Marcus Corp (MCS) 2018 Q1 法說會逐字稿

Good morning everyone and welcome to the Marcus Corporation First Quarter Earnings Conference Call. My name is Victor and I'll 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'd like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you very much and welcome to our Fiscal 2018 First Quarter Conference Call. As usual, I need to begin by stating that we plan on making a number of forward-looking statements on our call today. Our forward-looking statements conclude, but not be limited to statements of 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 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 our Regulation G disclosures when applicable on our website at www.marcuscorp.com.

So with that behind us, let's talk about our fiscal 2018 first quarter. We once again reported record revenues with contributions from both divisions and record earnings as well, thanks to the lower income taxes. Our theatre division did not quite match last year's record operating income, but it again outperformed the industry and in fact reported a second highest quarterly operating income ever, even beating last year's Star Wars led fourth quarter. Our Hotels and Resorts division also reported small improvement in revenues and a typical winter operating loss during the quarter as well, recognizing that our first quarter will always be our most challenging quarter due to the seasonal nature of our primarily Midwestern hotels.

I'll now 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.

And there are number of changes to our financial statements due to new accounting guidance. So, I'll need a span of a little extra time today explaining those as well. And before I dig into each division, let's spend a few minutes on a couple of the line items below operating income starting with interest expense. Our interest expense was approximately $400,000 higher than last year due primarily to an overall higher average interest rate during the quarter. rising short-term interest rates on our revolver borrowings and our decision to execute 2 interest rate swaps during the first quarter, converting $50 million of variable rate borrowings to a fixed rate, accounted for the increase in overall interest cost this quarter compared to last year.

Now offsetting this increase in interest expense in the first quarter, was a corresponding decrease in losses on disposition of property, equipment and other assets. There can and will be variations in this line items each quarter, depending upon our real estate activity and the amount of write-offs that we may have related to newly renovated properties, particularly in our theatre division.

Now the next line item of our earnings statement. Other expense is a new line item this year as we are required to adopt a new accounting standard for pension costs this quarter. This new standard requires us to break our pension expense into 2 components; normal service costs related to pension participants who will remain above the line in operating income; non-service costs, reflecting interest costs and amortization of prior service costs and actuarial losses will now appear on this new line item below operating income. And you can find an annual breakdown of these costs in our footnotes to our financial statement in our recent Form 10-K filing.

In conjunction with adopting the standard, we are required to restate the prior year results as well to match the new method of presentation. So you'll see a comparable number in the 2017 column. Year-over-year, there was not a material change in this line item, but obviously, moving this cost below the line did have the impact of increasing operating income in both years. Of course, as we cleared the affected net earnings was zero here, all we did was move some cost that previously were above the line in operating income down below the line. So this is really just about geography on the earnings statement.

Now most significant change in our line items below operating income was, of course, the income taxes due to the new tax law enacted in December 2017. Our first quarter effective income tax rate adjusted for losses from non-controlling interest was 25.8% right in the middle of that 25% to 27% range that we previously projected and, of course, significantly lower than last year's 37.7% first quarter effective income tax rate. Shifting gears just for a moment away from the earning statement, our total capital expenditures during the first quarter of fiscal 2018 totaled approximately $16 million compared to approximately $22 million last year. And nearly $14 million of this total spend during the fiscal 2018 first quarter was occurred in our theatre division, a majority of which related to our continuing DreamLounger seating projects, premium large format conversions and new food and beverage outlets that we've been discussing for some time now. The $ 2 million of capital expenditures in our Hotels and Resorts division was primarily related to various normal maintenance projects.

At this early stage of our fiscal year, I have no reason to make any major adjustments to our previous estimate of CapEx for 2018 to be amounting the $65 million to $80 million range. Recognizing that as we pointed out in our recent 10-K filing, the timing of several of our planned expenditures are still just estimates at this point. We're still finalizing the scope and timing of many other various requested projects by our 2 divisions. And we anticipate proceeding with many of these projects as the year unfolds. The actual timing of the various projects currently underway or proposed will certainly impact our final capital expenditure number as well any currently unidentified projects or acquisitions that matter, that could develop during our fiscal year.

