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…

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…

[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.