Good morning everyone, and welcome to the Marcus Corporation Third Quarter Earnings Conference Call. My name is Sue, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [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.

Well thank you very much and welcome everybody to our fiscal 2013 [sic] third quarter conference call. As usual, I do need to begin by stating we plan on making a number of forward-looking statements on our call today. Forward-looking statements could include, but not be limited to statements about our future revenues and earnings expectations, our future RevPAR occupancy rates and room rate expectations for our hotels and resorts division, expectations about the quality, quantity and audience appeal of film products 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 non-operating line items on our earnings statement and our expectations regarding future capital expenditures. Of course, our actual results could differ materially from those projected or suggested by our forward-looking statements. Factors, risks and uncertainties, which could impact our ability to achieve our expectations, are included in the risk factors section of our 10-K and 10-Q filings which can be obtained from the SEC or the company. We'll also post all Regulation G disclosures when applicable on our website at www.marcuscorp.com. With that behind, let's talk about our fiscal 2013 third quarter. I am going to spend a few minutes going 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. First, as you can see, there were no significant variations in a majority of the other income and expense line items below operating income. The small increase in investment income was offset by a small increase in our interest expense during the quarter, as…

Thanks Doug. I will begin my remarks today with our theatre division. Anyone that knows our business, certainly understands that the unpredictable nature of the quality and the quantity of film product, can cause significant variances over the short-term. Three months ago, I was on the same call, sharing with you details behind a record quarter for our theatre division, and indicating that our fiscal third quarter was off to a good start, because it was. We had a very good holiday season this year, highlighted by all four of the movies we listed in our press release, as our top films for the quarter. Unfortunately, we wouldn't keep that momentum going into calendar 2013. Box-office revenues were down five of the last eight weeks of our fiscal 2013 third quarter, compared to the prior year, and not by small amount, wiping out all the gains we had experienced in December. In most cases in the past, the reason of our decline at box-office [received] was pretty simple. The top movies this year didn't perform as well as the top movies during the same period, the prior year. That was not the case this quarter however. When I take a look at the performance of our top 15 films this quarter compared to last year, I was surprised to note that this year's top 15 films produced box office receipts that were 4.7% higher than our top 15 films last year. Doug earlier pointed out to you, that our total box office revenues for the quarter, were 5.8% lower than last year. On the surface, it would appear that these numbers conflict with each other. Of course, in this case, the answer for this apparent contradiction lies in the next year of films. We had a very deep slay of…

Thank you. [Operator Instructions]. Brian Rafn of Morgan Dempsey Capital. Please proceed.

Good morning guys.

Hey Brian.

Give me since -- going back to the President's speech and he was talking about raising minimum wage, from I think what $7.25 to $9. How does that affect the hospitality payroll SG&A and then your cinema, where you have got a lot of, certainly entry level kids, college kids, high school kids looking for a job? How does that impact staffing?

How does that affect staffing?

I mean, the President goes from $7.25 minimum to $9, I mean, what's kind of the impact? I mean, it's obviously, it's a pretty big hike in minimum wage, and how will that affect obviously payroll for you guys in the movie business?

Well, naturally that would push payrolls up, if it happened, and I can't tell you where we all sit on an average, I don't know, I don't have that number at my fingertips what the average pay rate is. But simply, even if we are above it, it pushes everybody up. So that would impact. Now that couldn't affect staffing. We haven't determined at this point what that will do to staffing, or whether that's a cost that we'd pass along to the consumer with that's something that we'll have to take up as we know more definitively on what the game plan is.

Okay. You talked a little bit about, I think the hotel side, primarily, in the third quarter, it's not generally a profitable quarter. Historically, what is your -- I mean, do people from a travel standpoint, be it business or retail traffic for your hotels, do they disappear, thanksgiving to Christmas and then you get a little bump at New Year's or -- what is -- or is the seasonality a weakness in lodging pretty much the entire quarter?