So now I would like to provide some financial comments on our operations for the first quarter, and as part of those comments, and I'll highlight some of the other accounting changes in our fiscal 2018 financial statements, that are important to note, as you compare some of the line items of last year. It's important to point out, however, there were some of the changes will result in a noticeable variation in specific line items, none of these changes had a material impact on overall operating income or net earnings.

So let's begin with theaters. As most of you know, we completed our acquisition of the Marcus Wehrenberg Theaters in December of 2016. So for -- so beginning here in the first quarter of 2018, the results of these acquired theaters are now in both of the reported period results, was certainly will make our comparisons of last few more meaningful.

With that in mind, our reported box office revenues decreased to 1.3% and our concession revenues increased 1.3% during the first quarter. Our Fiscal '18 numbers did include 2 new theaters that we opened during the second and third quarters last year, as well as an accounting change that negatively impacted box office revenues as well.

So let's talk about that first accounting change that I need to highlight. Through the first quarter of fiscal 2018, we like everybody else needed to adopt a new accounting standard related to revenue recognition. I assume most of you probably heard about that. We discuss the impact of this new standard in our recently filed Form 10-K, noting that it would primarily impact our accounting for our loyalty programs and our internet ticket fee revenues. Now in accordance with the new guidance, a portion of theater admission and concession revenues attributable to loyalty points that are earned by customers will now be deferred as a reduction of these revenues until the reward redemption occurs.

Prior to adopting this new standard, we recorded the estimated incremental cost of redeeming loyalty points at the time they were earned in advertising and marketing expense. That's during the first quarter of 2018. While the net effect of these changes in accounting for our theater loyalty program was essentially a net zero on our operating income. It did result in a decrease in theater admission revenues, a small increase in theater concession revenues and a decrease in advertising and marketing expense.

Now where this does become important is when we attempt to prepare our theater results to the rest of the industry. The data that we've seen from Rentrak, the national box office reporting service for the theater industry, represents gross box office receipts reported to it and by definition would be before any such deferral of revenues for accounting purposes that we or any other exhibitors might record. Thus we need add back the impact of this revenue recognition accounting change to our reported admission revenues in order to get the numbers that we can then compare to the rest of the industry.

So, according to data received from Rentrak and compiled by us in order to evaluate our fiscal 2018 first quarter results, U.S. box office receipts decreased 0.6% during the fiscal 2018 first quarter. After adjusting for the deferred revenue from our loyalty program our first quarter box office receipts decreased 0.4% compared to last year. So as a result, we believe our box office receipts for the first quarter fiscal 2018 outperformed the industry by 0.2 percentage point.

Now I want to point out that we outperformed the industry despite the fact that we once again had a number of screens out of service approximately 2% of our screens were out of service during long portions of the fiscal 2018 first quarter due to renovations underway at multiple theaters. We've now outperformed the industry average during 15 in the last 17 quarters and I would point out that Greg to dissect our first quarter performance versus the industry in a little greater detail during his prepared remarks. As film mix did have an unfavorable impact on our performance versus the national numbers this quarter.

The first quarter theater decrease in our box office revenues was attributable to a decrease in attendance at our theaters offset by an increase in our average admission price of 3.6%, a modest price increase taken in October and an increased number of premium large format screens with a corresponding price premium contributed to our increased average price this quarter. Our average admission price also likely benefited from a change in our film mix compared to last year.

Our top 2 films during the fiscal 2017 period where the PG-rated family movie, Beauty and the Beast and the Lego Batman movie, which by definition likely resulted in a higher percentage of lower priced children's ticket sold. Compared to our top 2 films during the first quarter of fiscal 2018, which included the PG-13 rated films Black Panther and Jumanji.

