The Marcus Corporation (MCS) Q2 2017 Earnings Report, Transcript and Summary

Good morning everyone and welcome to The Marcus Corporation Second Quarter Earnings Conference Call. My name is Amanda and I will be your operator for today. 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 would like to turn the program over to Mr. Neis for his opening remarks. Please go ahead sir.

Thank you Amanda, and welcome everybody to our fiscal 2017 second quarter conference call. As usual, I need to begin by stating that we plan on making a number of forward-looking statements on our call today. Our 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 product expected to be made available to us in the future; our expectations about the future trends in the business group and leisure travel industry and in our markets; our expectations and plans regarding growth in the number and type of our properties and facilities; our 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. So, with that behind us, let’s talk about our fiscal 2017 second quarter and first half. We are pleased to be reporting another quarter of increased operating results, despite what has been a well documented as a challenging quarter for movies, and thanks to an outstanding first quarter, we’re sitting at the half way mark of fiscal 2017 with consolidated revenues up 19.3% consolidated operating income up 24.2% and consolidated net earnings up a significant 32.4%. And while this is only our second year, I’m officially reporting on a calendar year cycle, we don’t hesitate using the word record several times in our press release. Our theatre division once again outperformed the industry as did our hotels and resorts division despite some calendar comparison challenges in that business this quarter. And as we referenced in the release, just as one time our pre-opening cost impacted our first quarter results for our hotels and resorts division, the fact that we have recently opened two new theatres resulted in significant onetime pre opening cost in that division during the second quarter. If not for nearly $600,000 of pre opening cost incurred in our second quarter related to the new theatres, our reported results would have been even better. I’m going to take you through some of the detail behind the numbers both on a consolidated basis and for each division and then turn the call over to Greg for his comments. Now before I dig in these divisions, I am going to spend a couple or few minutes on a couple of the line items below operating income starting with interest expense. As I shared with you on our last call, the majority of the increase in interest expense this quarter and for the first half is due to the fact that we assumed several capital leases in conjunction with the Wehrenberg acquisition last December. The vast majority of the increase in interest expense – is the interest expense portion of the rent payments that we made on those assumed leases. Now we did have increased borrowings compared to last year due to our capital expenditure program that has also contributed slightly to the increased interest expense but our overall average interest rate decreased compared to last year due primarily to a change in the mix of our debt portfolio offsetting most of the impact of the increased debt. You will also note that we reported gains and disposition of property and equipment this quarter compared to losses last year, due to the fact that we sold two theatres during the quarter, one of which had closed several years ago and one of which was operating as a budget theatre until mid-May at which point it was closed and subsequently sold. In addition, a hotel that we managed and held the minority interest end was sold earlier in our second quarter also generating a small gain. Offsetting a portion of these gains was the continued write-off of some theatre equipment as we continue our extensive renovation program at several of our theatres. Our first half effective income tax rate adjusted for losses from non-controlling interest was 37.3% slightly lower than last years’ first half effective rate of 39.2%, we would expect our effective rate for the remaining corners of fiscal 2017 to be close to our past historical kind of 38% to 40% range. Shifting gears away from the earnings statement for a moment. Our total capital expenditures during the first half of fiscal 2017 totaled approximately $55 million compared to approximately $42 million last year at this time. Nearly $43 million of our total spend during the first half of the year was incurred in our theatre division. Almost one half of which related to the two theatres referenced in our press release. With the remaining portion related to continuing to continuing DreamLounger seating projects, premium large format conversions and new food and beverage outlets that we’ve been discussing for some time now. The approximately $12 million of capital expenditures on our hotels and resorts division during the first half of fiscal 2017 were primarily to the new SafeHouse Chicago, the new villas are the Grand Geneva and the sort of other renovation and maintenance capital at our owned hotels. Halfway through our fiscal year, we are now adjusting our previous estimate for capitals expenditures for fiscal 2017 of an amount in the $100 million and $220 million range, recognizing that the timing of several of our planned expenditures are still just estimate this time. The actual timing of the various projects from the [Indiscernible] proposal certainly impacts our final CapEx number as will any currently identified projects or acquisitions that could develop during our year. Now I’d like to provide some financial comments on our operations for the second quarter and the first half beginning with theatres. Our box office revenues increased 18.5% and our concession revenues increased 23.4% during the second quarter and have now increased approximately 28% and 30% respectively year-to-date. But obviously those numbers include the Wehrenberg theatres and the new theatre in country club hills both of which opened out or were added in our fiscal 2016 fourth quarter as well as a new theatre that we opened in Shakopee Minnesota early in our fiscal 2017 second quarter. So if we exclude those new theatres, box office receipts actually decreased 4.1% in and concession revenues increased 1.6% for comparable theatres during the fiscal 2017 second quarter compared to last year. For the first half of 2017 comparable theatres have now reported a 3.1% increase in box office revenues and a 6.9% increase in concession revenues. Now those comparable theatres numbers results are the numbers that we can then compare to the rest of the industry. According to data