You know Brian, I think that, while certainly there are some nuances that occurred related to the holidays. I think the bigger issue is group travel. I mean, given that we are primarily in the Midwest, there are a lot of conventions going on here in Milwaukee for example, in those months, and so group travel is a significant component of what happens, and group is a big part of our business overall. So that tends to be -- I mean, there is nuances in every piece of the business, leisure travel as well could be impacted, but...

The last two thirds of the quarter tends to slowdown. And as you get past holidays, as you get into the first of the year, and business is slowing in the Midwest, where the weather is, I don't know where you are Brian, but right now it's sunny, but not beautiful here.

I'm in Milwaukee. So it's colder than you know what, so. I know it. Okay, give me your sense, you talk about certainly the supply expansion in hotel rooms down, and let's say downtown Milwaukee. What for us real estate novices, what is the total kind of, you talk about upscale, total upscale room count when these new hotels come online in downtown, and does that at all change, just as a layman I hear this, that Green Bay could never have a Super Bowl, because there is nowhere to put anybody, and Milwaukee is not a big convention town. But if we are adding rooms, does that not give Milwaukee a better footprint for building convention traffic?

You know the problem with that Brian, is that the rooms aren't being built by place. The rooms are being built -- are being built nowhere near the convention center. There was a study done a number of years ago, and what it said, this is before any new rooms were added to our market, and what it said was based on the convention space that we have now currently in our market, based on the size of the convention center, we have enough rooms. The problem we have, basically sort of on a rooms per square foot basis, there is a certain metric. We have enough rooms, and the -- but the problem is, they are not headquartered around the convention center. There is little hotels all around. So now, if you are thinking about expanding your convention center, you want to try and either add rooms to our property, to the Hilton, or you want to try to add another hotel, you are already going to impact the market negatively, because those rooms don't go away, hotels rooms don't become something else, you know, it's not like retail space. So now, even with that being the case before, we've compounded the problem, because we are now building -- I think we are going, I am looking at the numbers right now. I think the numbers are, we are going to go from 3,000 rooms downtown to 4,000 rooms over the next few years, that's on the books. So we are getting about a 30% increase -- I am sorry, we are going from 3,940 rooms, to 4,954 in a relevant market downtown. Then there is some more to be added on. So roughly, we are going to end up with about 30% increase in supply, when all is said and done and everything gets built; and again, none of it's near the convention center. In fact, one of the things is competing with the convention center, because the Potawatomi Hotel is going to be competition to that. So it's not helping the convention business, it's not beneficial and in fact it's a detriment because now how do we expand our convention center to bring more convention business to Milwaukee. It's a real challenge.

Okay, all right. That's good. You guys talked about I think, given the traffic in the cinema, you guys were still up on the food side. Was the per average ticket higher in food consumption? I mean, you guys constantly do a fabulous job and you know, with your Zaffiro's pizza and all of the different amenities, have you seen even lighter traffic that perhaps you had a greater penetration in concessions per ticket or per admissions?

Brian, I shared those numbers earlier in the call, so maybe you have might have missed, and let me repeat them. Our average concessions were up -- per person, concessions of food and beverage we lump them together, were up 4.2% for the quarter, and for the first three quarters of the year, they are up 5%, so they are doing very well.

All right. Thanks guys.

Thanks Brian.

Thank you. The next question comes from the line of Jonathan Pong of Robert W. Baird. Please proceed.

Hey good morning guys.

Hi Jonathan.

I just wanted to drill a little bit into the Hilton Garden Inn right there in downtown Milwaukee and it opened in November. I know it's probably still little early, but I want to see if you guys had any kind of anecdotal thoughts on how that's impacted your business, whether they have come in, pricing wise at a level where you are seeing a meaningful impact to demand at the Pfister and Intercon and some of your other properties?

Look, pricing wise, I think as they happened, they are trying to get a good rate. I don't think they are coming in to undercut the rate in the market. Now while there is someone else who will do that ultimately and face this competition, the answer is unclear, but they aren't doing that. You look at the [cumbersome or the] [ph] weakest times of the year, so I think everybody is feeling them a little bit, because I think the anecdotal, I heard that there is business going there, but it's -- but I don't know the numbers for a fact, but I suspect that they are taking some from everybody, because I don't know if there is a lot of new demand.