Now we are pleased to report increase in our average concession at food and beverage revenues per person of 6.4% for the first quarter. Our investments in non-traditional food and beverage outlets continued to contribute to higher per capita spending. And I'll also point out that the theater other revenues this quarter increased by approximately $1.4 million compared to last year. Now well as a small portion of this increase is due to increased pre-show ancillary revenues. The vast majority of the increase is related to another accounting change related to the internet ticketing fees that I referenced earlier.

Prior to the new revenue recognition standard, we recorded these fees net of third-party commissions or service fees. Under the new guidance that we adopted in the first quarter, we're recognizing ticket fee revenues gross, based on a gross transaction price. Now this change had the effect of increase in other revenues and increasing other operating expense by an equal amount, but had no impact on operating income or net earnings.

Lastly, it should be noted that the weather in the Midwest during the first quarter of fiscal 2018 was harsher than it was last year. As a result, our reported fiscal 2018 theater division operating income and margins for that matter were negatively impacted by approximately $400,000 of increased snow removal and heating cost compared to the fiscal 2017 first quarter. If you calculate our operating margin of theater admission without these added cost and without the impact of the accounting changes because by definition while the revenues came down, down the actual operating income didn't change. You find that there was a very little change in margin this quarter compared to the same quarter last year.

Shifting over to our hotels and resorts division. I want to start by briefly discussing a change in how we report hotel revenues. As you know, we manage multiple properties for other owners. In conjunction with those management agreements, we incur various costs, the largest of which is payroll that are reimbursed by the respective hotel owners. These costs are generally reimbursed dollar-for-dollar and we've historically netted the reimbursement against the cost in our earnings statement. As the amounts were determined to be immaterial for our financial statements and the net effect of this reimbursement activity by definition is zero.

Beginning with the first quarter of 2018, we've elected to make immaterial restatements and report these reimbursed costs on a gross basis. While we do have 2 very small management contracts in our theater division, the vast majority of the dollars that are now appearing on our earnings statement as both the revenue item and an expense item equal amounts relate to our hotel division and are now included in our hotel revenue segment data.

We've restated the prior year to conform to the current year presentation. Given as these amounts have zero impact on operating income or net earnings, we've chosen to show a subtotal of revenues before cost reimbursements in order to aid in comparability to prior years. And we have included cost reimbursement amounts in a footnote to our segment data as well to help you with comparisons to prior year reporting as well.

Excluding these cost reimbursements, our hotel -- overall hotel revenues were up 3.1% for the first quarter. Thanks primarily to a 5.1% increase in food and beverage revenues and the 29 new villas at the Grand Geneva Resort & Spa. The largest portion of the increase in food and beverage revenues is due to the opening of the new SafeHouse in Chicago in March of last year. Inversely, our total revenue per available room or RevPAR was down 2.4% during the first quarter compared to last year. As we've noted in the past, our RevPAR performance did vary by market and type of property.

Breaking out our numbers more specifically, our fiscal 2018 first quarter overall RevPAR decrease was entirely due to an overall occupancy rate decrease of 2.5 percentage points, partially offset by a 1.2% increase in our average daily rate or ADR. 4 of our 8 company-owned hotels reported increased ADR in RevPAR during the first quarter compared to the first quarter of fiscal 2017.

Now according to data received from Smith Travel Research compiled by us in order to compare our first quarter results, comparable upper upscale hotels throughout the United States experienced an increase in RevPAR 1% during the fiscal 2018 first quarter, but that is not actively reflect our predominantly Midwestern presence. According to Smith Travel, competitive hotels in our collective markets experienced a decrease in RevPAR of 3.2% during our fiscal 2018 first quarter. Thus, as you can see we outperformed in this division as well this quarter.

Finally, I'm pleased to tell you the result of these increased revenues and the fact that last year's results included pre-opening expenses from the new SafeHouse in Chicago, operating losses attributable specifically to our 8 owned hotels and resorts decreased during the first quarter of fiscal 2018 compared to the first quarter of fiscal 2017. And before I turn the call over to Greg, let me briefly address the increase in our corporate segment operating loss this quarter as well compared to last year. As our stock price has increased over the past few years, so has the value of our long-term compensation. We also had increased legal expenses this quarter and that's a line item that will always have some variations from quarter-to-quarter depending on what's going on at that time.