received from Rentrak which is a national box office reporting service for the theatre industry and compiled by us to a value at our fiscal 2017s second quarter and first half results, the United States’ box office receipts decreased 4.8% during the 2017 second quarter after adjusting for new bills for the top 10 theatre circuit, indicating that our box office receipts at comparable theatres during the second quarter of fiscal 2017 outperformed the industry by just under one percentage point. Performing that same calculation for our fiscal 2017 first half, we find that the U.S. box office receipts have increased 0.9% during our comparable 26 weeks, meaning that we have outperformed the industry by over two percentage points on a year-to-date basis. Now I want to quickly point out that we outperformed the industry despite the fact that we had nearly 5% of our comparable screen out of service during the long portions of fiscal 2017 second quarter and first half due to renovations underway at multiple theatres. We’ve now outperformed the industry average during 13 of the last 14 quarters. The second quarter comparable theatre decrease in our box office revenues of 4.1% was attributable to a decrease in attendance at our comparable theatres up 3.6% and a decrease in our average admission price of 0.4%. For the first half of fiscal 2017, comparable theatre attendance has increased 3% and our average ticket price has increased 0.1% compared to last year. Now despite a modest price increase taken in November, and an increased number of premium large-format screens with a corresponding price premium most important takeaway from the lack of any meaningful change in our average price increase is a the reminder that film mix can and does have an impact on our average price. During our second quarter and first half of fiscal half of fiscal 2017 the percentage of our box office receipts attributable to 3D films decreased significantly compared to last years films. As you know 3D films have a premium added to their ticket price and last years films led by Captain America Civil War were just more 3D friendly. In addition, our top film during fiscal 2017 to date was the PG rated family movie, Beauty and the Beast, which naturally results in a higher percentage of lower priced children’s tickets sold, compared to our top film during the first half of fiscal 2016, which was the R rated film Deadpool, which understandably would result in a high percentage of higher priced adult tickets sold. Now conversely, we are pleased to report an increase in our average concession revenues including beverage revenues per person of 5.9% for the second quarter and 4% for the first half fiscal 2017. Our investments in non-traditional food and beverage outlets continue to contribute to higher per capita spending despite the fact that our top film this year so far was family fare that likely negatively impacted our sales of some of those non traditional food and beverage items. Lastly, I’ll point out that approximately $2.7 million increase in consolidated other revenues this quarter and our $5.9 million increase in other revenues for the first half of fiscal 2017 was primarily from our theatre division. About one half of the increases related to comparable theatres and was due primarily to an increase in pre-show advertising income, internet surcharge ticketing fees and breakage and presold discounted tickets. The remaining increase in other revenues is distributable to the Wehrenberg theatres including preshow advertising income, Internet surcharge ticketing fees and rental income from the retail center that we acquired in the transaction. Shifting to our hotels and resorts division, our overall hotel revenues were up 0.6% for the second quarter and 1.9% for the first half of fiscal 2017 with increased food and beverage revenues due to the opening of our new SafeHouse in Chicago in March contributing to those increases. RevPAR at comparable owned hotels decreased 1.5% during the second quarter and has increased 1% during the first half of 2017. And as we have noted in the past, our RevPAR performance did vary by market and type of property. But as our press release notes, our overall results were negatively impacted by the fact that Easter was in April this year compared to the end of March last year, contributing to a drop in group business during the quarter. Breaking out our numbers more specifically, our fiscal 2017 second quarter overall RevPAR decrease was entirely due to an overall occupancy rate decline of approximately two percentage points, partially offset by a 1.1% increase in our ADR during the quarter. Year-to-date our overall 1% increase in RevPAR is attributable to a 0.6 percentage point increase in our occupancy rate and a 0.2% increase in our overall average daily rate. Now the good news is that despite the challenges we faced, we significantly outperformed our competitive set during this fiscal 2017 periods. According to data received from Smith Travel Research and compiled by us in order to compare our fiscal second quarter and first half results, competitive hotels and our collective markets experienced a decrease in RevPAR of 4.3% during the fiscal 2017 second quarter and a decrease of 3.9% during the fiscal 2017 first half. Thus we’ve outperformed these two periods by approximately three and five percentage points. Our decreased operating income during the second quarter certainly reflects the impact of the reduced room revenues from our owned hotels and year-to-date one time preopening cost related to our new SafeHouse Chicago that have had a negative impact on our reported results. In addition, comparisons to last year’s first half results were also negatively impacted by one time favorable adjustment last year impacting our management company profits. I’m pleased to tell you that operating income attributable specifically to our eight owned hotels and resorts has actually increased during the first half of fiscal 2017 compared to the first half fiscal 2016. Finally, a brief comment on our corporate segment, which includes amounts [not available] to the two business segments. Operating losses from our corporate items increased during the second quarter and first half of fiscal 2017 compared to the same period last year due in part to increased board of directors 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 for the second quarter of fiscal 2017. Addition of increase short and long-term incentive compensation expenses resulting from our improved financial performance and stock performance has also contributed to increased operating losses from our corporate items during the fiscal 2017 periods. With that, I’ll now turn the call over to Greg.

