continue to write-off of some theater equipment, as we continue to our extensive renovation program at several of our theaters. Last year we had small gains, we sold a parcel of land during the quarter. And while there wasn't a significant change in our earnings and losses -- earning losses from joint ventures during the third quarter. I did want to highlight a couple of transactions that will impact that line item in the future. During the second quarter we reported that a hotel that we manage and held the minority interest in the Sheraton Madison was sold generating small gain. In addition early in our current fourth quarter in October here, another hotel that we manage and held the minority interest in The Westin Atlanta Perimeter North was also sold, in this case generated a significant gain for us that will recognize in the fourth quarter. The final accounting of the transactions is not quite finished as it just happened, but we expect to report a gain of over $4.5 million. Future management fee revenues and earnings from joint ventures will be slightly impacted by the sale of these two properties, but we're obviously very pleased with the result of these transactions.

Our first three quarter's effective income tax rate adjusted for losses from noncontrolling interest was 37.8%, slightly lower than last year's first three quarters effective rate of 38.5%, and would expect our effective rate for the remaining quarter of fiscal 2017 to be close to our past historical 38% to 40% range. Shifting gears away from the earning statement, just for a second, our total capital expenditures during the first three quarters of fiscal 2017 now totaled approximately $87 million compared to approximately $58 million last year at this time. Over $69 million of our total spend during the fiscal '17 first three quarters was occurred in our theater division, approximately 1/3 of which related to the two new theaters that were referenced in our press release, with the remaining portion related to the continuing DreamLounger seating projects, premium large format conversions and new food and beverage outlets that we've been discussing for some time now. The over $17 million of CapEx in our hotels and resorts division during the first three quarters of the year 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. With only one quarter to go on our fiscal year, we're estimating that our total capital expenditures for fiscal 2017 will be in the $105 million to $115 million range, very consistent we've been saying in the past. Recognizing at the timing of several of our planned expenditures and actual cash payments are still just estimate this time. The actual timing of the various projects currently underway or proposed were certainly impact our final capital expenditure number as well any currently identified projects or acquisitions that could developed during the remainder of fiscal year.

Now I'd like to provide some financial comments on our operations for the third quarter and first three quarters beginning with theaters. Starting with theaters, our box office revenues increased 7.2% and our concession revenues increased 10% during the third quarter, and they've increased 21% and 23% respectively year-to-date. But obviously, those numbers include The Marcus Wehrenberg Theaters and the new theater in Country Club Hills, Illinois, both of which were added in fiscal 2016 in the fourth quarter, as well as the new theaters that we opened in Shakopee, Minnesota and Greendale, Wisconsin early in our fiscal 2017 second and third quarters. So if we exclude those new theaters, box office receipts actually decreased about 15.6% and concession revenues decreased 13.1% for comparable theaters during the fiscal 2017 third quarter compared to last year. For the first three quarters of the year, comparable theaters have reported a 3.6% decrease in box office revenues and a 0.3% decrease in concession revenues. Now those comparable theater results are the numbers that we can then compare to the rest of the industry. According to data received from Rentrak, a national box office reporting service for the theater industry and compiled by us to evaluate our fiscal 2017 third quarter and first three quarters. United States box office receipts decreased 13.4% during our fiscal 2017 third quarter after adjusting for new builds for the top 10 theater circuits. Indicating that our box office receipts as comparable theaters during the third quarter of fiscal 2017 slightly underperformed the industry by 2.2 percentage points. Performing that same calculation for our fiscal 2017 first three quarters, we find that U.S. box office receipts have decreased 4% during our comparable 39 weeks, meaning that we've outperformed the industry by 0.4 percentage points on a year-to-date basis. Now we believe that there were some unusual circumstances that contributed to our underperformance this quarter, and I'm going to let Greg speak to those numbers in his comments. I will point out that we once again had screens out of service during long portions of fiscal 2017 third quarter and the first three quarters due to renovations underway at multiple theaters. And despite these unusual circumstances, the fact is that we still now have outperform, we still have outperformed the industry average during 13 of the last 15 quarters. Now the third quarter comparable theater decrease in our box office revenues was attributable to a decrease in attendance at our comparable theaters of 17.4%, partially offset by an increase in our average admission price of 3.1%. For the first three quarters of the year, comparable theater attendance has decreased 4.4%, and our average ticket price has increased 1.2% compared to last year. Now modest price increase was taken last November and an increased number of premium large format screens with a corresponding price premium and a favorable change in film product mix, thanks to the fact that our top film this quarter was the R-rated movie, it contributed to our increased average admission price during the quarter. I will point out that during our third quarter and first three quarters of fiscal '17, the percentage of box office receipts attributable to 3D films decreased significantly compared to last year's films, so that dynamic contributed to a lesser increase in our average admission price during the fiscal 2017 periods that might otherwise be expected. In addition, we are pleased to report very healthy increases in our average concession in food and beverage revenues per person of 6.7% for the third quarter and 4.3% for the first three quarters of fiscal 2017. Our investments in nontraditional food and beverage outlets continue to contribute to this higher per capita spending. Also I want to share with you that we implemented modest admission and concession price increases in October 2017 that are expected to favorably impact our average admission and concession revenues per person in future periods.