Finally, we've also increased our contributions to our various Pension 401k plans as well as our charitable giving in 2018. Both in response to the reduced income taxes we're now experiencing.

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

Thanks, Doug. I'll begin my remarks today with our Theatre division. As you know, expectations for this first quarter in 2018 were pretty well as we were going up against the #2 movie of 2017 Beauty and the Beast, as well as an all-time record for Marcus Theatres. And so, well our operating results did fall slightly short of last year, the surprising performance of 2017 holdover films that include: Star Wars, Jumanji, and The Greatest Showman, plus the breakout performance of Black Panther, put us in a position to report our second best quarterly performance of all time, regardless of time period. Given what most prognosticators we're suggesting about the first quarter compared to the strong first quarter last year, our industry is proving to be very difficult to predict once again. In the end, the tenants was still down versus last year, but our management team and operational staff led by Rwanda Rodriguez worked extraordinarily hard each and every day to maximize results with the product that was available.

As Doug shared with you, we once again outperformed the industry this quarter albeit with the smaller differential than some of our previous quarters. I can say with some confidence, however the film mix this quarter compared to last year, likely had a negative impact on our comparative performance, which is the overall industry numbers. As I just mentioned, last year the top film during the quarter was Beauty and the Beast. Our Midwestern circuit performed very well with this film and in fact, overall, we believe we outperformed our normal share of total box office for this movie.

This year the top film was Black Panther. All other movie did very, very strong business in our theatres. An analysis of top of 100 markets in the U.S. shows that this year, the Midwest trailed the Eastern seaboard in the South on this film. As a result, it is not a surprise to us that while we still outperformed the nation overall during the first quarter, the differential was much smaller than prior quarters. Given the film mix headwind this quarter that I just described, the reason we still outperform the industry was clearly because of the improvements we are experiencing at our markets Wehrenberg theaters.

For competitive reasons, I'm not going to share the specific numbers, but it would be fair to assume that these theaters significantly outperformed the industry during our first quarter. And frankly, that outperformance is only increased during the early release in the second quarter. We told you that we acquired the Wehrenberg Theatres, that was our goal to take our unique package of marketing, pricing and operational strategies and combined with the significant investment to add amenities such as DreamLounger recliner seats, proprietary premium large format screens and our signature food and beverage concepts, our secret sauce if you will and apply them to these theaters. I believe we're beginning to see the positive results of these efforts. And I want to once again congratulate Rolando and the team on the tremendous amount of time and effort they've put in over the last year on these theaters. I truly believe they will be a bright spot for us in 2018.

As we look ahead, we're excited to continue to invest in both the new and existing theaters during fiscal 2018. As we further expand the successful concepts and amenities, they have contributed to our industry outperformance. As our press release notes, we have several more theatre renovations currently underway. We also look forward to begin the construction on our second BistroPlex, all in-theatre dining location at Brookfield Square in Wisconsin in the near future.

Our second quarter had started off pretty well, even though we did have to deal with some record-breaking April snow that impacted several of our markets. And we are once again outperformed the industry by a meaningful margin during these first weeks of the quarter. Our press release highlighted some of the films scheduled for release during the second quarter. On paper, they look very good. So at this point, we certainly expect a strong quarter compared to last year, and with strong pre-sales of Avengers kicking off tonight. It looks like we will get off to a running start.

So coming back, now I start our remarks. It is difficult to predict the box office. We hope the next 2 quarters of 2018 turn out to be a strong at the box office -- at the box office as some are suggesting. And if it does, we'll be prepared to capitalize what we have in the past. But if one or more films disappoint, we'll be prepared for that as well. We're looking at this business like we always do, with a long-term perspective. And with that same long-term perspective in mind, I would be missed if I didn't note that we continue to be very interested in expanding our circuit with selective acquisitions if appropriate opportunities arise.