Thanks, Doug. I’ll begin my remarks today with our theatre division. And comparing to my comments today, I took a quick look back and what I had to say last quarter. As you recall, most prognosticators were suggesting that the first quarter might be the most challenging quarter of 2017 particularly compared to the strong first quarter last year. Instead, the industry had a great quarter and we reported record results proving once again how difficult our industry is to predict. I specifically noted in my prepared remarks that we need to be prepared to take advantage of times like that because as we all know, history tells us that there will be quarters where the film product does not live up to expectations well. I must tell you I would have preferred to not be proven correct so quickly, but look, this is the reality of our business. There will be times when the film product connects with the movie going public and exceeds expectations and there will be times like our recently completed second quarter where it doesn’t. Although I do respect the authors of some of the inevitable articles that have been written recently, once again suggesting the imminent demise of the movie theatre business you excuse me if I reuse a well worn statement and note that we have seen this movie before. In fact, extending that analogy even further, one of the common themes I’ve heard is that the industry is suffering from [sequelpathy] that the customer has seen that movie too many time before. To that, I’d say that I certainly agree that the studios have a tendency to rely too many times unknown titles and that we believe new, original content is always needed. But lets put things in perspective, well reviewed sequels such as the recent Spiderman and Planet of the Apes films have performed well, and I certainly don’t hear anyone complaining about another Star Wars film coming out this year. There is nothing wrong with good films in an established franchise, but in the end, the movies have to be good and resonate with the customer. In this quarter, unfortunately there were a few too many that didn’t but that’s what makes this business interesting. There is always a new set of films scheduled to open each weekend and you’ll never really know for sure when the next unexpected blockbuster will show up, which brings us back to the same comments I made last quarter under entirely different circumstances. When the film progresses great, our goal is to outperform the industry and take advantage of the tremendous leverage in our business. Due to the high fixed cost component of our business model, by producing above average margins and returns, we did that in our first quarter. And when the film product is lacking like it was this past quarter, our goal is to still outperform the industry, seek opportunities to manage our costs and drive additional business to our theatres with the tools at our disposal that we can control. And I would submit to you that our outstanding management team led by Rolando Rodriguez and a great group of experienced and savvy executives and operators were successful in doing just that during our fiscal 2017 second quarter. And I will tell you the film part 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 theatres, but we have [Indiscernible] excuses around here. Despite all that, we reported record theatre operating results during the second quarter, and when added to our standing first quarter results, we are in a great place half way through the year. Clearly, the investments we are making in our theatres are continuing to make a difference, and when you combine those investments what are innovative, marketing and pricing initiatives along with our loyalty program that is now up to 2.3 million members with the integration of the Wehrenberg loyalty program. The result is record breaking performance for our theatres. Certainly a great deal of our focus during the first half has been integrating the new, the 14 new Wehrenberg theatres into our circuit. I feel our integration efforts are going but will admit that we had hoped to be further along with our capital investments at the theatres by now. Between negotiations with landlords, fine tuning the renovation plans and costs, and seeking the necessary municipality approvals it has taken longer than we had hoped to make meaningful changes to these theatres. I am pleased to tell you that we now have multiple renovation projects underway at our Wehrenberg theatres. We will complete our first [remodeled] conversion of all the auditoriums of one key theatre in the next few weeks and several other recliner conversions are now underway with food and beverage upgrades to follow. Most of these won’t help us during the third quarter as we once again have a number of screens out of service, but our plan is to have as many screens as possible converted before many of the highly anticipated pictures in November and December start hitting our screens. At the same time we continue to pay a lot of attention to opportunities to expand our successful amenities to the more original market leaders. As the press release notes, that the first day of the third quarter we had added DreamLounger recliner seats to seven more existing theatres increasing our industry-leading percentage of first owned auditoriums with recliner seating to 64% for our legacy market leaders and 32% overall including the Wehrenberg theatres. Upgrades are currently underway at five more theatres, including the Wehrenberg theatres I just referenced. And finally, our press release highlighted the fact that we opened a new theatre with all the latest amenities in Shakopee, Minnesota early in fiscal 2017 second quarter and our new entity to dining