Good morning everyone, and welcome to The Marcus Corporation first quarter earnings conference call. My name is Omicka, 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 would like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Well thank you and welcome to our fiscal 2011 first quarter conference call. As usual I need to begin by saying that we plan on making a number of forward-looking statements in 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. Our expectations about the quality, quantity and audience appeal of film products expected to be made available to us in the future, our expectations about the future trends in the business group in 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 non-operating lines on our earnings statement and our expectations regarding future capital expenditures. Of course our actual results could differ materially from those projected or suggested by our forward-looking statements. Factors, risks and uncertainties, which could impact our ability to achieve our expectations are included in the risk factors section of our 10-K and 10-Q filings, which can be obtained from the SEC or the company. We will, of course, post all Regulation G disclosures when applicable on our website at www.marcuscorp.com. So with that let us talk about our fiscal 2011 first quarter results. The positive trends in our hotels and resorts division continued in our first quarter resulting in substantial year-over-year improvements in that division, but even though our theatre business reported reduced operating results, we were able to report increased revenues, operating income and pre-tax earnings this quarter. So we are pleased with that. Before I get into quarter results, however, let me first briefly address any variations in the line items below operating income versus last year. As you can see,…

Thanks Doug. I will begin my remarks today with our theatre division. I think it has been pretty widely reported in the national press that this summer’s film slate didn’t create a lot of excitement amongst the movie going public, continuing a trend we saw in the last two months of fiscal 2010. While we had several films that performed well during the period led by the outstanding Toy Story sequel, the latest Twilight film, and the well-made original film Inception, we didn’t have a lot of depth to the film slate this time around. The indication of this is the fact that last year we had seven films produce at least $2 million of box office receipts for our circuit during our first quarter. This year we only had five films reach that mark. That second tier of films can make the difference between the record revenues we reported last year during the first quarter and a good but not great quarter like we just reported this year. As Doug pointed out, partially offsetting our decreased attendance this quarter was another increase in our average ticket price, driven once again by the premium associated with 3-D films and the fact that we have more 3-D screens and more 3-D films to show this year versus last year. Three of our top six films during the quarter were exhibited in digital 3-D including Toy Story 3, Despicable Me, and Shrek Forever After with approximately 50% of our revenues from these films coming from 3-D screens. In addition, as our press release notes, we were pleased with the customer’s response to our new UltraScreen XL3-D screens, and we are proceeding with the addition of large screen digital 3-D to three more of our existing UltraScreens. Once installed, 11 of our 13…

(Operator instructions) We will go first to David Loeb with Baird. Please proceed.

Thanks gentlemen. I wonder if we could start on theatres, can you give us a little color at least on the Appleton acquisition, if not explicitly the purchase price what kind of returns you expect, purchase price would be great?

You know, eventually David, you will probably see the purchase price. At this point in time we’re not disclosing as the transaction hasn’t closed yet, but you know, it is – we have done a couple of other acquisitions. This is a single theatre. It does include real estate, which would tell you that the multiple is a little higher than if it was a lease, and our past acquisitions had kind of a mix of real estate and a few leases. It is Appleton, Wisconsin, so from a – certainly we know the market well. We have been there. We’re already there from a market perspective. It is not Milwaukee or Chicago, and so from an average box office perspective it is probably a little less on average. But for the market it does very well, and it has been a very consistent theatre and we certainly applied our usual metrics in terms of how we have evaluate the investment, and feel that it certainly will be an accretive investment for us. And we are pleased to have it.

Good theatre. A good piece of real estate.

Yes.

Given it is perhaps lower box office, is it fair to say this is likely somewhere below what we have seen as kind of an average of 0.5 million of screen

Now you are talking on a purchase price standpoint now?

Yes, but just kind of general, not explicitly, we think 0.5 million of screen maybe around the going rate. So, given what you just said, is this likely to be less than that?

Well, you know, I have shared with you in the past that when including real estate we can’t build a theatre for $0.5 million a screen. So, depending on – in Appleton the land cost is not going to be as much as we're building in Chicago. So in the past we have typically built a theatre from anywhere from $750,000 a screen to $1 million a screen or more in some cases. So, I would suggest that because there is real estate involved, and the past average you saw had a mix, you’ve got to build that into a little bit.

Okay. That makes sense. Thanks [ph]. Greg on the 3-D, I have asked you several times about the business model, are you still kind of in the same place with the distributors, where the revenue splits are running around the same for 3-D even though it is a higher ticket price and you have to put in additional capital, or has there been any movement on that?

You know, to have the distributors decide to let us have more money?

That they really want you to show these movies in 3-D?

You know, they are eager to have them shown but not that eager. The margins continued to be the same and we face – look at these guys have got a lot of pressure, and their business is really quite challenged, their whole model is challenged. And so they are pushing on every end, and they are pushing on us and it is – so, the answer to your question is no. The margins are no better.