Lastly, I'll point out that the approximately $1.5 million increase in consolidated other revenues this quarter and $7 million increase in our other revenues for the first three quarters of fiscal 2017 was primarily from our theater division. Pretty much all of the third quarter increase and over [one-half] of the year-to-date increase in our other revenues is attributable to the Marcus Wehrenberg Theaters, including preshow advertising income, internet surcharge, ticketing fees and rental income from the retail center that we acquired in the transaction. The remaining year-to-date increases in other revenues relates to comparable theaters and was due primarily to again an increase in preshow advertising income, internet surcharge, ticketing fees and breakage on presold discounted tickets.

Finally, as we talked about last quarter, one time preopening costs have impacted our first three quarter results for the theater division. If not for approximately $800,000 of preopening costs incurred this year related to our two new theaters, our year-to-date reported results would have been even better.

Shifting to our hotels and resorts division, our overall hotel revenues were up 2% for both the third quarter and first three quarters of the year with increased food and beverage revenues due to the opening of the new SafeHouse in Chicago in March, contributing to those increases. Increased room revenues from the new villas that we opened at the Grand Geneva as well as increased ancillary revenues from our EscapeHouse concept, our Graydient Creative web design business, and our inhouse laundry business have also contributed to our increased revenues. RevPAR at comparable owned hotels decreased 0.4% during the third quarter and has increased 0.5% during the first three quarters of fiscal 2017. Now -- I know 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 a small drop in group business during the quarter. Breaking out the numbers a little more specifically, our fiscal '17 third quarter overall RevPAR decrease was due to an overall occupancy rate decrease of 0.1 percentage points and a 0.4% decrease in our ADR during the quarter. Year-to-date, our overall 0.5% increase in RevPAR is attributable entirely to a 0.4 percentage point increase in our occupancy rate with our overall average daily rate essentially flat during the period. Now once again despite the challenges we face, we continue to significantly outperform our competitive set during this fiscal 2017 periods. According to data received from Smith Travel Research and compiled by us in order to prepare our fiscal third quarter and first three quarter results. Competitive hotels in our collective markets experienced a decrease in RevPAR of 4.8% during the fiscal 2017 third quarter and a decrease of 4.2% during our fiscal 2017 first three quarters. Our decreased operating income during the third quarter certainly reflects the impact of the reduced RevPAR from our owned hotels as well as to continue to startup operating losses related to our new SafeHouse Chicago, which are not necessarily unexpected when you open up a new restaurant concept in new market. In addition, comparisons to last year's first three quarters results were also negatively impacted by a one time favorable adjustment last year impacting our management company profits, and also then as well preopening expenses this year from the new SafeHouse. In fact, if you exclude those two items, operating income for our hotels and resorts division during the first three quarters of fiscal 2017 was essentially equal to operating income during the first three quarters of fiscal 2016.