We'll always be disciplined in our approach, but we also believe that we are demonstrating currently, how we can add value to theatres and we'll welcome the right chance to bring our special sauce to more theatres in the future.

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. Given that most of our company-owned hotels are located in the Midwest. We typically lose money in this division during the winter months and the first quarter of fiscal 2018 was no exception. But as Doug shared with you, thanks to a good effort by our top-notch sales and management team, both our corporate offices and at each of our owned and managed hotels, we outperformed our competitive hotels in our respective markets and reduced our operating losses in this division.

As Doug shared with you, RevPAR was down 2.4% for the quarter, but that was partly mathematical issue, the addition of the new villas at the Grand Geneva contributed to increased dollar revenues at this property, but a reduced occupancy percentage due to having more rooms available during the slower time of year. You'll note that total room revenues were only down 1.3%. Overall total revenues increased this quarter due to both increased food and beverage revenues, thanks in large part to the SafeHouse Chicago, and increased other revenues. Thanks in part increased key revenues to the Grand Geneva. So I guess there is a good side, the additional snow we got this year.

They weren't any significant variations in our various customer segments during this traditionally slow time of year for us. Group business was up slightly overall, but the Milwaukee market saw a decrease due to the fact that last year, the city had 2 major basketball tournaments in town in March. Men's NCAA first and second round bracket and the women's Big East tournament. Overall, as Doug shared with you, 4 of our hotels reported increased RevPAR in this quarter and 4 hotels reported decreased RevPAR. And not surprisingly, down the result was a quarter that was just slightly better than last year.

Looking into future periods, our group room revenue bookings for future periods in fiscal 2018 something commonly referred to in the hotels and resorts industry as group pace, running just slightly ahead of the group room revenue bookings for future periods last year at this time. From a growth perspective, 2018 is off to a good start with the addition of 3 new management contracts as described in our press release. We continue to actively review opportunities to add to our portfolio managed hotels in the coming year. We also continue to seek opportunities, we might invest equity in new hotel opportunities as well.

Conversely, we also continue to open -- we also continue to open -- we are open to reviewing opportunities, so one or more owned hotels, depending upon a number of factors that we've described in the past. There is no secret hotel transaction market, has not been particularly robust in the last couple of years.

So, we'll continue to show patience as we review such opportunities. And finally, reinvesting in our existing hotels will always be an important part of our success as well. We are getting ready to begin a significant reinvestment in our Hilton Madison Hotel in 2018. And we are also actively preparing for our 2019 conversion of the InterContinental Milwaukee into an exciting new independent arts-focused hotel.

Before we open the call for questions, I want to conclude my remarks by once again highlighting the final summary section of today's press release. During the first quarter, we showed once again the willingness and ability to return capital to shareholders, while still pursuing an active growth strategy. For the fourth time in 3 years, we increased our quarterly dividend, this time by 20% that larger than normal increase combined with investments we are making and we'll continue to make in the future, in our associates, in our community. Our all direct response to the recently enacted tax reform legislation and despite a continued active CapEx plan, our debt to capitalization ratio remain at a remarkably well 40%, giving us a great deal to flexibility to pursue future opportunities, whatever they may arise.

Speaking of our associates, I want to thank all the people that work so hard every single day making ordinary days extraordinary days for our guests. With that, at this time, Doug and I'd be happy to open the call up for any questions you may have.

(Operator Instructions) And our first question comes from the line of James Goss from Barrington.

So I was wondering, since you've come back from CinemaCon, wondered if you may talk about any takeaways you had, any issues and competitive responses that you might be thinking about and it could be hot-button issues, film slates, stereo exhibitor relations or any new services that struck you?