The incremental revenue mix worthwhile to make this investment, could you continue to roll it out to more and more locations?

It is a positive David is that there is incremental revenue because we still get to keep 50% or little less than that of the increase in price. So, a chunk of that goes to cover our investment and the operating cost of 3-D. We pay, we pay through realty a fee, and so we have got that going on, but there is increased margin, and the thing that catches our eyes, which is no secret is that we’re seeing the box office, you are seeing increased box office and less people just the industry as a whole. And you know for us that is not the equation we like a whole lot because we make money when we get – we need more people coming in the door, and how is 3-D impacting that I’m not quite sure yet. The jury is still out. We have to be very careful, and as we pointed out in our prepared remarks, movies that are not very good, but are 3-D and the big rush to 3-D so that they can sell them for more money. That is very short-term thinking and we’re concerned that – we don’t want that to happen too much because it can negatively impact us on the long haul.

So, you may sell fewer tickets, but certainly sold less popcorn?

Got it.

Yes, okay. That is bad for everybody.

David, I would just jump in, the only caveat I would put would be that on the film cost issue and we have actually mentioned it briefly at our last conference call is that with our UltraScreen XL3-D we had found, and this is not enough to move the needle enough that you have noticed the big picture, but we have found that it was our desirable screens, and so we have had some situations where the studios have been willing to negotiate a little bit more on film rental if they can get that screen, which puts us in a position of as more product comes out saying, how badly do you want that screen?

Yeah.

And so in fact, the ones we're putting out – the new, the latest announcement was just three more of the UltraScreen XL3-D.

And this will get you to 85%, I’m guessing that you will hit the last 15% in time as well (inaudible)?

For the rhyme and reason to why we picked these three, but I certainly would think – we are heading that way with all the screens ultimately, in general at least.

Yes, okay. That makes perfect sense. On the hotel side, I guess as you come into the fall, particularly a time as you said that is a little more group dependent, a little less leisure dependent. Is occupancy getting high enough that you are comfortable with some kind of rate increases, and what have you locked in for group going forward, and is that going to hold back rate increases?

I guess, I will respond first, the last half of the question, I mean as we have indicated the bookings, the pace has been better, or was but it has been better. The rates that we’re locking in that we are booking here are still lower. I mean there has been a little bit of movement there, but in general there is still – there is just as much pressure on that group booking rate as there is elsewhere right now, and so that still is a challenge. It is certainly lower than where it was. On a year-over-year basis, we are making a little bit of progress. As it relates to the fall itself, and even it really reflects how we kind of managed the business this past summer as well. As Greg indicated, it wasn’t across the board, I mean, in average overall as indicated we were down 2.2% in ADR, but it wasn’t all 8 properties. We have a separate strategy for each property and in that market. So, we’re trying to approach it from a market by market basis, and Greg gave the example of Grand Geneva where I mean in the summer it was important to have people on campus. And so that was our approach with that property, but we are dealing with it on a property by property basis, and trying to push the rate a little bit in a couple of these properties.

I mean that has been – David as you know, in this business right now, everybody is seeing big occupancy drives, and not getting the rate. Now we’re pushing, we are pushing to get the rate. That is what we have been telling our guys, let us go out and get some more rate. I don’t think that we have got – it is not as – (inaudible), if there seems to be a clip with the leisure guys like could push the rate, sure. Let us turn off the faucet.

Right.

That is very frustrating. It is not so much with the group. And we’re pushing for it, and we will see how we do over time.

That makes sense. Last topic is capital allocation, you have spent on keeping your hotels fresh, which clearly is paying off. You have spent a little bit in this most recent acquisition, and you have been buying back stock. How do you view looking ahead, let us say the next year, how do you view your opportunities for investment? Do you think your stock is still likely the best use of your capital at this point?

Well, I mean the stock that we bought – you saw the numbers, basically the same that we talked about in July. So it was earlier in the quarter. Our remaining focus on trying to look at some opportunities to grow the two businesses that certainly would be our preference. But having said that, nothing is off the table in terms of buying back stock could be in the mix, dividend policy. I mean, we have talked about that in the past. That could be in the mix. We are not excluding any of the options at this point in time, and acquisition of a single theatre came along. We wanted to make sure we have the ability to do that. Clearly, right now with our balance sheet we have got the ability to do more than that and we are focused on seeking some of those opportunities right now.

Are you seeing – I am sorry, go ahead Greg?

So, we look at these issues virtually every day, and I think what you will see is that we continue to we keep making. Yes, we take measured steps as we go along, and we will just keep doing that. So if the stock is appropriate, we will buy the stock back. But we are probably not going to make – we’re just going to keep making measured steps. That is what we do with our company and so it is – how we have always operated like that so we will continue to do.

Are you seeing interesting opportunities out there? It does look to us from our vantage point that the major urban market hotels are well bid, there are a lot of buyers out there for them, but in some of the secondary markets, it seems like there is less and it does seem like there is some distress situations that are beginning to percolate up and be disposed of. Are you seeing more opportunities there?