Makes sense. Speaking of demand, when you look at maybe spring or summertime on a convention calendar in Milwaukee, how's that shaping up this year? Is that something that you guys see being a potential boost year-over-year or is it flat?

'13 actually is good, I don't know the percentage that it's not, but '13 is supposed to be a very good year here. '14 and '15, not as much.

We have got the '13, the summer for example ends with another Harley event, which is nice. But I have heard the same thing that '13 there is no business on the books at the convention center, just in general, and the city is very good.

Great. And then Doug, I think you mentioned earlier in the call that your CapEx expectations for fiscal 2013 is going down, I think from last quarter or -- last quarter when you guys reported, you said it was 35 to 50, it's now down to 25 to 35. Is there a change in scope of project, or is that just a timing difference where --

Completely timing, Jonathan, all the same projects. There weren't any projects that came off the time table. There were a couple of them that we have been working on, that we had thought maybe we'd get underway to spring, but just -- if they do, the dollars won't be impacted in this quarter so much, so it's really timing.

Are those going to be disrupted hotel side, where it could impact Q1, I guess fiscal 2014?

No, we stated in fact, that's part of what we are talking about is that -- because we don't ever want to disrupt the key summer time period in hotels and -- or either of the businesses, to be honest with you, and so, there was at least one project that I am thinking of, that probably will be pushed off until the fall, just because we don't want to disrupt things.

Okay, that makes sense. Greg, just on the Corners project. Can you give a little more detail maybe where you guys stand in terms of getting the all clear in terms of proceeding with this project? Is this maybe seventh or eighth inning, or do you handicap?

You know, if you want to put it in baseball terms, I'd like to think that we are going to be at that point in -- where that was the latter half of the game to understand, if we are going to get the go or no-go on this. As we've said before, we've rattled off in the prepared remarks, I refer to them as all these spinning plates that are kind of in the air, and every one of them is important, and every one of them, I think is -- still has positive momentum and positive progress, and as Greg kind of said in his prepared remarks, we are just not going to force the timing of it, it's going to happen as it's going to happen, and -- every one of the elements has seen progress since the last time we talked.

Great. That's all from me. Thanks guys.

Thank you. [Operator Instructions]. Our next question comes from the line of Jim Goss of Barrington Research. Please proceed.

All right. Thank you. I have a few. One, I was wondering, Doug, could you possibly clarify the -- say an all-in adjusted EPS figure? You have a lot of moving parts here of things you are adding or subtracting in, including the amount that you said was the non-controlling interest item, which was very large. Is there any offset to that, anywhere else in the income statement, or is that just all taken out and separated out, and so what would be sort of truth, if you try to get an adjusted EPS number?

Well, okay. So first of all, let me deal with the non-controlling interest question, and that accounting change that we did -- I did spend a little time on it last quarter, but its' confusing, so I appreciate the question. The accounting guidance has changed, and we are not required for -- we have two entities, two properties now, it’s the Cornhusker and the Skirvin that we are majority owners of, but there are minority interest partners, and we consolidate both of those hotels in our results, and 100% of their revenues, 100% of their operating income and any of their activity are -- will be in our financial statement. So there is no minority interest that's backed out, kind of above the line if you will. That's why you also see that $6 million of that unusual debt extinguishment income kind of above the line, above pre-tax income. The accounting guidance now requires us to, again, put the entire entity and then we back out the non-controlling interest at the bottom, to get the net earnings attributable to The Marcus Corporation only. So in this case, you know, you see the $6 million for example, coming in. you see $5 million, $6 million or $7 million, I don't have the number in front of me, coming out, with really the difference then just being any other kind of operating income from those two entities, that belongs to somebody else. Operating income or loss that belongs to the partners. That's how the non-controlling interest is concerned. So, the line is called net earnings, I don't really use that number, because it's a number that includes stuff that's not for The Marcus Corporation, but for the public shareholders. That's why -- so you back that out, and you come down to the net income attributable to the Marcus Corporation.