Finally, a brief comment on our corporate segment, which includes amounts not allocable to our two business segments. Operating losses from our corporate items were unchanged during the third quarter, but increased during the first three quarters of fiscal 2017 compared to last year due to a -- due in part to increased Board of Directors costs, including one time costs associated with the acceleration of certain long-term incentive compensation related to the retirement of two Directors from our Board of Directors during the second quarter of fiscal 2017, and the unfortunate passing of another Director during the third quarter. Increased long term incentive compensation expenses resulting from our improved financial performance and stock performance over the last several years have also contributed to increased operating losses from our corporate items during fiscal 2017 year-to-date.

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

Thanks, Doug. I'll begin my remarks today with our theater division. Doug did a good job recapping some of the key third quarter numbers, and I'll give you a little more color. But as you can imagine, our focus is on what lies ahead of us, not on the month that are now on our rearview mirror. The story of the third quarter is really pretty simple. Film product was just not as good as last year and when that occurred in July and August, two prime summer months. The negative impact on operating income is not particularly surprising. In fact, given the amount of fixed costs inherent in our business, our theater management team led by Rolando Rodriguez deserves a lot of credit for effectively managing our variable cost as well as they did. And driving additional business to our theaters with the tools at our disposal that we can control in order to lessen the impact of the reduced box office. Of course, a bad July and August coming on the heels of a weaker than expected second quarter led to the inevitable articles written about the future of the movie theater business. Until of course, a scary clown movie was released in September and turn the narrative around once again. Customers returned to the theaters and droves during a month that is typically the weakest month of the film year, proven once again that when Hollywood releases good movies, good things happen at the box office. And what can easily get lost in the shuffle is the fact that we had a record first quarter this year contributing to our 13.5% increase in year-to-date operating income from this division. You've heard us say this before that it's very hard to predict in advance, which quarters will be up and which quarters will be down in any given year. But when you step back and look at the results from 30,000 feet, the business look significantly less volatile. With a highly anticipated fourth quarter slated films yet to come is not crazy to suggest, but the calendar 2016 might still up meeting or beating last year's record results. And even if it does fall short, the year will likely end up much better than some might have predicted in August. But that's what makes this business interesting and keeps us focused on the long term. I would tell you that 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. In our Marcus Wehrenberg theaters, we have intentionally chosen to take more screens out of service at one time than we've typically done in our other renovations. As we believe we have more to gain in the long run by getting as many of the renovations done prior to the upcoming November and December films that are expected to do well at the box office. You have heard us previously report that we have had as much as 5% of our Marcus legacy screens out of service during a significant portion of 2017. Well, during this past quarter, our percentage of Marcus Wehrenberg screens out of service for portions of the quarter for renovation was 3x that amount, nearly 15%. So that definitely impacted our result this quarter. I'd also be [we miss] if I didn't comment on our small underperformance of our theaters versus the national numbers this quarter. Yes, we had Marcus legacy screens out of service during the quarter again that impacted us. But the real story occurred in July, our reasons for variations in performance in any given month are never certain, we believe that the particular mix of films during July 2017 was not as favorable to our Midwestern circuit as compared to the films released during July 