Well, let's go right to the bright side, I think the film slate, I mean again and I try to never prognosticate, but it's hard to not get excited about what looks like to be a year that still was really a great product, certainly this summer, should be much better than last summer we hope I mean again, you never know that's why they play the game, but again we're off to a great start tonight. So I think everybody was pretty excited about, about what was going on. It was certainly no shortage of things to talk about, but I don't think there was anything that was particularly surprising.

So nothing in particular that sort of bubble to the surface, that you think would cause you make any movement or anything of that sort?

I don't think so, Jim, I mean -- again we -- an overused term that we use in all the time comes in our long-term focus, but I mean, look, we've got -- we don't have our eye just on next week, but over the next years and so we obviously -- you just move the plan accordingly as you need to, but I don't think there was anything that bubbled up in the last 3 days that we know, already know is out there and that we're dealing with, and again I think there were some very positive feeling that we're coming out at overall.

I tell you, there is certainly no sure the guy is selling seats out there, which we actually (inaudible) for us is a great validation in a way of the strategy that we were -- we really moved quickly, talks to the benefit of owning our own real estate because we worked the first one with the recliners, but we saw it early in the cycle, we were able to (inaudible) on our real estate, accelerate that deployment on a relative basis this with from the pack of the major operators, for that I think we are going to see all these people selling seats as well as -- probably pretty good idea. Actually one of those actually have a massage unit, I like that, I'm hoping we put that up (inaudible).

We remain on pace to be with the projects that we've got going on as we speak and we can complete in the next couple quarters, we remain on pace to be probably in the 75% range in terms of penetration in our screens with the DreamLounger recliner seats and that's, again that's the piece of the whole puzzle as we've talked about in the past, it's not just the seats, it's -- we think we're the best in the business in the food & beverage. I think that was validated as well as CinemaCon when you see all the focus on food & beverage that was -- that we heard about and saw on the trade show. We've identified that earlier, and we think we are the best added, so I think that our penetration here is higher than anybody else and as you already know we've large format screen, our penetration I think we got 80 of them today with -- and there was 69 theaters and I don't think anyone has got that level of penetration as well.

Okay. And to the point about the seats, given that there are a variety of seats, does this enable you to potentially use something less extreme in some smaller markets and receipt more than 75% ultimately by not spending quite as much money perceived on some of the new initiatives?

I don't think, I'm sure that there are out -- that those exist. I mean, we were seeing, I think you are bumping the 2 dynamics, we're seeing in some of these markets that we're -- that when we do the re-seating, when you do it right, you really can -- you can drive so the bit you extend your radius on your trade area, people will drive for good experience and I think about I go back to hit the (inaudible) pull the grandfather card out, but I go back now 3 generations to feeling about what my grandfather said about the first theater which we still have to this day in Ripon, Wisconsin, the campus theater and talking about how -- it is really important to really do it right and to spend the money and create something that was special even in the small family middle of Wisconsin and that strategy that will work through and friends will walk (inaudible). I think you'll see [gym] as we move forward is that as we simply go to the natural cycle of refreshing theaters and we've always talked about, how we're very disciplined about trying to make sure that we reinvest in our properties. Most likely, we're going to be -- some point you put new seats in and why wouldn't we deploying the new recliners and the question IBS, because that's the feeder of tomorrow.

Okay and fair enough. And just one small one on the hotel side, are any -- changes in mix with some of the new relationships you are developing creating the potential impact to reduce any seasonality from the original Midwest focus?

You know, so much of our cash flow comes from the owned hotel, I mean, the astronomical proportion compared to what we get from management contract that it really -- it did, doesn't now.

Exactly, I mean the dollar, dollar range on these management contracts, given the size that we get a percentage of the revenues, (inaudible) not going to notice that so much, so as long as we have the current mix of our owned hotels that's seasonality, we are going have to live with.

That's from management perspective, that's very good, it is good news on a -- from supervisory perspective is if I need to go somewhere and work, let's do more outlets.

Exactly.

(Operator Instructions) Our next question comes from line of Mike Hickey from Benchmark Company.