concept BistroPlex opened in Greendale, Wisconsin on the first day of our third quarter. This latest new theatre as our tagline calls it our restaurant of service movies looks great and the results to date are encouraging. This is definitely a concept that we could see ourselves expanding to additional locations in the future. As you look ahead, our press release highlighted some of the films scheduled for released during the third quarter. Comparison to last year’s third quarter films like may be challenging due to the strong performance of films such as Secret Life of Pets, Suicide Squad and Finding Dory during the third quarter of fiscal 2016. Conversely film product scheduled to be released during the fourth quarter of fiscal 2017 appears quite promising, including films such as Thor, Ragnorak, Justice League, Coco, Star Wars, The Last Jedi, Pitch Perfect 3 and Jumanji, Welcome to the Jungle. So coming back to how I said in my remarks. It is difficult to predict the backoffice over the short term, but over the long terms steady growth has proven to be very predictable. We hope 2017 still turns out to be another record year at the box office like some are suggesting and if it does; we’ll be prepared to capitalize like we did in the first quarter. But if the quarter disappoints, we’ll be prepared for that as well. We are looking at this business like we always do, with a long-term perspective. With that, let’s move on to our other division, hotels and resorts. You’ve seen the segment numbers and Doug gave you some additional detail. It was a challenging quarter for our hotels but the majority of our decrease in operating income occurring in April, coinciding with the drop in group business in the weeks around Easter this year. While May was a little better at several of our properties, city wide group business in the city of Milwaukee where we operate three of our eight company hotels was also down significantly in May compared to last year, further impacting our reported results during the quarter. 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 in its overall customer mix. The really good news is that our RevPAR improved later in the second quarter and we had a particularly strong June due in part to the positive impact of the U.S. open golf tournament in the Milwaukee market. Partially offsetting some of the decline in the beginning of the quarter. As Doug noted earlier despite the difficult comparison due to the holiday timing, we outperformed our competitive sets during both the second quarter and first half of fiscal 2017 as we [Indiscernible] success replacing some of the declining group business with an increase in non-group business. Outperforming our competitive set by nearly 3 and 5 percentage points is no small task and our Executive Management led by Joe Khairallah as well as our sales team and the hard working teams at each of our owned and managed hotels deserves a lot of credit for achieving that outperformance under difficult circumstances this quarter. And when you step back and look at the big picture halfway through our fiscal 2017 there are some very positive things to hang our head on. First off, as Doug noted while our reported results, the division have some unusual items impacting us such as the preopening cost at our new SafeHouse Chicago, our operating income at our eight owned hotels and resorts has increased during the first half of fiscal 2017 compared to the same period last year. Secondly, our hotels continue to be leaders in the markets in which we operate. So like our theatre division, while we can’t always control what is going on in our respective markets, we can work hard to beat the competition within that environment. Thirdly, we were encouraged by our June results and looking to future periods, we are encouraged by the fact that at this point in time our group room revenue bookings for the remaining future period in fiscal 2017, something commonly referred to in the hotels and resorts industry as group pace is running slightly ahead of our group room revenue bookings for future periods last year at this time. Bank [Indiscernible] revenue pace for the remainder of fiscal 2017 has also increased compared to last year at this time. As a result we hope to be able to make up some of the shortfall in group room revenue bookings during the second half of fiscal 2017. Our hotels and resorts division operating results should benefit in future periods from two current growth initiatives. As our press release notes, we recently introduced 29 new all season villas at the Grand Geneva resort and spa to a positive guest response. This should also help our ADR as these units are expected to rent at a higher rate than a regular group. We are also preparing for the August 2017 opening of the new Omaha Marriott Downtown at the capital district in Omaha, Nebraska, a new hotel that we will manage in which we will hold the minority interest. Also from a growth perspective, we continue to actively review opportunities to add to our portfolio of managed hotels in the coming year and we hope to have one or more of these come to fruition in the coming months. Lastly, before we open the call for questions, I want to conclude my remarks by saying thank you, to all the hardworking associates of the Marcus Corporation. I don’t want to ever take for granted the fact that we once again reported increased operating results despite several headwinds this quarter in both of our businesses. The results we are sharing with you today are the direct result of a lot of hard work in both of our divisions and for that, I am grateful. With that, at this time, Doug and I would be happy to open the call up for any questions you may have.