2016. For example, the top film during July 2016 was The Secret Life of Pets. And this family oriented film performed particularly well in our theaters as they normally do compared to the rest of the nation, contributing to our comparative underperformance to the industry in July 2017 versus July 2016. In addition, historically in our Midwestern markets, rain on the weekends or very warm weather often has a favorable impact on theater attendance. During July 2017, we can weather in the markets at which we operate was on average not quite as warm as July 2016 in order it have as many weekend days with the rain as it did last year. Our past experience has been the people in Midwest tend to enjoy outdoor activities once dry on the weekend and not overly hot. What leads us to believe that our July underperformance was an anomaly is the fact that on August, our results are more in line with the industry. And then in September, I review the national numbers indicates that we outperformed the industry by over 9 percentage points. Unfortunately since July box office revenues represent approximately 50% of our third quarter total box office revenues. That month had a disproportionate impact on our overall third quarter results. But we don't think fans of excuses around here. Our goal remains to continue to outperform the industry each quarter and I'm pleased to tell you that we did that in September, and we continue to outperform in October so far. Clearly, the investments we are making in our theaters are continuing to make a difference. And when you combine those investments with our innovative marketing and pricing initiatives along with our loyalty program that is now up to over 2.4 million members, good results should follow. And speaking of investments as evidenced by the capital expenditure numbers, Doug shared with you, we have been and continue to be very busy rolling out our successful amenities to new theaters, with a particular focus right now on our Marcus Wehrenberg theaters. We've got asked this question a lot. Let me give you a brief rundown and what has happened this past quarter and what we're working on now. During the first three quarters of fiscal 2017, we completed the addition of DreamLounger recliner seating to nine more existing theaters, including two theaters, one of which was a Marcus Wehrenberg theater, completed late in our fiscal 2017 third quarter, increasing our industry leading percentage of first-run auditoriums with recliner seating. The 66% are legacy market leaders and 56% overall, including the theaters we acquired in the Wehrenberg acquisition. This month we are completing the addition of DreamLounger recliner seating to four more existing theaters including three Marcus Wehrenberg theaters. And we are currently in the process of converting two additional Marcus Wehrenberg theaters to all DreamLounger recliner seating with expected completion late in the fourth quarter fiscal 2017, early in the first quarter of fiscal 2018. In addition, we opened one new Zaffiro's Express outlet during the third quarter of fiscal 2017, and expect to open two new Zaffiro's Express outlets, three new Take Five Lounge outlets and two Reel Sizzle outlets during the fourth quarter of fiscal 2017. We also converted one existing traditional UltraScreen to an UltraScreen DLX auditorium and three existing screens to SuperScreen DLX auditoriums during the third quarter of fiscal 2017, and converted one additional existing traditional UltraScreen to an UltraScreen DLX auditorium and two existing screens to SuperScreen DLX auditoriums early in the fourth quarter of fiscal 2017. We expect to convert one existing Wehrenberg branded PLF to an UltraScreen DLX, and have the six additional existing screens to SuperScreen DLX auditoriums during the fourth quarter of fiscal 2017 as well. So yes, the team has been busy. Obviously, our plan is to have as many screens as possible converted before many of the highly anticipated pictures in November and December that we listed in our press release start hitting our screens, which brings me 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 continue to execute on our operating and investment strategies, so that we will be prepared to capitalize like we did in the first quarter and the two fiscal years before that. And if a quarter disappoints, we will be prepared for that as well. We're looking at this business like we always do, the long term perspective.