Okay. So that is an adjusted figure in itself because --

That in and of itself is an adjusted figure, and that's just Marcus Corporation income, with the minority income --

But you mentioned the legal charge, but I wasn't quite sure if that was in any of the items --?

Yeah, no. But now we also mentioned a couple of the unusual items, that adds up to about in this quarter, about $2 million or we did the quick math and suggest, if you tax effect it as well, $0.04 per share, actually a little more than $0.04. We are just pointing -- those are in our operating income numbers, the legal expenses, if you will notice the admin expense line and the SEC section of the P&L, that's what you'll notice [entirely], that's where those legal charges are. And the impairment charge has its own line, that we took on one particular theatre, a budget second run theatre. So I am raising those two issues, just to indicate -- if you look at these numbers, it's a little bit more behind and they just are normal operating activities.

All right sounds good. Then on the theatrical side, have you -- or can you talk even in some terms about the difference between 2D, 3D and premium ticket prices in the quarter? It seems like there was less of an impact, and it was more driven by my attendance levels and that potentially in the next quarter, we are getting more 3D product taking out the ticket pricing. Could you talk about those items?

Yeah, well I would tell you there was -- I don't think 3D was a major component in this particular quarter. Although, I will tell you that our top picture was The Hobbit, and that was offered in 3D as well. So to the degree that, when you look at that 3.9% increase that I mentioned in our average admission price for this particular quarter, which is two points higher than our year-to-date average. The mix of films and the fact that our top picture had, within 3D, probably both contributed to that. But as I look at the list of our top 15 pictures, in both this year and last year, 3D was not a major component for the most part. But as you correctly noted, there are a fair number of 3D pictures coming up in May and heading into the summer. In fact, there were most listed as 3D, than not in that list of some of the kind of expected big potential hits.

All right. On the lodging area, you mentioned that you never make any money in the third quarter because of the Midwest locations, and to the extent that you have added some Nebraska type locations, and even though I think it did had an Atlanta location. Do you have any strategy to embrace other locations, maybe further south, that might have somewhat of an offset in the quarter? Or is there some geographic consistency you want to maintain, just from a management standpoint?

Well, what I would point out Jim, keep in mind is that obviously our company-owned properties have significantly, and these numbers show up significantly more than our joint venture type properties. So we mentioned Atlanta, which doesn't show up at all in any of the numbers, other than one line, which is equity earnings and losses from joint ventures, as a net number of other properties that we have as well. So given that our -- we certainly haven't ruled out that we could buy another hotel or be a majority owner of other hotels, we did it with the Cornhusker, but we have also pointed out that's not necessarily our predominant strategy and that's where we are seeking management contracts and other projects that have partners. It's just as likely that we could get additional properties that would be off balance sheet. So it won't change that particular dynamic that you are talking about. It just so happens as we grew this company on the early stages in particular, that when we were still putting hotels primarily on our books, that they were Midwestern properties. But we are looking at properties all across the country, and we are not focusing on any particular geographic regions, and while we have to be here in Midwest, because there is some operating advantage to us.

Little bit, but as you hire, given the size of the investment, the magnitude of the assets, you are putting some pretty talented professional management in place at the location. So is it helpful they have some management, you are sending someone out to the West Coast or sending someone (inaudible), it's helpful, and we will look to be strategic about that. And as we make from an overall investment standpoint, as [slivers] that up, as you make equity at other places, that could have some balancing impact, but that will be more of an investment, than a P&L impact to equity.

All right. Thanks very much.

Thanks Jim.

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

Well, thank you everybody, and we appreciate everyone joining us. We look forward to talking to you once again in July this time, when we release our fourth quarter and year-end fiscal 2013 results. Until then, thank you and have a great day.

Thank you. That concludes today's call. You may disconnect your line at any time. Thank you for joining and have a good day.