[Operator Instructions] And our first question comes from the line of Eric Wold of B. Riley. Your line is open.

Thank you, good morning guys. A couple of questions. On the hotels I guess or on the hotel side, can you give us your take on what you are seeing around the kind of this environment for the hotel transactions obviously you were past the 180 day window for a normal 10/31 transaction around the Wehrenberg but you might have more time given sort of reverse tend that you only have another taxable win yet, but what are you seeing in this environment, is there just a general lack of interest from buyers overall or just a bit as spread its a little too owners for you, I’ll start with that one. Thank you.

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

I mean, I think there are two nails on the head. I think that there is a bit [Indiscernible] spread and then to add to that to exacerbate that because Doug pointed out and you will see, if you look at the industry literature transactions are down this year, but the other piece of that is that the debt markets have been pretty active and so what you’ll read is transactions are down and potential sellers are just choosing to refinance and so that the overall attractiveness of the debt markets combined with the spread and the bid ask is reading per transactions to be down along with the dynamics that I have talked about but which really is a good point about where we say 17, I was just talking to our sales people and while 17 paces up a little bit, no one is predicting like huge RevPAR increases for the industry, and we -- but there’s 18, business travel is starting to look okay, and so that may be leading to the second point, Doug made, which is why we started see things from up little bit more. So I think is all of those things are sort waving into the mix than what we’re seeing.

Okay. That’s fair and I guess, have you done any more kind of work or look into the possibility of a worst tender you -- being beyond 180 days. I know it’s – I guess you – I’d assume you want some comfort there that you be able to get it done and through the IRS before going through with the transaction?

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

And then, on the hotel there is a last question, you always been outperforming the peers group for little bit and assume that you continue. Is there been a time in the past where you have and to this degree and what is been kind of the reaction from the local kind of peers or competitive that [Indiscernible] that you’re seeing reaction from area operators or those kind of enough to go around so to speak where everyone's doing okay, you just doing a little better?

I’ll start and I would say, there’s a couple of dynamics that’s play here. During the first year and it doesn't always play between the second quarter, but certainly had this year. Our markets, the Midwestern markets et cetera tend to not perform as well as the national market. So the upper upscale segment did better than those competitive sets that I shared with you. Well, when you actually about it, it kind of makes some sense, right. Our first quarter in our markets is the winter and so that kind of makes some sense that our markets aren’t perform as well as the national number and then in this particular situation the second quarter we had some – kind of also make some sense when you think about the Easter element because given our markets and our preponderance towards group business we’re – so Eric do you still there?

It does seem that his line has cut off. [Operator Instructions]. And Mr. Wold line is now open.

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

I think you’re pretty close. I think we’re good. Also one last in, one last question, if you end up not getting something done around Wehrenberg specifically, does the retail center that your [quad] along with that fit in kind of your long-term plans?

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

Okay. Fair enough. Thanks, Greg.

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

Good morning, guys.

Hey, Brian.

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

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

On that thought Doug, does that add up real sizzle and take by [launch]. Does that get a draw from family or is that primarily driven by adult pictures?

Well, the real sizzles does appear is the food will benefit from families and benefit from having just to get attendance. Obviously the bars do much better when there is adult films, I mean we can’t sell enough cosmopolitans when we have [Indiscernible].

Got you. Okay. And then trends on the value to say, its still continues traffic wise do for you well?

Yes. On a comparable basis for the first half of the year, our Tuesdays are up.