With that let's move on to 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 a pretty good August sandwiched by a weaker than hoped for July and September. Once again the drop in group business was the main story, but also once again, we outperformed our competitive sets during the quarter by a pretty significant 4 percentage points. As we have shared with you in the past, our collection of hotels and particularly our largest hotels [relies] a great deal on group business and it's overall customer mix. I will tell you that some of the decrease in group business was unexpected and we hope a result of a nonrecurring issue. I'm not sure if I referred to the term group sales productivity in the past, but there was a particular challenge during the third quarter. Productivity relates to the percentage of group room actually sold versus the group rooms originally booked. During the fiscal 2017 third quarter, we had an unusually high number of groups contribute less actual room sold than we're originally booked. For example, for a particular city wide convention in Milwaukee this quarter, we were asked to book a 1000 room nights, and unfortunately, the actual number of room sold was significantly less. It's not that this doesn't ever happen, but I raise it because it was a larger issue for some reason in our fiscal third quarter. I have no reason to think this represents a trend, we think it was just specific to this particular batch of group bookings. In fact, if anything, we're encouraged by the fact that our group room revenue bookings for the remaining quarter of 2017 and for fiscal 2018 so far something commonly referred to as group pace in the industry are running ahead of 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. The productivity returns to more normal levels. The net would bode well for future periods in this division. Now, you've heard me say before, when group room revenues are down, we need to work very hard to replace that business with nongroup business. As evidenced by our outperformance versus our competitive set, we were able to do that better than our competitors. So I want to once again congratulate our outstanding management team on that outperformance. As is often the case, we did have to give up a little bit of average daily rate in order to [drive] occupancy, and that showed up in the numbers Doug shared with you earlier. Our hotels and resorts division operating results should continue to benefit in future periods from the new villas of the Grand Geneva. We're really happy with how that turned out. In addition, the Omaha Marriott Downtown at the Capital District in Omaha, Nebraska, a new hotel that we manage in which we hold the minority interest opened on August 8, 2017, an initial guest response to this hotel has been very favorable. We were also pleased to announce our assumption of the management of the Sheraton Chapel Hill hotel in Chapel Hill North Carolina in September. These two new management contracts will help to offset the loss of management fees from the two hotels that were sold in the last few months. We also continue to actively review opportunities to add to our portfolio managed hotels in the future, and we hope to have one or more of those come to fruition in the coming months. I want to close my remarks by commenting on our announcement today that the Westin Atlanta was recently sold for a substantial gain. You've heard us talk about our growth strategy of adding management contracts, often with a small minority equity component in the past. Well, I would suggest to you that the Westin Atlanta is a perfect representative for the -- what we would like to continue to do in the future. Five years ago this month with strong partners, we identified a hotel that we need the renovation and a better operating strategy. But had a lot of things going forward, including strong location. Together we bought it at a fair price and at the right time. And then Marcus Hotels and Resorts proceeded to oversee a significant renovation and manage the hotel with great results. For five years our operating results benefited from the management fees generated from this hotel. Not surprisingly with significant value created, our partners decided it was time to sell, we fully support them in that decision. After a successful execution [the sale] closed this month, and with our 11% equity interest as an opportunity for a promoted interest built into our deal, we will now be recognizing a gain of over $4.5 million in this transaction.

I know our analyst friends and our loyal investors are often value our company based on multiple of EBITDA, the result again of this type can easily be overlooked. But I'd be -- we miss if I didn't once again point out, the hidden value of this often inherent in strong asset base that makes up the Marcus Corporation. These assets and a strong conservative balance sheet that backs them up is one of the real strengths of your company.

And finally, before we open up 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 what's each and everyone of them does to contribute the success of both our businesses. I also want to share with you the news that we said goodbye this week to Joe Khairallah, who recently submitted his resignation as Division President and Chief Operating Officer with Marcus Hotels and Resorts to pursue global opportunities.

I'd like to thank you all for your service and contribution to these past four years. For the time being, I resume day to day operational oversight of the hotel division along with the support of our outstanding senior leadership team in that division. I am confident that we won't miss a beat as we continue to serve people, create memories and deliver exceptional experiences in our hotels and resorts.

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

Thank you, sir. (Operator Instructions) And our first question comes from Eric Wold from B. Riley & Co. You may begin, sir.

Thanks and good morning, guys. Couple of questions. I guess one, you mentioned that 15% or so of the screens are out of service during the quarter due to the renovations. I'm assuming a much lower percentage will be out during Q4, given the slate. Give a sense of what that could be and what we should assume for 2018?