Obviously Q2 looks great on paper, huge franchises, I think it's pretty easy to sort them all out of big number, but sort of curious, I guess, your view on the spacing of [thumbs] in the quarter and you sort of see that as an opportunity loss I guess when you think about the second half of the year and maybe just sort of -- I think about the pressure, I guess on the consumer seats or did film so to call of each other? I have a follow-up.

You know that there is -- there is always a concern, but that you know, we got a great picture in the first quarter on Black Panther, I mean it's a mix, but again we guess on these all turn out, I mean we're all -- I hope we're all right, but what's the hourly plays out.

I guess just thinking about maybe your medium-term type growth opportunity in your hotel business still sort of like steady state here obviously go incremental upside with management contracts, your theater business is certainly been exceptionable, but now it seems like you're kind of achieving scale in terms of your (inaudible) rollout, so just sort of wondering how you see here -- where you see, I guess your medium opportunity for growth.

The first thing that will come to mind for me, in the near term is going to just be what we expect, what we hope to see from our markets Wehrenberg theaters Mike. When you think about those theaters in 2017, job one was to absorb them operationally, we put a $5 choose a program and right away, a few months later with the loyalty program in and we introduced a lot of our operational policies and procedures and, but the capital really been go into the near the end of the year -- the latter half of the year and so I think that there is still, I mean if you talking near term, I think that's, I think the 2018 is going to be the year not kind of what hear, that we really see some of the real benefits and what we try to do and how we try to add value to that existing chain. So, I certainly think that we still have some nice runway with those properties. We have a number of efforts and throughout the rest of the circuit as well in terms of things such as we got a major focus. We talked a lot about in some of our meetings in CinemaCon this week, a very major focus on sales, on sales effort. Rolando likes to use the word that we're hunters that we don't just sit back and wait for the customers to come to us, but we go out there and we're hunting customers rather seeking customers and taking some ownership of our business and there's lot of examples of that, lot of things we do, although touch on one of them which is our group sales effort. We have people who every morning wake up in the morning, looking for groups, looking for opportunities to be able to bring people into our theaters and so, I mean there's a number of efforts like to add, those are things where we still think we have the ability to move the needle, in the short term just on the existing stuff, never mind the capital.

We always have lot of leavers to pull. If there is -- we're consistently -- as my remarks said we're out looking for -- we're looking for opportunities, if anybody has any data how to find me and I was joking with (technical difficulty) they just call you out, send him a note, if you got something for sale.

We're open to that, but it's not -- we have other ways of -- we will look for other opportunities and if there are not opportunities then we'll return capital to shareholders.

The nice process we have.

Fair enough guys. I guess the last one on opportunities to grow attendance. How you see the sort of the eSports market potentially taking shape or form within [tactical] space by offering the space I guess seems like add CinemaCon this year, they were so pretty clever examples of how you can sort of combine the eSports and theater market together and drive the tenant and excitement, maybe even the demographic perhaps that is not a strong in the theaters maybe the degeneration, I am just sort of just curious you guys have always been pretty innovative and forward experimented with the idea, if you do see it as a potential way to grow in medium-term?

I don't even know how to answer the question yet, Mike. We have been looking at it because yes, you are right. We want to keep an eye in that stuff, we do keep an eye on it. My hope is at the vision throughput or if all times that we can -- to make it make sense. That it's interesting, anytime you can take something and throw it upon the big screen like that, it really does have one, it really have some great impact. And I've checked out, I checked years ago, I checked out the legal legends and so there's something there but we don't know what this yet.

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

Listen, we like to thank all of you once again for joining us today. Maybe we'll see some of you in less than 2 weeks at our upcoming annual meeting on Tuesday, May 8, at our new BistroPlex Cinema in Greendale, Wisconsin. And for those of you can't attend, we certainly we'll be webcasting the meeting once again as well. We also look forward talking to you once again in July, when we release our fiscal 2018 second quarter results. Until then, thank you and have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may now disconnect. Everyone have a great day.