Okay. The Wehrenberg theaters when you guys talk, you talk a little about landlord issues, you talk about municipal permits and that type of thing, without having seen the physical brick-and-mortar, I’m assuming they have stadium seating. I'm assuming they have digital cinema. You guys have the UltraScreens of 70 x 36 feet. You got the Dolby Atmos which is up to 64 speakers. How much is some of that high-tech does the Wehrenberg theaters either have or are missing from the standpoint of audio [Indiscernible] and screen size and that type of thing?

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

Okay. So would you say corners and carpeting and bathroom fixes that type of things, a little tried, is that what you kind of alluding to?

Yes.

Yes, absolutely.

Okay.

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

But Brian, when you call tried, we call opportunity.

Well, that’s good. That’s awesome. It gives us some opportunity. I have not been down to the BistroPlex in Greendale. You’ve had about one almost three weeks or so. What’s kind of been your traffic and how is that price on a ticket basis?

We get a buck more for the ticket, so we’re getting a premium for the ticket. Its – I think it’s turned out fantastic and people are really very excited about it. We hit some bumps. We’re trying to figure out it is a new business model for us, but it’s not brand new. We are in the food and beverage. We’re in theater dinning experience department already with our BSPs and so we come to the table with some experience, but this is a new concept for us and we have some [growing pains], but I think overall very well received and it looks fantastic. The food is great and I think its going to some, its going to be wonderful for us.

I mean, if you think about it Brian, it’s a 800 or 900 seat restaurant and so there aren’t many of those out there and so from that perspective the nuances of staggering show times and just getting the kitchen to deal with onslaught of people than anything else, its -- we [come late] years to where we were on day one and I’m sure, Greg, we’ll say, we still have a ways to go but we’re pleased with the results so far.

Yes. With the food clean- up and all of that does that stagger the movie’s pictures a little more, so little more gap between showings?

Right now I don’t know that we can take – I can’t tell you the exact here. I know the issue – for us it’s just beyond just clean-up, its making sure that that we don't slam the kitchen, right. I mean imagine if you put your two biggest houses and have one little under 500 seats of your 900 seats restaurant all piling on your kitchen at one time you can really make a nightmare for anybody working there. So, it's a mixture of clean-up and getting people out and how we get their checks closed out and how do we not schedule a nightmare for the kitchen. So, we are working through all those things right now.

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

Absolutely.

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

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

All right, guys. Thanks a lot. Keep up the good work.

Thanks Brian.

Thank you. [Operator Instructions] Our next question is from the line of Jim Goss of Barrington Research. Your line is open.

Hi. So, in the Wehrenberg’s theaters where you have an IMAX, are you looking to do a companion UltraScreen and or have you done any of those to this point?

We haven’t yet. Go ahead Doug.

Yes. Go ahead, Doug.

Yes. I mean, we have look – we have – we’ve got several super screens that are already on the docket. I don't believe we have any Ultra Screens planned that locations that would have IMAX. At this stage of the game I think the team is still looking at their overall plan. But we've got I think at least three super screens that are currently either approved or pending and even under construction. So we’re working our way through that. I think that there is also another, there is actually one UltraScreen DLX at Wehrenberg location is scheduled to open up in the fourth quarter. It does not have – that location does not have an IMAX.

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

Right. So they have – as I mentioned earlier that existing they call a mega screen, we’re going to convert that one to an UltraScreen DLX and that will – that conversion should be completed sometime in the fourth quarter. But we’re also doing three additional SuperScreen DLX conversions in the coming months as well.

And we do have the ability where we have IMAXs to add our own premium – our proprietary premium.

We just don’t have – roughly schedule.

That will be interesting to see bit of a test kitchen in terms of the economics to you of one format versus the other and how they compare?

We do actually and we are doing, where I said we have the ability to do it. We did. We did – we’re adding one at Ronnie’s where there is an IMAX.

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

We still been less of them, which has driven down our APP level, has muted our APP.

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

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

The answer to your questions are no and yes. No, has not change our focus on M&A where we’re looking but if you asked me do I prefer to own them? Absolutely, this just shows how fortunate we've been to own our real estate. It highlights that how much easier it is to make nimble decisions when you own your real estate. They just one last party to deal with then when you have to deal Wehrenberg it just take some more time to negotiate through that -- working with that negotiation.

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

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

All right. Thanks very much.

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

Well, thank you everybody for joining us today. Apologize I didn’t see an email that apparently we have some sort of – all of our outbound calls were disconnected briefly in our whole office, so I not be able to reconnect quickly enough to keep the call going. So appreciate to joining us. We look forward to talking you once again in October when we release our fiscal 2017 third quarter results. Till then thanks and have a great day.

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