Well, in October, which is the beginning of Q4, we're still in that same general range as it relates to the Marcus Wehrenberg theater, as we mentioned in the call, Eric, we're -- our goal is -- we accelerated our whole plan at The Marcus Wehrenberg theaters in order and try to be ready for [Thor] and a bunch of the pictures are coming out in November. So we still have -- really is equivalent of a couple of, I mean, we've got four, five auditoriums per location or more in some situations and you add them all up, we've got the equivalent of two full theaters basically still down in October in Wehrenberg, but you're right, once we hit November, we'll still have as Greg mentioned in his comments, we will have a couple of theaters that will continue on until the end of the year, but certainly will start to decline once we hit November. But to be clear just -- to make sure that [remark] was clear. The 15% only applies to The Marcus Wehrenberg set of screen, that's not the overall percentage.

Okay. And then on the hotel side, congrats on news on the Atlanta sale, I guess -- I kind of want to -- of course you think about your own strategy to sell your own hotels obviously, that was an opportunity possibly around the Wehrenberg transaction to do [reverse 1031], that has not occurred, maybe talk about just the environment out there, buyers versus sellers in terms of -- you can only get something done, if you're still out there looking for opportunities for minority interest ownership in hotels along with management contracts, I'm sure you understand the dynamics around evaluations and industry given on the buyer side, they're having interval time on the seller side somewhat?

Sure. I'll take it -- let me take it backwards. Your last question about, are we still looking for minority interests where we make acquisitions in that strategy, absolutely in that, as you can see that, that strategy worked. So that is when we continue to focus on. As it relates to hotels for sale, we continue to be out in the market, we're watching the market, now the market is -- it's not -- it's still a disconnect. We haven't seen the pricing that we want to see yet, but we continue to look forward, and we'll take advantage of it when we can.

Okay. And then lastly, it's a general question, obviously a lot of price out there on movie [pattern] subscription programs, what is your view on subscription programs in general that something you would consider implementing Marcus on its own or if you're to go with the third-party with revenue share deals with concessions or admissions even something you consider?

Well, it's hard for me to comment on movie pass, because I don't have access to their numbers and know what they're doing and know how it works in terms -- I managed a model (inaudible) I can read in the press. Look at, we have to watch all the pricing models, and I think the comment that they made originally when we talked about at a certain price point, the customers are going to do the math and we end up with a very self selected customers and we can bear out, because as you know, we are a pretty forward thinking company and we tested our own subscription service in some certain markets probably four years ago, maybe five years ago, and what we saw very [vividly], we were at about $30 and $35 a month, that it was a very self selected group and we weren't winning that bet, which is how we didn't extend it. Now at a lower price point, I'm not sure where that model goes, it's up for us to watch it. Then you bring up a very important point, which is, would you rather do it yourself or with a movie pass and frankly, I go back to one of the benefits of our loyalty program. For the first time in a two years or it was really once now (inaudible) place for few years, but if -- almost 80 years, we didn't know who was walking in the door. We now know and we believe that, that knowledge is power, and we think it's very important to make sure that we preserve and manage and own that relationship with our customer, and I can't say the number of people who would like to get in the middle of that. Movie pass clearly is one of them. And so, I think it's up to us as a company and up to us as an industry to be thoughtful and very careful about how we manage that relationship, because it's -- I think it's very important to us and will be important to us in the future.

Thank you. (Operator Instructions) Our next question comes from the line of Jim Goss from Barrington Research. You may begin, sir.

All right. Thanks. Couple of questions. I may actually just had a call on which they talked about the strong performance they had in September, especially relative to in the latest quarter relative to the industry. I'm wondering if you can pick out just how well your own PLF screens faired relative to the rest of your stable screens both of you have mentioned it of course, is there any way to look at that performance as a subset of your overall performance?