Yes, the volume has picked up a little bit. It is not excessive, but it is happening. And we keep looking at properties, and you are right, in the good urban markets, it is not surprising to see 15, 20 bids on something now, but we keep looking at it, and we’re looking in all markets.

And I assume the same in theatre, are you still looking and talking to people, but it is just a matter of when opportunities arise?

Yes, theatres are completely different. There is nothing driving that necessarily. It is just somebody – it is more personal motivation what is going on with a family member. Certainly, given the business robust nature over the last few years, there is not really anybody pressed to sell anything.

Okay, great. That is what I had. Thanks.

Thanks David.

(Operator instructions) Your next question comes from the line of Herb Buchbinder with Wells Fargo. Please proceed.

You know actually, I kind of answered my question, I thought there were enough properties out there in the hotels that you might be able to do something this year, and maybe you just could give us an idea if you thought there is a good chance you would be able to acquire a hotel property in 2010 and even 2011? Do you think that is in the cards?

You know, Herb, as Greg said, we have got a decent list of projects we are working on. To be clear, and as Greg said in his prepared remarks, we’re looking at this in a variety of different ways, and so it might not necessarily mean acquire a ninth company-owned property that would be structured that way. We are looking to expand our management business. We are willing to co-invest. And so there is a variety of different ways that we are looking at trying to grow that and you know, the project list in the our development guys are working on right now is maybe a little bit longer than what it was previously, but it is not – as Greg said, it is not excessive. So, it is hard to tell if we will have several of them hit or we will have one of them hit. We certainly have some dollars set aside in our capital budget for something to happen.

You typically have an equity interest when you manage your property, what percentage of the managed properties due you have an actual equity interest in the whole property?

Today we have of the 11 managed properties that we have, we have an equity interest in 2 of them that are just the traditional equity interest, and we have a 15% interest in 2 of that we are managing. However, another two of them are those condo hotels that we certainly have a financial interest in as well. It is not structured the same way. So, 4 out of the 11, we have some sort of financial interest, and the other ones are straight management contracts.

As you look at some of these deals in the future, is that something that you like to do, has it had the equity interest, or it is not a major consideration when you look at doing a management deal?

You know, we are willing to do both. We think it is a strategic advantage for us, not every management company can do what we can do in that perspective. So we think that in some cases that does provide with a competitive advantage, but some of the deals that we are pursuing may just be straight management as well.

All right. Thank you.

Your next question comes from the line of Marla Backer with Hudson Square. Please proceed.

Thank you. I was hoping we could get a little bit more color on the 3-D footprint that you are growing, so in your markets where you have upgraded to 3-D what percent of the total 3-D footprint do you comprise? Are you it, or are they other 3-D players?

There are other 3-D players. It depends on which markets you are talking about Marla, but in some markets we are it, and in some markets there are other three players.

Again with the caveat that in general, we have the vast majority of the screens in our specific markets. Now, if you can define the market as Chicago, there are 3-D players. If you are going to be a little more narrow about the definition of the market, and talk about the various zones in Chicago, then we tend to be – the 3-D competition will just be in an adjacent zone where someone will be driving theoretically kind of out of their normal territory to just go see a film, but locally here in Milwaukee there is a theatre that is kind of in the centre of town that has an IMAX 3-D.

And in your theatres where you have the 3-D screens, are you providing side-by-side 2-D screens on the same title?

It depends on the title Marla. It depends on what the distributor’s preference is, what our preference is.

You know, with all the major titles, the answer will likely be yes. But (inaudible).

Right, nobody showed that.

Right.

And then has there been any change for you in terms of the day-to-day operations of Screenvision given all of the potential changes with management there?

No. We had a good summer for our advertising ancillary income and the operating folks have been consistent. The short answer is no.

Okay, good. And then my last question, just so that I understand when you are talking about on the hotel business, the group bookings, that is also corporate but it is unrelated to convention business, is that how I should think about that?

Yes. I mean, two of our hotels are convention hotels in Milwaukee and Madison that have convention centers, where they are getting citywide type of activity as well. So group business is a sub – convention business is to subset of that, but on the broader sense, Grand Geneva does lots of group business. The Milwaukee Hilton, which is a convention hotel also, does its own group business that is not associated with the convention business. So, yes, it is corporate group business that is vast majority of that business with convention citywide type activity being a subset.

Thank you.

You are welcome.

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

All right. We certainly want to thank you once again for joining us today. We hope to see some of you at our annual meeting on Wednesday, October 13, at the North Shore Cinema in Mequon, Wisconsin. For those of you who cannot attend, we will be web casting that meeting. We also look forward to talk with you once again in December, when we release our second quarter fiscal 2011 results. Thank you and have a great day.

That concludes today’s call. You may disconnect your line at any time.