Yes, Jim, I don't have numbers at my fingertips, so that I could throw at you, but there's no question that [film] performed very well on our large format screens. As you heard, we reported a nice little increase in our average ticket price this quarter and certainly September had a part of that because of twofold. In my prepared remarks, I mentioned the fact that, okay, you had mixed of pictures and so you had (inaudible) picture being a number one film, and so certainly by definition your ticket mix is going to skew towards the higher price. But then, and I didn't mention, but you've actually, I think you were raising it, the fact that large format screens were a key element of our success certainly contributed to that as well, and we absolutely benefited from that picture playing on the large format screens and you've heard, I mean, we've had a, for sometime now we've had a pretty significant focus on expanding our number of large format screens. There's no exact statistics out there in the industry, but I haven't found anybody that has a higher percentage of large format screens than we do in our circuit in terms of the complexes that have at least one large format screen, because we think it's very key going forward. And you look at these next two months, I mean, look, we've had a strong push to try to even get more open and more converted, because when you get these big pictures coming up the way we do in November and December, that's where the customer loves to see the picture. And so, it's a pretty big focus for us, no question about it.

Okay. But in terms of financial results carving out those, do you try to analyze those screens relative to the rest of your.

We do, we don't share that publicly, but obviously, [IMAX] that's their business and so you can get those direct numbers from them. But, so we certainly do our own internal analysis, but I'm not prepared to share any numbers with you today.

Okay. And in terms of competitive situations, AMC just announced it was going to build an auditorium or a set of auditoriums in Orland Park, not very far from your -- a pretty significant property of yours and not to just talk about that situation, but how have these competitive situation has been working out for you, especially as the receiving initiatives have become more important?

Jim, that's a great point that you're bringing up. And yes, we notice that announcement. For us -- and what we've been very good about. And yes, we're going to see competition in our market, there's no doubt about it, but the team has been very focused on. We had a strategy from day one as I said, look, let's make sure that we keep our fingers as competitive as possible, and just to make sure that we minimize that this kind of disruption. And I would tell you that these -- that's what we've done and that's why our asset base is as strong as it is. And where we've gone up against them, we went, and so it's going to be a battle and we'll win the battle. But it is something that we have -- we got our eye on and we're focused on [intently].

The last thing I raise is dynamic pricing, ticket pricing, [regal] race with -- in conjunction with [atom] tickets earlier this week, have you been looking at that aspect and is that something you'd want to experiment with as well?

Well, as you know, we are a forward thinking company. We're always try and think about where the industry is going, and you could take the position that variable pricing is something that we've been involved in now for a while, especially if you think about our $5 Tuesday program, variable pricing could take many forms, it can be pricing based on the day, can be pricing based on the film. Now, we obviously have been doing the based in the film, but we are doing it based on the day of the week and we had success. I think what that points to and I think with the [regal] I think points to, why has our $5 Tuesday program work, and I've talked about this before. The reason of his work in a way, because we're not cannibalizing really much business out of our weekend business, because there is a certain group of customers that had left the theater, because don't forget, and I think Hollywood sometimes forget with the laws of supply and demand do apply to our business. And the more supply you pump into the ancillary markets at a very low price, which is what happens. Netflix, I don't know what the cost-per-view on a streaming service is, but it will. And so, as you pump supply into the low price downstream, you will ultimately impact upstream what's happening. And I think that it would be naive for anyone who is thinking about how the model -- what the model should look like to think that the moves they make will only have an isolated impact on what they are doing. They impact the entire chain, and so $5 Tuesday was in essence or reaction to what has been going on over a number of years. And so, but (inaudible) is doing, this continues to show that there is going to be reactions to what is going on our industry, we don't exist in isolation. Now, the good news is that our variable pricing model by day of the week has been very successful. And so, we watch (inaudible) doing very intently and we will see where things go.

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

Well. Thank you, everybody, for joining us once again. We look forward to talking to you again this time in February when we release our fiscal 2017 fourth quarter and year-end results. Until then, thank you. Have a good day and go see a movie. [Talk to you soon].

Ladies and gentlemen that concludes today's call. You may disconnect your line at any time. Everyone have a good day.